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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2005
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from            to
 Commission File Number: 001-32681
 PETROQUEST ENERGY, INC.
  State of incorporation: Delaware
    
    
    
    I.R.S. Employer Identification No. 72-1440714
 
   Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value $.001 per share
    
    New York Stock ExchangePreferred Stock Purchase Rights
    
    New York Stock Exchange
   o þ
  o þ
  þ o
 o
  o þ o
  o þ




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TABLE OF CONTENTS
 Page No.PART IItem 1.
    
    Business
    
    
    
    
    
    
    2Item 1A.
    
    Risk Factors
    
    
    
    
    
    
    9Item 1B.
    
    Unresolved Staff Comments
    
    
    
    
    
    
    18Item 2.
    
    Properties
    
    
    
    
    
    
    18Item 3.
    
    Legal Proceedings
    
    
    
    
    
    
    21Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    
    
    
    
    21PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    
    
    
    
    21Item 6.
    
    Selected Financial Data
    
    
    
    
    
    
    22Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    
    
    
    
    22Item 7A.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    
    
    
    
    31Item 8.
    
    Financial Statements and Supplementary Data
    
    
    
    
    
    
    32Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    
    
    
    
    32Item 9A.
    
    Controls and Procedures
    
    
    
    
    
    
    32Item 9B.
    
    Other Information
    
    
    
    
    
    
    34PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    
    
    
    
    34Item 11.
    
    Executive Compensation
    
    
    
    
    
    
    34Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    
    
    
    
    34Item 13.
    
    Certain Relationships and Related Transactions
    
    
    
    
    
    
    34Item 14.
    
    Principal Accounting Fees and Services
    
    
    
    
    
    
    34PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    
    
    
    
    35Index to Financial Statements.
    
    
    
    
    
    
    F-1Code of Business Conduct and EthicsSubsidiaries of the CompanyConsent of Independent AuditorsConsent of Ryder Scott Company, L.P.Certification of CEO pursuant to Rule 13a-14a/15d-14aCertification of CFO pursuant to Rule 13a-14a/15d-14aCertification pursuant to Section 906Certification pursuant to Section 906
  1




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PART I
 
 ITEM 1. BUSINESS
 Overview
   2




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Business Strategy
 Concentrate in Core Operating Areas and Build Scale.
 Pursue Balanced Growth and Portfolio Mix.
 Manage Our Risk Exposure.
 Target Underexploited Properties with Substantial Opportunity for Upside.
 Maintain Our Financial Flexibility.
 2005 Financial and Operational Summary
  3




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Gulf Coast Basin
 South Chauvin Field.
 Gibson Field.
 Oklahoma
  Texas
 SE Carthage Field.
 Markets and Customers
  
    
    the extent of domestic production and imports of oil and gas;
    
    the proximity of the gas production to gas pipelines;
    
    the availability of capacity in such pipelines;
    
    the demand for oil and gas by utilities and other end users;
    
    the availability of alternative fuel sources;
    
    the effects of inclement weather;
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
    
    state and federal regulation of oil and gas production, and
    
    federal regulation of gas sold or transported in interstate commerce.
   Federal Regulations
 Sales and Transportation of Natural Gas
   Sales and Transportation of Crude Oil.
  5




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Federal Leases.
    Federal, State or American Indian Leases.
  State Regulations
  
    
    requirements for obtaining drilling permits;
    
    the method of developing new fields;
    
    the spacing and operation of wells;
    
    the prevention of waste of oil and gas resources; and
    
    the plugging and abandonment of wells.
 6




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Legislative Proposals
  Environmental Regulations
 General.
  Solid and Hazardous Waste.
  Superfund.
 7




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Oil Pollution Act.
  Clean Water Act.
 Air Emissions.
 Coastal Coordination.
   8




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OSHA.
  Corporate Offices
  Employees
  Available Information
  
 ITEM 1A. RISK FACTORS
 Risks Related to Our Business, Industry and Strategy
 Our future success depends upon our ability to find, develop, produce and acquire additional oil
and natural gas reserves that are economically recoverable.
  Oil and natural gas prices are volatile, and a substantial and extended decline in the prices of
oil and natural gas would likely have a material adverse effect on our financial condition.
  9




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
    
    relatively minor changes in the supply of and the demand for oil and natural gas;
    
    market uncertainty;
    
    the level of consumer product demand;
    
    weather conditions in the United States, such as hurricanes;
    
    the condition of the United States and worldwide economies;
    
    the actions of the Organization of Petroleum Exporting Countries;
    
    domestic and foreign governmental regulation, including price controls
adopted by the Federal Energy Regulatory Commission;
    
    political instability in the Middle East and elsewhere;
    
    the price of foreign imports of oil and natural gas; and
    
    the price and availability of alternate fuel sources.
   Factors beyond our control affect our ability to market oil and natural gas.
  
    
    the level of domestic production and imports of oil and natural gas;
    
    the proximity of natural gas production to natural gas pipelines;
    
    the availability of pipeline capacity;
    
    the demand for oil and natural gas by utilities and other end users;
    
    the availability of alternate fuel sources;
    
    the effect of inclement weather, such as hurricanes;
    
    state and federal regulation of oil and natural gas marketing; and
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
    
    federal regulation of natural gas sold or transported in interstate commerce.
  A substantial portion of our operations is exposed to the additional risk of tropical weather
disturbances.
   Shortage of rigs, equipment, supplies or personnel may restrict our operations.
  Hedging production may limit potential gains from increases in commodity prices or result in
losses.
  We have a substantial amount of indebtedness, which may adversely affect our cash flow and our
ability to operate our business, remain in compliance with debt covenants and make payments on our
debt.
  
    
    it may be more difficult for us to satisfy our obligations with respect to
our 10 3/8% senior notes due 2012, which we refer to as the our 10 3/8% notes, and any
failure to comply with the obligations of any of our debt agreements, including
financial and other restrictive covenants, could result in an event of default under
the indenture governing our 10 3/8% notes and the agreements governing such other
indebtedness;
    
    the covenants contained in our debt agreements limit our ability to borrow
money in the future for acquisitions, capital expenditures or to meet our operating
expenses or other general corporate obligations;
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
    
    we will need to use a substantial portion of our cash flows to pay
principal and interest on our debt, approximately $15.6 million per year for interest
on our 10 3/8% notes alone, which will reduce the amount of money we have for
operations, capital expenditures, expansion, acquisitions or general corporate or other
business activities;
    
    the amount of our interest expense may increase because certain of our
borrowings are at variable rates of interest, which, if interest rates increase, could
result in higher interest expense;
    
    we may have a higher level of debt than some of our competitors, which may
put us at a competitive disadvantage;
    
    we may be more vulnerable to economic downturns and adverse developments in
our industry or the economy in general, especially declines in oil and natural gas
prices; and
    
    our debt level could limit our flexibility in planning for, or reacting to,
changes in our business and the industry in which we operate.
   We may incur substantially more debt, which may intensify the risks described above, including our
ability to service our indebtedness.
  To service our indebtedness, we will require a significant amount of cash. Our ability to generate
cash depends on many factors beyond our control, and any failure to meet our debt obligations could
harm our business, financial condition and results of operations.
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We face strong competition from larger oil and natural gas companies that may negatively affect our
ability to carry on operations.
  
    
    the availability of funds and information relating to a property;
    
    the standards established by us for the minimum projected return on investment; and
    
    the transportation of natural gas.
  We may be unable to overcome risks associated with our drilling activity.
  The loss of key management or technical personnel could adversely affect our ability to operate.
   You should not place undue reliance on reserve information because reserve information represents
estimates.
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
    
    the available data;
    
    assumptions regarding future oil and natural gas prices;
    
    estimated expenditures for future development and exploitation activities; and
    
    engineering and geological interpretation and judgment.
    We may be unable to successfully identify, execute or effectively integrate future acquisitions,
which may negatively affect our results of operations.
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We may not be able to obtain adequate financing to execute our operating strategy.
  
    
    borrowings from banks or other lenders;
    
    the issuance of debt securities;
    
    the sale of common stock, preferred stock or other equity securities;
    
    joint venture financing; and
    
    production payments.
  Restrictive debt covenants could limit our growth and our ability to finance our operations, fund
our capital needs, respond to changing conditions and engage in other business activities that may
be in our best interests.
  
    
    dispose of assets;
    
    incur or guarantee additional indebtedness and issue certain types of preferred stock;
    
    pay dividends on our capital stock;
    
    create liens on our assets;
    
    enter into sale and leaseback transactions;
    
    enter into specified investments or acquisitions;
    
    repurchase, redeem or retire our capital stock or subordinated debt;
    
    merge or consolidate, or transfer all or substantially all of our assets and the assets of our subsidiaries;
    
    engage in specified transactions with subsidiaries and affiliates; or
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
    
    other corporate activities.
   We may not be able to fund our planned capital expenditures.
  Operating hazards may adversely affect our ability to conduct business.
  
    
    unexpected drilling conditions including blowouts, cratering and explosions;
    
    uncontrollable flows of oil, natural gas or well fluids;
    
    equipment failures, fires or accidents;
    
    pollution and other environmental risks; and
    
    shortages in experienced labor or shortages or delays in the delivery of equipment.
  Losses and liabilities from uninsured or underinsured drilling and operating activities could have
a material adverse effect on our financial condition and operations.
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Environmental compliance costs and environmental liabilities could have a material adverse effect
on our financial condition and operations.
  
    
    require the acquisition of permits before drilling commences;
    
    restrict the types, quantities and concentration of various substances that
can be released into the environment from drilling and production activities;
    
    limit or prohibit drilling activities on certain lands lying within
wilderness, wetlands and other protected areas;
    
    require remedial measures to mitigate pollution from former operations,
such as plugging abandoned wells; and
    
    impose substantial liabilities for pollution resulting from our operations.
    Ownership of working interests and overriding royalty interests in certain of our properties by
certain of our officers and directors potentially creates conflicts of interest.
  Lower oil and natural gas prices may cause us to record ceiling test write-downs.
  17




