8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): December 20, 2017 (December 15, 2017)

PetroQuest Energy, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware	001-32681	72-1440714
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
400 E. Kaliste Saloom Rd., Suite 6000 Lafayette, Louisiana		70508
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (337) 232-7028

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 1.01 Entry into a Material Definitive Agreement

Lease Acquisition Agreement

On December 18, 2017 (the “Execution Date”), PetroQuest Energy, L.L.C. (“PQLLC”), a direct subsidiary of PetroQuest Energy, Inc. (the “Company”), entered into a Lease Acquisition Agreement (the “Acquisition Agreement”), with Navitas Oil & Gas, LLC (“Navitas”), pursuant to which PQLLC agreed to acquire all of Navitas’ right, title and interest in and to certain leases and rights to acquire leases (the “Acquired Leasehold Interests”) in a certain geographical area covering approximately 24,600 gross acres of the Austin Chalk formation located in central Louisiana. In connection with the acquisition of the Acquired Leasehold Interests, (i) PQLLC will pay up to approximately $18.8 million in cash (consisting of (A) approximately $7.0 million of payments previously made by PQLLC to Navitas with respect to certain leases, (B) approximately $1.4 million to be reimbursed by PQLLC to Navitas with respect to certain leases for lease bonus payments, (C) approximately $3.4 million to be paid by PQLLC as additional lease bonus payments under certain leases and (D) approximately $7.0 million to be paid by PQLLC to Navitas with respect to certain leases, of which $0.6 million will be paid in 2018); and (ii) the Company will issue 2,000,000 shares (the “Shares”) of the Company’s common stock, par value $.001. The cash payments will be funded using $8.75 million in proceeds from the sale of certain of the Company’s water disposal assets in East Texas (as discussed below) and approximately $6 million of cash on hand. Pursuant to the Acquisition Agreement, the remainder of the cash payments that are payable to Navitas in 2017 and the Shares issuable to Navitas are to be delivered to Navitas within three business days of the Execution Date. The remainder of the cash payments due under the Acquisition Agreement, which include $0.6 million to be paid to Navitas and approximately $3.4 million to be paid under certain leases, in each case, during 2018, are expected to be funded through customary arrangements with industry partners.

In addition, pursuant to the Acquisition Agreement, Navitas has agreed to attempt to obtain additional leases in an agreed contract area for a period of six months after the Execution Date, which period may be extended for an additional six months at the option of PQLLC. Further, if Navitas acquires additional leases within an agreed area of mutual interest, Navitas will offer such leases to PQLLC.

Consent under the Company’s Multidraw Term Loan Agreement

On December 18, 2017, PQLLC and the Company entered into a consent (the “Consent”) with the lenders under their Multidraw Term Loan Agreement dated as of October 17, 2016 (as amended, the “Loan Agreement”). Under the terms of the Consent, the lenders under the Loan Agreement agreed, subject to the conditions and limitations with respect to payment amounts specified in the Consent, to consent to the acquisition of the Acquired Leasehold Interests pursuant to the Acquisition Agreement, notwithstanding the $2 million cap on ordinary course acquisitions of oil and gas properties in the Loan Agreement. Such $2 million cap will be deemed fully used in connection with the acquisition of the Acquired Leasehold Interests pursuant to the Acquisition Agreement.

Item 2.01 Completion of Acquisition or Disposition of Assets

The information provided under Item 1.01 in this Current Report on Form 8-K regarding the Acquisition Agreement and the acquisition of the Acquired Leasehold Interests is incorporated by reference into this Item 2.01.

Item 3.02 Unresgistered Sales of Equity Securities

The information provided under Item 1.01 in this Current Report on Form 8-K regarding the issuance of the Shares to Navitas pursuant to the terms of the Acquisition Agreement is incorporated by reference into this Item 3.02. No finders’ fees or commissions will be paid to any party in connection with the issuance of the Shares. The Shares will be issued by the Company in a private placement transaction in reliance upon an exemption from registration pursuant to Rule 506(b) of Regulation D promulgated under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

On December 18, 2017, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with a holder of its outstanding 10.00% Second Lien Senior Secured Notes due 2021 (the “Notes”). Pursuant to the Exchange Agreement, the holder will exchange (the “Exchange”) $4.75 million aggregate principal amount of the Notes for 2,240,000 shares (the “Exchange Shares”) of the common stock, par value $0.001, of the Company. The issuance of the Exchange Shares in the Exchange will be exempt from registration under the Securities Act, pursuant to the exemption from registration provided by Section 3(a)(9) of the Securities Act. The closing of the transactions contemplated by the Exchange Agreement are conditioned upon the receipt by the Company of the unconditional approval of the New York Stock Exchange to the listing of the Exchange Shares on the New York Stock Exchange. No finders’ fees or commissions will be paid to any party in connection with the issuance of the Exchange Shares.

