Company Quick10K Filing
PetroQuest Energy
Price1.00 EPS-0
Shares9 P/E-3
MCap9 P/FCF1
Net Debt-17 EBIT-3
TEV-7 TEV/EBIT2
TTM 2019-06-30, in MM, except price, ratios
10-Q 2019-06-30 Filed 2019-08-12
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-03-28
10-Q 2018-09-30 Filed 2018-11-13
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-03-08
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-08-04
10-Q 2017-03-31 Filed 2017-05-04
10-K 2016-12-31 Filed 2017-03-09
10-Q 2016-09-30 Filed 2016-11-04
10-Q 2016-06-30 Filed 2016-08-03
10-Q 2016-03-31 Filed 2016-05-04
10-K 2015-12-31 Filed 2016-03-04
10-Q 2015-09-30 Filed 2015-11-03
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-06
10-K 2014-12-31 Filed 2015-03-06
10-Q 2014-09-30 Filed 2014-11-04
10-Q 2014-06-30 Filed 2014-08-05
10-Q 2014-03-31 Filed 2014-05-07
10-K 2013-12-31 Filed 2014-03-05
10-Q 2013-09-30 Filed 2013-11-06
10-Q 2013-06-30 Filed 2013-08-06
10-Q 2013-03-31 Filed 2013-05-08
10-K 2012-12-31 Filed 2013-03-11
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-07
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-05
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-05
10-K 2010-12-31 Filed 2011-02-28
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-05
10-Q 2010-03-31 Filed 2010-05-05
10-K 2009-12-31 Filed 2010-02-26
8-K 2019-06-21
8-K 2019-06-19
8-K 2019-02-08
8-K 2019-01-31
8-K 2019-01-14
8-K 2018-12-18
8-K 2018-11-06
8-K 2018-11-05
8-K 2018-10-31
8-K 2018-10-19
8-K 2018-10-05
8-K 2018-09-28
8-K 2018-09-14
8-K 2018-08-31
8-K 2018-08-15
8-K 2018-08-06
8-K 2018-07-31
8-K 2018-07-10
8-K 2018-06-21
8-K 2018-05-16
8-K 2018-05-07
8-K 2018-05-07
8-K 2018-04-17
8-K 2018-03-05
8-K 2018-02-20
8-K 2018-01-31

PQ 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation
Note 2 - Going Concern
Note 3 - Emergence From Chapter 11 Reorganization
Note 4 - Fresh Start Accounting
Note 5 - Acquisitions and Divestitures
Note 6 - Equity
Note 7 - Earnings per Share
Note 8 - Share - Based Compensation
Note 9 - Long - Term Debt
Note 10 - Asset Retirement Obligation
Note 11 - Derivative Instruments
Note 12 - Fair Value Measurements
Note 13 - Income Taxes
Note 14 - Other Comprehensive Income
Note 15 - Revenue Recognition
Note 16 - Leases
Item 2.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 pq6301910qex311.htm
EX-31.2 pq6301910qex312.htm
EX-32.1 pq6301910qex321.htm
EX-32.2 pq6301910qex322.htm

PetroQuest Energy Earnings 2019-06-30

Balance SheetIncome StatementCash Flow
795583371159-53-2652012201420172020
Assets, Equity
25191372-32016201720182020
Rev, G Profit, Net Income
23514759-29-117-2052012201420172020
Ops, Inv, Fin

10-Q 1 pq6301910q.htm 10-Q Document

UNITED STATES
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 June 30, 2019
OR
¨
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: 001-32681
PETROQUEST ENERGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
 
72-1440714
(State of Incorporation)
 
(I.R.S. Employer
Identification No.)
400 E. Kaliste Saloom Rd., Suite 6000
Lafayette, Louisiana
 
70508
(Address of principal executive offices)
 
(Zip code)
337-232-7028
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
N/A
N/A
N/A
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  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
x
Smaller reporting company
x
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 
 
 


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No ¨
As of August 2, 2019, the registrant had outstanding: 9,371,120 shares of Class A Common Stock, par value $0.01 per share; one share of Class B Common Stock, par value $0.01 per share; and one share of Class C Common Stock, par value $0.01 per share.

 
 
 


PETROQUEST ENERGY, INC.
Table of Contents
 
 
Page No.
Part I. Financial Information
 
 
 
Item 1. Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Forward-Looking Statements
This Quarterly Report on Form 10-Q (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 this Form 10-Q are forward looking statements. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected.
Among those risks, trends and uncertainties are:
our ability to remain in compliance with a significant financial ratio under our Exit Facility (as defined below);
risks and uncertainties associated with our previous Chapter 11 proceedings;
the likelihood that our Chapter 11 proceedings may have disrupted our business;
the possibility that the assumptions and analyses used to develop our Chapter 11 plan of reorganization may prove to have been incorrect;
the likelihood that our historical financial information may no longer be indicative of our future financial performance;
the possibility that our new board of directors (the “Board”) may have a different strategy and plan for the Company's future;
our ability to attract and retain key personnel may be affected by our emergence from bankruptcy;
the volatility of oil and natural gas prices;
our indebtedness and the amount of cash required to service our indebtedness;
our ability to obtain adequate financing when the need arises to execute our long-term strategy and to fund our planned capital expenditures;
limits on our growth and our ability to finance our operations, fund our capital needs and respond to changing conditions imposed by the Term Loan Agreement dated as of February 8, 2019, by and among PQE (as defined below), as borrower, the Company, as parent, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent (the “Exit Facility”) and restrictive debt covenants;
the effects of a financial downturn or negative credit market conditions on our liquidity, business and financial condition;
our responsibility for offshore decommissioning liabilities for offshore interests we no longer own;
our ability to find, develop, produce and acquire additional oil and natural gas reserves that are economically recoverable;
the risk of severe weather, including hurricanes and tropical storms, as well as flooding, coastal erosion and sea level rise;
our ability to successfully develop our inventory of undeveloped acreage;
the possibility of a substantial lease renewal cost or the loss of our leases and prospective drilling opportunities that could result from a failure to drill sufficient wells to hold our undeveloped acreage;
Securities and Exchange Commission (the "SEC") rules that could limit our ability to book proved undeveloped reserves in the future;
the likelihood that our actual production, revenues and expenditures related to our reserves will differ from our estimates of proved reserves;
our ability to identify, execute or efficiently integrate future acquisitions;
losses and liabilities from uninsured or underinsured drilling and operating activities;
ceiling test write-downs resulting, and that could result in the future, from lower oil and natural gas prices;

