SOURCE: Quicksilver Resources Inc.

November 06, 2007 06:45 ET

Quicksilver Resources Reports Record Quarterly Results

Organic Growth Fuels 17th Consecutive Quarterly Production Increase; Net Income Increases 25% to $28.7 Million

FORT WORTH, TX--(Marketwire - November 6, 2007) - Quicksilver Resources Inc. (NYSE: KWK) today reported record quarterly production and revenues for the period ended September 30, 2007. Net income for the third quarter was $28.7 million ($.35 per diluted share), up 25 percent as compared to $22.9 million ($.28 per diluted share) in the prior-year quarter.

Adjusted net income, a non-GAAP measure which excludes items associated with the divestment of the company's properties and assets in Michigan, Indiana and Kentucky, was $32.2 million ($.39 per diluted share) for the third quarter of 2007, up 40 percent as compared to $22.9 million ($.28 per diluted share) in the prior-year quarter. Net cash from operating activities for the nine months ended September 30, 2007 was $247.4 million, an increase of nearly 32 percent from $187.7 million generated in the same period of 2006, as presented in the attached Condensed Consolidated Statements of Cash Flows.

Third-Quarter 2007 Highlights

--  Produced record volumes of 238 Mmcfe per day -- up 36%
--  Generated $100 million of net cash from operating activities
--  Drilled 68 horizontal wells in the Fort Worth Basin; connected 61
    wells to sales
--  Completed successful initial public offering of Quicksilver Gas
    Services, netting nearly $100 million to the company
--  Announced divestment of Northeast Operations; transaction closed
    November 1
    

"The continued successful execution of our development program in the Fort Worth Basin paved the way for our 17th consecutive quarterly increase in production volumes," said Glenn Darden, Quicksilver president and chief executive officer. "As a result, total production volumes in this basin increased 150 percent from the prior-year period. Included in this increase is more than a three-fold increase in the amount of natural gas liquids extracted from our high-Btu production. With the superior performance we are experiencing from this area, we expect to be able to exceed our initial forecast of 25 percent growth in total production for 2007, despite the divestment of approximately 75 Mmcfe per day from our properties in Michigan, Indiana and Kentucky.

"Cash proceeds received for the property divestment and initial public offering of our Texas midstream operations have significantly strengthened the company's capital structure while enabling us to maintain a meaningful interest in the future growth of these assets. The company is well positioned to capitalize on the organic growth provided by its large inventory of low-risk development projects."

Production

Total average production increased 36 percent to a record 238 million cubic feet of natural gas equivalent (Mmcfe) per day for the third quarter of 2007 versus the prior-year period of 175 Mmcfe per day. Total daily production volumes increased 14 percent sequentially from the second quarter of 2007. Natural gas, including natural gas liquids (NGLs), comprised approximately 96 percent of the company's total production in the third quarter of 2007.

Production, on a thousand cubic feet of natural gas equivalent (Mcfe) per day basis, for the company's primary operating areas for the three months ended September 30 was as follows:


                         Mcfe per day
                    ========================
Area                   2007         2006        Change
                    ===========  ===========  ==========
Texas                   101,338       40,505         150%
Canada                   57,036       49,208          16%
Northeast Operations     76,173       81,353          (6%)
Other                     3,108        3,440         (10%)
                    -----------  -----------
  Total company         237,655      174,506          36%
                    ===========  ===========

Revenues and Costs

Total revenues for the third quarter of 2007 were $159.2 million compared to $99.2 million in the prior-year quarter. Sales of natural gas, NGLs and oil totaled $151.0 million in the third quarter of 2007, up nearly 54 percent from the 2006 quarter. The increase reflects a 36 percent increase in equivalent daily production volumes and a 13 percent increase in the average realized price per Mcfe.

Production costs of $44.2 million for the 2007 third quarter represent a $19.6 million increase from the prior-year quarter. This increase was primarily due to increased production from Texas as well as a $5.4 million severance-related charge associated with the previously announced divestment of the company's Northeast Operations in Michigan, Indiana and Kentucky. Excluding these divested-related charges, unit production costs were $1.78 per Mcfe during the 2007 quarter.

Operations Update

In the Fort Worth Basin, the company drilled 68 wells (59.8 net) and connected 61 wells (53.8 net) to sales during the third quarter. With 13 rigs currently working in the basin, the company now expects to drill 220 to 230 wells in the area during 2007. Third-quarter 2007 recoveries of natural gas liquids from production in the Fort Worth Basin averaged more than 115 barrels for each million cubic feet of natural gas processed.