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Risks Relating to Our Outstanding Common Stock
 Our stock price could be volatile, which could cause you to lose part or all of your investment.
   Provisions in certificate of incorporation, bylaws and shareholder rights plan could delay or
prevent a change in control of our company, even if that change would be beneficial to our
stockholders.
  
    
    the charter authorization of blank check preferred stock;
    
    provisions that directors may be removed only for cause, and then only on
approval of holders of a majority of the outstanding voting stock;
    
    a restriction on the ability of stockholders to call a special meeting and
take actions by written consent; and
    
    provisions regulating the ability of our stockholders to nominate directors
for election or to bring matters for action at annual meetings of our stockholders.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
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Oil and Gas Reserves
  Proved
    
    Proved
    
    TotalDeveloped
    
    Undeveloped
    
    ProvedOil (MBbls)
    
    
    2,891
    
    
    
    751
    
    
    
    3,642Natural Gas and NGL (MMcfe)
    
    
    73,250
    
    
    
    35,865
    
    
    
    109,115Estimated pre-tax future net cash flows
    
    $
    626,736,378
    
    
    $
    234,952,710
    
    
    $
    861,689,088Discounted pre-tax future net cash flows
    
    $
    478,216,958
    
    
    $
    161,516,664
    
    
    $
    639,733,622
   Production, Pricing and Production Cost Data
  Year Ended December 31,2005
    
    2004
    
    2003Production:Oil (Bbls)
    
    
    665,400
    
    
    
    818,405
    
    
    
    744,575Gas (Mcfe)
    
    
    12,058,377
    
    
    
    9,305,075
    
    
    
    5,192,760Total Production (Mcfe)
    
    
    16,050,777
    
    
    
    14,215,505
    
    
    
    9,660,210Average sales prices:Oil (per Bbl)
    
    $
    45.76
    
    
    $
    35.31
    
    
    $
    28.47Gas (per Mcfe)
    
    
    7.47
    
    
    
    5.99
    
    
    
    5.14Per Mcfe
    
    
    7.51
    
    
    
    5.95
    
    
    
    4.96Average Production Cost per Mcfe (1)
    
    $
    1.54
    
    
    $
    1.04
    
    
    $
    1.07
 
 (1)
    
    Production costs include lease operating costs and production taxes 19




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Oil and Gas Drilling Activity
  2005
    
    2004
    
    2003Gross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetExploration:Productive
    
    
    32
    
    
    
    14.82
    
    
    
    17
    
    
    
    8.87
    
    
    
    4
    
    
    
    1.55Non-productive
    
    
    3
    
    
    
    1.53
    
    
    
    1
    
    
    
    0.18
    
    
    
    2
    
    
    
    1.20Total
    
    
    35
    
    
    
    16.35
    
    
    
    18
    
    
    
    9.05
    
    
    
    6
    
    
    
    2.75Development:Productive
    
    
    46
    
    
    
    30.90
    
    
    
    15
    
    
    
    9.90
    
    
    
    4
    
    
    
    1.96Non-productive
    
    
    5
    
    
    
    4.29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    51
    
    
    
    35.19
    
    
    
    15
    
    
    
    9.90
    
    
    
    4
    
    
    
    1.96
  Leasehold Acreage
  Developed
    
    UndevelopedGross
    
    Net
    
    Gross
    
    NetMississippi (onshore)
    
    
    721
    
    
    
    458
    
    
    
    88
    
    
    
    56Louisiana (onshore)
    
    
    4,318
    
    
    
    1,279
    
    
    
    9,966
    
    
    
    2,754Louisiana (offshore)
    
    
    2,039
    
    
    
    1,682
    
    
    
    9,281
    
    
    
    1,545Oklahoma
    
    
    45,397
    
    
    
    30,981
    
    
    
    7,759
    
    
    
    5,079Texas (onshore)
    
    
    17,157
    
    
    
    8,507
    
    
    
    35,942
    
    
    
    18,692Federal Waters
    
    
    116,063
    
    
    
    69,443
    
    
    
    78,021
    
    
    
    53,171Total
    
    
    185,695
    
    
    
    112,350
    
    
    
    141,057
    
    
    
    81,297
  Title to Properties
  
    
    royalties and other burdens and obligations, express or implied, under oil and gas leases;
    
    overriding royalties and other burdens created by us or our predecessors in title;
    
    a variety of contractual obligations (including, in some cases, development obligations)
arising under operating agreements, farmout agreements, production sales contracts and
other agreements that may affect the properties or their titles;
    
    back-ins and reversionary interests existing under purchase agreements and leasehold
assignments;
 20




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
    
    liens that arise in the normal course of operations, such as those for unpaid taxes,
statutory liens securing obligations to unpaid suppliers and contractors and contractual
liens under operating agreements; pooling, unitization and communitization agreements,
declarations and orders; and
    
    easements, restrictions, rights-of-way and other matters that commonly affect property.
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER 
     PURCHASES OF EQUITY SECURITIES
 Market Price of and Dividends on Common Stock
  NYSE/Nasdaq Stock MarketHigh
    
    Low20041st Quarter
    
    $
    4.02
    
    
    $
    2.402nd Quarter
    
    
    4.38
    
    
    
    3.003rd Quarter
    
    
    5.85
    
    
    
    4.094th Quarter
    
    
    5.74
    
    
    
    3.5520051st Quarter
    
    $
    7.75
    
    
    $
    4.532nd Quarter
    
    
    7.08
    
    
    
    5.123rd Quarter
    
    
    11.17
    
    
    
    6.504th Quarter
    
    
    11.17
    
    
    
    7.96
    21




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ITEM 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2005
    
    2004
    
    2003 (a)
    
    2002
    
    2001 (b)(in thousands except per share data)Revenues
    
    $
    123,348
    
    
    $
    84,868
    
    
    $
    48,688
    
    
    $
    48,238
    
    
    $
    55,342Net Income
    
    
    21,417
    
    
    
    16,348
    
    
    
    3,640
    
    
    
    2,307
    
    
    
    11,645Net Income per share:Basic
    
    
    0.46
    
    
    
    0.37
    
    
    
    0.08
    
    
    
    0.06
    
    
    
    0.37Diluted
    
    
    0.44
    
    
    
    0.35
    
    
    
    0.08
    
    
    
    0.06
    
    
    
    0.34Oil and Gas Properties, net
    
    
    365,183
    
    
    
    211,683
    
    
    
    160,229
    
    
    
    120,746
    
    
    
    101,029Total Assets
    
    
    431,470
    
    
    
    231,617
    
    
    
    176,384
    
    
    
    132,063
    
    
    
    114,639Long-term Debt
    
    
    158,340
    
    
    
    38,500
    
    
    
    22,200
    
    
    
    2,400
    
    
    
    33,000Stockholders Equity
    
    
    144,537
    
    
    
    121,277
    
    
    
    107,727
    
    
    
    97,770
    
    
    
    54,215
 
 (a)
    
    During 2003, the Company adopted SFAS No. 143. The cumulative effect of adoption resulted in a
gain of $849,000, or $0.02 per share.(b)
    
    The Companys financial statements for 2001 were audited by Arthur Andersen LLP, which has
ceased operations. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Overview
    22




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Critical Accounting Policies and Estimates
 Full Cost Method of Accounting
       Future Abandonment Costs
  23




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Reserve Estimates
  Derivative Instruments
    New Accounting Standards
  24




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Results of Operations
  Year Ended December 31,2005
    
    
    2004
    
    
    2003Production:Oil (Bbls)
    
    
    665,400
    
    
    
    818,405
    
    
    
    744,575Gas (Mcfe)
    
    
    12,058,377
    
    
    
    9,305,075
    
    
    
    5,192,760Total Production (Mcfe)
    
    
    16,050,777
    
    
    
    14,215,505
    
    
    
    9,660,210Sales:Total oil sales
    
    $
    30,446,897
    
    
    $
    28,896,550
    
    
    $
    21,196,246Total gas sales
    
    
    90,105,054
    
    
    
    55,698,797
    
    
    
    26,713,611Total oil and gas sales
    
    $
    120,551,951
    
    
    $
    84,595,347
    
    
    $
    47,909,857Average sales prices:Oil (per Bbl)
    
    $
    45.76
    
    
    $
    35.31
    
    
    $
    28.47Gas (per Mcfe)
    
    
    7.47
    
    
    
    5.99
    
    
    
    5.14Per Mcfe
    
    
    7.51
    
    
    
    5.95
    
    
    
    4.96
  Comparison of Results of Operations for the Years Ended December 31, 2005 and 2004
  Production
    26




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Prices
  Revenue
   Expenses
        27




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Comparison of Results of Operations for the Years Ended December 31, 2004 and 2003
  Production
  Prices
  Revenue
   Expenses
      28




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Liquidity and Capital Resources
  Source of Capital: Operations
   Source of Capital: Debt
    29




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Source of Capital: Issuance of Securities
  Use of Capital: Exploration and Development
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Contractual Obligations
  AfterTotal
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    2010Bank debt (1)
    
    $
    12,870
    
    
    $
    700
    
    
    $
    725
    
    
    $
    750
    
    
    $
    10,695
    
    
    $
    
    
    
    $
    10 3/8% Senior Notes (1)
    
    
    249,214
    
    
    
    15,563
    
    
    
    15,563
    
    
    
    15,563
    
    
    
    15,563
    
    
    
    15,563
    
    
    
    171,399Purchase obligations (2)
    
    
    30,265
    
    
    
    8,240
    
    
    
    9,125
    
    
    
    9,125
    
    
    
    3,775
    
    
    
    
    
    
    
    Operating leases (3)
    
    
    3,232
    
    
    
    821
    
    
    
    778
    
    
    
    764
    
    
    
    771
    
    
    
    98
    
    
    
    Capital projects (4)
    
    
    21,607
    
    
    
    2,350
    
    
    
    2,769
    
    
    
    2,690
    
    
    
    356
    
    
    
    2,172
    
    
    
    11,270
 
 (1)
    
    Includes principal and estimated interest.(2)
    
    Consists of a three-year commitment for the rental of a drilling rig and a commitment
to acquire seismic data during 2006.(3)
    