1


our ability to market our oil and natural gas production;
changes in laws and governmental regulations and increases in insurance costs or decreases in insurance availability directed toward our business;
regulatory initiatives relating to oil and natural gas development, hydraulic fracturing, and derivatives;
proposed changes to U.S. tax laws;
competition from larger oil and natural gas companies;
the operating hazards attendant to the oil and gas business;
governmental regulation relating to environmental compliance costs and environmental liabilities;
the impact of potential cybersecurity threats;
the loss of our information and computer systems;
the impact of terrorist activities on global economies;
the possibility that the interests of our significant stockholders could be in conflict with the interest of our other stockholders;
no meaningful trading market for our Class A common stock, par value $0.01 per share (the “Class A Common Stock”) and the volatility of the market price for our Class A Common Stock;
the restrictions in our certificate of incorporation and bylaws which could delay or prevent a change of control of our company; and
the restrictions on our ability to pay dividends with respect to any series of common stock.
Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot assure you that the expectations reflected in our forward looking statements will prove to have been correct.
When used in this 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 Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and elsewhere in this Form 10-Q.
You should read these statements carefully because they discuss our expectations about our future performance, contain projections of our future operating results or our future financial condition, or state other “forward-looking” information. You should be aware that the occurrence of any of the events described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and elsewhere in this Form 10-Q and under “Item 1A. Risk Factors” in the Annual Report on Form 10-K for the Year Ended December 31, 2018 (the “Form 10-K”) could substantially harm our business, results of operations and financial condition and that upon the occurrence of any of these events, the trading price of our Class A Common Stock could decline, and you could lose all or part of your investment.
We cannot guarantee any future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update any of the forward-looking statements in this Form 10-Q after the date of this Form 10-Q.
As used in this Form 10-Q, the words “we,” “our,” “us,” and the “Company” refer to PetroQuest Energy, Inc. and its subsidiaries, except as otherwise specified. Furthermore, we may refer to the Company prior to the Effective Date as the “Predecessor,” and on and after the Effective Date as the “Successor.”


2


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
PETROQUEST ENERGY, INC.
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
 
Successor
 
Predecessor
 
June 30,
2019
 
December 31,
2018
 
(unaudited)
 
(Note 1)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
16,292

 
$
34,502

Restricted cash
389

 
389

Revenue receivable
3,848

 
6,364

Joint interest billing receivable
19,085

 
4,716

Deposit for surety bonds
75

 
3,550

Other current assets
1,488

 
3,261

Total current assets
41,177

 
52,782

Property and equipment:
 
 
 
Oil and gas properties:
 
 
 
Oil and gas properties, full cost method
69,344

 
1,361,374

Unevaluated oil and gas properties
126,353

 
23,492

Accumulated depreciation, depletion and amortization
(6,399
)
 
(1,301,592
)
Oil and gas properties, net
189,298

 
83,274

Other property and equipment
321

 
9,282

Accumulated depreciation of other property and equipment
(19
)
 
(9,056
)
Total property and equipment
189,600

 
83,500

Other assets
371

 
1,005

Right of use asset
1,777

 

Total assets
$
232,925

 
$
137,287

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable to vendors
$
28,416

 
$
11,699

Advances from co-owners
3,543

 
2,020

Oil and gas revenue payable
4,132

 
7,765

Accrued interest
289

 
639

Asset retirement obligation
1,525

 
183

Other accrued liabilities
883

 
1,259

       Right of use liability-short-term
921

 

Total current liabilities
39,709

 
23,565

Multi-draw Term Loan
45,727

 
49,738

10% Senior Secured PIK Notes due 2024
68,699

 

Asset retirement obligation
2,597

 
2,297

Deferred income taxes
694

 

Right of use liability-long-term
751

 

Total liabilities not subject to compromise
158,177

 
75,600

Liabilities subject to compromise

 
323,854

Total liabilities
$
158,177

 
$
399,454








3




PETROQUEST ENERGY, INC.
Consolidated Balance Sheets
(Amounts in thousands, except per share data)

 
Successor
 
Predecessor
 
June 30,
2019
 
December 31,
2018
 
(unaudited)
 
(Note 1)
Stockholders’ equity (Predecessor):
 
 
 
Preferred stock, $.001 par value; authorized 5,000 shares; issued and outstanding 1,495 shares
$

 
$
1

Common stock, $.001 par value; authorized 150,000 shares; issued and outstanding 25,587 shares.

 
26

Paid-in capital

 
314,268

Accumulated deficit

 
(576,462
)
Stockholders’ equity (Successor):
 
 
 
Preferred stock, $.01 par value; authorized 10,000 shares

 

Common stock, $.01 par value; authorized 65,000 shares, issued and outstanding 9,371 shares
94

 

Paid-in capital
74,678

 

Accumulated deficit
(24
)
 

Total stockholders’ equity
74,748

 
(262,167
)
Total liabilities and stockholders’ equity
$
232,925

 
$
137,287



See accompanying Notes to Consolidated Financial Statements.



4


PETROQUEST ENERGY, INC.
Consolidated Statements of Operations
(unaudited)
(Amounts in thousands, except per share data)
 
Successor
 
Predecessor
 
Three Months Ended June 30, 2019
 
Three Months Ended June 30, 2018
Revenues:
 
 
 
Oil and gas sales
$
13,958

 
$
21,561

Expenses:
 
 
 
Lease operating expenses
4,164

 
4,972

Production taxes
732

 
334

Depreciation, depletion and amortization
4,136

 
6,023

Ceiling test write-down

 

General and administrative
3,297

 
4,004

Restructuring expense
1,284

 

Accretion of asset retirement obligation
46

 
42

Interest expense
500

 
7,636

Lease costs
271

 

 
14,430

 
23,011

Other income:
 
 
 
Gain on sale of oil and gas properties

 

Other income
164

 
178

Derivative expense

 
(54
)
 
164

 
124

 
 
 
 
Loss from operations
(308
)
 
(1,326
)
Reorganization items, net

 

Income tax expense
(453
)
 

Net loss
(761
)
 
(1,326
)
Preferred stock dividend

 
1,285

Loss available to common stockholders
$
(761
)
 
$
(2,611
)
 
 
 
 
Loss per common share:
 
 
 
Basic
$
(0.08
)
 
$
(0.10
)
Diluted
$
(0.08
)
 
$
(0.10
)
Weighted average number of common shares:
 
 
 
Basic
9,371

 
25,568

Diluted
9,371

 
25,568

See accompanying Notes to Consolidated Financial Statements.