In Canada, drilling activities resumed as expected in the third quarter following the end of the spring break-up period. The company has drilled 149 operated wells in the Horseshoe Canyon area during the first nine months of 2007 and expects to drill an additional 90 wells here by year end. As a result, we remain on track to achieve the projected 10 percent annual production growth from our Canadian operations.

Total capital expenditures for the third quarter of 2007 were approximately $286 million, of which approximately 76 percent was associated with drilling and completion activities, approximately 17 percent for midstream activities, approximately five percent for acreage purchases, and approximately two percent for corporate.

Fourth-Quarter Outlook

Fourth-quarter production volumes are expected to average in the range of 210 to 220 MMcfe per day, reflecting the divestment of the Northeast Operations as of November 1, 2007. Average unit expenses, on an Mcfe basis are expected as follows:

-   Production costs                     $1.45 - $1.55
-   Production taxes                       .10 -   .15
-   General and administrative             .55 -   .60
-   Depletion, depreciation & accretion   1.45 -  1.50

Conference Call

The company will host a conference call to discuss third-quarter 2007 operational and financial results today, at 2:00 p.m. eastern time.

Quicksilver invites interested parties to participate in the call via the company's website at http://www.qrinc.com or by calling 1-877-313-7932, using the conference ID number 6104498, prior to 1:55 p.m. eastern time. A digital replay of the conference call will be available at 5:00 p.m. eastern time today, and will remain available for 30 days. The replay can be dialed at 1-800-642-1687 and reference should be made to the conference ID number 6104498. A replay will also be archived for 30 days on the company's website.

Use of Non-GAAP Financial Measures

This press release and the accompanying schedules include the non-generally accepted accounting principles ("non-GAAP") financial measures of Adjusted Net Income, Adjusted EBITDA and Adjusted Gross Margin. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, operating income or any other GAAP measure of liquidity or financial performance.

About Quicksilver Resources

Fort Worth, Texas-based Quicksilver Resources is a natural gas and crude oil exploration and production company engaged in the development and acquisition of long-lived, unconventional natural gas reserves, including coal bed methane, shale gas, and tight sands gas in North America. The company has U.S. offices in Fort Worth, Texas; Granbury, Texas and Cut Bank, Montana. Quicksilver's Canadian subsidiary, Quicksilver Resources Canada Inc., is headquartered in Calgary, Alberta. For more information about Quicksilver Resources, visit www.qrinc.com.

Forward-Looking Statements

The statements in this press release regarding future events, occurrences, circumstances, activities, performance, outcomes and results are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although these statements reflect the current views, assumptions and expectations of Quicksilver Resources' management, the matters addressed herein are subject to numerous risks and uncertainties, which could cause actual activities, performance, outcomes and results to differ materially from those indicated. Factors that could result in such differences or otherwise materially affect Quicksilver Resources' financial condition, results of operations and cash flows include: changes in general economic conditions; fluctuations in natural gas and crude oil prices; failure or delays in achieving expected production from natural gas and crude oil exploration and development projects; effects of hedging natural gas and crude oil prices; uncertainties inherent in estimates of natural gas and crude oil reserves and predicting natural gas and crude oil reservoir performance; competitive conditions in our industry; actions taken by third-party operators, processors and transporters; changes in the availability and cost of capital; delays in obtaining oilfield equipment and increases in drilling and other service costs; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; the effects of existing and future laws and governmental regulations; and the effects of existing or future litigation; as well as, other factors disclosed in Quicksilver Resources' filings with the Securities and Exchange Commission. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

                        QUICKSILVER RESOURCES INC.
                   Unaudited Selected Operating Results


                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------- ---------------------
                                  2007       2006       2007       2006
                                ---------- ---------- ---------- ----------
Production:
  Natural gas (MMcf)                16,399     13,794     45,259     39,430
  Oil (MBbls)                          153        148        462        444
  NGL (MBbls)                          756        229      1,605        464
    Total (MMcfe)                   21,864     16,055     57,662     44,878

United States (MMcfe)               16,617     11,528     42,466     31,496
Canada (MMcfe)                       5,247      4,527     15,196     13,382
                                ---------- ---------- ---------- ----------
    Total (MMcfe)                   21,864     16,055     57,662     44,878

Average Daily Production:
  Natural gas (Mcfd)               178,250    149,939    165,784    144,431
  Oil (Bbld)                         1,673      1,603      1,692      1,628
  NGL (Bbld)                         8,228      2,491      5,880      1,698
    Total (Mcfed)                  237,655    174,506    211,215    164,387


