PetroQuest Energy, Inc. (PQ, Financial) last month announced results for the second quarter of 2014. The following compares certain second quarter 2014 metrics to those of the second quarter of 2013, highlighting the company's continued growth driven by its successful drilling programs in Oklahoma and Texas, its acquisition of certain Gulf of Mexico assets in July 2013 ("Gulf of Mexico Acquisition") and stronger natural gas prices:
- Oil production increased 99%
- NGL production increased 32% (up 47% from first quarter 2014)
- Net income increased 162%
- Fourth consecutive quarter of discretionary cash flow growth; increased 77%
- Oil and gas revenues up 59%
Net income available to common stockholders for the quarter ended June 30, 2014 was $9,592,000, or $0.15 per share, compared to second quarter 2013 net income available to common stockholders of $3,662,000, or $0.06 per share. For the first six months of 2014, the company reported net income available to common stockholders of $19,635,000, or $0.30 per share, compared to net income available to common stockholders of $6,269,000, or $0.10 per share, for the 2013 period.
Discretionary cash flow for the second quarter of 2014 was $35,153,000, as compared to $19,809,000 for the comparable 2013 period. For the first six months of 2014, discretionary cash flow was $69,641,000, as compared to discretionary cash flow of $38,441,000 for the first six months of 2013. See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow.
Production for the second quarter of 2014 was 10.7 Bcfe, compared to 8.7 Bcfe for the comparable period of 2013. For the first six months of 2014, production was 20.5 Bcfe, compared to 16.9 Bcfe for the comparable period of 2013. Oil and NGL volumes made up approximately 28% of second quarter 2014 production as compared to 22% in the second quarter of 2013.
Stated on an Mcfe basis, unit prices including the effects of hedges for the second quarter of 2014 were $5.64 per Mcfe, as compared to $4.39 per Mcfe in the second quarter of 2013. For the first six months of 2014, unit prices including the effects of hedges, were $5.88 per Mcfe, as compared to $4.37 per Mcfe for the first six months of 2013. Oil and gas sales during the second quarter of 2014 were $60,581,000, as compared to $38,076,000 in the second quarter of 2013. For the first six months of 2014, oil and gas sales were $120,547,000 compared to oil and gas sales of $74,052,000 for the first six months of 2013.
Lease operating expenses ("LOE") for the second quarter of 2014 increased to $12,168,000, as compared to $8,837,000 in the second quarter of 2013. LOE per Mcfe was $1.13 for the second quarter of 2014 as compared to $1.02 in the second quarter of 2013. For the first six months of 2014, lease operating expenses increased to $1.19 per Mcfe from $1.10 per Mcfe in the comparable period of 2013. The increase in per unit lease operating expenses is primarily due to an increase in expensed workovers during the 2014 periods as compared to the 2013 periods.
Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the second quarter of 2014 was $1.99 per Mcfe, as compared to $1.64 per Mcfe in the second quarter of 2013. For the first six months of 2014, DD&A on oil and gas properties was $2.02 per Mcfe compared to $1.59 per Mcfe for the comparable period of 2013. The increase in the per unit DD&A rate is primarily the result of the Gulf of Mexico Acquisition, which had a higher cost per unit as compared to our overall amortization base.
Interest expense for the second quarter of 2014 increased to $7,380,000, as compared to $3,116,000 in the second quarter of 2013. For the first six months of 2014, interest expense was $15,016,000, compared to $5,980,000 for the comparable period of 2013. The increase in interest expense was primarily the result of the issuance of $200 million of 10% senior notes due 2017 inJuly 2013 to finance the Gulf of Mexico Acquisition.
General and administrative expenses during the quarter and six months ended June 30, 2014 totaled $6,467,000 and$12,709,000, respectively, as compared to expenses of $6,351,000 and $11,067,000 during the comparable 2013 periods. General and administrative expenses included non-cash share based compensation expenses of $1,327,000 and $1,240,000during the second quarters of 2014 and 2013, respectively, and $2,716,000 and $1,796,000 for the respective six month periods ended June 30, 2014 and 2013.
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Operations update
East Texas
The company recently completed its PQ #13 (NRI β 75% β 4,697 foot lateral), PQ #14 (NRI β 75% β 4,622 foot lateral) and PQ #15 (NRI β 41% β 3,107 foot lateral) horizontal Cotton Valley wells. The PQ #13 well achieved a maximum 24-hour gross rate of 8,794 Mcf of gas, 583 barrels of natural gas liquids and 32 barrels of oil. The PQ #14 well achieved a maximum 24-hour gross rate of 9,810 Mcf of gas, 619 barrels of natural gas liquids and 55 barrels of oil. The PQ #15 well achieved a maximum 24-hour gross rate of 8,367 Mcf of gas and 504 barrels of natural gas liquids. In addition, the Company recently commenced completion operations on its PQ #11 (NRI β 41% β 4,402 foot lateral) well. This well is in the early stages of flowback, and its maximum 24-hour rate is expected to be reported in the company's next operations update press release.
Woodford
The company recently established production on three new wells in its West Relay field. These three wells (average NRI β 30%) achieved an average maximum 24-hour gross rate of 4,132 Mcf of gas and 626 barrels of natural gas liquids per well. In total, the company has now completed fourteen wells in its West Relay field which have achieved an average maximum 24-hour gross rate of 3,649 Mcf of gas and 577 barrels of natural gas liquids per well. The company has two rigs running in the West Relay field and is currently completing a three well pad. In addition, the company is currently planning for potential activity in its Hoss field in the fourth quarter relative to its dry gas joint venture drilling program.
Gulf Coast
At the Thunder Bayou prospect, the company is currently drilling at approximately 5,000 feet. The prospect has a proposed total depth of 21,000 feet, which the company expects to reach during the fourth quarter of 2014. The company has an approximate 50% working interest in this high impact prospect.
The company's Eagle Crest discovery recently established initial production at 492 barrels of oil and 2,312 Mcf of gas per day. The company has an approximate 47% net revenue interest in this project.