5


PETROQUEST ENERGY, INC.
Consolidated Statements of Operations
(unaudited)
(Amounts in thousands, except per share data)
 
 
Successor
 
Predecessor
 
 
February 9, 2019 through June 30, 2019
 
January 1, 2019 through February 8, 2019
 
Six Months Ended June 30, 2018
Revenues:
 
 
 
 
 
 
Oil and gas sales
 
$
22,440

 
$
6,657

 
$
46,478

Expenses:
 
 
 
 
 
 
Lease operating expenses
 
6,342

 
2,158

 
12,012

Production taxes
 
1,175

 
298

 
1,561

Depreciation, depletion and amortization
 
6,418

 
1,796

 
12,528

General and administrative
 
4,986

 
2,468

 
7,304

Restructuring expense
 
1,952

 

 

Accretion of asset retirement obligation
 
69

 
17

 
240

Interest expense
 
831

 
307

 
15,117

Lease costs
 
453

 
156

 

 
 
22,226

 
7,200

 
48,762

Other income:
 
 
 
 
 
 
Other income (expense)
 
215

 
(290
)
 
191

Derivative expense
 

 

 
(54
)
 
 
215

 
(290
)
 
137

 
 
 
 
 
 
 
Income/(loss) from operations
 
429

 
(833
)
 
(2,147
)
Reorganization items, net
 

 
262,801

 

Income tax expense
 
(453
)
 
(241
)
 
(106
)
Net income (loss)
 
(24
)
 
261,727

 
(2,253
)
Preferred stock dividend
 

 

 
2,570

Income (loss) available to common stockholders
 
$
(24
)
 
$
261,727

 
$
(4,823
)
 
 
 
 
 
 
 
Net income (loss) per common share:
 


 
 
 
 
Basic
 
$

 
$
9.50

 
$
(0.19
)
Diluted
 
$

 
$
8.92

 
$
(0.19
)
Weighted average number of common shares:
 
 
 
 
 
 
Basic
 
9,371

 
25,587

 
25,554

Diluted
 
9,371

 
27,289

 
25,554

See accompanying Notes to Consolidated Financial Statements.


6


PETROQUEST ENERGY, INC.
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(Amounts in thousands)
 
Successor
 
Predecessor
 
Three Months Ended June 30, 2019
 
Three Months Ended June 30, 2018
Net loss
$
(761
)
 
$
(1,326
)
Change in fair value of derivative instruments, accounted for as hedges, net of income tax expense of $0 and $172, respectively

 
(84
)
Comprehensive loss
$
(761
)
 
$
(1,410
)




See accompanying Notes to Consolidated Financial Statements.


7


PETROQUEST ENERGY, INC.
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(Amounts in thousands)

 
Successor
 
Predecessor
 
February 9, 2019 through June 30, 2019
 
January 1, 2019 through February 8, 2019
 
Six Months Ended June 30, 2018
Net income (loss)
$
(24
)
 
$
261,727

 
$
(2,253
)
Change in fair value of derivative instruments, accounted for as hedges, net of income tax expense of $0, $0 and $106, respectively

 

 
(1,080
)
Comprehensive income (loss)
$
(24
)
 
$
261,727

 
$
(3,333
)



See accompanying Notes to Consolidated Financial Statements.


8


PETROQUEST ENERGY, INC.
Consolidated Statements of Stockholders' Equity
(unaudited)
(Amounts in thousands)
 
Common Stock
 
Preferred Stock
 
Paid-In Capital
 
Other Comprehensive Loss
 
Accumulated deficit
 
Total Stockholders' Equity
Balance, March 31, 2018 (Predecessor)
$
26

 
$
1

 
$
313,637

 
$
(718
)
 
$
(564,754
)
 
$
(251,808
)
Share-based compensation expense

 

 
256

 

 

 
256

Derivative fair value adjustment, net of tax

 

 

 
(84
)
 

 
(84
)
Preferred stock dividend

 

 

 

 
(1,285
)
 
(1,285
)
Net loss

 

 

 

 
(1,326
)
 
(1,326
)
Balance, June 30, 2018 (Predecessor)
$
26

 
$
1

 
$
313,893

 
$
(802
)
 
$
(567,365
)
 
$
(254,247
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, March 31, 2019 (Successor)
94

 

 
$
73,972

 
$

 
$
737

 
$
74,803

Share-based compensation expense

 

 
706

 

 

 
706

Net loss

 

 

 

 
(761
)
 
(761
)
Balance, June 30, 2019 (Successor)
$
94

 
$

 
$
74,678

 
$

 
$
(24
)
 
$
74,748


See accompanying Notes to Consolidated Financial Statements.


9


PETROQUEST ENERGY, INC.
Consolidated Statements of Stockholders' Equity
(unaudited)
(Amounts in thousands)

 
Common Stock
 
Preferred Stock
 
Paid-In Capital
 
Other Comprehensive Income (Loss)
 
Accumulated deficit
 
Total Stockholders' Equity
Balance, December 31, 2017 (Predecessor)
$
26

 
$
1

 
$
313,244

 
$
278

 
$
(562,484
)
 
$
(248,935
)
Issuance of shares

 

 
(11
)
 

 

 
(11
)
Share-based compensation expense

 

 
617

 

 

 
617

Issuance of shares under employee stock purchase plan

 

 
43

 

 

 
43

Derivative fair value adjustment, net of tax

 

 

 
(1,080
)
 
(58
)
 
(1,138
)
Preferred stock dividend

 

 

 

 
(2,570
)
 
(2,570
)
Net loss

 

 

 

 
(2,253
)
 
(2,253
)
Balance, June 30, 2018 (Predecessor)
$
26

 
$
1

 
$
313,893

 
$
(802
)
 
$
(567,365
)
 
$
(254,247
)
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018 (Predecessor)
$
26

 
$
1

 
$
314,268

 
$

 
$
(576,462
)
 
$
(262,167
)
Share-based compensation expense

 

 
44

 

 

 
44

Net income

 

 

 

 
261,727

 
261,727

Cancellation of Predecessor equity
(26
)
 
(1
)
 
(314,312
)
 

 
314,735

 
396

Issuance of Successor common stock and options
92

 

 
72,749

 

 

 
72,841

Issuance of Successor common stock upon vesting of restricted stock, net of shares retired for taxes
2

 

 
857

 

 

 
859

Balance, February 8, 2019 (Predecessor)
$
94

 
$

 
$
73,606

 
$

 
$

 
$
73,700

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, February 8, 2019 (Successor)
$
94

 
$

 
$
73,606

 

 
$

 
$
73,700

Share-based compensation expense

 

 
1,072

 

 

 
1,072

Net income

 

 

 

 
(24
)
 
(24
)
Balance, June 30, 2019 (Successor)
$
94

 
$

 
$
74,678

 
$

 
$
(24
)
 
$
74,748


See accompanying Notes to Consolidated Financial Statements.