Average Sales Price Per Unit
 (excluding effects of
 hedging):
  Natural gas (per Mcf)         $     5.29 $     5.35 $     5.82 $     5.88
  Oil (per Bbl)                 $    70.47 $    64.74 $    60.32 $    62.85
  NGL (per Bbl)                 $    43.18 $    41.91 $    40.52 $    41.51
    Total (per Mcfe)            $     5.96 $     5.79 $     6.18 $     6.22


Average Sales Price Per Unit
 (including effects of
 hedging):
  Natural gas (per Mcf)         $     6.63 $     5.73 $     6.77 $     6.05
  Oil (per Bbl)                 $    69.67 $    64.74 $    60.06 $    61.84
  NGL (per Bbl)                 $    41.82 $    41.91 $    39.88 $    41.51
    Total (per Mcfe)            $     6.91 $     6.11 $     6.91 $     6.36

Expense per Mcfe:
  United States production cost $     2.15 $     1.56 $     1.92 $     1.67
  Canada production cost        $     1.64 $     1.45 $     1.52 $     1.31
                                ---------- ---------- ---------- ----------
    Total production cost       $     2.02 $     1.53 $     1.82 $     1.56

  Production and ad valorem
   taxes                        $     0.20 $     0.28 $     0.23 $     0.24
  General and administrative
   expenses                     $     0.65 $     0.39 $     0.60 $     0.40
  Depletion, depreciation and
   accretion                    $     1.47 $     1.24 $     1.47 $     1.24




                        QUICKSILVER RESOURCES INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
             In thousands, except for share data - Unaudited


                                              September 30,  December 31,
                                                  2007           2006
                                              -------------  -------------
                   ASSETS
Current assets
Cash and cash equivalents                     $      19,590  $       5,281
  Accounts receivable, net of allowance for
   doubtful accounts                                 69,895         76,521
  Current derivative assets                          26,638         64,086
  Other current assets                               38,632         25,076
                                              -------------  -------------
         Total current assets                       154,755        170,964

Investments in and advances to equity
 affiliates                                           7,161          7,434

Properties, plant and equipment - net ("full
 cost")                                           2,387,851      1,679,280

Deferred derivative assets                                -          3,753

Other assets                                         22,209         21,481
                                              -------------  -------------
                                              $   2,571,976  $   1,882,912
                                              =============  =============

      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Current portion of long-term debt           $         126  $         400
  Accounts payable                                  133,920        109,914
  Accrued liabilities                                89,325         67,697
  Accrued derivative obligations                      3,822              -
  Current deferred tax liability                      6,238         21,378
                                              -------------  -------------
         Total current liabilities                  233,431        199,389

Long-term debt                                    1,318,441        919,117
Derivative obligations                                2,733              -
Asset retirement obligations                         31,114         25,058
Deferred gain                                        83,697              -
Deferred income taxes                               200,453        156,251
Minority interest                                    26,711          7,431

Stockholders' equity
  Preferred stock, $0.01 par value,
   10,000,000 shares authorized, no shares
   issued                                                 -              -
  Common stock, $0.01 par value, 200,000,000
   shares authorized and 81,382,988 and
   80,181,593 shares issued, respectively               814            802
  Paid in capital in excess of par value            261,352        238,063
  Treasury stock of 2,615,943 and 2,579,671
   shares, respectively                             (12,262)       (10,737)
  Accumulated other comprehensive income             55,097         60,099
  Retained earnings                                 370,395        287,439
                                              -------------  -------------
Total stockholders' equity                          675,396        575,666
                                              -------------  -------------
                                              $   2,571,976  $   1,882,912
                                              =============  =============



                         QUICKSILVER RESOURCES INC.
               CONDENSED CONSOLIDATED STATEMENTS OF INCOME
            In thousands, except for per share data - Unaudited


                                    For the Three         For the Nine
                                    Months Ended          Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
Revenues
  Oil, gas and related product
   sales                        $ 151,046  $  98,150  $ 398,297  $ 285,375
  Other revenue                     8,153      1,063     13,880      2,953
                                ---------  ---------  ---------  ---------
    Total revenues                159,199     99,213    412,177    288,328
Expenses
  Oil and gas production costs     44,246     24,602    104,804     70,232
  Production and ad valorem
   taxes                            4,366      4,502     13,068     10,661
  Other operating costs               855        300      1,940      1,249
  Depletion, depreciation and
   accretion                       32,115     19,933     84,614     55,560
  Provision for doubtful
   accounts                           136          -       (128)         -
  General and administrative       14,192      6,245     34,452     17,936
                                ---------  ---------  ---------  ---------
    Total expenses                 95,910     55,582    238,750    155,638
                                ---------  ---------  ---------  ---------

Income (loss) from equity
 affiliates                           285        210        682        318
                                ---------  ---------  ---------  ---------