Item 7.01 Regulation FD Disclosure.

On December 20, 2017, the Company issued a news release announcing the acquisition of the Acquired Leasehold Interests. A copy of the news release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

On December 20, 2017, the Company posted presentation materials about the acquisition of the Acquired Leasehold Interests on the “Investors – Events & Presentations” section of its website at www.petroquest.com. Information on the Company’s website or any other website is not incorporated by reference in this Current Report on Form 8-K and does not constitute a part of this Current Report on Form 8-K. The presentation materials are attached hereto as Exhibit 99.2 and incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached Exhibit 99.1 and Exhibit 99.2 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Item 8.01 Other Events

On December 15, 2017, PQLLC entered into (i) a Purchase and Sale Agreement (the “SWD Purchase Agreement”), for the sale and transfer by PQLLC of certain water disposal assets located in Panola County, Texas and (ii) a Gathering Services Agreement (Produced Water) (the “Gathering Agreement”), which provides for, among other things, PQLLC’s dedication and commitment to deliver minimum water volumes to the counterparty, for which PQLLC will pay the counterparty those fees specified in the agreement, for an aggregate purchase price under the SWD Purchase Agreement and the Gathering Agreement of $8.75 million.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit Number	Description of Exhibit
99.1	News Release dated December 20, 2017.
99.2	Louisiana Austin Chalk Acquisition Presentation.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: December 20, 2017

PETROQUEST ENERGY, INC.

/s/ J. Bond Clement

J. Bond Clement

Executive Vice President, Chief Financial Officer and Treasurer

EX-99.1

Exhibit 99.1

NEWS RELEASE

For further information, contact:	Matt Quantz, Manager - Corporate Communications
	(337) 232-7028, www.petroquest.com

PETROQUEST ENERGY ANNOUNCES ENTRY INTO CENTRAL LOUISIANA OIL PLAY

LAFAYETTE, LA – December 20, 2017 - PetroQuest Energy, Inc. (NYSE: PQ) announced today its entry into an oil focused play in central Louisiana targeting the Austin Chalk formation through the execution of agreements to acquire interests in approximately 24,600 gross acres. The leasehold acquisition costs were funded by $8.75 million in proceeds from the sale of certain of the Company’s water disposal assets in East Texas, approximately $6 million of cash on hand and the issuance of 2 million shares of the Company’s common stock. The Company plans to drill its initial horizontal test well during the second quarter of 2018 utilizing data from existing vertical and unfracked horizontal wells in the area and from fracked horizontal wells that are expected to be drilled in the area.

Through geologic and reservoir studies and analysis of results comparing fracked and unfracked horizontal Austin Chalk wells in both Texas and now in central Louisiana, the Company believes that applying modern hydraulic fracturing methods to this formation provides the opportunity to achieve a substantial uplift in recoveries versus vintage unfracked horizontal wells. Based on a comparative analysis between 22 fracked and hundreds of unfracked Austin Chalk wells drilled in Karnes County, Texas, fracked horizontal wells achieved an approximate 500% increase in resource recoveries as compared to unfracked horizontal wells. The average per well recovery for these fracked wells was in excess of 600,000 barrels of oil equivalent.

This acreage position is expected to provide PetroQuest the opportunity to utilize its expertise gained from operating and/or participating in over 600 horizontal wells in multiple resource projects. Since selling its Woodford shale assets in 2015, the Company has shifted its focus to a horizontal Cotton Valley program in East Texas that is estimated to have over 800 horizontal locations. The emerging Austin Chalk play is expected to complement the Company’s growing East Texas operations, and could serve as the catalyst to achieve a balanced commodity mix over the ensuing years through a project that is expected to offer years of inventory.