10


PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(unaudited)
(Amounts in Thousands)
 
Successor
 
Predecessor
 
February 9, 2019 through June 30, 2019
 
January 1, 2019 through February 8, 2019
 
Six Months Ended June 30, 2018
Cash flows from operating activities:
 
 
 
 
 
Net income (loss)
$
(24
)
 
$
261,727

 
$
(2,253
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 
 
 
 
Deferred tax expense
453

 
241

 
106

Depreciation, depletion and amortization
6,418

 
1,796

 
12,528

Accretion of asset retirement obligation
69

 
17

 
240

Share-based compensation expense
1,410

 
44

 
593

Amortization costs and other
916

 
555

 
402

Non-cash interest expense on PIK Notes

 

 
2,961

Payments to settle asset retirement obligations
(158
)
 
(11
)
 
(75
)
Non-cash reorganization items, net

 
(267,585
)
 

Changes in working capital accounts:

 
 
 
 
Revenue receivable
9,856

 
(7,340
)
 
7,480

Joint interest billing receivable
(12,177
)
 
(2,192
)
 
4,078

Accounts payable and accrued liabilities
(2,971
)
 
8,363

 
(24,104
)
Advances from co-owners
180

 
1,343

 
(1,117
)
Refund of (Deposit for) surety bonds
3,475

 

 
(4,000
)
Other
(565
)
 
2,336

 
242

Net cash provided by (used in) operating activities
6,882

 
(706
)
 
(2,919
)
Cash flows used in investing activities:

 
 
 
 
Investment in oil and gas properties
(18,878
)
 
(5,290
)
 
(9,785
)
Investment in other property and equipment
(71
)
 
(36
)
 
(136
)
Sale of oil and gas properties

 

 
(2,428
)
Sale of unevaluated oil and gas properties

 

 
2,928

Net cash used in investing activities
(18,949
)
 
(5,326
)
 
(9,421
)
Cash flows (used in) provided by financing activities:

 
 
 
 
Net proceeds from share based compensation

 

 
43

Deferred financing costs

 
(111
)
 
(55
)
Costs incurred to redeem 2021 Notes

 

 
(11
)
Proceeds from borrowings

 

 
2,500

Net cash (used in) provided by financing activities

 
(111
)
 
2,477

Net decrease in cash and cash equivalents
(12,067
)
 
(6,143
)
 
(9,863
)
Cash, restricted cash and cash equivalents, beginning of period
28,748

 
34,891

 
15,655

Cash, restricted cash and cash equivalents, end of period
$
16,681

 
$
28,748

 
$
5,792

Supplemental disclosure of cash flow information:

 
 
 
 
Cash paid during the period for:

 
 
 
 
Interest, net of capitalized interest
$
829

 
$
929

 
$
3,304

Reorganization items, net
$
1,952

 
$
4,784

 
$

See accompanying Notes to Consolidated Financial Statements.

11


PETROQUEST ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1—Basis of Presentation
PetroQuest Energy, Inc., a Delaware corporation, is an independent oil and gas company headquartered in Lafayette, Louisiana with an exploration office in The Woodlands, Texas. It is engaged in the exploration, development, acquisition and operation of oil and gas properties in Texas and Louisiana. To facilitate our financial statement presentations, we refer to the post-emergence reorganized company in these consolidated financial statements and footnotes as the “Successor” for periods subsequent to February 8, 2019, and to the pre-emergence company as “Predecessor” for periods prior to and including February 8, 2019, the Effective Date of the Plan (as defined below). As discussed in “Note 3-Emergence from Chapter 11 Reorganization” the Company and its wholly owned direct and indirect subsidiaries filed voluntary petitions for bankruptcy relief on November 6, 2018 and subsequently operated as debtors in possession, in accordance with the applicable provisions of the Bankruptcy Code, until emergence on February 8, 2019.
The consolidated financial information for the period February 9, 2019 through June 30, 2019 (Successor), for the period January 1, 2019 through February 8, 2019 (Predecessor) and for the three and six month periods ended June 30, 2018 (Predecessor), have been prepared by the Company and were not audited by its independent registered public accountants. In the opinion of management, all normal and recurring adjustments have been made to present fairly the financial position, results of operations, and cash flows of the Company at June 30, 2019 and for all reported periods. Results of operations for the interim periods presented are not necessarily indicative of the operating results for the full year or any future periods.
The balance sheet at December 31, 2018 has been derived from the audited financial statements at that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the audited financial statements and related notes thereto included in the Company’s Form 10-K. Certain prior period amounts have been reclassified to conform to current year presentation.
Principles of Consolidation
The consolidated financial statements of the Predecessor include the accounts of the Company and its subsidiaries, PetroQuest Energy, L.L.C ("PQE"), PetroQuest Oil & Gas, L.L.C, and its former subsidiaries, Pittrans, Inc. and TDC Energy LLC through and including the Effective Date. The Successor's consolidated financial statements include the accounts of the Company, PQE and PetroQuest Oil & Gas, L.L.C. All intercompany accounts and transactions have been eliminated as part of the normal course of business.
Bankruptcy Accounting and Financial Reporting
The consolidated financial statements have been prepared in accordance with Accounting Standards Codification ("ASC") 852, Reorganizations ("ASC 852"), for the period subsequent to the bankruptcy filing. ASC 852 requires that the consolidated financial statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses, gains and losses that were realized or incurred in the Chapter 11 Cases (as defined below) were recorded as reorganization items, net in the consolidated statement of operations. In addition, the pre-petition obligations that may be impacted by the bankruptcy reorganization process were classified on the consolidated balance sheet as liabilities subject to compromise. These liabilities are reported at the amounts expected to be allowed by the Bankruptcy Court (as defined below), even if they may be settled for lesser amounts.
Upon the Effective Date of the Plan, February 8, 2019, we applied fresh start accounting. See "Note 4-Fresh Start Accounting". As a result of the application of fresh start accounting, as well as the effects of the implementation of the Plan, a new entity for financial reporting purposes was created, and as such, the consolidated financial statements on or after February 9, 2019, are not comparable with the consolidated financial statements prior to that date. A blackline presentation has been used to delineate the lack of comparability between predecessor and successor balances. See Note 4 for additional information on the selection of the Effective Date of fresh start accounting and for further discussion.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business for the twelve month period following the filing date of these consolidated financial statements.
Recently Issued Accounting Standards
In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging," to improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its consolidated financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current US GAAP. ASU 2017-12 is effective for public entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal

12


years, with earlier application permitted. The Company has adopted this new standard. As there are no outstanding derivatives, there is no effect on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses", that requires entities to estimate all expected credit losses for most financial assets held at the reporting date based on an expected loss model, which requires consideration of historical experience, current conditions, and reasonable and supportable forecasts. This ASU also requires enhanced disclosure requirements to enable users of financial statements to understand the entity's assumptions, models and methods for estimating expected credit losses. For public companies, this ASU is effective for interim and annual reporting periods beginning after December 31, 2019, with early adoption permitted. The Company does not expect this guidance to have a material impact on its financial statements.
    
