<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from: to:
Commission file number: 019020
------------------------
PETROQUEST ENERGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 98-0115468
(State of Incorporation) (I.R.S. Employer Identification No.)
625 E. KALISTE SALOOM RD., LAFAYETTE, LOUISIANA 70508
(Address of principal executive offices) (Zip code)
------------------------
Registrant's telephone number, including area code: (318) 232-7028
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
As of May 17, 1999 there were 18,537,347 shares of the Registrant's
Common Stock, par value $.001 per share, outstanding.
<PAGE> 2
PETROQUEST ENERGY, INC.
INDEX
<TABLE>
<CAPTION>
Page
Part I
<S> <C> <C>
Item 1. Financial Statements:
Consolidated Balance
Sheets as of March 31, 1999
and December 31,1998....................................... 3
Consolidated Statements of
Operations for the three-month periods ended
March 31, 1999 and 1998.................................... 4
Consolidated Statements of Stockholders' Equity............... 5
Consolidated Statements of
Cash Flows for the three months
ended March 31, 1999 and 1998.............................. 6
Notes to Consolidated Financial Statements.................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 10
Part II
Item 3. Quantitative and Qualitative disclosures about market risk...... 14
Item 4. Submission of matters to a vote of security holders............. 14
Item 5 Other Information............................................... 15
Item 6. Exhibits and Reports on Form 8-K................................ 15
</TABLE>
2
<PAGE> 3
PETROQUEST ENERGY, INC.
Consolidated Balance Sheets
(amounts in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
------ ------------ ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 1,448 $ 1,081
Accounts Receivable 2,718 1,016
Other Current Assets 78 177
------------ ------------
Total Current Assets 4,244 2,274
------------ ------------
Oil and Gas Properties
Oil and Gas Properties, Full Cost Method 45,858 42,755
Unevaluated Oil and Gas Properties 5,387 5,747
Accumulated Depreciation,
Depletion and Amortization (31,942) (31,079)
------------ ------------
Net Oil and Gas Properties 19,303 17,423
Plugging and Abandonment Escrow 94 221
Other Assets 316 148
------------ ------------
$ 23,957 $ 20,066
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable & Accrued Liabilities $ 5,280 $ 2,330
Current Portion of Long-Term Debt 2,300 2,400
------------ ------------
Total Current Liabilities 7,580 4,730
------------ ------------
Accounts Payable to be Refinanced 2,004 --
Long-term Debt 800 1,300
Other Liabilities 700 700
Stockholders' Equity
Common Stock 19 19
Paid-in Capital 43,795 43,795
Accumulated Deficit (30,941) (30,478)
------------ ------------
Total Stockholders' Equity 12,873 13,336
------------ ------------
$ 23,957 $ 20,066
============ ============
</TABLE>
The accompanying notes are an integral part of these
statements.
3
<PAGE> 4
PETROQUEST ENERGY, INC.
Consolidated Statements of Operations
(Unaudited)
(amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1999 1998
------------ ------------
Revenues:
<S> <C> <C>
Oil and Gas Sales $ 1,217 $ 600
Interest Income 20 67
------------ ------------
1,237 667
------------ ------------
Expenses:
Lease Operating Expenses 408 236
Production Taxes 64 66
Depreciation, Depletion and Amortization 886 610
General and Administrative Expenses 283 270
Interest Expense 69 --
Foreign Exchange (Gain)/Loss (10) 172
------------ ------------
1,770 1,354
------------ ------------
Net Loss $ (463) $ (687)
============ ============
Loss Per Common Share
Basic $ (0.02) $ (0.06)
============ ============
Diluted $ (0.02) $ (0.06)
============ ============
Average shares outstanding 18,537,347 11,002,346
============ ============
Average shares outstanding assuming dilution 18,537,347 11,002,346
============ ============
</TABLE>
The accompanying notes are an integral part of these
statements.