    Consists primarily of leases for office space and leases for equipment rentals.(4)
    
    Consists of estimated future obligations to abandon our leased properties. 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
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Instrument
    
    
    
    
    
    WeightedProduction Period
    
    Type
    
    Daily Volumes
    
    Average PriceNatural Gas:2006
    
    Swap
    
    5,500 Mmbtu
    
    $
    4.33First Quarter 2006
    
    Costless Collar
    
    16,500 Mmbtu
    
    $
    8.80 - 14.30Second Quarter 2006
    
    Costless Collar
    
    14,500 Mmbtu
    
    $
    7.95 - 12.41Third Quarter 2006
    
    Costless Collar
    
    11,000 Mmbtu
    
    $
    8.55 - 13.14Fourth Quarter 2006
    
    Costless Collar
    
    9,000 Mmbtu
    
    $
    8.22 - 13.29Crude Oil:First Quarter 2006
    
    Costless Collar
    
    600 Bbls
    
    $
    37.67 - 57.37April  December 2006
    
    Costless Collar
    
    200 Bbls
    
    $
    23.00 - 26.40
   Instrument
    
    
    
    
    
    WeightedProduction Period
    
    Type
    
    Daily Volumes
    
    Average PriceCrude Oil:Second Quarter 2006
    
    Costless Collar
    
    750 Bbls
    
    $
    65.00 - 74.30Third Quarter 2006
    
    Costless Collar
    
    500 Bbls
    
    $
    65.00 - 75.35Fourth Quarter 2006
    
    Costless Collar
    
    300 Bbls
    
    $
    65.00 - 75.65
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  i.
    
    that the Companys disclosure controls and procedures are designed to ensure (a) that
information required to be disclosed by the Company in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SECs rules and forms, and (b) that such information is
accumulated and communicated to the Companys management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure; andii.
    
    that the Companys disclosure controls and procedures are effective.
 32




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##### Table of Contents



Changes in Internal Controls
  Managements Report on Internal Control Over Financial Reporting
      /s/ Charles T. Goodson
 /s/ Michael O. Aldridge
 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
 
  33




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##### Table of Contents



ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEMS 10, 11, 12, 13 & 14
  34




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   
    2.1
    
    Plan and Agreement of Merger by and among Optima Petroleum
Corporation, Optima Energy (U.S.) Corporation, its wholly-owned subsidiary, and
Goodson Exploration Company, NAB Financial L.L.C., Dexco Energy, Inc., American
Explorer, L.L.C. (incorporated herein by reference to Appendix G of the Proxy
Statement on Schedule 14A filed July 22, 1998).2.2
    
    Agreement and Plan of Merger dated April 12, 2005, among PetroQuest
Energy, Inc., TDC Acquisition Sub LLC and TDC Energy LLC (incorporated by
reference to Exhibit 2.1 to Form 8-K filed April 13, 2005).2.3
    
    Purchase and Sale Agreement, dated as of April 13, 2005 between Staab
Holdings, L.L.C. and PetroQuest Energy, LLC (incorporated by reference to Exhibit
2.1 to Form 8-K filed April 22, 2005).2.4
    
    Purchase and Sale Agreement, dated as of April 7, 2005, among MAKO
Resources, LLC, Golden Gas Service Company and PetroQuest Energy, LLC
(incorporated by reference to Exhibit 2.2 to Form 8-K filed April 22, 2005).2.5
    
    Purchase and Sale Agreement, dated as of April 7, 2005, between
Golden Gas Service Company and PetroQuest Energy, LLC (incorporated by reference
to Exhibit 2.3 to Form 8-K filed April 22, 2005).2.6
    
    Purchase and Sale Agreement, dated as of April 7, 2005, between
Golden Gas Service Company and PetroQuest Energy, LLC (incorporated by reference
to Exhibit 2.4 to Form 8-K filed April 22, 2005).3.1
    
    Certificate of Incorporation of the Company (incorporated herein by
reference to Exhibit 4.1 to Form 8-K dated September 16, 1998).3.2
    
    Bylaws of the Company (incorporated herein by reference to Exhibit
4.2 to Form 8-K dated September 16, 1998).3.3
    
    Certificate of Domestication of Optima Petroleum Corporation
(incorporated herein by reference to Exhibit 4.4 to Form 8-K dated September 16,
1998).3.4
    
    Certificate of Designations, Preferences, Limitations And Relative
Rights of The Series a Junior Participating Preferred Stock of PetroQuest Energy,
Inc. (incorporated herein by reference to Exhibit A of the Rights Agreement
attached as Exhibit 1 to Form 8-A filed November 9, 2001).
 35




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##### Table of Contents



4.1
    
    Warrant to Purchase Common Shares of PetroQuest Energy, Inc.
(incorporated by reference to Exhibit 4.1 to Form 8-K filed December 29, 2003).4.2
    
    Rights Agreement dated as of November 7, 2001 between PetroQuest
Energy, Inc. and American Stock Transfer & Trust Company, as Rights Agent,
including exhibits thereto (incorporated herein by reference to Exhibit 1 to Form
8-A filed November 9, 2001).4.3
    
    Form of Rights Certificate (incorporated herein by reference to
Exhibit C of the Rights Agreement attached as Exhibit 1 to Form 8-A filed November
9, 2001).4.4
    
    Indenture, dated May 11, 2005, among PetroQuest Energy, Inc.,
PetroQuest Energy, LLC, the Subsidiary Guarantors identified therein, and the Bank
of New York Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to Form
8-K filed May 11, 2005).4.5
    
    Registration Rights Agreement dated April 12, 2005, between
PetroQuest Energy, Inc. and Macquarie Bank Limited (incorporated by reference to
Exhibit 4.1 to Form 8-K filed April 13, 2005).4.6
    
    Registration Rights Agreement dated May 6, 2005, among PetroQuest
Energy, Inc., PetroQuest Energy, LLC, the Subsidiary Guarantors identified therein
and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Form 8-K
filed May 11, 2005).4.7
    
    Registration Rights Agreement dated June 17, 2005, among PetroQuest
Energy, Inc., PetroQuest Energy, LLC, the Subsidiary Guarantors identified therein
and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Form 8-K
filed June 17, 2005).10.1
    
    PetroQuest Energy, Inc. 1998 Incentive Plan, as amended and restated
effective December 1, 2000 (incorporated herein by reference to Appendix A to Proxy
Statement on Schedule 14A filed April 20, 2001).10.2
    
    Amended and Restated Credit Agreement, dated as of May 14, 2003, by
and between PetroQuest Energy, LLC, PetroQuest Energy, Inc., Bank One, NA, Banc
One Capital Markets, Inc., and certain other Lenders (incorporated herein by
reference to Exhibit 10.1 to Form 10-Q filed August 13, 2003).10.3
    
    Guaranty dated May 14, 2003, between PetroQuest Energy, Inc. and Bank
One, NA, as Agent for the Lenders (incorporated herein by reference to Exhibit
10.2 to Form 10-Q filed August 13, 2003).10.4
    
    First Amendment to Amended and Restated Credit Agreement dated as of
November 6, 2003, by and among PetroQuest Energy, L.L.C., PetroQuest Energy, Inc.;
Bank One, N.A., and Union Bank of California, N.A. (incorporated herein by
reference to Exhibit 10.4 to Form 10-Q filed November 13, 2003).10.5
    
    Second Amendment to Amended and Restated Credit Agreement dated as of
December 23, 2003, by and among PetroQuest Energy, L.L.C., PetroQuest Energy,
Inc., and Bank One, N.A. (incorporated herein by reference to Exhibit 10.2 to Form
8-K filed December 29, 2003).10.6
    
    Third Amendment to Amended and Restated Credit Agreement dated as of
July 27, 2004, by and among PetroQuest Energy, L.L.C., PetroQuest Energy, Inc.,
and Bank One, N.A. (incorporated herein by reference to Exhibit 10.1 to Form 10-Q
filed July 30, 2004).10.7
    
    Fourth Amendment to Amended and Restated Credit Agreement dated as of
October 14, 2004 by and between PetroQuest Energy, LLC, PetroQuest Energy, Inc.
and Bank One, N.A. (incorporated by reference to Exhibit 10.1 on Form 8-K filed
October 19, 2004).10.8
    
    Fifth Amendment to Amended and Restated Credit Agreement entered into
as of November 3, 2004 by and between PetroQuest Energy, LLC, PetroQuest Energy,
Inc., Pittrans Inc. (a wholly owned subsidiary of PetroQuest Energy, LLC) and Bank
One, N.A. (incorporated by reference to Exhibit 10.1 on Form 8-K filed November
15, 2004).
 36




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##### Table of Contents



10.9
    
    Sixth Amendment to Amended and Restated Credit Agreement dated April
12, 2005, by and among PetroQuest Energy, LLC, PetroQuest Energy, Inc., Pittrans
Inc., TDC Acquisition Sub LLC, and JP Morgan Chase Bank, N.A. (incorporated by
reference to Exhibit 10.1 to Form 8-K filed April 13, 2005).10.10
    
    Seventh Amendment to Amended and Restated Credit Agreement dated May
9, 2005, by and among PetroQuest Energy, LLC, PetroQuest Energy, Inc., Pittrans
Inc., TDC Energy LLC, and JP Morgan Chase Bank, N.A. (incorporated by reference to
Exhibit 10.1 to Form 8-K filed May 11, 2005).10.11
    
    Eighth Amendment to Amended and Restated Credit Agreement dated June
17, 2005, by and among PetroQuest Energy, LLC, PetroQuest Energy, Inc., Pittrans
Inc., TDC Energy LLC, and JP Morgan Chase Bank, N.A., Guaranty Bank, FSB and
Calyon New York Branch (incorporated by reference to Exhibit 10.1 to Form 8-K
filed June 17, 2005).10.12
    
    Second Amended and Restated Credit Agreement dated as of November
18, 2005, among PetroQuest Energy, LLC, PetroQuest Energy, Inc., JP Morgan Chase
Bank, N.A. as lender, agent and issuer of letters of credit, Macquarie Bank
Limited as lender, and Calyon New York Branch as lender and syndication agent
(incorporated by reference to Exhibit 10.1 to Form 8-K filed November 23, 2005).10.13
    
