PetroQuest Energy, Inc. (PQ)
Q4 2012 Earnings Call
February 28, 2013 9:30 a.m. ET
Executives
Matt Quantz - Manager, Investor Relations
Charles Goodson - Chairman, CEO, and President
Bond Clement - CFO
Analysts
Ron Mills - Johnson Rice
Tim Rezvan - Sterne Agee
Curtis Trimble - Global Hunter Securities
Amir Arif - Stifel Nicolaus
Jason Lazarus - Intrepid Capital
Presentation
Operator
Good morning, and welcome to the PetroQuest Energy 2012 Year End and Fourth Quarter Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Matt Quantz, Manager of Investor Relations. Please go ahead.
Matt Quantz
Thank you. Good morning, everyone. We would like to welcome you to our fourth quarter and year end conference call and webcast. Participating with me today on the call are Charles Goodson, Chairman, CEO and President; Todd Zehnder, COO; and Bond Clement, CFO.
As you’ve come to expect, we would like to make our Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements made today regarding PetroQuest business, which are not historical facts are forward-looking statements that involve risk and uncertainties. For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in these forward-looking statements, see Risk Factors in our annual and quarterly SEC filings, and in the forward-looking statements in our press release. We assume no obligation to update our forward-looking statements. Please also note that on today’s call, we will be referring to non-GAAP financial measures, including discretionary cash flow. Historical non-GAAP financial measures are reconciled to the most directly comparable GAAP measures in our press release included in our Form 8-K filed with the SEC today.
With that, Charlie will get us started with an overview of the quarter.
Charles Goodson
Good morning. During the fourth quarter, we produced 8.9 Bcfe or approximately 96 million cubic feet of gas equivalent per day. The 96 million cubic feet equivalent per day was comprised of approximately 75 million cubic feet of gas, 1500 barrels of oil and 2000 barrels of NGLs. Our fourth quarter 2012 average daily liquids production increased 41% over the comparable 2011 period and was the fifth consecutive quarter of production growth.
Moving on to our full year results, we produced 34 Bcfe or approximately 93 million cubic equivalent per day, which was 13% higher than our 2011 production rate. Our 2012 average daily production of 93 million cubic feet equivalent per day was comprised of approximately 75 million cubic feet of gas, 1400 barrels of oil and 1500 barrels of NGLs. The 2900 barrels of liquids per day was a 13% increase from 2011.
Before going through our operations details, I’d like to discuss our 2013 plans which were provided to the market during our 2013 guidance press release a few weeks ago. In that release, we outlined the capital budget which stated approximately 35% lower than our 2012 capital spend. However, it’s important to note that when factoring in our joint venture, our $80 million to $100 million capital budget essentially becomes a $110 million to $130 million program. Even with this reduction in CapEx, we are forecasting production growth of 6% (inaudible) if any, small capped E&P companies that can be this flexible while delivering this type of performance. This speaks volumes for the calibre of our assets and teams we have in place as well as our promoting capital structure benefitted by our long term joint venture.
In addition to our capital and production guidance, we announced that we were moving into the second phase of our Mississippi Lime program which will be shooting at 3D seismic survey, our various acreage positions. We believe that by combining this – the production history and well results from our 2012 program with 3D we will significantly improve our geologic and reservoir model. We expect this post-3D understanding in Mississippian Lime reservoirs will greatly enhance our ability to identify future drilling locations and generate more consistent results.
This strategy is part of the plan we put in place in 2011. That plan called for testing each of our three distinct areas by drilling 12 to 15 wells and then following up with 3D shoot and field study. We implemented a similar strategy when we entered the Woodford and saw what’s combining production history the 3D study can do for development program. Our initial pre-3D horizontal Woodford wells had EURs of approximately 2 Bcf per well and took 40 days to drill. Today with the benefit of 3D our EURs have risen to an average of 5 Bcf per well and we are consistently drilling wells in under 20 days. With 3D we are able to stay in section 98% of the lateral and are able to approve – avoid minor faulting that can steal frac energy or potentially serve as a conduit to excessive water production. We would not consider drilling projects in the Gulf Coast, Gulf of Mexico and Woodford without fully integrating 3D into geologic and reservoir model. We believe that we are able to substantially reduce the variability of our well results and costs in the Mississippi Lime with the 3D integration.
There are 12 to 15 rigs active near our three acreage positions and we will be able to access most of well data production history through our consortium and will therefore be able to enhance our best practices, well and completion designs as they improve.
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