Note 2—Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these consolidated financial statements. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.
During 2019, the Company initiated production from three East Texas wells and has drilled but not completed two additional East Texas wells. At June 30, 2019, the Company had approximately $16.3 million in unrestricted cash and had no availability under the Exit Facility. As a result of the Company's limited liquidity position and the decline in natural gas prices, drilling operations have been suspended in East Texas, including deferring the completion of the two wells that have been drilled.
The Company continues to evaluate additional sources of liquidity in order to execute its drilling plans. Options include additional debt or equity financing, joint ventures or industry partnerships, along with evaluating potential corporate level transactions such as a merger or a sale of the Company. There is no guarantee the Company will be successful in any of its attempts to strengthen its liquidity position. While there are no pending debt maturities and the Company expects to be able to fund required payments under the Exit Facility in the near term, the Company expects production, cash flow and proved reserves to decline until drilling operations can be resumed. The decline in proved reserves will likely impact the Company's ability to remain compliant with the financial ratio contained in the Exit Facility (the "Coverage Ratio") and, if natural gas prices remain depressed, the Company will likely be out of compliance with the Coverage Ratio as of September 30, 2019 unless it receives a waiver from the lenders under the Exit Facility. As a result, there is substantial doubt about the Company's ability to continue as a going concern. See-Liquidity and Capital Resources-Successor Long-Term Debt-Exit Facility.

Note 3—Emergence from Chapter 11 Reorganization
On November 6, 2018 (the “Petition Date”), the Company, PQE and their direct and indirect wholly owned subsidiaries (collectively, the “Debtors”) filed voluntary petitions (collectively, the “Petition,” and the cases commenced thereby, the “Chapter 11 Cases”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).
On January 31, 2019, the Court entered an order (the “Confirmation Order”) confirming the Debtors’ First Amended Chapter 11 Plan of Reorganization, as Immaterially Modified as of January 28, 2019 (as amended, modified or supplemented from time to time, the “Plan”) under Chapter 11 of the Bankruptcy Code. On February 8, 2019 (the “Effective Date”), the Plan became effective in accordance with its terms and the Debtors emerged from the Chapter 11 Cases. On the Effective Date, TDC Energy, LLC, Pittrans, Inc. and Sea Harvester Energy Development, L.L.C. were dissolved. The remaining Debtors (collectively, the "Reorganized Debtors") continue in existence.
On the Effective Date and pursuant to the terms of the Plan and the Confirmation Order, the Company:
Adopted an amended and restated certificate of incorporation and bylaws;
Appointed four new members to the Successor’s Board to replace all of the directors of the Predecessor, other than the director also serving as Chief Executive Officer, who was re-appointed pursuant to the Plan;
Canceled all of the Predecessor’s common stock and 6.875% Series B Cumulative Convertible Perpetual Preferred Stock with the former holders thereof not receiving any consideration in respect of such stock;

13


Authorized 64,999,998 shares of the Successor's Class A Common Stock; one share of the Successor's Class B Common Stock, par value $0.01 per share (the "Class B Common Stock"); one share of the Successor's Class C Common Stock, par value $0.01 per share (the "Class C Common Stock") and 10,000,000 shares of the Successor's preferred stock;
Issued to the former holders of the Predecessor’s 2021 Notes and 2021 PIK Notes, (collectively, the “Old Notes”), in exchange for the cancellation and discharge of the Old Notes:
8,900,000 shares of the Successor’s Class A Common Stock; and
$80 million of the Successor’s 10% Senior Secured PIK Notes due 2024 (the “2024 PIK Notes”);
Issued 300,000 shares of the Successor’s Class A Common Stock to certain former holders of the Old Notes for their commitment to backstop the Exit Facility (as defined below);
Issued to the Class B Holder (as defined in the Successor’s amended and restated certificate of incorporation) one share of the Class B Common Stock, par value $0.01 per share, which confers certain rights to elect directors and certain drag-along rights;
Issued to the Class C Holder (as defined in the Successor’s amended and restated certificate of incorporation) one share of the Class C Common Stock, par value $0.01 per share, which confers certain rights to elect directors and certain drag-along rights;
Entered into a new $50 million senior secured term loan agreement (the “Exit Facility”) upon the repayment and termination of the Predecessor’s Multidraw Term Loan Agreement;
Entered into a registration rights agreement (the “Registration Rights Agreement”) with certain holders of the Successor’s Class A Common Stock and 2024 PIK Notes;
Adopted a new management incentive plan (the “2019 Long Term Incentive Plan”) for officers, directors and employees of the Successor and its subsidiary, pursuant to which 1,344,000 shares of the Successor’s Class A Common Stock were reserved for issuance. Upon emergence, 827,638 restricted stock units and 316,319 options were granted to officers and directors; and
the General Unsecured Creditor's (the "GUC") pool was funded in the amount of $1.2 million.
The foregoing is a summary of the substantive provisions of the Plan and related transactions and is not intended to be a complete description of, or a substitute for a full and complete reading of, the Plan and the other documents referred to above.
Effect of Filing on Creditors
Subject to certain exceptions, under the Bankruptcy Code, the filing of the Petition automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the Petition Date. Absent an order of the Bankruptcy Court, substantially all of the Debtors’ prepetition liabilities were subject to settlement under the Bankruptcy Code. Although the filing of the Petition triggered defaults on the Debtors’ debt obligations, creditors were stayed from taking any actions against the Debtors as a result of such defaults, subject to certain limited exceptions permitted by the Bankruptcy Code.
Rejection of Executory Contracts
Subject to certain exceptions, under the Bankruptcy Code, the Debtors were entitled to assume, assign or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and satisfaction of certain other conditions. Generally, the rejection of an executory contract or unexpired lease was treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieved the Debtors of performing their future obligations under such executory contract or unexpired lease but entitled the contract counterparty or lessor to a prepetition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtors’ estate for damages. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with any of the Debtors in this Quarterly Report on Form 10-Q, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the applicable Debtor, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and the Debtors expressly preserve

14


all of their rights with respect thereto. During the bankruptcy process the Company's rejection damages were approximately $0.1 million.
Reorganization Items, net
Reorganization Items, net incurred as a result of the Chapter 11 Cases are presented separately in the accompanying unaudited consolidated statement of operations for the Predecessor period January 1, 2019 through February 8, 2019 as follows (in thousands):
Gain on settlement of liabilities subject to compromise
$
168,952

Fresh start adjustments
102,830

Reorganization professional fees and other expenses
(5,398
)
Write-off of deferred financing costs
(370
)
Other reorganization items, net
(3,213
)
Total reorganization items, net
$
262,801


