PetroQuest Energy (PQ)

[dan_s]

PetroQuest Energy, Inc. (PQ): A profile has been posted under the Watch List Tab. PQ is being added to our Small-Cap Growth Portfolio.

On a boe basis natural gas is still ~72% of PQ's production, but only ~45% of their revenues. The company's focus is now on increasing their liquids production. I used a rather low natural gas prices ($3.75/mcf) in my 2015 forecast to arrive at my Fair Value Estimate of $12.30/share. They have ~50% of their 2H 2014 gas sold with a SWAP at $4.14/mcf. They said at EnerCom they hope to hedge 50% of next year's gas.

IMO there is a good chance that gas prices move higher into year-end and PQ gets a chance to hedge at a good price.

PQ is funding this year's capital program with cash flow from operations (a very good thing). Operating CFPS should be around $2.20, so the stock is now trading at just 3X CFPS. That is a very low multiple for a well run company with a lot of running room. Check out the August presentation and I think you will agree, this is a good addition to our Small-Cap Growth Portfolio.

[ghrcap]

This and LINE were the most interesting stories for me yesterday in SF at the IPAA Conference.

[dan_s]

I agree. I added PQ to our Small-Cap Growth Portfolio because I was very impressed by them at EnerCom.

[ghrcap]

Their Thunder Bayou well, which is 500 feet from TD, looks like a direct analog to their LaCantera discovery and PQ has 50% and operates.

[dan_s]

For those of you unfamiliar with PQ, you should read our profile. Thunder Bayou is a big prospect. If successful, my valuation of PQ will go higher. I believe the pre-drill estimate is 65 BCF, which would be huge for a company of this size.

Note that I gave zero value for Thunder Bayou in my forecast and valuation of $12.30/share.