I would imagine the presentation went something like this:
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 acquisition, exploration, development 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. At June 30, 2000, the Company operated 74% of all wells in which it participated. For the six months ended June 30, 2000, approximately 20% of the Company's equivalent production is oil and 80% is gas. Before year-end, the Company plans to drill six new wells, two of which are offshore.
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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 and six-month periods ended June 30, 2000 and 1999.
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
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Production:
Oil (Bbls) 34,112 19,629 68,341 42,394
Gas (Mcf) 829,085 560,209 1,660,105 1,070,304
Total production (Mcfe) 1,033,757 677,983 2,070,151 1,324,668
Revenues:
Total oil sales $ 887,807 $ 322,211 $1,826,930 $ 560,188
Total gas sales 2,915,637 1,190,820 5,075,255 2,150,274
Average Sales Prices:
Oil (per Bbl) $ 26.03 $ 16.42 $ 26.73 $ 13.21
Gas (per Mcf) 3.52 2.13 3.06 2.01
Per Mcfe 3.68 2.23 3.33 2.05
The net income (loss) totaled $1,036,000 and $(795,000) for the quarters ended June 30, 2000 and 1999, respectively. Net income for the six months ended June 30, 2000 was $1,666,000 as compared to net loss of $(1,258,000) for the first six months of 1999. The positive results are due to the following components:
PRODUCTION. Oil produced in 2000 increased 74% and 61% over the second quarter and six months ended 1999, respectively. Natural gas produced in 2000 increased 48% and 55% over the second quarter and six months ended 1999, respectively. On a Mcfe basis, 2000 production for the second quarter and six months increased 52% and 56%, respectively, over 1999.
The increase in 2000 production volumes, as compared to 1999, was due primarily to three new wells that were not producing in 1999. CL&F#13 and CL&F#14 at Turtle Bayou and Valentine Sugars #1 came on-line in October 1999, December 1999, and May 2000, respectively. Oil production in the first half of 2000 was also boosted by the Company's Bully Camp Field, which was shut-in the first half of 1999 due to low product prices.
PRICES. Average oil prices for the second quarter and six months ended June 30, 2000 were $26.03 and $26.73, respectively, as compared to $16.42 and $13.21 for the same periods in 1999. Average gas prices were $3.52 and $3.06 for the second quarter and six months ended 2000, respectively, as compared to $2.13 and $2.01 for the same periods in 1999. Stated on a Mcfe basis, unit prices received during the second quarter and the first six months of 2000 were 65% and 62% higher, respectively, than the prices received during the comparable 1999 period.
REVENUE. Oil and gas sales during the second quarter of 2000 increased 150% to $3,803,000, as compared to second quarter 1999 revenues of $1,513,000. For the first six months of 2000, oil and gas sales increased 155% to $6,902,000, compared to oil and gas revenues of $2,710,000 during the 1999 period. The strong rise in product prices coupled with the growth in production volumes resulted in significant increases in revenue.
EXPENSES. Lease operating expenses for the second quarter of 2000 increased to $694,000 from $567,000 during the second quarter of 1999. Lease operating expenses for the six months ended June 30, 2000 increased to $1,297,000 from $975,000 during the six months ended June 30, 1999. The rise in lease operating expenses for 2000 is primarily due to the three new wells that began operating after June 30, 1999, and workovers in the Valentine and Deer Island Fields. On a Mcfe basis, lease operating expenses for the second quarter decreased from $0.84 per Mcfe in 1999 to $0.67 in 2000 and from $0.74 per Mcfe in 1999 to $0.62 in 2000 for the first six months due to increased production volumes with nominal increases in operating costs.
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General and administrative expenses during the second quarter of 2000 totaled $739,000 as compared to expenses of $428,000 during the 1999 quarter. For the six months ended June 30, 2000 general and administrative expenses were $1,341,000 compared to $711,000 in 1999. The increases in overhead expenses are primarily due to a 25% increase in personnel due to increased activity in 2000. In addition, the Company expensed $240,000 for fees and expenses related to a mezzanine debt financing, which was not completed in favor of the Company's successfully completed private placement.
Depreciation, depletion and amortization ("DD&A") expense for the six months ended June 30, 2000 increased 17% from the 1999 period. The rise in DD&A is due to bringing the three new wells on-line. On a Mcfe basis, which reflects the changes in production, the DD&A rate for the first six months of 2000 was $1.13 per Mcfe compared to $1.52 per Mcfe for the same period in 1999. For the second quarter of 2000, DD&A per Mcfe was $1.16 compared to $1.66 for the comparable period in 1999. The reduction in per unit of DD&A is due to reserve additions at Valentine and Turtle Bayou Fields and Vermilion Block 376.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL AND CASH FLOW. For the first six months of 2000, working capital (before considering the current portion of debt) increased from $1.6 million in 1999 to $4.1 million in 2000. The increase in working capital is primarily the result of improved operating results and the private placement of common stock partially offset by expenditures for exploration and development.
The Company's borrowing base under the reducing revolving line of credit at June 30, 2000 was $3,550,000 and reduces $225,000 per month on the first day of each month. At June 30, 2000, $3,100,000 was outstanding under this facility. The next borrowing base redetermination is scheduled for August 2000. Interest under the loan is payable monthly at prime plus 1/2% (10% at June 30, 2000). Amounts outstanding under this line of credit were paid in July with proceeds received from the private placement.
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 three production months, all of the net cash flow from the property was dedicated to payment of principal and interest on the loan. Subsequently, 85% of the net cash flow from the property (assuming production levels of 12.5 MMcf/day) is dedicated to debt service. The well began producing during the first part of July 1999. $1,763,000 remains outstanding under this loan at June 30, 2000.
Net cash flow from operations before working capital changes increased from $754,000 in 1999 to $4,128,000 in 2000. This is the result of increased production due to the Company's successful drilling program and higher product prices.
The Company filed a Form 8-K on July 21, 2000, reporting funding of a private placement of 4.89 million shares of common stock at a purchase price of $2.50 per share for a total consideration of $12,225,000 before fees and expenses. The Company received proceeds of $10,000,000 before fees and expenses by June 30, 2000 and recorded an additional $1,182,250 of common stock subscription receivables in the accompanying balance sheet. These subscriptions were paid on July 20, 2000. The proceeds from the private placement will be used to build and install production facilities, and for development drilling and completion activities.
Management believes the funds received from the private placement, cash flows from operations and additional borrowing capacity will be sufficient in the near term to fund exploration and development activities. In the future, our exploration activities could require additional financings, which may include sales of additional equity or debt securities, additional bank borrowings or joint venture arrangements with industry partners. There can be no assurances that such additional financings will be available on acceptable terms, if at all. 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.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts included in and incorporated by reference into this Form 10Q are forward-looking statements. These forward-looking statements include, without limitation, statements regarding the Company's estimate of the sufficiency of its existing capital resources and its ability to raise additional capital to fund
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cash requirements for future operations, and regarding the uncertainties involved in estimating quantities of proved oil and natural gas reserves and in projecting future rates or production and timing of development expenditures. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it cannot give any assurance that such expectation reflected in these forward-looking statements will prove to have been correct.
When used in the Form 10-Q, the words, "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons, including those discussed under "Management's Discussions and Analysis of Financial Condition and Results of Operations", and elsewhere in this Form 10-Q.>>> |