Note 4—Fresh Start Accounting
Upon emergence from bankruptcy, the Company qualified for and adopted fresh start accounting in accordance with the provisions of ASC 852 as (i) the holders of existing voting shares of the Predecessor received less than 50% of the voting shares of the Successor and (ii) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the post-petition liabilities and allowed claims. See "Note 3- Emergence from Chapter 11 Reorganization" for the terms of the Plan. The Company applied fresh start accounting as of February 8, 2019. Fresh start accounting required the Company to present its assets, liabilities and equity as if it were a new entity upon emergence from bankruptcy, with no beginning retained earnings or deficit as of the fresh start reporting date. As described in "Note 1-Basis of Presentation", the new entity is referred to as Successor, and includes the financial position and results of operations of the reorganized Company subsequent to February 8, 2019. References to Predecessor relate to the financial position and results of operations of the Company prior to, and including, February 8, 2019.
Reorganization Value
Under fresh start accounting, reorganization value represents the fair value of the Successor's total assets and is intended to approximate the amount a willing buyer would pay for the assets immediately after restructuring. Upon application of fresh start accounting, the Company allocated the reorganization value to its individual assets based on their estimated fair values in conformity with ASC 805, "Business Combinations" ("ASC 805").
The Company’s reorganization value is derived from an estimate of enterprise value. Enterprise value represents the estimated fair value of an entity’s long-term debt and stockholders’ equity. The Bankruptcy Court approved the Plan, which included as support the Company's estimate that the enterprise value of the core assets (as defined in the Plan) of the Successor was in the range of $104 million to $187 million without cash at emergence. The sum of the estimated range of enterprise value plus the amount of estimated cash at emergence was in the range of $117 million to $200 million. This valuation analysis was prepared using reserve information, development schedules, other financial information and financial projections and applying standard valuation techniques, including net asset value analysis, precedent transactions analyses and public comparable company analyses. Based on the estimates and assumptions used in determining the enterprise value, the Company ultimately estimated the enterprise value of the Successor's core assets to be approximately $155.2 million.
Valuation of Assets
The Company’s principal assets are its oil and gas properties, which the Company accounts for under the full cost accounting method. With the assistance of valuation experts, the Company determined the fair value of its oil and gas properties based on the discounted cash flows expected to be generated from these assets. The computations were based on market conditions and reserves in place as of the bankruptcy emergence date. 
The fair value analysis performed by independent third party valuation experts was based on the Company’s estimates of reserves as developed internally by the Company’s reserve engineers. For purposes of estimating the fair value of the Company's proved and probable reserves, an income approach was used which estimated fair value based on the anticipated cash flows associated with the Company's reserves, risked by reserve category and discounted using a weighted average cost of capital of

15


13.0%. The discount factor was derived from a weighted average cost of capital computation which utilized a blended expected cost of debt and expected returns on equity for similar market participants.
Future revenues were based upon forward strip oil and natural gas prices as of the emergence date, adjusted for differentials realized by the Company, and held flat after 2023. Development and operating costs were based on the Company's recent cost trends. The discounted cash flow models also included estimates not typically included in proved reserves such as depletion, depreciation and income tax expenses. The proved reserve locations were limited to wells expected to be drilled in the Company's five year development plan.
As a result of this analysis, the Company concluded the fair value of its proved reserves was $52.1 million and the fair value of its unproven reserves was $99 million as of the Effective Date. The Company also reviewed its undeveloped leasehold acreage. An analysis of comparable market transactions indicated a fair value of undeveloped acreage totaling approximately $19.7 million. These amounts are reflected in item 2 in "Fresh Start Adjustments" below. The fair value of the Company's asset retirement obligations was estimated at $2.5 million and was based on estimated plugging and abandonment costs as of the Effective Date, adjusted for inflation and discounted at the Successor's credit-adjusted risk free rate of 10%.
See further discussion in "Fresh Start Adjustments" below for details on the specific assumptions used in the valuation of the Company’s various other assets.
The following table reconciles the enterprise value per the Plan to the estimated fair value (for fresh start accounting purposes) of the Successor's common stock as of the Effective Date (in thousands):
 
February 8, 2019

Enterprise value
$
155,246

Plus: Cash
23,073

Plus: Restricted cash
5,675

Less: Fair value of 10% PIK Notes due 2024
(65,025
)
Less: Fair value of Exit Facility
(45,269
)
Fair value of Successor common stock
$
73,700

Shares issued upon emergence
9,371

Per share value
$
7.86

The following table reconciles the enterprise value to the reorganization value as of the Effective Date (in thousands):
 
February 8, 2019

Enterprise value
$
155,246

Plus: Cash
23,073

Plus: Restricted cash
5,675

Plus: Current liabilities
39,758

Plus: Asset retirement obligations (long-term)
2,303

Plus: Other long-term liabilities
2,845

Reorganization value of Successor assets
$
228,900

Reorganization value and enterprise value were estimated using numerous projections and assumptions that are inherently subject to significant uncertainties and resolution of contingencies that are beyond our control. Accordingly, the estimates set forth herein are not necessarily indicative of actual outcomes, and there can be no assurance that the estimates, projections or assumptions will be realized.
Consolidated Balance Sheet
The adjustments set forth in the following consolidated balance sheet reflect the effects of the transactions contemplated by the Plan and carried out by the Company (reflected in the column "Reorganization Adjustments") as well as fair value adjustments as a result of the adoption of fresh start accounting (reflected in the column "Fresh Start Adjustments"). The explanatory notes highlight methods used to determine fair values or other amounts of the assets and liabilities as well as significant assumptions or inputs.

16


The following table reflects the reorganization and application of ASC 852 on our consolidated balance sheet as of February 8, 2019 (in thousands):
 
 
Predecessor
 
Reorganization Adjustments
 
Fresh Start Adjustments
 
Successor
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
31,881

 
$
(8,808
)
(1)
$

 
$
23,073

Restricted cash
389

 
5,286

(2)

 
5,675

Revenue receivable
13,704

 

 

 
13,704

Joint interest billing receivable
6,908

 

 

 
6,908

Deposit for surety bonds
3,550

 

 

 
3,550

Other current assets
924

 

 

 
924

Total current assets
57,356

 
(3,522
)
 

 
53,834

Property and equipment:
 
 
 
 
 
 
 
Oil and gas properties:
 
 
 
 
 
 
 
Oil and gas properties, full cost method
1,366,884

 

 
(1,314,814
)
(12)
52,070

Unevaluated oil and gas properties
24,033

 

 
94,660

(12)
118,693

Accumulated depreciation, depletion, and amortization
(1,303,376
)
 

 
1,303,376

(12)

Oil and gas properties, net
87,541

 

 
83,222

 
170,763

Other property and equipment
9,318

 

 
(9,068
)
(13)
250

Accumulated depreciation of other property and equipment
(9,068
)
 

 
9,068

(13)

Total property and equipment
87,791

 

 
83,222

 
171,013

Other assets
4,151

 

 
(98
)
(14)
4,053

Total Assets
$
149,298

 
$
(3,522
)
 
$
83,124

 
$
228,900

 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Accounts payable to vendors
$
14,813

 
$
2,575

(4)
$

 
$
17,388

Advances from co-owners
3,363

 

 

 
3,363

Oil and gas revenue payable
16,059

 

 

 
16,059

Accrued interest
1,181

 
(1,181
)
(5)

 

Asset retirement obligation
183

 

 

 
183

Right of use liability-short-term
1,080

 

 

 
1,080

Other accrued liabilities
1,224

 
461

(6)

 
1,685

Total current liabilities
37,903

 
1,855

 

 
39,758

Multi-draw Term Loan
49,754

 
246

(3)
(4,731
)
(15)
45,269

10% Senior Secured PIK Notes due 2024

 
80,000

(7)
(14,975
)
(16)
65,025

Asset retirement obligation
2,303

 