Operating income                   63,574     43,841    174,109    133,008

Other income-net                     (385)      (167)    (1,856)    (1,015)
Interest expense                   20,690     11,040     53,858     30,808
                                ---------  ---------  ---------  ---------

Income before income taxes and
 minority interest                 43,269     32,968    122,107    103,215
Income tax expense                 14,093     10,046     38,158     29,139
Minority interest expense             457         61        648         72
                                ---------  ---------  ---------  ---------

Net income                      $  28,719  $  22,861  $  83,301  $  74,004
                                =========  =========  =========  =========

Basic net income per common
 share                          $    0.37  $    0.30  $    1.07  $    0.97
Diluted net income per common
 share                          $    0.35  $    0.28  $    1.01  $    0.91

Weighted average common shares
 outstanding
  Basic                            77,875     77,007     77,557     76,593
  Diluted                          84,185     83,306     84,014     83,056






                     QUICKSILVER RESOURCES INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      In thousands-Unaudited

                                                For the Nine Months Ended
                                                      September 30,
                                                --------------------------
                                                    2007          2006
                                                ------------  ------------
Operating activities:
  Net income                                    $     83,301  $     74,004
  Charges and credits to net income not
   affecting cash
      Depletion, depreciation and accretion           84,614        55,560
      Deferred income taxes                           37,912        29,095
      Non-cash compensation                            9,319         4,775
      Amortization of deferred loan costs              1,458         1,615
        Non-cash gain from hedging activities         (2,959)         (114)
      Income from equity affiliates                     (682)         (318)
      Minority interest                                  648            72
        Other                                          2,275           232
      Changes in assets and liabilities
        Accounts receivable                            6,754         7,748
        Inventory, prepaid expenses and other        (12,628)      (17,921)
        Accounts payable                                 511        14,844
        Accrued liabilities and other                 36,907        18,114
                                                ------------  ------------
Net cash provided by operating activities            247,430       187,706
                                                ------------  ------------

Investing activities:
  Development and exploration costs and other
   property additions                               (706,035)     (429,485)
  Return of investment from equity affiliates            162           558
  Proceeds from sale of assets                           166         5,670
                                                ------------  ------------
Net cash used for investing activities              (705,707)     (423,257)
                                                ------------  ------------

Financing activities:
  Issuance of debt                                   540,030       483,148
  Repayments of debt                                (182,357)     (271,808)
  Debt issuance costs                                 (4,513)       (9,213)
  Proceeds from exercise of stock options             15,570        18,480
  Minority interest contributions                    109,905         4,506
  Minority interest distributions                     (7,694)            -
  Purchase of treasury stock                          (1,525)         (480)
                                                ------------  ------------
Net cash provided by financing activities            469,416       224,633
                                                ------------  ------------

Effect of exchange rate changes in cash                3,170           (37)
                                                ------------  ------------

Net increase (decrease) in cash and cash
 equivalents                                          14,309       (10,955)

Cash and cash equivalents at beginning of
 period                                                5,281        14,318
                                                ------------  ------------

Cash and cash equivalents at end of period      $     19,590  $      3,363
                                                ============  ============





                       QUICKSILVER RESOURCES INC.
           RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
           In thousands, except for per share data - Unaudited


                       For the Three Months Ended For the Nine Months Ended
                              September 30,             September 30,
                        ------------------------  ------------------------
                            2007         2006         2007         2006
                        -----------  ------------ -----------  ------------

Net income              $    28,719  $     22,861 $    83,301  $     74,004
                        -----------  ------------ -----------  ------------

Adjustments for
 divestment of
 Northeastern
 Operations
  Related hedges             (2,000)            -      (2,000)            -
  Termination-related
   expense                    5,396             -       5,396             -
  Divestiture-related
   professional fees          2,000             -       2,000             -
                        -----------  ------------ -----------  ------------
  Total adjustments
   before income tax
   expense                    5,396             -       5,396             -
  Income tax expense         (1,889)            -      (1,889)            -
                        -----------  ------------ -----------  ------------
Adjustments for
 divestment after taxes       3,507             -       3,507             -
                        -----------  ------------ -----------  ------------

Adjusted net income     $    32,226  $     22,861 $    86,808  $     74,004
                        ===========  ============ ===========  ============

Adjusted net income per
 common share - Diluted $      0.39  $       0.28 $      1.05  $       0.91

Diluted weighted
 average common shares
 outstanding                 84,185        83,306      84,014        83,056

Contact Information

  • Investor & Media Contact:
    Quicksilver Resources Inc.
    Rick Buterbaugh
    (817) 665-4835