SOURCE: Quicksilver Resources Inc.

February 26, 2008 06:30 ET

Quicksilver Resources Reports Record Results for 2007

FORT WORTH, TX--(Marketwire - February 26, 2008) - Quicksilver Resources Inc. (NYSE: KWK) today reported record net income for the fourth quarter of 2007 of $396.1 million ($2.35 per diluted share), including $366.8 million ($2.17 per diluted share) associated with the divestiture of the company's Northeast Operations. The company's comparative fourth-quarter 2006 net income was $19.7 million ($.12 per diluted share). Full year 2007 net income was a record $479.4 million ($2.86 per diluted share), as compared to full-year 2006 net income of $93.7 million ($.58 per diluted share). Per share data reflects the two-for-one stock split effected in the form of a stock dividend on January 31, 2008.

Adjusted net income, a non-GAAP measure that excludes items associated with the divestment of the company's Northeast Operations, was $29.3 million ($.18 per diluted share) for the fourth quarter of 2007, up approximately 49% as compared to $19.7 million ($.12 per diluted share) in the prior-year quarter. The Northeast Operations included all of the company's properties and assets in Michigan, Indiana and Kentucky. Net cash from operating activities for the year ended December 31, 2007 was a record $319.1 million, an increase of nearly 32% from $242.2 million generated in the same period of 2006, as presented in the attached Condensed Consolidated Statements of Cash Flows.

Full-Year 2007 Highlights

--  Reported record net income of $479 million
--  Generated a record $319 million of net cash from operating activities
--  Produced record volumes of more than 213 MMcfe per day; up 27% year-
    over-year
--  Drilled 244 horizontal wells in the Fort Worth Basin; connected 187
    wells to sales
--  Replaced 780% of production with drill bit; Finding & Development cost
    of $1.37 per Mcfe
--  Divested mature assets
--  Completed initial public offering of midstream assets
--  Reduced debt as a percent of total capital to 43%
    

"Even while completing two major transactions, we stayed focused on efficiently executing our development program. This has positioned Quicksilver as an even higher growth company with one of the lowest cost structures in the industry," said Glenn Darden, Quicksilver president and chief executive officer. "The divestment of our Northeast Operations and the initial public offering of our Fort Worth Basin midstream business have highlighted the value of these previously under-appreciated assets. Net proceeds from these transactions have significantly strengthened our capital structure and provided added flexibility for the company to continue to invest in the development of our high-return Fort Worth Basin Barnett Shale properties. We are off to a great start in 2008 and remain on track to achieve new records in 2008 for both production and reserves."

Production

For the fourth quarter of 2007, average daily production was 220 million cubic feet of natural gas equivalent (MMcfe) per day compared to 178 MMcfe per day for the same period in 2006, an increase of approximately 24%. Total production for the fourth quarter of 2007 was 20.3 billion cubic feet of natural gas equivalent (Bcfe), compared to 16.4 Bcfe for the fourth quarter of 2006. Natural gas and natural gas liquids (NGL), comprised 96% of the company's total production in both the fourth quarter and full year of 2007.

Production, on a thousand cubic feet of natural gas equivalent (Mcfe) per day basis, by operating area, for the three months and years ended December 31, was as follows:


                         Quarter Ended Dec. 31,   Year Ended Ended Dec. 31,
                        -------------------------- ------------------------
                          2007     2006   Change    2007     2006   Change
                        -------- -------- -------  ------- -------- ------

Texas                    131,857   44,152     199%  90,577   34,681    161%
Other U.S.                 3,064    3,120      -2%   3,194    3,291     -3%
                        -------- --------          ------- --------
                         134,921   47,272     185%  93,771   37,972    147%
Canada                    60,492   53,141      14%  56,880   50,057     14%
                        -------- --------          ------- --------
                         195,413  100,413      95% 150,651   88,029     71%
Northeast Operations*     25,074   77,673     -68%  62,901   79,811    -21%
                        -------- --------          ------- --------
  Total                  220,487  178,086      24% 213,552  167,840     27%
                        ======== ========          ======= ========

*  The company's Northeast Operations were divested as of November 1, 2007.

Revenues and Costs

Total revenues for the fourth quarter of 2007 were $149.1 million compared to $102.0 million in the prior-year quarter. Sales of natural gas, NGLs and crude oil totaled $146.8 million in the fourth quarter of 2007, up approximately 45% from the 2006 quarter. The increase reflects a 24% increase in equivalent daily production volumes and a 17% increase in the average realized price per Mcfe.

Production costs of $35.1 million for the 2007 fourth quarter represent a $5.2 million increase from the prior-year quarter. This increase was primarily due to increased production volumes from Texas coupled with $0.9 million of severance expense associated with the divestment of the company's Northeast Operations. Unit production costs, excluding divestment-related expenses, were $1.53 per Mcfe during the fourth quarter of 2007 as compared to $1.52 per Mcfe in the prior-year quarter and down $.25 per Mcfe sequentially from the third-quarter 2007 level of $1.78 per Mcfe.