4
<PAGE> 5
PETROQUEST ENERGY, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
Total
Common Paid-In Accumulated Stockholders'
Stock Capital Deficit Equity
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998 $ 19 $ 43,795 $ (30,478) $ 13,336
Net Loss -- -- (463) (463)
------------ ------------ ------------ ------------
March 31, 1999 $ 19 $ 43,795 $ (30,941) $ 12,873
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (Loss) $ (463) $ (687)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation, Depletion and Amortization 886 610
Changes in Working Capital Accounts:
Accounts Receivable (1,702) 245
Other Current Assets 99 --
Loan Receivable -- (594)
Accounts Payable & Accrued Liabilities 2,950 (145)
Plugging and Abandonment Escrow 127 499
Other (191) (42)
---------- ----------
Net Cash Provided By (Used in) Operating Activities 1,706 (114)
---------- ----------
Cash flows from Investing Activities:
Investment in Oil and Gas Properties (2,743) (325)
---------- ----------
Net Cash (Used in) Investing Activities (2,743) (325)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from Borrowings 2,004 --
Repayment of Debt (600) (1)
---------- ----------
Net Cash Provided by Financing Activities 1,404 (1)
---------- ----------
Net Increase (Decrease) in Cash 367 (440)
Cash Balance Beginning of Period 1,081 3,955
---------- ----------
Cash Balance End of Period $ 1,448 $ 3,515
========== ==========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 69 $ 2
========== ==========
</TABLE>
The accompanying notes are an integral part of these
statements.
6
<PAGE> 7
PETROQUEST ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL STATEMENTS -
The consolidated financial statements of PetroQuest Energy, Inc. (the
"Company") at March 31, 1999 and for the three-month periods then ended are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position and operating results for the interim
period. The financial statements reflect the results of the Company and its
predecessor entity, Optima Petroleum Corporation ("Optima"), for all periods
presented. The consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto, together with
management's discussion and analysis of financial condition and results of
operations, contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998. The results of operations for the three-month period
ended March 31, 1999 are not necessarily indicative of future financial
results. Certain prior period amounts have been reclassified to conform to
current period presentation.
NOTE 2 - MERGER OF OPTIMA (U.S.) ENERGY CORPORATION -
On September 1, 1998, the Company completed its transaction to merge
its wholly owned subsidiary Optima Energy (U.S.) Corporation with American
Explorer, L.L.C. (American). Concurrent with the transaction, the Company
became a Delaware corporation and converted each share of Optima no par value
common stock into one share of the Company's $.001 par value common stock and
changed its name from Optima Petroleum Corporation to PetroQuest Energy, Inc.
American conducted oil and natural gas exploration activities in the Gulf Coast
Region.
Under the terms of the transaction, American merged with the Company
in exchange for 7,335,001 shares of the Company's common stock, issued to the
three former members of American, representing about 40% of the post
acquisition shares outstanding. Additionally, the Company issued 1,667,001
contingent stock rights exchangeable for common shares should the market share
price of the Company's common stock exceed $5 per share for 20 consecutive
trading days during the three year term of the rights. The rights terminate on
September 1, 2001.
The transaction was treated as a purchase for accounting purposes. No
value was assigned to the contingent stock rights. The purchase price of
approximately $10.6 million was allocated to the assets and liabilities based
on estimated fair value.
The operating results of American have been consolidated in the
Company's statement of operations since September 1, 1998. The following
summarized unaudited income statement data reflects the impact the transaction
would have had on the Company's results of operations for the three months
ended March 31, 1999 and 1998 had the transaction occurred January 1, 1998.
7
<PAGE> 8
<TABLE>
<CAPTION>
Proforma Results for the
Three Months Ended March 31,
---------------------------------
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Revenues $ 1,237 $ 2,315
============= =============
Net Loss $ (463) $ (1,110)
============= =============
Loss per common share:
Basic $ (0.02) $ (0.06)
============= =============
Diluted $ (0.02) $ (0.06)
============= =============
</TABLE>
NOTE 3 - EARNINGS PER SHARE -
Basic net income per share of common stock was calculated by dividing
net income applicable to common stock by the weighted-average number of common
shares outstanding during the periods. For both periods, all options were
excluded from the computation of diluted loss per share because they were
antidilutive. The contingent stock rights assigned in connection with the
merger are excluded from the calculation of diluted earnings per share.