    Amendment No. 1 to Second Amended and Restated Credit Agreement
dated as of December 22, 2005, among PetroQuest Energy, LLC, PetroQuest Energy,
Inc., Pittrans, Inc., TDC Energy LLC, JP Morgan Chase Bank, N.A. as lender, agent
and issuer of letters of credit, Macquarie Bank Limited as lender, and Calyon New
York Branch as lender and syndication agent (incorporated by reference to Exhibit
10.1 to Form 8-K filed December 22, 2005).10.14
    
    Senior Second Lien Secured Credit Agreement dated November 6, 2003,
between PetroQuest Energy, L.L.C., PetroQuest Energy, Inc., each of the Lenders
from time to time party thereto; and Macquarie Americas Corp., as administrative
agent for the Lenders (incorporated herein by reference to Exhibit 10.1 to Form
10-Q filed November 13, 2003).10.15
    
    Unconditional Guaranty Agreement dated November 6, 2003, by
PetroQuest Energy, Inc. to Macquarie Americas Corp., as administrative agent for
the benefit of the Lenders under the Credit Agreement (incorporated herein by
reference to Exhibit 10.2 to Form 10-Q filed November 13, 2003).10.16
    
    First Amendment To Second Lien Secured Credit Agreement dated
December 23, 2003, among PetroQuest Energy, L.L.C., PetroQuest Energy, Inc., each
of the Lenders from time to time party thereto, and Macquarie Americas Corp., as
administrative agent for the Lenders (incorporated herein by reference to Exhibit
10.1 to Form 8-K filed December 29, 2003).10.17
    
    Second Amendment to Second Lien Secured Credit Agreement dated July
27, 2004, among PetroQuest Energy, L.L.C., PetroQuest Energy, Inc., each of the
Lenders from time to time party thereto, and Macquarie Americas Corp., as
administrative agent for the Lenders (incorporated herein by reference to Exhibit
10.2 to Form 10-Q filed July 30, 2004).10.18
    
    Third Amendment to Second Lien Secured Credit Agreement dated as of
October 14, 2004 by and between PetroQuest Energy, LLC, PetroQuest Energy, Inc.
and Macquarie Bank Limited (incorporated by reference to Exhibit 10.2 on Form 8-K
filed October 19, 2004).10.19
    
    Fourth Amendment to Second Lien Secured Credit Agreement dated as of
December 29, 2004 by and between PetroQuest Energy, LLC and Macquarie Bank Limited
(incorporated by reference to Exhibit 10.1 on Form 8-K filed December 30, 2004).10.20
    
    Fifth Amendment to Second Lien Secured Credit Agreement dated April
12, 2005, among PetroQuest Energy, LLC, TDC Energy LLC f/k/a TDC Acquisition Sub
LLC, PetroQuest Energy, Inc. and Macquarie Bank Limited (incorporated by reference
to Exhibit 10.2 to Form 8-K filed April 13, 2005).
 37




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##### Table of Contents



10.21
    
    Employment Agreement dated September 1, 1998, between PetroQuest
Energy, Inc. and Charles T. Goodson (incorporated herein by reference to Exhibit
10.2 to Form 8-K dated September 16, 1998).10.22
    
    First Amendment to Employment agreement dated September 1, 1998
between PetroQuest Energy, Inc. and Charles T. Goodson dated July 30, 1999
(incorporated herein by reference to Exhibit 10.1 to For 8-K dated August 9, 1999).10.23
    
    Employment Agreement dated September 1, 1998, between PetroQuest
Energy, Inc. and Ralph J. Daigle (incorporated herein by reference to Exhibit 10.4
to Form 8-K dated September 16, 1998).10.24
    
    First Amendment to Employment Agreement dated September 1, 1998
between PetroQuest Energy, Inc. and Ralph J. Daigle dated July 30, 1999
(incorporated herein by reference to Exhibit 10.3 to Form 8-K dated August 9, 1999).10.25
    
    Severance Agreement and Release, effective April 8, 2005, between
PetroQuest Energy, Inc. and Ralph J. Daigle (incorporated herein by reference to
Exhibit 10.1 to Form 8-K filed April 22, 2005).10.26
    
    Employment Agreement dated May 8, 2000 between PetroQuest Energy,
Inc. and Michael O. Aldridge (incorporated by reference to Exhibit 10.1 to the Form
10-Q filed August 14, 2000).10.27
    
    Employment Agreement dated December 15, 2000 between PetroQuest
Energy, Inc. and Arthur M. Mixon, III. (incorporated herein by reference to Exhibit
10.12 to Form 10-K filed March 30, 2001).10.28
    
    Employment Agreement dated April 20, 2001 between PetroQuest Energy,
Inc. and Daniel G. Fournerat (incorporated herein by reference to Exhibit 10.1 to
Form 10-Q filed May 15, 2001).10.29
    
    Employment Agreement dated April 20, 2001 between PetroQuest
Energy, Inc. and Dalton F. Smith III (incorporated herein by reference to Exhibit
10.21 to Form 10-K filed March 13, 2002).10.30
    
    Employment agreement dated July 28, 2003, between PetroQuest
Energy, Inc. and Stephen H. Green (incorporated herein by reference to Exhibit 10.3
to Form 10-Q filed November 13, 2003).10.31
    
    Form of Termination Agreement Between PetroQuest Energy, Inc. and
each of its executive officers, including Charles T. Goodson, Michael O. Aldridge,
Arthur M. Mixon, III, Daniel G. Fournerat, Dalton F. Smith III and Stephen H. Green
(incorporated herein by reference to Exhibit 10.20 to Form 10-K filed March 13,
2002).10.32
    
    Form of Indemnification Agreement between PetroQuest Energy, Inc.
and each of its directors and executive officers, including Charles T. Goodson,
Ralph J. Daigle, Daniel G. Fournerat, E. Wayne Nordberg, William W. Rucks, IV,
Michael O. Aldridge, Arthur M. Mixon, III, Dalton F. Smith III, Michael L. Finch,
W.J. Gordon, III, Stephen H. Green and Charles F. Mitchell, II (incorporated herein
by reference to Exhibit 10.21 to Form 10-K filed March 13, 2002).*14.1
    
    Code of Business Conduct and Ethics.*21.1
    
    Subsidiaries of the Company.*23.1
    
    Consent of Independent Auditors.*23.2
    
    Consent of Ryder Scott Company, L.P.*31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13-a-14(a)
/ Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as
amended.*31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13-a-14(a)
/ Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as
amended.
 38




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##### Table of Contents



*32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Chief Executive
Officer.*32.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Chief Financial
Officer.
 
 *
    
    Filed herewith.
    
    Management contract or compensatory plan or arrangement   GLOSSARY OF CERTAIN OIL AND NATURAL GAS TERMS
  Bbl
 Bcf
 Bcfe
 Block
 Btu or British Thermal Unit
 Completion
 Condensate
 Developed acreage
 Developmental well
 Dry hole
 Exploratory well
 Farm-in or farm-out
 Field
 39




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##### Table of Contents



Gross acres or gross wells
 Lead
 MBbls
 Mcf
 Mcfe
 MMBls
 MMBtu
 MMcf
 MMcfe
 Net acres or net wells
 Productive well
 Prospect
 Proved developed non-producing reserves
 Proved developed producing reserves (PDP)
 Proved developed reserves
 Proved reserves
 Proved undeveloped reserves
 Reservoir
 Undeveloped acreage
 Working interest
 40




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##### Table of Contents



PETROQUEST ENERGY, INC.By:
    /s/Charles T. GoodsonCHARLES T. GOODSONChairman of the Board and Chief
Executive Officer  By:
    
    /s/ Charles T. Goodson

CHARLES T. GOODSON
    
    Chairman of the Board, Chief
Executive Officer and Director
(Principal Executive Officer)By:
    
    /s/ Michael O. Aldridge

MICHAEL O. ALDRIDGE
    
    Senior Vice President, Chief
Financial Officer, Treasurer and
Director (Principal Financial and
Accounting Officer)By:
    
    /s/ W.J. Gordon, III

W.J. GORDON, III
    
    DirectorBy:
    
    /s/ Michael L. Finch

MICHAEL L. FINCH
    
    DirectorBy:
    
    /s/ Charles F. Mitchell, II, M.D.

Charles F. Mitchell, II, M.D.
    
    DirectorBy:
    
    /s/ E. Wayne Nordberg

E. WAYNE NORDBERG
    
    DirectorBy:
    
    /s/ William W. Rucks, IV

WILLIAM W. RUCKS, IV
    
    Director
 41




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets of PetroQuest Energy, Inc. as of December 31, 2005 and 2004
    
    
    F-3Consolidated Statements of Income of PetroQuest Energy, Inc. for the years ended December 31, 2005, 2004 and 2003
    
    
    F-4Consolidated Statements of Stockholders Equity of PetroQuest Energy, Inc. for the years ended December 31, 2005, 2004 and 2003
    
    
    F-5Consolidated Statements of Cash Flows of PetroQuest Energy, Inc. for the years ended December 31, 2005, 2004 and 2003
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Accounting for Asset
Retirement Obligations.
   
 F-2




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##### Table of Contents



PETROQUEST ENERGY, INC.
 