Capital Structure

At December 31, 2007, the company's total debt outstanding was $813.9 million and the company had $28.2 million of cash on the balance sheet. Total debt as a percent of total capitalization was approximately 43% at December 31, 2007 versus approximately 61% at December 31, 2006.

Ownership of BreitBurn Energy Partners' Units

On November 1, 2007, the company completed the divestiture of its Northeast Operations to BreitBurn Energy Partners L.P. (BBEP) for $750 million in cash and approximately 21.348 million limited partner units of BBEP, representing approximately 32% ownership of limited partner interests in BBEP. The investment in BBEP is being accounted for using the equity method and the company will record its earnings from BBEP during the quarter in which BBEP's financial statements become publicly available. For the fourth quarter of 2007, the company recorded no earnings associated with this investment but expects to report the equity earnings from BBEP on a one-quarter lagged basis.

Operational Update

In the Fort Worth Basin, the company drilled 57 (52 net) wells and connected 58 (50 net) wells to sales during the fourth quarter. For the full year of 2007, the company drilled 244 (219 net) wells and connected 187 (163 net) wells to sales and expects to drill 200 to 220 wells in the area during 2008. As a result, the company expects to achieve annual production growth of more than 100% from the basin in 2008.

In Canada, the company drilled 221 (161 net) wells in the Horseshoe Canyon area during 2007 and expects to drill approximately 265 (165 net) wells in this area during 2008. As a result, the company expects to achieve annual production growth in the range of 7% to 9% from its Canadian operations in 2008.

Total company capital expenditures for the fourth quarter of 2007 were approximately $330 million, of which approximately 70% was associated with drilling and completion activities, approximately 13% for midstream activities, approximately 13% for acreage purchases and approximately 4% for corporate. For the year, capital expenditures totaled approximately $1.0 billion.

Finding and Development Costs

The company's estimated all-in finding and development cost (F&D) for 2007 has been finalized based upon the total 2007 capital expenditures. All-in F&D costs for 2007 were $1.37 per Mcfe. A reconciliation of the "2007 Finding & Development Costs" is available on the company's website -- www.qrinc.com. For a description of the calculation of, and certain other information regarding, F&D costs, please see the discussion below under the heading "F&D Costs."

First-Quarter 2008 Outlook

First-quarter 2008 production volumes are expected to average in the range of 210 MMcfe to 220 MMcfe per day. Average unit expenses, on an Mcfe basis are expected as follows:

-- Production costs                       $1.05 - $1.10
-- Gathering & processing                   .20 -   .25
-- Transportation                           .29 -   .32
-- Production taxes                         .10 -   .15
-- General and administrative               .55 -   .60
-- Depletion, depreciation & accretion     1.80 -  1.85

Conference Call and Investor Meeting

The company will host a conference call to discuss fourth-quarter 2007 operating and financial results and its outlook for the future at 11:00 a.m. eastern time today.

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 27092653, prior to 10:55 a.m. eastern time. A digital replay of the conference call will be available at 3:00 p.m. eastern time today, and will remain available for 30 days. The replay can be accessed at 1-800-642-1687 and enter the conference ID number 27092653. The replay will also be archived for 30 days on the company's website.

The company will hold its 2008 analyst conference on Wednesday, March 5, 2008. To access the live webcast, visit our website at www.qrinc.com on Wednesday, March 5, 2008 at 2:00 p.m. eastern time. If you are unable to listen to the live webcast, a replay will be available beginning March 6, 2008 for 30 days and can be accessed from www.qrinc.com.

Use of Non-GAAP Financial Measure

This press release and the accompanying schedule include the non-generally accepted accounting principles ("non-GAAP") financial measure of adjusted net income. The accompanying schedule provides a reconciliation of this non-GAAP financial measure to its 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 measure should not be considered as an alternative to the GAAP measures of 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; Glen Rose, 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, natural gas liquids and crude oil prices; failure or delays in achieving expected production from natural gas, natural gas liquids and crude oil exploration and development projects; effects of hedging natural gas, natural gas liquids and crude oil prices; uncertainties inherent in estimates of natural gas, natural gas liquids and crude oil reserves and predicting natural gas, natural gas liquids and crude oil reservoir performance; effects of hedging natural gas, natural gas liquids and crude oil; competitive conditions in our industry; actions taken by third parties, including 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.

