PetroQuest Energy, Inc (PQUE and T.PQU) Message Board

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Gold/Mining/Energy : PetroQuest Energy, Inc (PQUE and T.PQU)

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To: Dave M who wrote (46)	5/15/1997 10:37:00 PM
From: Ed Ajootian	of 686

Dave, They had to take a 7 BCF writedown of their gas reserves up in Canada and a 6 BCF writedown in their Turtle Bayou field in Louisiana. This is what caused the decrease in gas reserves. Without the writedowns they would have finished with 33.4 BCF of gas, essentially flat with last year. This makes sense since their big claim to fame last year, the East Cameron field, is virtually all oil and little gas. Because of the above problems they certainly did go backwards in '96. That is why the stock tanked by about 1/3 over the year. When you look at the cash flow numbers it looks pretty good (C$.54 in '96 vs. C$.23 in '95) but the question of the day is how much of that C$.54 in cash flow went south with the problems they had in Turtle Bayou and Wildhay? Fortunately we won't have long to wait since the 1st quarter numbers should be out any day now and how they did vs. 4th quarter will tell us what the deal is. They produced 135,000 BOE (converting gas to oil at a 10:1 rate) for 4th quarter and they have estimated that they produced 130,000 for 1st quarter. As long as the actual results are somewhere close to this number the stock should rally a bit. This is because we already know that they have added about 25,000 BOE from the wells they put on line late in the 1st quarter and this is a significant improvement to the company's production. I feel that overall the management has let us down. They were not aggressive enough over this last year in developing their projects or getting into new ones. Their response to this would be that they are not the operators and therefore can't do anything to move the project along. Also there is an industry-wide shortage of drilling rigs. If that's the case then they need to get into more projects IMO. For 1996 they barely spent their cash flow in exploration & production work. For 1997 they have budgeted substantially less than their expected cash flow for such expenditures. To me there is no excuse for this. There are plenty of quality deals out there. The only thing that could salvage this company at this point is a blockbuster deal to sell and/or farm out their Wildhay property in Canada, and then they use that money for some greater good, whether it be exploring in Trinidad, buying back stock, or whatever. I have largely given up on this company and although I still own it my position is only a shadow of its former self. Right now there are too many other O&G microcaps doing much more exciting things and growing much more quickly.

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