  Amounts in Thousands
 December 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,703
    
    
    $
    1,529Revenue receivable
    
    
    22,492
    
    
    
    9,392Joint interest billing receivable
    
    
    17,567
    
    
    
    3,655Other current assets
    
    
    3,441
    
    
    
    1,017Total current assets
    
    
    50,203
    
    
    
    15,593Property and equipment:Oil and gas properties:Oil and gas properties, full cost method
    
    
    523,212
    
    
    
    363,756Unevaluated oil and gas properties
    
    
    52,745
    
    
    
    16,380Accumulated depreciation, depletion and amortization
    
    
    (210,774
    )
    
    
    (168,453
    )Oil and gas properties, net
    
    
    365,183
    
    
    
    211,683Gas gathering assets
    
    
    10,861
    
    
    
    Accumulated depreciation and amortization of gas gathering assets
    
    
    (1,055
    )
    
    
    Total property and equipment
    
    
    374,989
    
    
    
    211,683Other assets, net of accumulated depreciation and amortization
of $10,353 and $5,967, respectively
    
    
    6,278
    
    
    
    4,341Total assets
    
    $
    431,470
    
    
    $
    231,617LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable to vendors
    
    $
    41,462
    
    
    $
    24,176Advances from co-owners
    
    
    5,874
    
    
    
    2,265Oil and gas revenue payable
    
    
    8,090
    
    
    
    2,930Hedging liability
    
    
    15,987
    
    
    
    4,536Other accrued liabilities
    
    
    10,542
    
    
    
    6,115Total current liabilities
    
    
    81,955
    
    
    
    40,022Bank debt
    
    
    10,000
    
    
    
    38,50010 3/8% Senior Notes
    
    
    148,340
    
    
    
    Asset retirement obligation
    
    
    19,257
    
    
    
    15,238Deferred income taxes
    
    
    27,139
    
    
    
    14,606Other liabilities
    
    
    242
    
    
    
    1,974Commitments and contingenciesStockholders equity:Common stock, $.001 par value; authorized 75,000
shares; issued and outstanding 47,325 and 44,685
shares, respectively
    
    
    47
    
    
    
    45Paid-in capital
    
    
    117,441
    
    
    
    112,387Accumulated other comprehensive loss
    
    
    (7,444
    )
    
    
    (4,231
    )Retained earnings
    
    
    34,493
    
    
    
    13,076Total stockholders equity
    
    
    144,537
    
    
    
    121,277Total liabilities and stockholders equity
    
    $
    431,470
    
    
    $
    231,617
  F-3




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##### Table of Contents



PETROQUEST ENERGY, INC.
 
  Amounts in Thousands, Except Per Share Data
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Revenues:Oil and gas sales
    
    $
    120,552
    
    
    $
    84,595
    
    
    $
    47,910Interest and other income
    
    
    2,796
    
    
    
    273
    
    
    
    778123,348
    
    
    
    84,868
    
    
    
    48,688Expenses:Lease operating expenses
    
    
    20,972
    
    
    
    13,161
    
    
    
    9,449Production taxes
    
    
    3,764
    
    
    
    1,549
    
    
    
    884Depreciation, depletion and amortization
    
    
    43,747
    
    
    
    35,435
    
    
    
    27,098General and administrative
    
    
    7,347
    
    
    
    6,212
    
    
    
    4,444Accretion of asset retirement obligation
    
    
    1,253
    
    
    
    833
    
    
    
    682Interest expense
    
    
    12,371
    
    
    
    2,817
    
    
    
    579Derivative expense
    
    
    
    
    
    
    2
    
    
    
    1,07189,454
    
    
    
    60,009
    
    
    
    44,207Income from operations
    
    
    33,894
    
    
    
    24,859
    
    
    
    4,481Income tax expense
    
    
    12,477
    
    
    
    8,511
    
    
    
    1,690Income before cumulative effect of
change in accounting principle
    
    $
    21,417
    
    
    $
    16,348
    
    
    $
    2,791Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    849Net income
    
    $
    21,417
    
    
    $
    16,348
    
    
    $
    3,640Earnings per common share:BasicIncome before cumulative effect of
change in accounting principle
    
    $
    0.46
    
    
    $
    0.37
    
    
    $
    0.06Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    0.02Net income
    
    $
    0.46
    
    
    $
    0.37
    
    
    $
    0.08DilutedIncome before cumulative effect of
change in accounting principle
    
    $
    0.44
    
    
    $
    0.35
    
    
    $
    0.06Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    0.02Net income
    
    $
    0.44
    
    
    $
    0.35
    
    
    $
    0.08Weighted average number of common shares:Basic
    
    
    46,714
    
    
    
    44,616
    
    
    
    43,661Diluted
    
    
    48,242
    
    
    
    46,438
    
    
    
    44,181
  F-4




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PETROQUEST ENERGY, INC
 
  Amounts in Thousands
 Unearned
    
    
    Other
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Deferred
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersStock
    
    
    Capital
    
    
    Compensation
    
    
    Loss
    
    
    Earnings (Deficit)
    
    
    EquityDecember 31, 2002
    
    $
    43
    
    
    $
    106,173
    
    
    $
    (337
    )
    
    $
    (1,197
    )
    
    $
    (6,912
    )
    
    $
    97,770Options and warrants exercised
    
    
    2
    
    
    
    2,110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,112Sale of common stock
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    
    
    
    
    
    
    
    
    268Tax effect of deferred
compensation
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Warrant fair value adjustment
    
    
    
    
    
    
    3,745
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,745Derivative fair value
adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    
    
    
    
    182Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,640
    
    
    
    3,640December 31, 2003
    
    $
    45
    
    
    $
    112,038
    
    
    $
    (69
    )
    
    $
    (1,015
    )
    
    $
    (3,272
    )
    
    $
    107,727Options and warrants exercised
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170Sale of common stock
    
    
    
    
    
    
    203
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    69Tax effect of deferred
compensation
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )Derivative fair value
adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,216
    )
    
    
    
    
    
    
    (3,216
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,348
    
    
    
    16,348December 31, 2004
    
    $
    45
    
    
    $
    112,387
    
    
    $
    
    
    
    $
    (4,231
    )
    
    $
    13,076
    
    
    $
    121,277Options and warrants exercised
    
    
    2
    
    
    
    1,003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,005Issuance of common stock
    
    
    
    
    
    
    4,051
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,051Derivative fair value
adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,213
    )
    
    
    
    
    
    
    (3,213
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,417
    
    
    
    21,417December 31, 2005
    
    $
    47
    
    
    $
    117,441
    
    
    $
    
    
    
    $
    (7,444
    )
    
    $
    34,493
    
    
    $
    144,537
  F-5




---



##### Table of Contents



PETROQUEST ENERGY, INC.
 
  Amounts in Thousands
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net income
    
    $
    21,417
    
    
    $
    16,348
    
    
    $
    3,640Adjustments to reconcile net income to net cash
provided by operating activities:Deferred tax expense
    
    
    12,477
    
    
    
    8,511
    
    
    
    1,690Amortization of debt issuance costs
    
    
    1,390
    
    
    
    1,678
    
    
    
    531Compensation expense
    
    
    213
    
    
    
    272
    
    
    
    381Depreciation, depletion and amortization
    
    
    43,747
    
    
    
    35,435
    
    
    
    27,098Derivative mark to market
    
    
    
    
    
    
    (218
    )
    
    
    (258
    )Write-off of debt issuance costs
    
    
    2,575
    
    
    
    
    
    
    
    Amortization of bond discount
    
    
    111
    
    
    
    
    
    
    
    Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (849
    )Accretion of asset retirement obligation
    
    
    1,253
    
    
    
    833
    
    
    
    682Changes in working capital accounts:Revenue receivable
    
    
    (13,100
    )
    
    
    (2,871
    )
    
    
    (20
    )Joint interest billing receivable
    
    
    (13,912
    )
    
    
    (1,080
    )
    
    
    (409
    )Accounts payable and accrued liabilities
    
    
    14,255
    
    
    
    12,521
    
    
    
    1,416Other assets
    
    
    (448
    )
    
    
    (619
    )
    
    
    (273
    )Advances from co-owners
    
    
    3,609
    
    
    
    (487
    )
    
    
    1,811Other
    
    
    (397
    )
    
    
    (13
    )
    
    
    (1,250
    )Net cash provided by operating activities
    
    
    73,190
    
    
    
    70,310
    
    
    
    34,190Cash flows from investing activities:Investment in oil and gas properties
    
    
    (171,980
    )
    
    
    (80,142
    )
    
    
    (54,126
    )Investment in gas gathering assets
    
    
    (10,861
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (182,841
    )
    
    
    (80,142
    )
    
    
    (54,126
    )Cash flows from financing activities:Proceeds from exercise of options and warrants
    
    
    972
    
    
    
    170
    
    
    
    2,111Proceeds from bank borrowings
    
    
    44,500
    
    
    
    39,000
    
    
    
    39,600Repayment of bank borrowings
    
    
    (73,000
    )
    
    
    (28,000
    )
    
    
    (21,100
    )Proceeds from issuance of 10 3/8% senior notes
    
    
    148,229
    
    
    
    
    
    
    
    Deferred financing costs
    
    
    (5,876
    )
    
    
    (588
    )
    
    
    (1,027
    )Issuance of common stock, net of expenses
    
    
    
    
    
    
    
    
    
    
    (6
    )Net cash provided by financing activities
    
    
    114,825
    
    
    
    10,582
    
    
    
    19,578Net increase (decrease) in cash and cash equivalents
    
    
    5,174
    
    
    
    750
    
    
    
    (358
    )Cash and cash equivalents at beginning of period
    
    
    1,529
    
    
    
    779
    
    
    
    1,137Cash and cash equivalents at end of period
    
    $
    6,703
    
    
    $
    1,529
    
    
    $
    779Supplentmental disclosure of cash flow informationCash paid during the period for:Interest
    
    $
    9,628
    
    
    $
    1,752
    
    
    $
    435Income taxes
    
    $
    75
    
    
    $
    
    
    
    $
    
  F-6




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##### Table of Contents



PETROQUEST ENERGY, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Organization and Summary of Significant Accounting Policies
  Principles of Consolidation
  Use of Estimates
  Oil and Gas Properties
     F-7




---



##### Table of Contents



Gas Gathering Assets
  Other Assets
  Cash and Cash Equivalents
  Income Taxes
  Earnings per Common Share Amounts
  Year Ended December 31,2005
    
    
    2004
    
    
    2003Basic shares outstanding
    
    
    46,714
    
    
    
    44,616
    
    
    
    43,661Effect of stock options
    
    
    1,327
    
    
    
    858
    
    
    
    179Effect of warrants
    
    
    201
    
    
    
    964
    
    
    
    341Diluted shares outstanding
    
    
    48,242
    
    
    
    46,438
    
    
    