F&D Costs

Finding and development cost, or F&D cost, is calculated by dividing (x) development, exploitation, exploration and acquisition capital expenditures for the period, plus unevaluated capital expenditures as of the beginning of the period, less unevaluated capital expenditures as of the end of the period, by (y) reserve additions for the period. Our calculation of "all-in F&D cost" includes costs and reserve additions related to the purchase of proved reserves. The methods we use to calculate our F&D cost may differ significantly from methods used by other companies to compute similar measures. As a result, our F&D cost may not be comparable to similar measures provided by other companies. We believe that providing a measure of F&D cost is useful in evaluating the cost, on a per thousand cubic feet of natural gas equivalent basis, to add proved reserves.

However, this measure is provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with generally accepted accounting principles. Due to various factors, including timing differences in the addition of proved reserves and the related costs to develop those reserves, F&D costs do not necessarily reflect precisely the costs associated with particular reserves. As a result of various factors that could materially affect the timing and amounts of future increases in reserves and the timing and amounts of future costs, we cannot assure you that our future F&D costs will not differ material from those presented.

A reconciliation of F&D costs is available on the company's website at www.qrinc.com.

KWK 08-05

                        QUICKSILVER RESOURCES INC.
                   Unaudited Selected Operating Results


                                 Three Months Ended        Year Ended
                                    December 31,          December 31,
                                --------------------- ---------------------
                                   2007       2006       2007       2006
                                ---------- ---------- ---------- ----------
Production:
Natural gas (MMcf)                  14,360     13,836     59,619     53,265
NGL (MBbls)                            865        282      2,471        746
Oil (MBbls)                            122        143        584        587
    Total (MMcfe)                   20,285     16,384     77,946     61,262

United States (MMcfe)               14,720     11,495     57,185     42,991
Canada (MMcfe)                       5,565      4,889     20,761     18,271
                                ---------- ---------- ---------- ----------
    Total (MMcfe)                   20,285     16,384     77,946     61,262

Average Daily Production:
Natural gas (Mcfd)                 156,089    150,389    163,340    145,933
NGL (Bbld)                           9,403      3,067      6,768      2,043
Oil (Bbld)                           1,330      1,549      1,600      1,608
    Total (MMcfed)                 220,487    178,086    213,552    167,840

Average Sales Price Per Unit
 (excluding effects of
 hedging):
Natural gas (per Mcf)           $     5.62 $     5.40 $     5.77 $     5.75
NGL (per Bbl)                   $    54.23 $    34.49 $    45.32 $    38.85
Oil (per Bbl)                   $    82.93 $    54.22 $    65.06 $    60.75
    Total (MMcfe)               $     6.79 $     5.62 $     6.34 $     6.06


Average Sales Price Per Unit
 (including effects of
 hedging):
Natural gas (per Mcf)           $     6.58 $     6.05 $     6.73 $     6.05
NGL (per Bbl)                   $    49.44 $    34.49 $    43.23 $    38.85
Oil (per Bbl)                   $    78.26 $    54.22 $    63.87 $    59.99
    Total (MMcfe)               $     7.24 $     6.17 $     6.99 $     6.31

Expense per Mcfe: (1)
United States production cost   $     1.68 $     1.79 $     1.86 $     1.70
Canada production cost          $     1.31 $     0.89 $     1.46 $     1.20
   Total production cost        $     1.58 $     1.52 $     1.76 $     1.55

Production and ad valorem taxes $     0.15 $     0.30 $     0.21 $     0.25
General and administrative
 expenses                       $     0.63 $     0.47 $     0.60 $     0.42
Depletion, depreciation and
 accretion                      $     1.78 $     1.42 $     1.55 $     1.29


(1) As reported




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

                                               December 31,  December 31,
                                                  2007 (1)      2006 (1)
                                                ------------  ------------
                  ASSETS
Current assets
     Cash and cash equivalents                  $     28,226  $      5,281
     Accounts receivable - net of allowance
      for doubtful accounts                           90,244        76,521
     Derivative assets at fair value                  10,797        64,086
     Current deferred income tax asset                18,946             -
     Other current assets                             42,188        25,076
                                                ------------  ------------
         Total current assets                        190,401       170,964

Investments in and advances to equity
 affiliates                                          420,171         7,434

Properties, plant and equipment - net ("full
 cost")                                            2,142,346     1,679,280

Derivative assets at fair value                          354         3,753

Other assets                                          22,574        21,481
                                                ------------  ------------
                                                $  2,775,846  $  1,882,912
                                                ============  ============

           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
     Current portion of long-term debt          $         34  $        400
     Accounts payable                                192,855       109,914
     Income taxes payable                             46,601           589
     Accrued liabilities                              54,981        67,108
     Derivative liabilities at fair value             64,104             -
     Current deferred tax liability                        -        21,378
                                                ------------  ------------
         Total current liabilities                   358,575       199,389

Long-term debt                                       813,817       919,117
Asset retirement obligations                          23,864        25,058
Derivative liabilities at fair value                  16,327             -
Other liabilities                                     10,609             -
Deferred income taxes                                374,645       156,251
Deferred gain on sale of partnership interests        79,316             -
Minority interest in consolidated subsidiaries        30,338         7,431