NOTE 4 - LONG-TERM DEBT -
In April 1999, the Company's borrowing base was redetermined and set
at $3,350,000. It reduces $150,000 on May 1, 1999 and June 1, 1999. Beginning
July 1, 1999 and continuing on the first day of each month thereafter, the
borrowing base shall be reduced by $250,000. The next redetermination is
scheduled for August 1, 1999. Interest under the loan is payable monthly at
prime plus 1/2% (8 1/4 at March 31, 1999).
On April 21, 1999, the Company entered into a loan agreement for
non-recourse financing to fund completion, flow line and facility costs of its
High Island Block 494 property. The property is security for the loan. Interest
is payable at 12% and the lender receives a 2 1/2% overriding royalty interest
in the property. For the first two production months, all of the cash flow from
the property will be dedicated to payment of principal and interest on the
loan. Subsequently, 85% of the cash flow from the property (assuming certain
production levels) will be dedicated to debt service. At March 31, 1999,
$2,004,000 of vendor payables related to the completion, flow line and
facilities of the well at High Island 494 are classified as long-term since
they were subsequently funded through this facility.
NOTE 5 - NEW ACCOUNTING STANDARDS -
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for reporting and
display of comprehensive income in the financial statements. Comprehensive
income is the total of net income and all other non-owner changes in equity.
SFAS No. 131 requires that companies disclose segment data based on how
management makes decisions about allocating resources to segments and measuring
their performance. SFAS Nos. 130 and 131 are effective for 1998. The Company
adopted these standards in 1998 with no effect on the Company's financial
statements, financial position or results of operations.
8
<PAGE> 9
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards that require every derivative instrument (including certain
derivative instruments embedded in other contracts) to be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15,
1999 and must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued, acquired,
or substantively modified after December 31, 1997 (and, at the company's
election, before January 1, 1998).
Because the Company does not currently use derivative instruments, the
adoption of SFAS No. 133 will not impact the Company's financial statements.
NOTE 6 - RELATED PARTY TRANSACTIONS -
In conjunction with the merger discussed at Note 2, the employees and
consultants of Optima were terminated. American had no employees. It was
managed and its properties (and certain of Optima's properties) were operated
by American Explorer, Inc. (AEI), a corporation owned by two officers of the
Company and former members of American. From September 1, 1998 through December
31, 1998, the Company's properties were operated by AEI and certain management
functions were performed by AEI. The officers of AEI are also the officers of
the Company. AEI charged the Company a management fee to cover its costs of
services for the Company ($600,000 for the four months ended December 31,
1998). At December 31, 1998, the Company owed AEI approximately $1,053,000.
This amount is included in Accounts Payable. Effective January 1, 1999, the
Company assumed the operating and management functions from AEI, whose
employees became employees of the Company.
9
<PAGE> 10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
PetroQuest Energy, Inc. is an independent oil and gas company engaged
in the development, exploration, acquisition and operation of oil and gas
properties onshore and offshore in the Gulf Coast Region. The Company and its
predecessors have been active in this area since 1986, which gives the Company
extensive geophysical, technical and operational expertise in this area. The
Company's business strategy is to increase production, cash flow and reserves
through exploration, development and acquisition of properties located in the
Gulf Coast Region.
MERGER OF OPTIMA (U.S.) ENERGY CORPORATION -
On September 1, 1998, the Company completed the transaction to merge
its wholly owned subsidiary Optima Energy (U.S.) Corporation with American
Explorer, L.L.C. (American). Concurrent with the transaction, the Company
became a Delaware corporation and converted each share of Optima no par value
common stock into one share of the Company's $.001 par value common stock and
changed its name from Optima Petroleum Corporation to PetroQuest Energy, Inc.
American conducted oil and natural gas exploration activities in the Gulf Coast
Region.