    44,181
  F-8




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##### Table of Contents



Revenue Recognition
  Certain Concentrations
  Year Ended December 31,2005
    
    2004
    
    2003Cokinos
    
    
    12
    %
    
    
    (a
    )
    
    
    12
    %Louis Dreyfus Corporation
    
    
    20
    %
    
    
    26
    %
    
    
    27
    %Texon LP
    
    
    16
    %
    
    
    24
    %
    
    
    24
    %
 
 (a)
    
    Less than 10 percent Fair Value of Financial Instruments
  Derivative Instruments
     F-9




---



##### Table of Contents



Instrument
    
    
    
    
    
    WeightedProduction Period
    
    Type
    
    Daily Volumes
    
    Average PriceNatural Gas:2006
    
    Swap
    
    5,500 Mmbtu
    
    $
    4.33First Quarter 2006
    
    Costless Collar
    
    16,500 Mmbtu
    
    $
    8.80 - 14.30Second Quarter 2006
    
    Costless Collar
    
    14,500 Mmbtu
    
    $
    7.95 - 12.41Third Quarter 2006
    
    Costless Collar
    
    11,000 Mmbtu
    
    $
    8.55 - 13.14Fourth Quarter 2006
    
    Costless Collar
    
    9,000 Mmbtu
    
    $
    8.22 - 13.29Crude Oil:First Quarter 2006
    
    Costless Collar
    
    600 Bbls
    
    $
    37.67 - 57.37April  December 2006
    
    Costless Collar
    
    200 Bbls
    
    $
    23.00 - 26.40
  New Accounting Standards
     F-10




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##### Table of Contents



Year Ended December 31,2005
    
    
    2004
    
    
    2003Net income
    
    $
    21,417
    
    
    $
    16,348
    
    
    $
    3,640Stock-based compensation:Add: expense included in reported results, net of tax
    
    
    22
    
    
    
    177
    
    
    
    248Deduct: fair value based method, net of tax
    
    
    (688
    )
    
    
    (1,191
    )
    
    
    (541
    )Pro forma net income
    
    $
    20,751
    
    
    $
    15,334
    
    
    $
    3,347Earnings per common shareBasic  as reported
    
    $
    0.46
    
    
    $
    0.37
    
    
    $
    0.08Basic  pro forma
    
    $
    0.44
    
    
    $
    0.34
    
    
    $
    0.08Diluted  as reported
    
    $
    0.44
    
    
    $
    0.35
    
    
    $
    0.08Diluted  pro forma
    
    $
    0.43
    
    
    $
    0.33
    
    
    $
    0.08
  Note 2  Asset Retirement Obligations
   F-11




---



##### Table of Contents



Year EndedDecember 31, 2005Asset retirement obligation at beginning of year
    
    $
    16,393Liabilities incurred (1)
    
    
    7,105Liabilities settled
    
    
    Accretion expense
    
    
    1,253Revisions in estimated cash flows
    
    
    (3,144
    )Asset retirement obligation at end of period
    
    
    21,607Less: current portion of obligation
    
    
    (2,350
    )Long-term asset retirement obligation
    
    $
    19,257
 
 (1)
    
    Approximately $6.5 million relates to the assumption of estimated abandonment
costs in connection with the Companys acquisition of TDC Energy, Inc (see Note 6). Note 3  Equity
 Other Comprehensive Income
  Year Ended December 31,2005
    
    
    2004
    
    
    2003Net income
    
    $
    21,417
    
    
    $
    16,348
    
    
    $
    3,640Change in fair value of derivative instrument,
accounted for as hedges, net of taxes
    
    
    (3,213
    )
    
    
    (3,216
    )
    
    
    182Comprehensive income
    
    $
    18,204
    
    
    $
    13,132
    
    
    $
    3,822
    F-12




---



##### Table of Contents



Unearned Deferred Compensation
  Note 4  Debt
      F-13




---



##### Table of Contents



Note 5  Related Party Transactions
    Note 6  Acquisitions
   F-14




---



##### Table of Contents



Note 7  Investment in Oil and Gas Properties
  amounts in thousands
 For the Year-Ended December 31,2005
    
    
    2004
    
    
    2003Acquisition costs:Proved
    
    $
    58,121
    
    
    $
    23,041
    
    
    $
    22,679Unproved
    
    
    24,152
    
    
    
    5,963
    
    
    
    1,769Exploration costs:Proved
    
    
    39,311
    
    
    
    28,298
    
    
    
    5,170Unproved
    
    
    15,098
    
    
    
    
    
    
    
    Development costs
    
    
    51,420
    
    
    
    24,204
    
    
    
    21,685Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    8,150Capitalized general and administrative and interest costs
    
    
    7,719
    
    
    
    4,919
    
    
    
    4,062Total costs incurred
    
    $
    195,821
    
    
    $
    86,425
    
    
    $
    63,515
 For the Year-Ended December 31,2005
    
    
    2004
    
    
    2003Accumulated depreciation, depletion
and amortization (DD&A)Balance, beginning of year
    
    $
    (168,453
    )
    
    $
    (133,482
    )
    
    $
    (109,450
    )Provision for DD&A
    
    
    (42,513
    )
    
    
    (34,971
    )
    
    
    (26,654
    )Effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    2,622Sale of proved properties and other
    
    
    192
    
    
    
    
    
    
    
    Balance, end of year
    
    $
    (210,774
    )
    
    $
    (168,453
    )
    
    $
    (133,482
    )DD&A per Mcfe
    
    $
    2.65
    
    
    $
    2.46
    
    
    $
    2.76
   F-15




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##### Table of Contents



Note 8  Income Taxes
   December 31,2005
    
    
    2004Net operating loss carryforwards
    
    $
    22,710
    
    
    $
    12,565Percentage depletion carryforward
    
    
    1,994
    
    
    
    1,839Alternative minimum tax credit
    
    
    105
    
    
    
    115Temporary differences:Oil and gas properties  full cost
    
    
    (52,101
    )
    
    
    (29,278
    )Compensation expense
    
    
    153
    
    
    
    153$
    (27,139
    )
    
    $
    (14,606
    )
   For the Year-Ended December 31,2005
    
    
    2004
    
    
    2003Amount computed using the statutory rate
    
    $
    11,863
    
    
    $
    8,701
    
    
    $
    1,568Increase (reduction) in taxes resulting from:State & local taxes
    
    
    746
    
    
    
    547
    
    
    
    99Percentage depletion carryforward
    
    
    (155
    )
    
    
    (498
    )
    
    
    (50
    )Other
    
    
    23
    
    
    
    (239
    )
    
    
    73Income tax expense
    
    $
    12,477
    
    
    $
    8,511
    
    
    $
    1,690
 Note 9  Commitments and Contingencies
   F-16




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##### Table of Contents



Lease Commitments
   2006
    
    $
    8212007
    
    
    7782008
    
    
    7642009
    
    
    7712010
    
    
    98Thereafter
    
    
    $
    3,232
  Note 10  Employee Benefit Plans
   Year Ended December 31,2005
    
    
    2004
    
    
    2003Number of
    
    
    Wgtd. Avg.
    
    
    Number of
    
    
    Wgtd. Avg.
    
    
    Number of
    
    
    Wgtd. Avg.Options
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding at beginning of year
    
    
    2,664,634
    
    
    $
    2.70
    
    
    
    2,069,634
    
    
    $
    3.03
    
    
    
    2,197,353
    
    
    $
    3.14Granted
    
    
    155,000
    
    
    
    6.33
    
    
    
    1,239,500
    
    
    
    3.32
    
    
    
    150,000
    
    
    
    1.94Expired/cancelled/forfeited
    
    
    (20,834
    )
    
    
    3.37
    
    
    
    (556,167
    )
    
    
    5.41
    
    
    
    (235,253
    )
    
    
    3.76Exercised
    
    
    (487,236
    )
    
    
    1.97
    
    
    
    (88,333
    )
    
    
    1.93
    
    
    
    (42,466
    )
    
    
    1.23Outstanding at end of year
    
    
    2,311,564
    
    
    
    3.08
    
    
    
    2,664,634
    
    
    
    2.70
    
    
    
    2,069,634
    
    
    
    3.03Options exercisable at year-end
    
    
    1,709,373
    
    
    
    2.73
    
    
    
    1,892,963
    
    
    
    2.46
    
    
    
    1,690,371
    
    
    
    2.77Options available for future grant
    
    
    486,899
    
    
    
    
    
    
    
    621,066
    
    
    
    
    
    
    
    1,359,069Weighted average fair value of
options granted during the year
    
    $
    6.33
    
    
    
    
    
    
    $
    1.93
    
    
    
    
    
    
    $
    1.18
  F-17




---



##### Table of Contents



Range of
    
    
    Options
    
    
    Wgtd. Avg.
    
    
    Wgtd. Avg.
    
