PetroQuest Energy, Inc. (PQ)

LEGMAKER (< 20) Submitted: 5/21/08 5:11 PM : Start Price: $22.81 PQ Score: -31.10

It’s difficult not getting excited about the oil and gas sector. Today's announcement of slower growth and higher unemployment through the rest of 2008 points money in a different direction. Many of the smart guys on Wall Street have been short of oil for sometime, as they believe the bubble is right around the corner. Before anyone responds to the article, I am bullish oil through November of this year. I am not saying it will double only that it will gain somewhat over that time frame. Gas is the same, but will probably have a better run than oil will, mostly due to valuation. As commodities continue to increase, it is smart to find plays that will do well during this time frame. The smaller ones are positioned very well for growth and even larger gains and or losses can be garnered from these types of investments.





Since 1998, the stock price of this company has grown from $.81 per share to $22.75. Over this time reserves have increased by 31% per year, production is up 39% per year, cash flow is up 114% per year, stockholders equity increased by 37% per year, and lastly, stock price is up 38% per year. Their growth strategy has been sound as they have made acquisitions, increased production and developed reserves. At one time, this company was only in the Gulf of Mexico but that has changed as 2008 is estimated to have 33% from offshore Gulf of Mexico, 23% South Louisiana, 17% East Texas, and 27% Arkansas and Oklahoma. This companies diversification, has improved since 2002 when they had $64 million in 10 wells, this year they will have $260 million in 180 wells. They also have hedging positions to decrease risk. Currently their position is 40% for 2008.





Looking at their chart, on May 6th, they experienced a triple top breakout. Their bullish chart is accompanied by current quarter estimated earnings of 94.7% and 77% for the full year. They have also beat earnings for the past four quarters and I believe the upcoming could be a blow out. Analyst estimates are pretty spread out as there is a fight over well energy prices will continue to go higher in this environment. Full year estimates from earnings are anywhere from $1.06 to $198. This wide variance in expected earnings bodes well in an environment with constant energy pressures. Even if energy pulls off of its highs, it is more a question of how far then if. Look for PQ has a good 2008 as inflationary pressures continue through 2008.

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