Management’s Comment

“We are excited to have an early, first mover position in this emerging oil play right in our backyard at a very attractive cost,” said Charles T. Goodson, Chairman, Chief Executive Officer and President. “Based on recent well results in the area of our acreage, as well as in South Texas, the application of contemporary horizontal drilling and fracking is showing a material impact on resource recovery from the Austin Chalk formation, which has produced over 1.3 billion barrels of oil since 1902. Our acreage position is expected to provide us with a capital allocation option to grow our oil production, which should complement our gas-weighted Cotton Valley assets in terms of diversifying our future production mix and cash flow. These assets are ideally located with available takeaway options close to the gulf coast refineries and rapidly expanding options for NGLs and associated natural gas that fit with our strategy to focus on assets near these key markets.”

About the Company

PetroQuest Energy, Inc. is an independent energy company engaged in the exploration, development, acquisition and production of oil and natural gas reserves in the Texas, Louisiana and the shallow waters of the Gulf of Mexico. PetroQuest’s common stock trades on the New York Stock Exchange under the ticker PQ.

Forward-Looking Statements

This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this news release are forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these statements are based upon assumptions and anticipated results that are subject to numerous uncertainties and risks. Actual results may vary significantly from those anticipated due to many factors, including the volatility of oil and natural gas prices and significantly depressed oil prices since the end of 2014; our indebtedness and the significant amount of cash required to service our indebtedness; our estimate of the sufficiency of our existing capital sources, including availability under our multi-draw term loan facility; our ability to post additional collateral to satisfy our offshore decommissioning obligations; our ability to fund and execute our Cotton Valley and Austin Chalk development programs as planned; our ability to increase recoveries in the Austin Chalk formation and to increase our overall oil production as planned; our estimates with respect to fracked Austin Chalk wells in Louisiana, including production EURs and costs; our ability to hedge future production to reduce our exposure to price volatility in the current commodity pricing market; our ability to find, develop and produce oil and natural gas reserves that are economically recoverable and to replace reserves and sustain and/or increase production; ceiling test write-downs resulting, and that could result in the future, from lower oil and natural gas prices; our ability to raise additional capital to fund cash requirements for future operations; limits on our growth and our ability to finance our operations, fund our capital needs and respond to changing conditions imposed by our multi-draw term loan facility and restrictive debt covenants; more than 50% of our production being exposed to the additional risk of severe weather, including hurricanes, tropical storms and flooding, and natural disasters; losses and liabilities from uninsured or underinsured drilling and operating activities; changes in laws and governmental regulations as they relate to our operations; the operating hazards attendant to the oil and gas business; the volatility of our stock price; and our ability to meet the continued listing standards of the New York Stock Exchange with respect to our common stock or to cure any deficiency with respect thereto. In particular, careful consideration should be given to cautionary statements made in the various reports the Company has filed with the SEC. The Company undertakes no duty to update or revise these forward-looking statements.

EX-99.2

Louisiana Austin Chalk Acquisition Exhibit 99.2

Forward-Looking Statements This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  All statements other than statements of historical fact included in this presentation are forward-looking statements. Although PetroQuest believes that the expectations reflected in these forward-looking statements are reasonable, these statements are based upon assumptions and anticipated results that are subject to numerous uncertainties and risks. Actual results may vary significantly from those anticipated due to many factors, the volatility of oil and natural gas prices and significantly depressed oil prices since the end of 2014; our indebtedness and the significant amount of cash required to service our indebtedness; our estimate of the sufficiency of our existing capital sources, including availability under our multi-draw term loan facility; our ability to post additional collateral to satisfy our offshore decommissioning obligations; our ability to fund and execute our Cotton Valley and Austin Chalk development programs as planned; our ability to increase recoveries in the Austin Chalk formation and to increase our overall oil production as planned; our estimates with respect to fracked Austin Chalk wells in Louisiana, including production, EURs and costs; our ability to hedge future production to reduce our exposure to price volatility in the current commodity pricing market; our ability to find, develop and produce oil and natural gas reserves that are economically recoverable and to replace reserves and sustain and/or production; ceiling test write-downs resulting, and that could result in the future, from lower oil and natural gas prices; our ability to raise additional capital to fund cash requirements for future operations; limits on our growth and our ability to finance our operations, fund our capital needs and respond to changing conditions imposed by our multi-draw term loan facility and restricted debt covenants; 50% of our production being exposed to the additional risk of severe weather, including hurricanes, tropical storms and flooding, and natural disasters; losses and liabilities from uninsured or underinsured drilling and operating activities; changes in laws and governmental regulations as they relate to our operations; the operating hazards attendant to the oil and gas business; the volatility of our stock price; and our ability to meet the continued listing standards of the New York Stock Exchange with respect to our common stock or to cure any deficiency with respect thereto. In particular, careful consideration should be given to cautionary statements made in the various reports the Company has filed with the SEC. The Company undertakes no duty to update or revise these forward-looking statements. In particular, careful consideration should be given to cautionary statements made in the various reports PetroQuest has filed with the Securities and Exchange Commission. PetroQuest undertakes no duty to update or revise these forward-looking statements.   Prior to 2010, the Securities and Exchange Commission generally permitted oil and gas companies, in their filings, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions.  Beginning with year-end reserves for 2009, the SEC permits the optional disclosure of probable and possible reserves.  We have elected not to disclose our probable and possible reserves in our filings with the SEC. We use the terms “reserve inventory,” “gross unrisked reserves,”  “EUR,” “inventory”, “unrisked resource potential”, 3P reserves or other descriptions of volumes of hydrocarbons to describe volumes of resources potentially recoverable through additional drilling or recovery techniques that the SEC’s guidelines prohibit us from including in filings with the SEC. Estimates of reserve inventory, gross unrisked reserves EUR, inventory, unrisked 3P reserves  do not reflect volumes that are demonstrated as being commercially or technically recoverable. Even if commercially or technically recoverable, a significant recovery factor would be applied to these volumes to determine estimates of volumes of proved reserves.  Accordingly, these estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the Company.  The methodology for estimating unrisked inventory, gross unrisked reserves, EUR, or unrisked resource potential or 3P reserves may also be different than the methodology and guidelines used by the Society of Petroleum Engineers and is different from the SEC’s guidelines for estimating probable and possible reserves.  

