PetroQuest Energy Inc., Lafayette, Louisiana, (NYSE: PQ) recorded a net loss available to common stockholders for the quarter ended June 30, 2011 of ($3,045,000) or ($0.05) per share, compared to second quarter 2010 net income available to common stockholders of $5,248,000, or $0.08 per share. For the first six months of 2011, the company reported a net loss available to common stockholders of ($1,148,000), or ($0.02) per share, compared to net income available to common stockholders of $34,965,000, or $0.56 per share, for the comparable 2010 period. During the second quarter of 2011, the company recorded a non-cash ceiling test write-down of $12,973,000 as a result of the impact of low natural gas prices and higher estimated future development costs on the discounted net cash flows from its estimated proved reserves. During the six month period ended June 30, 2011, the company's ceiling test write-down totaled $18,907,000.
Production for the second quarter of 2011 was 7.4 Bcfe, compared to 7.3 Bcfe for the comparable period of 2010. For the first six months of 2011, production was 14.7 Bcfe, compared to 15.1 Bcfe for the comparable period of 2010. Approximately 62% of the company's second quarter 2011 production was from long-lived basins, which is a company record. Stated on an Mcfe basis, unit prices including the effects of hedges for the second quarter of 2011 were $5.69 per Mcfe, as compared to $5.71 per Mcfe in the second quarter of 2010. For the first six months of 2011, unit prices including the effects of hedges, were $5.66 per Mcfe, as compared to $5.94 per Mcfe for the first six months of 2010. Oil and gas sales during the second quarter of 2011 were $41,920,000, as compared to $41,857,000, in the second quarter of 2010. For the first six months of 2011, oil and gas sales were $83,466,000 compared to oil and gas sales of $89,402,000 for the first six months of 2010.
Lease operating expenses (LOE) for the second quarter of 2011 increased to $10,206,000, as compared to $9,020,000 in the second quarter of 2010. LOE per Mcfe was $1.38 for the second quarter of 2011, as compared to $1.23 in the second quarter of 2010. For the first six months of 2011, lease operating expenses increased to $1.34 per Mcfe from $1.24 per Mcfe in the comparable period of 2010. The increases in lease operating expenses for the 2011 periods are primarily due to expensed workovers in Texas and Oklahoma.
Operations Update
In the Gulf Coast basin, the company's La Cantera discovery has been logged and fully evaluated. Porosity tools and sidewall cores have confirmed 248 net feet of pay in the Cris R massive objective. Casing has been set to protect the entire sand package through 18,400 feet and the company is currently drilling ahead with expectations of reaching its proposed total depth of 19,300 feet within two weeks. The company has a 16% net revenue interest in the well and expects production to commence early next year. In addition, the company is currently planning to spud a delineation well in first quarter of 2012 to further evaluate the size of this discovery.
In the Woodford, the company recently completed two Woodford operated wells.
In addition to the above completions, the company has two Woodford operated wells (PQ #58 - PQ #59) that are in the early stages of completion and has reached total depth on four additional wells (PQ #54 - PQ #56 - PQ #57 - PQ #61). Including the four wells that have reached total depth, the company expects to complete 10-12 additional Woodford operated wells before year end and currently has four operated rigs working in the basin.
In East Texas, the company has reached total depth on its second operated horizontal Cotton Valley well (WI – 50%) and expects to complete the well at the end of the month. In addition, the company's third and fourth Classic operated horizontal Cotton Valley wells (WI - 30%) have reached total depth and are expected to be completed in two weeks. The company expects to drill one more operated and two more non-operated horizontal Cotton Valley wells by the end of the year.
In South Texas, the company's second operated Eagle Ford Shale well (NRI - 38%) located in La Salle County was recently completed and is in the early stages of flow back. In addition, the company's third operated Eagle Ford Shale well (WI - 44%) located in La Salle County has reached total depth and is expected to be completed next week. At the end of the second quarter, the company acquired an additional 638 gross acres (319 net) in La Salle County. The company expects to participate in two non-operated wells during 2011 on this acreage, one of which is in progress.
During July 2011, the company entered into a purchase and sale agreement to acquire a private company's leasehold position in the Mississippi Lime play. The company expects to close this acquisition during September 2011 using a portion of its cash on hand. If consummated, this acquisition, combined with ongoing leasing efforts in the play, would bring the company's net acreage position in northern Oklahoma and southern Kansas to approximately 40,000 acres at blended cost of approximately $750 per acre. The company plans to begin its initial Mississippi Lime drilling program late in the fourth quarter of 2011. The Company is continuing to build its position in this emerging oil focused trend and is evaluating partnership opportunities.
"Our La Cantera discovery should provide us with high cash margin production, which has driven our decision to continue to deploy capital in this region." says Charles T. Goodson, chairman, chief executive officer and president. "I am very proud of our Gulf Coast team that has worked tirelessly to make this project an enormous success. This type of discovery, as well as our other Gulf Coast properties, allows us to execute our strategy of growing our long-lived asset base while operating within cash flow. Entering the Mississippi Lime play along the Oklahoma-Kansas border will be a strategic fit for our Tulsa office and staff who have worked hard to deliver industry leading results in the Woodford."
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