PetroQuest received $60m in cash at closing and will receive an additional $14m in cash in November 2011. If certain performance metrics are achieved, the company will receive an additional $14m in cash. Additionally, NextEra will fund a share of PetroQuest’s future drilling costs under a two phase program.
During Phase 1 of the drilling program, NextEra will fund a share of PetroQuest’s cost to drill and develop undeveloped Woodford acreage upto a value of $54m, net to PetroQuest’s interest.
After reaching the Phase 1 funding limit, NextEra can elect to participate in Phase 2 of the JV drilling program. If NextEra participates in Phase 2, it will fund a share of PetroQuest’s drilling costs upto an additional $92.6m, with elections to continue participation every six months. Both phases of the drilling program contain well-by-well non-consent provisions on behalf of NextEra.
As a result of the entry into the Woodford JV, PetroQuest expects to add a second operated rig during the next 60 days and third operated rig during the fourth quarter. The estimated impact to the company’s 2010 capital expenditures budget and production guidance is not expected to be material. The company will continue to monitor natural gas prices and will adjust the pace of development accordingly.
PetroQuest is engaged in the exploration, development, acquisition and production of oil and natural gas reserves in the Arkoma Basin, East Texas, South Louisiana and the shallow waters of the Gulf of Mexico.