Louisiana Austin Chalk Entry Rationale Familiar development story: access existing fields that had variable production success using conventional development techniques and apply the latest horizontal/completion technologies to significantly enhance recoveries Examples: Permian, Eagle Ford, Scoop/Stack, Cotton Valley, etc Hundreds of control points in the area from vintage unfracked Austin Chalk/Tuscaloosa wells Increase oil production/reserves in portfolio: Louisiana Austin Chalk production mix is approximately 70% oil Attractive leasehold position: early mover action resulted in acreage position offsetting the initial EOG test well (September (19 days) production averaged 1,421 Bbls/d and 1,264 Mcf/d - production data included unloading period) Strong economics: base case estimate of 600,000 Bbl/well is projected to generate 60% IRR at $50 oil Liquidity building options: recent offers at $2,000+ per acre. Considering sell-down structures to recoup acquisition cost and fund initial drilling program

Austin Chalk Trend Regional Overview Master’s Creek Austin Chalk trend has produced over 1.3 billion barrels of oil Several large cap companies with Austin Chalk experience in Texas have established leasehold positions in the Louisiana Austin Chalk Goal is to replicate the recent Texas Austin Chalk results in Louisiana Over 300,000 acres have been leased with additional aggressive leasing activity ongoing in 5-6 Louisiana parishes Latest horizontal fracked Austin Chalk wells in Karnes County, Texas have EURs on average (22 wells) over 600,000 BOE – 500% uplift over unfracked wells (104,000 BOE) = EOG Eagles Ranch 14H Pearsall Giddings Brookeland North Bayou Jack Karnes

CHALK COMPARISON: TEXAS – LOUISIANA MBOE Avg. pre-fracked Horizontal Oil CUM (Pre-2013) 104 EOG: Avg. Fracked Horizontal Oil EUR (2016–Current) 632 Percent increase 508% Karnes County, TX Avoyelles Parish, LA MBOE Avg. pre-fracked Horizontal Oil CUM 119 Estimated Fracked Horizontal Oil EUR (based on % increase in 22 sample EOG wells in Karnes County) 732 Estimated Percent Increase 508% = Austin Chalk Wells = Austin Chalk Wells = EOG Eagles Ranch 14H Initial horizontal fracked well already produced > 100,000 Bbls

Economic Sensitivities Estimates Assumptions: Well Cost = $9.0 MM Facility and SWD Cost of $375 M/well Product Pricing: $50/BO, $3.00/MMBtu, $25.50/Bbl NGL IRR ROI PV(10) High Side Case 800 MBO/Well 97% 2.98 $12.5 MM Expected Case 600 MBO/Well 60% 2.08 $6.4 MM Low Side Case 400 MBO/Well 16% 1.23 $0.4 MM