PetroQuest’s Oil and Gas Downhole Production Tubing and Pump Testing TOOL Pro-forma Cash Flow Summary

September 27, 2011

This cash flow pro-forma is prepared on the basis that the tool will be readied for field service in November 2011. The company will identify the tool’s readiness for marketing in a news release.

Assumptions:

• Most wells will require a repair of the downhole pump and/or production tubing at least once every five years and in the case of heavy oil as frequently as every two years. The problem for the well operator is to quickly determine whether it is failure of the pump or the tubing which is causing loss of production. The TOOL will reduce the amount of time required to identify the problem and assist in the repair process, thereby reducing expensive service rig time and loss of production.
• North America has almost 600,000 active producing oil wells.
• The Company’s target market is believed to be at least 150,000 of these wells, amounting to some 30,000 wells to be serviced annually.

This Pro-forma is limited to the Canadian target market of 64,000 oil wells and assumes 6,400 wells to be serviced annually. Once the initial Canadian program is successfully launched expansion to the much larger US market will follow.

The TOOL will be available to users through service tool rental outlets of which there are several majors with numerous outlets in towns in all areas with production wells. The service rig operators will rent the TOOL to meet the well operators’ requirements.

PROJECTED ANNUAL REVENUE
Daily Rental Rate Per TOOL	Average Rental Days/Week	Available Weeks (weather limited)	Rental Outlets in Canada	Tools Per Outlet	Total Revenue
$700	2	40	20	4	$4,480,000
PROJECTED ANNUAL EXPENSES
Rental Outlet Commission at 20%	Agency Sales Commission at 10%	Royalty at 20%			Total Expenses
$ 896,000	$ 448,000	$ 896,000			$ 2,240,000
NET ANNUAL CASH FLOW					$ 2,240,000

This cash flow projection is equal to $0.051 per share on a fully diluted share basis (including all outstanding options, warrants and currently announced Private Placement share and warrants, totaling approximately 43,600,000 shares (currently 28,820,214 shares issued and outstanding)). This CFP is based on the above assumptions and size of market which may not be realistic and may result in materially different cash flow.

Canada Production	Oil Wells Active	Gas Wells Active	Total
Alberta	31912	98698	130610
BC	1043	7129	8172
MB	2730	0	2730
SK	25800	20156	45956
ON	2500	n/a	2500
* 2009 Stats from Canada Center for Energy	63985	125983	189968
2010 Stats	n/a	n/a	11350
2011 Stats* estimated	n/a	n/a	12250

US Production	Oil Wells Active	Gas Wells active	Total
*2011 Worldoil.com stats	530396	n/a	530396

Print Page

Email Page