PetroQuest Sells Fayetteville Assets
Sale of non-operated Fayetteville shale natural gas assets producing 5 MMcf per day.
PetroQuest Energy Inc. (NYSE: PQ) has closed on the sale of its non-operated Fayetteville shale natural gas assets to an undisclosed buyer for about $9.2 million.
PetroQuest announced that operating cash flows from the assets, which are in Arkansas, totaled about $1.3 million for 2012 from an average daily production of about 5 million cubic feet (MMcf) of natural gas per day. The company reported that, as of Sept. 30, 2012, proved reserves from the Fayetteville assets totaled about 11 Bcf, and were worth about $5.5 million when discounted at 10%.
The sale of the assets will not affect the current borrowing base of $130 million, the company stated.
"We are pleased to complete the sale of our non-operated Fayetteville assets, which enables us to further strengthen our balance sheet while increasing our focus on growing our liquids production from our core assets in the Mississippian Lime, Woodford, East Texas and Gulf Coast Basin," said Charles T. Goodson, chairman, chief executive and president.
"We have a strong track record of utilizing seismic data in the Gulf Coast and the Woodford to significantly improve our drilling success. We believe that obtaining seismic data over our Mississippian acreage is the next logical step in our development plan and we expect the data will be extremely beneficial in reducing the variability of well results."
The announced sale did not impress analysts, although the company’s share price did not show an abrupt movement during the day after the sale was announced. A report from Raymond James & Associates Inc. stated the sale of the assets should have no material impact on the company’s overall performance even though the sale looked undervalued at first glance.
PetroQuest sold about 9,000 acres for $9.2 million, a multiple of about $1,840 per flowing Mcfe per day and $0.83 per proven Mcfe. Those multiples are generally inexpensive given the company’s valuation of around $37,000 per Mcfe per day and $2.20 per Mcfe in proven reserves. Based on those multiples, the sale looks cheap, but the report added that the sale was in line with the company’s trading multiple when viewed on a cash flow basis. The $1.3 million in cash flow from the Fayetteville assets are about seven times the EBITDA (earnings before interest, taxes depreciation and amortization), Raymond James reported.
Raymond James reiterated its “Market Perform” rating for the company based on the balance of its revolving credit facility , EBITDA multiple and its cautious outlook on commodity prices.
PetroQuest Energy Inc. is an independent upstream energy company based in Lafayette, La., with assets in East Texas, the Arkoma Basin, South Louisiana and the shallow waters of the Gulf of Mexico. Its year-end 2011 proved reserves were 265 Bcfe, about 91% of which were natural gas and 61% developed.