    
    Options
    
    
    Wgtd. Avg.Exercise
    
    
    Outstanding
    
    
    Remaining
    
    
    Exercise
    
    
    Exercisable
    
    
    ExercisePrice
    
    
    12/31/05
    
    
    Contractual Life
    
    
    Price
    
    
    12/31/05
    
    
    Price$
    0.85 - $1.65
    
    
    
    407,300
    
    
    4.5 years
    
    $
    1.32
    
    
    
    387,302
    
    
    $
    1.30$
    1.81 - $3.13
    
    
    
    575,000
    
    
    5.4 years
    
    $
    2.69
    
    
    
    548,336
    
    
    $
    2.71$
    3.17 - $4.24
    
    
    
    1,104,264
    
    
    7.6 years
    
    $
    3.28
    
    
    
    720,402
    
    
    $
    3.23$
    4.93 - $8.51
    
    
    
    225,000
    
    
    9.2 years
    
    $
    6.30
    
    
    
    53,333
    
    
    $
    6.652,311,564
    
    
    6.6 years
    
    $
    3.08
    
    
    
    1,709,373
    
    
    $
    2.73
 Note 11  Oil and Gas Reserve Information  Unaudited
    F-18




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##### Table of Contents



Oil
    
    Natural Gasin
    
    and NGL inMBbls
    
    MMcfeProved reserves as of December 31, 2002
    
    
    5,258
    
    
    
    37,137Revisions of previous estimates
    
    
    (369
    )
    
    
    (7,935
    )Extensions, discoveries and other additions
    
    
    83
    
    
    
    6,830Purchase of producing properties
    
    
    217
    
    
    
    28,410Sale of producing properties
    
    
    (200
    )
    
    
    (1,456
    )Production
    
    
    (744
    )
    
    
    (5,193
    )Proved reserves as of December 31, 2003
    
    
    4,245
    
    
    
    57,793Revisions of previous estimates
    
    
    (396
    )
    
    
    3,461Extensions, discoveries and other additions
    
    
    559
    
    
    
    14,575Purchase of producing properties
    
    
    124
    
    
    
    12,545Production
    
    
    (818
    )
    
    
    (9,305
    )Proved reserves as of December 31, 2004
    
    
    3,714
    
    
    
    79,069Revisions of previous estimates
    
    
    (29
    )
    
    
    (8,315
    )Extensions, discoveries and other additions
    
    
    362
    
    
    
    29,966Purchase of producing properties
    
    
    294
    
    
    
    21,211Sale of producing properties
    
    
    (34
    )
    
    
    (758
    )Production
    
    
    (665
    )
    
    
    (12,058
    )Proved reserves as of December 31, 2005
    
    
    3,642
    
    
    
    109,115Proved developed reservesAs of December 31, 2003
    
    
    3,446
    
    
    
    34,655As of December 31, 2004
    
    
    2,984
    
    
    
    50,809As of December 31, 2005
    
    
    2,891
    
    
    
    73,250
 F-19




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##### Table of Contents



Standardized Measure
 December 31,2005
    
    
    2004
    
    
    2003Future cash flows
    
    $
    1,157,283
    
    
    $
    622,941
    
    
    $
    460,073Future production costs
    
    
    (195,648
    )
    
    
    (111,165
    )
    
    
    (100,213
    )Future development costs
    
    
    (99,946
    )
    
    
    (68,289
    )
    
    
    (66,511
    )Future income taxes
    
    
    (213,222
    )
    
    
    (94,454
    )
    
    
    (53,514
    )Future net cash flows
    
    
    648,467
    
    
    
    349,033
    
    
    
    239,83510% annual discount
    
    
    (165,055
    )
    
    
    (91,279
    )
    
    
    (64,609
    )Standardized measure of discounted future net cash flows
    
    $
    483,412
    
    
    $
    257,754
    
    
    $
    175,226
 Changes in Standardized Measure
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Standarized measure at beginning of year
    
    $
    257,754
    
    
    $
    175,226
    
    
    $
    139,416Sales and transfers of oil and gas produced,
net of production costs
    
    
    (95,816
    )
    
    
    (69,885
    )
    
    
    (37,577
    )Changes in price, net of future production costs
    
    
    164,071
    
    
    
    46,382
    
    
    
    23,007Extensions and discoveries, net of future
production and development costs
    
    
    168,802
    
    
    
    73,535
    
    
    
    38,883Changes in estimated future development costs,
net of development costs incurred during this period
    
    
    6,398
    
    
    
    10,122
    
    
    
    10,577Revisions of quantity estimates
    
    
    (47,025
    )
    
    
    4,076
    
    
    
    (35,796
    )Accretion of discount
    
    
    32,627
    
    
    
    21,435
    
    
    
    16,605Net change in income taxes
    
    
    (87,808
    )
    
    
    (29,375
    )
    
    
    (12,507
    )Purchase of reserves in place
    
    
    94,834
    
    
    
    27,623
    
    
    
    40,605Sale of reserves in place
    
    
    (1,352
    )
    
    
    
    
    
    
    (3,802
    )Changes in production rates (timing) and other
    
    
    (9,073
    )
    
    
    (1,385
    )
    
    
    (4,185
    )Standardized measure at end of year
    
    $
    483,412
    
    
    $
    257,754
    
    
    $
    175,226
  F-20




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##### Table of Contents



Note 12  Summarized Quarterly Financial Information  Unaudited
  Quarter EndedMarch-31
    
    
    June-30
    
    
    September-30
    
    
    December-312005:Revenues
    
    $
    21,743
    
    
    $
    30,279
    
    
    $
    31,381
    
    
    $
    39,945Expenses
    
    
    17,556
    
    
    
    26,414
    
    
    
    26,336
    
    
    
    31,625Net income
    
    $
    4,187
    
    
    $
    3,865
    
    
    $
    5,045
    
    
    $
    8,320Earnings per share:Basic
    
    $
    0.09
    
    
    $
    0.08
    
    
    $
    0.11
    
    
    $
    0.18Diluted
    
    $
    0.09
    
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.172004:Revenues
    
    $
    18,202
    
    
    $
    21,497
    
    
    $
    22,572
    
    
    $
    22,597Expenses
    
    
    15,030
    
    
    
    17,260
    
    
    
    18,632
    
    
    
    17,598Net income
    
    $
    3,172
    
    
    $
    4,237
    
    
    $
    3,940
    
    
    $
    4,999Earnings per share:Basic
    
    $
    0.07
    
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    0.11Diluted
    
    $
    0.07
    
    
    $
    0.09
    
    
    $
    0.08
    
    
    $
    0.11
 
 (1)
    
    The above quarterly earnings per share may not total to the full year per share amount,
as the weighted average number of shares outstanding for each quarter fluctuated as a
result of the assumed exercise of stock options. F-21




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##### Table of Contents



Exhibit Index
 2.1
    
    Plan and Agreement of Merger by and among Optima Petroleum
Corporation, Optima Energy (U.S.) Corporation, its wholly-owned subsidiary, and
Goodson Exploration Company, NAB Financial L.L.C., Dexco Energy, Inc., American
Explorer, L.L.C. (incorporated herein by reference to Appendix G of the Proxy
Statement on Schedule 14A filed July 22, 1998).2.2
    
    Agreement and Plan of Merger dated April 12, 2005, among PetroQuest
Energy, Inc., TDC Acquisition Sub LLC and TDC Energy LLC (incorporated by
reference to Exhibit 2.1 to Form 8-K filed April 13, 2005).2.3
    
    Purchase and Sale Agreement, dated as of April 13, 2005 between Staab
Holdings, L.L.C. and PetroQuest Energy, LLC (incorporated by reference to Exhibit
2.1 to Form 8-K filed April 22, 2005).2.4
    
    Purchase and Sale Agreement, dated as of April 7, 2005, among MAKO
Resources, LLC, Golden Gas Service Company and PetroQuest Energy, LLC
(incorporated by reference to Exhibit 2.2 to Form 8-K filed April 22, 2005).2.5
    
    Purchase and Sale Agreement, dated as of April 7, 2005, between
Golden Gas Service Company and PetroQuest Energy, LLC (incorporated by reference
to Exhibit 2.3 to Form 8-K filed April 22, 2005).2.6
    
    Purchase and Sale Agreement, dated as of April 7, 2005, between
Golden Gas Service Company and PetroQuest Energy, LLC (incorporated by reference
to Exhibit 2.4 to Form 8-K filed April 22, 2005).3.1
    
    Certificate of Incorporation of the Company (incorporated herein by
reference to Exhibit 4.1 to Form 8-K dated September 16, 1998).3.2
    
    Bylaws of the Company (incorporated herein by reference to Exhibit
4.2 to Form 8-K dated September 16, 1998).3.3
    
    Certificate of Domestication of Optima Petroleum Corporation
(incorporated herein by reference to Exhibit 4.4 to Form 8-K dated September 16,
1998).3.4
    
    Certificate of Designations, Preferences, Limitations And Relative
Rights of The Series a Junior Participating Preferred Stock of PetroQuest Energy,
Inc. (incorporated herein by reference to Exhibit A of the Rights Agreement
attached as Exhibit 1 to Form 8-A filed November 9, 2001).




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##### Table of Contents



4.1
    
    Warrant to Purchase Common Shares of PetroQuest Energy, Inc.
(incorporated by reference to Exhibit 4.1 to Form 8-K filed December 29, 2003).4.2
    
    Rights Agreement dated as of November 7, 2001 between PetroQuest
Energy, Inc. and American Stock Transfer & Trust Company, as Rights Agent,
including exhibits thereto (incorporated herein by reference to Exhibit 1 to Form
8-A filed November 9, 2001).4.3
    
    Form of Rights Certificate (incorporated herein by reference to
Exhibit C of the Rights Agreement attached as Exhibit 1 to Form 8-A filed November
9, 2001).4.4
    
    Indenture, dated May 11, 2005, among PetroQuest Energy, Inc.,
PetroQuest Energy, LLC, the Subsidiary Guarantors identified therein, and the Bank
of New York Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to Form
8-K filed May 11, 2005).4.5
    
    Registration Rights Agreement dated April 12, 2005, between
PetroQuest Energy, Inc. and Macquarie Bank Limited (incorporated by reference to
Exhibit 4.1 to Form 8-K filed April 13, 2005).4.6
    
    Registration Rights Agreement dated May 6, 2005, among PetroQuest
Energy, Inc., PetroQuest Energy, LLC, the Subsidiary Guarantors identified therein
and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Form 8-K
filed May 11, 2005).4.7
    
    Registration Rights Agreement dated June 17, 2005, among PetroQuest
Energy, Inc., PetroQuest Energy, LLC, the Subsidiary Guarantors identified therein
and the Initial Purchasers (incorporated by reference to Exhibit 4.2 to Form 8-K
filed June 17, 2005).10.1
    
    PetroQuest Energy, Inc. 1998 Incentive Plan, as amended and restated
effective December 1, 2000 (incorporated herein by reference to Appendix A to Proxy
Statement on Schedule 14A filed April 20, 2001).10.2
    
    Amended and Restated Credit Agreement, dated as of May 14, 2003, by
and between PetroQuest Energy, LLC, PetroQuest Energy, Inc., Bank One, NA, Banc
One Capital Markets, Inc., and certain other Lenders (incorporated herein by
reference to Exhibit 10.1 to Form 10-Q filed August 13, 2003).10.3
    