Under the terms of the transaction, American merged with the Company
in exchange for 7,335,001 shares of the Company's common stock, issued to the
three former members of American, representing about 40% of the post
acquisition shares outstanding. Additionally, the Company issued 1,667,001
contingent stock rights exchangeable for common shares should the market share
price of the Company's common stock exceed $5 per share for 20 consecutive
trading days during the three year term of the rights. The rights terminate on
September 1, 2001.
The transaction was treated as a purchase for accounting purposes. No
value was assigned to the contingent stock rights. The purchase price of
approximately $10.6 million was allocated to the assets and liabilities based
on estimated fair value. The purchase price allocation is preliminary and
subject to final review. The operating results of American have been
consolidated in the Company's statement of operations since September 1, 1998.
RESULTS OF OPERATIONS
The following table sets forth certain operating information with
respect to the oil and gas operations of the Company for the three-month
periods ended March 31, 1999 and 1998.
10
<PAGE> 11
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Production:
Oil (Bbls) 22,765 22,292
Gas (Mcf) 510,095 102,107
Total Production (Mcfe) 646,685 235,859
Sales:
Total oil sales $ 237,977 $ 329,490
Total gas sales $ 959,454 $ 253,268
Average sales prices:
Oil (per Bbl) $ 10.45 $ 14.78
Gas (per Mcf) $ 1.88 $ 2.48
Per Mcfe $ 1.85 $ 2.47
</TABLE>
The net loss totaled $463,000 and $687,000 for the quarters ended
March 31, 1999 and 1998, respectively. The reduced loss in 1999 is the result
of the addition of the American properties partially offset by a decline in
product prices.
On a thousand cubic feet equivalent (Mcfe) basis, first quarter 1999
production volumes increased 175% over first quarter 1998 production volumes.
This is due to the merger with American and the addition of the CL&F #12 in the
Turtle Bayou Field. The CL&F #12 was a discovery in the fourth quarter of 1998
which commenced production in December 1998. The properties previously owned by
American produced 341,000 Mcfe during this quarter and the CL&F #12 produced
88,000 Mcfe.
Oil and gas sales during the first quarter of 1999 increased 103% to
$1,200,000, as compared to first quarter 1998 revenues of $600,000. The
production increases discussed above were partially offset by decreased product
prices. Prices received during the first quarter of 1999 averaged $10.45 per
barrel of oil and $1.88 per Mcf of gas, as compared to averages of $14.78 per
barrel and $2.48 per Mcf received in the 1998 period. Stated on a Mcfe basis,
unit prices received during the first quarter of 1999 were 25% lower than the
prices received during the comparable 1998 period.
Operating expenses for the first quarter of 1999 increased to $408,000
from $236,000 during the first quarter of 1998 due primarily to the American
merger and the addition of the related properties. On a Mcfe basis, operating
expenses decreased from $1.00 per Mcfe in 1998 to $0.63 in 1999.
General and administrative expenses during the first quarter of 1999
totaled $283,000 as compared to expenses of $270,000 during the 1998 quarter.
Not included in the 1999 amount is $373,000 which was capitalized as related
directly to the acquisition, exploration and development effort. Total general
and administrative costs increased in 1999 due to the additional staffing
levels related to the generation and operation of properties.
Interest expense increased due to the addition of the debt associated
with the American merger.
11
<PAGE> 12
Depreciation, depletion and amortization ("DD&A") expense for the
three months ended March 31, 1999 increased 45% from the 1998 period. This
resulted from the additions to property cost on the balance sheet for the
American properties. On a Mcfe basis, which reflects the changes in production,
the DD&A rate for the first three months of 1999 was $1.37 per Mcfe compared to
$2.54 per Mcfe for the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Cash Flow. Working capital (before considering the
current portion of debt) decreased from $0.1 million deficit at December 31,
1998 to $1 million at March 31, 1999. This was caused primarily by funds
expended for principal payments on debt and oil and gas properties.
In April 1999, the Company's borrowing base of its reducing revolving
line of credit was redetermined and set at $3,350,000. It reduces $150,000 on
May 1, 1999 and June 1, 1999. Based on the loan balance at March 31, 1999,
$50,000 of principal payments will be required during the second quarter
assuming no additional draws under the line. Thereafter, the line will reduce
$250,000 per month until the next redetermination at August 1, 1999.