 

 
2,303

Right of use liability-long-term
2,604

 

 

 
2,604

Deferred tax liability

 

 
241

(17)
241

Total liabilities not subject to compromise
92,564

 
82,101

 
(19,465
)
 
155,200

 
 
 
 
 
 
 
 
 

17


Liabilities subject to compromise
321,495

 
(321,495
)
(8)

 

 
 
 
 
 
 
 
 
 
Stockholder's equity:
 
 
 
 
 
 
 
Preferred stock (Predecessor)
1

 
(1
)
(9)

 

Common stock (Predecessor)
26

 
(26
)
(9)

 

Paid-in capital (Predecessor)
314,312

 
(314,312
)
(9)

 

Common stock (Successor)

 
94

(10)

 
94

Paid-in capital (Successor)

 
73,606

(10)

 
73,606

Accumulated deficit
(579,100
)
 
476,511

(11)
102,589

(18)

Total stockholder's equity
(264,761
)
 
235,872

 
102,589

 
73,700

 
 
$
149,298

 
$
(3,522
)
 
$
83,124

 
$
228,900

Reorganization Adjustments (in thousands, except per share values)
1.
Reflects the cash payments made as of the Effective Date from implementation of the Plan:
Uses:

Payment of accrued interest on the Multidraw Term Loan Agreement
$
(1,181
)
Payment of financing costs related to the Exit Facility
(124
)
Funding of the general unsecured claims administrative escrow account
(1,200
)
Cash transferred to restricted cash for professional fee escrow
(5,157
)
Cash transferred to restricted cash for consenting creditors fees
(129
)
Payment of professional fees at emergence
(1,017
)
Total:
$
(8,808
)
2.
Reflects the cash reclassified to Restricted Cash as of the Effective Date from implementation of the Plan:
Reclassifications to Restricted Cash:
 
Funding of the professional fee escrow account
$
5,157

Funding of the consenting creditors escrow account
129

Total:
$
5,286

3.
Reflects the payment of financing costs related to the Exit Facility and the write off of deferred financing costs related to the MultiDraw Term Loan Agreement and the Exit Facility.
4.
Represents the $3.6 million of accrued expenses related to the success fee recognized at emergence and the payment of $1.0 million of professional fees at emergence.
5.
Represents the $1.2 million of accrued interest paid at emergence related to the Predecessor's Multidraw Term Loan Agreement.
6.
Represents the accrual of the tax liability associated with the forfeiture of RSUs issued at emergence.
7.
Represents the issuance of the $80 million PIK Notes due 2024 at face value.
8.
Liabilities subject to compromise were settled as follows in accordance with the Plan:

18


10% Senior Secured Notes due 2021
$
9,427

10% Senior Secured PIK Notes due 2021
275,046

Accrued interest on Senior Secured Notes due 2021 and PIK Notes due 2021
20,624

General Unsecured Claims & Convenience Claims
1,749

Preferred stock accrued dividends
14,649

Total liabilities subject to compromise
$
321,495

 
 
Issuance of the equity to the holders of the Senior Secured Notes due 2021 and PIK Notes due 2021
(71,343
)
Issuance of Successor 10% PIK Notes
(80,000
)
GUC Administration Funding
(1,200
)
Gain on settlement of liabilities subject to compromise
$
168,952

9.
Reflects the cancellation of the Predecessor's preferred stock, common stock and additional paid-in capital to retained earnings.
10.
Reflects the issuance of equity of the Successor. In accordance with the Plan, the Successor issued 8.9 million shares of new Class A Common Stock to the holder of Second Lien 10% Senior Secured Notes due 2021 and Second Lien 10% Senior Secured PIK Notes due 2021 as part of the settlement of certain liabilities subject to compromise. In addition, 300,000 shares of new Class A Common Stock were issued to consenting creditors, as well as 263,599 shares of new Class A Common Stock issued to holders of stock awards which vested at emergence. For those shares issued to the holders of stock awards, 92,479 were surrendered for tax purposes; therefore, a net 171,120 shares were considered outstanding at emergence. Each share of Class A Common Stock has a par value of $0.01. Additionally, the Successor issued one share of Class B Common Stock and one share of Class C Common Stock on the Effective Date in accordance with the Plan.
Common stock, par value $0.01
$
94

Issuance of the equity to the holders of the Senior Secured Notes due 2021 and PIK Notes due 2021
71,249

Issuance of the equity related to the emergence vesting of RSUs
1,318

Issuance of the equity to the consenting creditors
1,500

Total equity issued at emergence
74,161

Value of shares relinquished to satisfy taxes on the RSUs vested at emergence
(461
)
Net equity issued at emergence
$
73,700

11.
Reflects the cumulative net impact of the effects on Accumulated deficit as follows:
Gain on settlement of liabilities subject to compromise
$
168,952

Issuance of the equity to the consenting creditors
(1,500
)
Issuance of the equity related to the emergence vesting of RSUs
(1,318
)
Success fees recognized at emergence
(3,592
)
Accelerated vesting of Predecessor stock compensation
(396
)
Write-off deferred financing costs
(370
)
     Net impact to Reorganization items, net
161,776

Cancellation of Predecessor equity, including vesting
314,735

     Net Impact to Accumulated deficit
$
476,511

Fresh Start Adjustments
12.
Fair value adjustments to proved oil and a gas properties, associated inventory, unproved acreage, as well as the respective reset of depletion, depreciation, and amortization balances. See above for a detailed discussion of the fair value methodology.

19


13.
Adjustments to record the fair value of the well equipment, leasehold improvements, computer software, computers, as well as the reset of accumulated depreciation. The Company concluded that the net book value of the assets represented the fair value at emergence.
14.
Represents the write-down of the Indianola investment to fair value based on a five year cash flow analysis.
15.
Upon emergence, the Predecessor's Multidraw Term Loan Agreement was extinguished in the amount of $50 million and the Company entered into the Exit Facility in the amount of $50 million. This adjustment represents the fair value adjustment associated with the Exit Facility. Fair value was estimated via a discounted cash flow analysis by discounting scheduled debt service payments at a credit spread of 10.1%. The credit spread was determined by performing a synthetic credit rating analysis, considering yields on similarly-rated, energy corporate issues, and adjusting based on recovery rates for first lien debt.
16.
Represents the fair value adjustments to the 2024 PIK Notes. Fair value was estimated via a discounted cash flow analysis by discounting scheduled debt service payments at a credit spread of 11.9%. The credit spread was determined by performing a synthetic credit rating analysis, considering yields on similarly-rated, energy corporate issues, and adjusting based on recovery rates for second lien debt.
17.
Represents the net decrease in tax assets and tax liabilities associated with adjustments for fresh start accounting.
18.
Reflects the cumulative impact of the fresh start adjustments discussed above:
Proved oil and gas properties fair value adjustment
$
(11,438
)
Unproved oil and gas properties fair value adjustment
94,660

Other asset fair value adjustment
(98
)
Exit Facility fair value adjustment
4,731

2024 PIK Notes fair value adjustment
14,975

Net gain on fresh start adjustments
102,830

Tax impact on fresh start accounting adjustments
(241
)
Net impact to Accumulated deficit
$
102,589

The net gain on fresh start adjustments has been included in Reorganization items, net in the Consolidated Statement of Operations. See "Note 3-Emergence from Chapter 11 Reorganization" for additional details of reorganization items, net.