    Guaranty dated May 14, 2003, between PetroQuest Energy, Inc. and Bank
One, NA, as Agent for the Lenders (incorporated herein by reference to Exhibit
10.2 to Form 10-Q filed August 13, 2003).10.4
    
    First Amendment to Amended and Restated Credit Agreement dated as of
November 6, 2003, by and among PetroQuest Energy, L.L.C., PetroQuest Energy, Inc.;
Bank One, N.A., and Union Bank of California, N.A. (incorporated herein by
reference to Exhibit 10.4 to Form 10-Q filed November 13, 2003).10.5
    
    Second Amendment to Amended and Restated Credit Agreement dated as of
December 23, 2003, by and among PetroQuest Energy, L.L.C., PetroQuest Energy,
Inc., and Bank One, N.A. (incorporated herein by reference to Exhibit 10.2 to Form
8-K filed December 29, 2003).10.6
    
    Third Amendment to Amended and Restated Credit Agreement dated as of
July 27, 2004, by and among PetroQuest Energy, L.L.C., PetroQuest Energy, Inc.,
and Bank One, N.A. (incorporated herein by reference to Exhibit 10.1 to Form 10-Q
filed July 30, 2004).10.7
    
    Fourth Amendment to Amended and Restated Credit Agreement dated as of
October 14, 2004 by and between PetroQuest Energy, LLC, PetroQuest Energy, Inc.
and Bank One, N.A. (incorporated by reference to Exhibit 10.1 on Form 8-K filed
October 19, 2004).10.8
    
    Fifth Amendment to Amended and Restated Credit Agreement entered into
as of November 3, 2004 by and between PetroQuest Energy, LLC, PetroQuest Energy,
Inc., Pittrans Inc. (a wholly owned subsidiary of PetroQuest Energy, LLC) and Bank
One, N.A. (incorporated by reference to Exhibit 10.1 on Form 8-K filed November
15, 2004).




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##### Table of Contents



10.9
    
    Sixth Amendment to Amended and Restated Credit Agreement dated April
12, 2005, by and among PetroQuest Energy, LLC, PetroQuest Energy, Inc., Pittrans
Inc., TDC Acquisition Sub LLC, and JP Morgan Chase Bank, N.A. (incorporated by
reference to Exhibit 10.1 to Form 8-K filed April 13, 2005).10.10
    
    Seventh Amendment to Amended and Restated Credit Agreement dated May
9, 2005, by and among PetroQuest Energy, LLC, PetroQuest Energy, Inc., Pittrans
Inc., TDC Energy LLC, and JP Morgan Chase Bank, N.A. (incorporated by reference to
Exhibit 10.1 to Form 8-K filed May 11, 2005).10.11
    
    Eighth Amendment to Amended and Restated Credit Agreement dated June
17, 2005, by and among PetroQuest Energy, LLC, PetroQuest Energy, Inc., Pittrans
Inc., TDC Energy LLC, and JP Morgan Chase Bank, N.A., Guaranty Bank, FSB and
Calyon New York Branch (incorporated by reference to Exhibit 10.1 to Form 8-K
filed June 17, 2005).10.12
    
    Second Amended and Restated Credit Agreement dated as of November
18, 2005, among PetroQuest Energy, LLC, PetroQuest Energy, Inc., JP Morgan Chase
Bank, N.A. as lender, agent and issuer of letters of credit, Macquarie Bank
Limited as lender, and Calyon New York Branch as lender and syndication agent
(incorporated by reference to Exhibit 10.1 to Form 8-K filed November 23, 2005).10.13
    
    Amendment No. 1 to Second Amended and Restated Credit Agreement
dated as of December 22, 2005, among PetroQuest Energy, LLC, PetroQuest Energy,
Inc., Pittrans, Inc., TDC Energy LLC, JP Morgan Chase Bank, N.A. as lender, agent
and issuer of letters of credit, Macquarie Bank Limited as lender, and Calyon New
York Branch as lender and syndication agent (incorporated by reference to Exhibit
10.1 to Form 8-K filed December 22, 2005).10.14
    
    Senior Second Lien Secured Credit Agreement dated November 6, 2003,
between PetroQuest Energy, L.L.C., PetroQuest Energy, Inc., each of the Lenders
from time to time party thereto; and Macquarie Americas Corp., as administrative
agent for the Lenders (incorporated herein by reference to Exhibit 10.1 to Form
10-Q filed November 13, 2003).10.15
    
    Unconditional Guaranty Agreement dated November 6, 2003, by
PetroQuest Energy, Inc. to Macquarie Americas Corp., as administrative agent for
the benefit of the Lenders under the Credit Agreement (incorporated herein by
reference to Exhibit 10.2 to Form 10-Q filed November 13, 2003).10.16
    
    First Amendment To Second Lien Secured Credit Agreement dated
December 23, 2003, among PetroQuest Energy, L.L.C., PetroQuest Energy, Inc., each
of the Lenders from time to time party thereto, and Macquarie Americas Corp., as
administrative agent for the Lenders (incorporated herein by reference to Exhibit
10.1 to Form 8-K filed December 29, 2003).10.17
    
    Second Amendment to Second Lien Secured Credit Agreement dated July
27, 2004, among PetroQuest Energy, L.L.C., PetroQuest Energy, Inc., each of the
Lenders from time to time party thereto, and Macquarie Americas Corp., as
administrative agent for the Lenders (incorporated herein by reference to Exhibit
10.2 to Form 10-Q filed July 30, 2004).10.18
    
    Third Amendment to Second Lien Secured Credit Agreement dated as of
October 14, 2004 by and between PetroQuest Energy, LLC, PetroQuest Energy, Inc.
and Macquarie Bank Limited (incorporated by reference to Exhibit 10.2 on Form 8-K
filed October 19, 2004).10.19
    
    Fourth Amendment to Second Lien Secured Credit Agreement dated as of
December 29, 2004 by and between PetroQuest Energy, LLC and Macquarie Bank Limited
(incorporated by reference to Exhibit 10.1 on Form 8-K filed December 30, 2004).10.20
    
    Fifth Amendment to Second Lien Secured Credit Agreement dated April
12, 2005, among PetroQuest Energy, LLC, TDC Energy LLC f/k/a TDC Acquisition Sub
LLC, PetroQuest Energy, Inc. and Macquarie Bank Limited (incorporated by reference
to Exhibit 10.2 to Form 8-K filed April 13, 2005).




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##### Table of Contents



10.21
    
    Employment Agreement dated September 1, 1998, between PetroQuest
Energy, Inc. and Charles T. Goodson (incorporated herein by reference to Exhibit
10.2 to Form 8-K dated September 16, 1998).10.22
    
    First Amendment to Employment agreement dated September 1, 1998
between PetroQuest Energy, Inc. and Charles T. Goodson dated July 30, 1999
(incorporated herein by reference to Exhibit 10.1 to For 8-K dated August 9, 1999).10.23
    
    Employment Agreement dated September 1, 1998, between PetroQuest
Energy, Inc. and Ralph J. Daigle (incorporated herein by reference to Exhibit 10.4
to Form 8-K dated September 16, 1998).10.24
    
    First Amendment to Employment Agreement dated September 1, 1998
between PetroQuest Energy, Inc. and Ralph J. Daigle dated July 30, 1999
(incorporated herein by reference to Exhibit 10.3 to Form 8-K dated August 9, 1999).10.25
    
    Severance Agreement and Release, effective April 8, 2005, between
PetroQuest Energy, Inc. and Ralph J. Daigle (incorporated herein by reference to
Exhibit 10.1 to Form 8-K filed April 22, 2005).10.26
    
    Employment Agreement dated May 8, 2000 between PetroQuest Energy,
Inc. and Michael O. Aldridge (incorporated by reference to Exhibit 10.1 to the Form
10-Q filed August 14, 2000).10.27
    
    Employment Agreement dated December 15, 2000 between PetroQuest
Energy, Inc. and Arthur M. Mixon, III. (incorporated herein by reference to Exhibit
10.12 to Form 10-K filed March 30, 2001).10.28
    
    Employment Agreement dated April 20, 2001 between PetroQuest Energy,
Inc. and Daniel G. Fournerat (incorporated herein by reference to Exhibit 10.1 to
Form 10-Q filed May 15, 2001).10.29
    
    Employment Agreement dated April 20, 2001 between PetroQuest
Energy, Inc. and Dalton F. Smith III (incorporated herein by reference to Exhibit
10.21 to Form 10-K filed March 13, 2002).10.30
    
    Employment agreement dated July 28, 2003, between PetroQuest
Energy, Inc. and Stephen H. Green (incorporated herein by reference to Exhibit 10.3
to Form 10-Q filed November 13, 2003).10.31
    
    Form of Termination Agreement Between PetroQuest Energy, Inc. and
each of its executive officers, including Charles T. Goodson, Michael O. Aldridge,
Arthur M. Mixon, III, Daniel G. Fournerat, Dalton F. Smith III and Stephen H. Green
(incorporated herein by reference to Exhibit 10.20 to Form 10-K filed March 13,
2002).10.32
    
    Form of Indemnification Agreement between PetroQuest Energy, Inc.
and each of its directors and executive officers, including Charles T. Goodson,
Ralph J. Daigle, Daniel G. Fournerat, E. Wayne Nordberg, William W. Rucks, IV,
Michael O. Aldridge, Arthur M. Mixon, III, Dalton F. Smith III, Michael L. Finch,
W.J. Gordon, III, Stephen H. Green and Charles F. Mitchell, II (incorporated herein
by reference to Exhibit 10.21 to Form 10-K filed March 13, 2002).*14.1
    
    Code of Business Conduct and Ethics.*21.1
    
    Subsidiaries of the Company.*23.1
    
    Consent of Independent Auditors.*23.2
    
    Consent of Ryder Scott Company, L.P.*31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13-a-14(a)
/ Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as
amended.*31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13-a-14(a)
/ Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as
amended.




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##### Table of Contents



*32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Chief Executive
Officer.*32.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Chief Financial
Officer.
 
 *
    
    Filed herewith.
    
    Management contract or compensatory plan or arrangement