PetroQuest Energy Inc.’s (NYSE: PQ) bank group has completed its semi-annual re-determination of its borrowing base under its credit facility. As a result, the company's $220 million borrowing base has been revised to $190 million, subject to the aggregate commitments of the bank group, which the company elected to remain unchanged at $170 million.
In addition, the company's minimum ratio of consolidated current assets to consolidated current liabilities has been amended to the following: 0.75 to 1.0 as the last day of the fiscal quarters ending March 31 and June 30, and 1.0 to 1.0 as the last day of any fiscal quarter ending thereafter.
PetroQuest is currently in compliance with the financial covenants under the credit facility. The company has requested an interim re-determination of the borrowing base which is scheduled to occur by July 1, and will be based upon the valuation of the reserves attributable to the company's oil and gas properties as of July 1.
The purpose of the interim re-determination is to allow the company's Thunder Bayou discovery well to be reflected as a producing asset in the borrowing base. Forecasted production rates from this discovery have increased from initial expectations of 25,000 Mcfe/d to approximately 38,000 Mcfe/d. PetroQuest expects to begin production in early May, and is constructing production facilities capable of accommodating up to 70,000 Mcf/d.
Global Hunter Securities analysts commented, “While the headline reads as a reduction in liquidity, with PQ's elected commitment unchanged at $170MM, there is little impact to borrowing ability.”
The company had $75 million drawn at the end of 2014, giving the company over $100 million in liquidity, the analysts said, noting the ability to “fund a modest deficit in 2015 (<~$20MM).”