Note 5—Acquisitions and Divestitures
Divestitures (Predecessor):
On January 31, 2018, the Company sold its Gulf of Mexico properties. The Company received no consideration from the sale of these properties and was required to contribute approximately $3.8 million towards the future abandonment costs for the properties. As a result of the sale, the Company extinguished approximately $28.2 million of its discounted asset retirement obligations. In connection with the sale, the Company received a cash refund of $12.4 million related to a depositary account that served to collateralize a portion of the Company's offshore bonds related to these properties. After finalizing purchase price adjustments, during October 2018 the Company settled the remaining liabilities related to this sale for $4.2 million. This sale was accounted for as an adjustment to the capitalized costs of oil and gas properties.


20


Note 6—Equity
Predecessor Stockholder's Equity
As discussed in “Note 3-Emergence from Chapter 11 Reorganization,” on the Effective Date and pursuant to the terms of the Plan and the Confirmation Order, all of the Predecessor’s common stock and 6.875% Series B Cumulative Convertible Perpetual Preferred Stock were canceled with the former holders thereof not receiving any consideration in respect thereof. Accordingly, the following discussion relates solely to the Predecessor’s common stock and 6.875% Series B Cumulative Convertible Perpetual Preferred Stock prior to such cancellation.
Convertible Preferred Stock
The Company had 1,495,000 shares of 6.875% Series B Cumulative Convertible Perpetual Preferred Stock (the “Series B Preferred Stock”) outstanding as of February 8, 2019, all of which were canceled on the Effective Date pursuant to the Plan, including the $14.6 million of accumulated and unpaid dividends.    
Successor Stockholder's Equity
On the Effective Date, pursuant to the terms of the Plan, the Successor issued 8,900,000 shares of Class A Common Stock pro rata to the holders of the Old Notes. In addition, pursuant to the terms of the Plan, the Successor issued 300,000 shares of Class A Common Stock to certain holders of the Old Notes for their commitment to backstop the Exit Facility. See "Note 9-Long-Term Debt". Additionally, on the Effective Date, the Company:
Issued to the Class B Holder (as defined in the Successor’s amended and restated certificate of incorporation) one share of Class B Common Stock, which confers certain rights to elect directors and certain drag-along rights;
Issued to the Class C Holder (as defined in the Successor’s amended and restated certificate of incorporation) one share of Class C Common Stock, which confers certain rights to elect directors and certain drag-along rights;
Adopted the 2019 Long Term Incentive Plan for officers, directors and employees of the Successor and its subsidiaries, pursuant to which 1,344,000 shares of the Successor’s Class A Common Stock were reserved for issuance; and
authorized 10 million shares of the Successor's preferred stock.
On the Effective Date, in accordance with the Plan and the Confirmation Order, the Company entered into the Registration Rights Agreement with certain former holders of Old Notes who received Class A Common Stock and the 2024 PIK Notes distributed on the Effective Date. On June 21, 2019, the Company entered into an amended and restated registration rights agreement (the "Amended and Restated Registration Rights Agreement") with such holders, pursuant to which the holders, acting together at any time, may request (i) that the Company file with the SEC a shelf registration statement that includes the Registrable Securities (as defined in the Amended and Restated Registration Rights Agreement) and (ii) that the Company use commercially reasonable efforts to cause all shares of Class A Common Stock to be quoted on an over-the-counter securities market and to use commercially reasonable efforts to maintain such quotation.


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Note 7—Earnings Per Share
On February 8, 2019, upon emergence from Chapter 11 bankruptcy, the Predecessor equity was canceled and new equity was issued. See "Note 3-Emergence from Chapter 11 Reorganization"and "Note 6-Equity" for further details.
Successor
A reconciliation between the basic and diluted earnings per share computations (in thousands, except per share amounts) is as follows:
For the Three Months (Successor) Ended June 30, 2019
Income
(Numerator)
 
Shares
(Denominator)
 
Per
Share Amount
BASIC EPS
 
 
 
 
 
Net loss available to common stockholders
$
(761
)
 
9,371

 
$
(0.08
)
Restricted shares

 

 
 
Attributable to participating securities

 

 
 
DILUTED EPS
$
(761
)
 
9,371

 
$
(0.08
)
 
 
 
 
 
 
For the Successor Period of February 9, 2019 through June 30, 2019
Income
(Numerator)
 
Shares
(Denominator)
 
Per
Share Amount
BASIC EPS
 
 
 
 
 
Net loss available to common stockholders
$
(24
)
 
9,371

 
$

 
 
 
 
 
 
Restricted shares

 

 
 
Attributable to participating securities

 

 
 
DILUTED EPS
$
(24
)
 
9,371

 
$



22


Predecessor
A reconciliation between the basic and diluted earnings per share computations (in thousands, except per share amounts) is as follows:
For the Predecessor Period of January 1, 2019 through February 8, 2019
Income
(Numerator)
 
Shares
(Denominator)
 
Per
Share Amount
BASIC EPS
 
 
 
 
 
Net income available to common stockholders
$
261,727

 
25,587

 
 
Gain on cancellation of Preferred Shares
(14,650
)
 
 
 
 
Attributable to participating securities
(3,944
)
 
 
 
 
Net income available to common stockholders
$
243,133

 
25,587

 
$
9.50

 
 
 
 
 
 
Net income available to common stockholders
$
261,727

 
25,587

 
 
Gain on cancellation of Preferred Shares
(14,650
)
 
 
 
 
Effect of dilutive securities:
 
 
 
 
 
Preferred shares

 
1,287

 
 
  Restricted shares
(3,944
)
 
415

 
 
Attributable to participating securities
186

 

 
 
DILUTED EPS
$
243,319

 
27,289

 
$
8.92

 
 
 
 
 
 
For the Three Months (Predecessor) Ended June 30, 2018
Loss (Numerator)
 
Shares
(Denominator)
 
Per
Share Amount
BASIC EPS
 
 
 
 
 
Net loss available to common stockholders
$
(2,611
)
 
25,568

 
$
(0.10
)
Stock options

 

 
 
Attributable to participating securities

 

 
 
DILUTED EPS
$
(2,611
)
 
25,568

 
$
(0.10
)
 
 
 
 
 
 
For the Six Months (Predecessor) Ended June 30, 2018
Loss (Numerator)
 
Shares
(Denominator)
 
Per
Share Amount
BASIC EPS