On April 21, 1999, the Company entered into a loan agreement for
non-recourse financing to fund completion, flow line and facility costs of its
High Island Block 494 property. Interest is payable at 12% and the lender
receives a 2 1/2% overriding royalty interest in the property which is security
for the loan. For the first two production months, all of the cash flow from
the property will be dedicated to payment of principal and interest on the
loan. Subsequently, 85% of the cash flow from the property (assuming certain
production levels) will be dedicated to debt service.
Net cash flow from operations before working capital changes increased
for the first quarter of 1999 to $423,000 compared to negative $77,000 for
1998. This was the result of the addition of the American properties and the
CL&F #12 discovery in the Turtle Bayou Field.
The Company's liquidity has been adversely affected by declines in
prices received for sales of oil and gas production. In order to fund its cash
requirements for continued oil and gas exploration activities, operations and
debt service, the Company plans to raise private capital and to fund a
substantial portion of its anticipated capital expenditures through drilling
ventures with industry partners; however, there can be no assurance that such
plans will be successful. Private capital may involve the sale of equity, which
will dilute current stockholders. If the Company is unable to obtain additional
financing, it could be forced to delay or even abandon some of its exploration
and development opportunities. Furthermore, the Company may be required to sell
some of its producing properties in order to provide needed liquidity.
On May 5, 1999 the Company received notice from the Nasdaq Stock
Market, Inc. ("Nasdaq") that because it does not meet the $1.00 per share
closing bid standard as required by Nasdaq, it will no longer be listed for
trading on that system. The Company was immediately eligible for trading in the
over-the-counter market on an electronic bulletin board established for
securities that do not meet the Nasdaq listing requirements. The Company
intends to request the Nasdaq Listing and Hearing Review Council review this
decision. However, this request and potential review will not operate to stay
the Nasdaq decision and there can be no assurances the Company will be
successful in its appeal. The Company's listing on the Toronto Stock Exchange
was not affected.
12
<PAGE> 13
Year 2000 Compliance. During 1998, the Company's executive management
and Board of Directors implemented a program to identify, evaluate and address
the Company's Year 2000 ("Y2K") risks to ensure that all its Information
Technology ("IT") Systems and Non-IT Systems will be able to process dates from
and after January 1, 2000 without critical systems failure. In addition to
evaluating its own systems, the Company will also assess the Y2K risks
associated with its significant customers and suppliers.
The Company is currently evaluating its IT Systems for Y2K compliance.
As part of this evaluation, the Company has contracted third-party consultants
to assist in the identification and replacement of non-compliant IT Systems.
During 1998, the Company began modification of IT Systems for Y2K compliance.
The modifications are planned to be completed in the second quarter of 1999.
The Non-IT Systems are currently being assessed to determine which
systems would be affected by Y2K issues. Once assessment is completed, any
necessary replacements or modifications will be performed. Management believes
that any Non-IT issues will be minor and should be corrected by first quarter
of 1999.
The assessment of third parties has the primary purpose of determining
any disruptions in operations due to non-compliance by an outside organization.
This will be determined by contacting the Company's suppliers and customers to
determine their level of Y2K compliance and the steps they are taking towards
compliance. These assessment and corrective measures are scheduled for
completion during the second quarter of 1999.
Total costs incurred to-date and estimated remaining costs for
consultants software and hardware applications for Y2K compliance is
approximately $35,000. The Company does not separately account for the internal
costs incurred for its Y2K Compliance efforts. The costs of these projects and
the dates on which the Company plans to complete modifications and replacements
are based on managements' best estimates, the estimates of third-party
specialists assisting the Company, the modification plans of third-parties and
other factors. There can be no guarantee that these estimates will be achieved
and actual results could differ materially from those plans.
Based on preliminary risk assessments, the Company believes the most
likely Y2K related failure would be a temporary disruption in certain materials
and services provided by third-parties, which would not be expected to have a
material adverse effect on the Company's financial condition or results of
operations. If during its assessment it is determined that Y2K related failure
would have a material adverse effect on the Company, contingency plans will be
developed. There can be no assurance that the Company will not be materially
adversely affected by Y2K problems.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Report includes certain statements that may be deemed to be
"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
facts, included in this Report that address activities, events or developments
that the Company expects, believes or anticipates will or may occur in the
future, including drilling of wells, reserve estimates, future production of
oil and gas, future cash flows and other such matters are
13
<PAGE> 14
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions, expected future developments and
other factors it believes are appropriate under the circumstances. Such
forward-looking statements are subject to certain risks, uncertainties and
other factors, many of which are beyond the control of the Company, which could
cause actual results to differ materially from those currently anticipated.
These factors include, without limitation, the numerous uncertainties inherent
in estimating quantities of proven oil and gas reserves and in projecting
future rates of production and timing of development expenditures which may
vary significantly from reserves and production estimates; the results of
exploratory and developmental drilling; operating hazards attendant to the oil
and gas business, including downhole drilling and completion risks that are
generally not recoverable from third parties or insurance; actions or inactions
of third-party operators of the Company's properties; lease and rig
availability; the successful identification, acquisition and development of
properties; changes in the price received for oil and/or gas which may effect
results of operations and cash flows; the demand for and supply of gas and oil;
the weather; pipeline capacity; general economic conditions; governmental
regulation; changes in interest rates; the Company's ability to find and retain
skilled personnel; labor relations; Year 2000 compliance by the Company and
third parties; competitors of the Company having greater resources than those
of the Company; or other unanticipated external developments materially
impacting the Company's operational and financial performance. Readers are
cautioned that any such statements are not guarantees of future performance and
the Company can give no assurances that actual results or developments will not
differ materially from those projected in the forward-looking statements.
Stockholders, potential investors and other readers are urged to consider these
factors carefully in evaluating the forward-looking statements and are
cautioned not to place undue reliance on such forward-looking statements. The
forward-looking statements made herein are only made as of the date of this
Report and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
PART II
Item 3. DISCLOSURE ABOUT MARKET RISKS
The Company's indebtedness under its line of credit is variable
rate financing. The Company believes that its exposure to market risk relating
to interest rate risk is not material. The Company believes that its business
operations are not exposed to market risks relating to foreign currency
exchange risk or equity price risk.
Price Risk
The Company's revenues are derived from the sale of its crude oil
and natural gas production. Based on projected annual sales volumes for the
remaining nine months of 1999, a 10% decline in the prices the Company receives
for its crude oil and natural gas production would have an approximate $600,000
impact on the Company's revenues.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
14
<PAGE> 15
Item 5 OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial data schedule
(b) The Company filed a Form 8-K on May 7, 1999 reporting that
its securities ceased trading on the NASDAQ Stock Market
effective on the close of business, Wednesday, May 5, 1999.
The Company's stock was immediately eligible to trade on
the OTC Bulletin Board and its listing on the Toronto Stock
Exchange was not affected.
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 thereunto duly authorized.
PETROQUEST ENERGY, INC.
Date: May 17, 1999 By: /s/ Robert R. Brooksher
-----------------------------------
Robert R. Brooksher
Chief Financial Officer and Secretary
(Authorized Officer and Principal
Financial Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,448,000
<SECURITIES> 0
<RECEIVABLES> 2,718,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,244,000
<PP&E> 51,245,000
<DEPRECIATION> 31,942,000
<TOTAL-ASSETS> 23,957,000
<CURRENT-LIABILITIES> 7,580,000
<BONDS> 2,804,000
0
0
<COMMON> 19,000
<OTHER-SE> 12,854,000
<TOTAL-LIABILITY-AND-EQUITY> 23,957,000
<SALES> 1,217,000
<TOTAL-REVENUES> 1,237,000
<CGS> 0
<TOTAL-COSTS> 408,000
<OTHER-EXPENSES> 1,293,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,000
<INCOME-PRETAX> (463,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (463,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (463,000)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