Stockholders' equity
      Preferred stock, $0.01 par value,
       10,000,000 shares authorized,
       no shares outstanding                               -             -
      Common stock, $0.01 par value,
       200,000,000 shares authorized and
       160,633,270 and 157,783,515 shares
       issued, respectively                            1,606         1,578
      Paid-in capital in excess of par value         272,515       237,287
      Treasury stock of 2,616,726 and 2,579,671
       shares, respectively                          (12,304)      (10,737)
      Accumulated other comprehensive income          40,066        60,099
      Retained earnings                              766,472       287,439
                                                ------------  ------------
Total stockholders' equity                         1,068,355       575,666
                                                ------------  ------------
                                                $  2,775,846  $  1,882,912
                                                ============  ============


(1) Share amounts have been adjusted to reflect a two-for-one stock
    split effected in the form of a stock dividend in January 2008. The
    split did not affect treasury shares.





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


                       For the Three Months Ended   For the Year Ended
                              December 31,              December 31,
                        ------------------------  ------------------------
                          2007 (1)     2006 (1)     2007 (1)     2006 (1)
                        -----------  -----------  -----------  -----------
Revenues
  Natural gas, NGL and
   crude oil sales      $   146,792  $   101,165  $   545,089  $   386,540
  Other                       2,289          869       16,169        3,822
                        -----------  -----------  -----------  -----------
    Total revenues          149,081      102,034      561,258      390,362

Expenses
  Oil and gas production
   expense                   32,027       24,944      136,831       95,176
  Production and ad
   valorem taxes              3,074        4,958       16,142       15,619
  Other operating costs         852          212        2,792        1,461
  Depletion, depreciation
   and accretion             36,083       23,240      120,697       78,800
  General and
   administrative            12,736        7,700       47,060       25,636
                        -----------  -----------  -----------  -----------
    Total expenses           84,772       61,054      323,522      216,692
                        -----------  -----------  -----------  -----------

Income from equity
 affiliates                     (21)         208          661          526
Gain on sale of oil and
 gas properties             628,709            -      628,709            -
Loss on natural gas
 sales contract             (63,525)           -      (63,525)           -
                        -----------  -----------  -----------  -----------

Operating income            629,472       41,188      803,581      174,196

Other income - net           (2,031)        (810)      (3,887)      (1,825)
Interest expense             16,669       13,253       70,527       44,061
                        -----------  -----------  -----------  -----------

Income from continuing
 operations before
 income taxes and
 minority interest          614,834       28,745      736,941      131,960
Income tax expense          218,350        9,011      256,508       38,150
Minority interest
 expense                        407           19        1,055           91
                        -----------  -----------  -----------  -----------

Net income              $   396,077  $    19,715  $   479,378  $    93,719
                        ===========  ===========  ===========  ===========

Net income per common
 share - basic          $      2.53  $      0.13  $      3.08  $      0.61

Net income per common
 share - diluted        $      2.35  $      0.12  $      2.86  $      0.58

Weighted average common
 shares outstanding
  Basic                     156,547      154,078      155,475      153,416
  Diluted                   168,818      166,776      168,029      166,266


(1) Share amounts have been adjusted to reflect a two-for-one stock split
    effected in the form of a stock dividend in January 2008. The split
    did not affect treasury shares.





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

                                                     For the Year Ended
                                                         December 31,
                                                    ----------------------
                                                       2007        2006
                                                    ----------  ----------
Operating activities:
  Net income                                        $  479,378  $   93,719
  Adjustments to reconcile net cash provided by
   operating activities
    Depletion, depreciation and accretion              120,697      78,800
    Deferred income taxes                              209,943      37,877
    (Gain) loss from sale of properties               (627,348)        188
    Non-cash loss from hedging activities and
     derivative activities                              62,515           -
    Stock-based compensation                            11,243       6,546
    Amortization of deferred loan costs                  2,050       2,070
    Minority interest expense                            1,055          91
    Income from equity affiliates                         (661)       (526)
    Other non-cash items                                 1,840         927
    Divestiture expenses                                 2,015           -
  Changes in assets and liabilities
    Accounts receivable                                (14,423)     (1,100)
    Inventory, prepaid expenses and other assets        (4,144)     (4,495)
    Accounts payable                                    18,939      15,193
    Accrued and other liabilities                       56,005      12,896
                                                    ----------  ----------
Net cash provided by operating activities              319,104     242,186
                                                    ----------  ----------

Investing activities:
  Purchases of property, plant and equipment        (1,020,684)   (619,061)
  Return of investment from equity affiliates            9,635       1,923
  Proceeds from sales of properties and equipment      741,297       5,113
                                                    ----------  ----------
Net cash used for investing activities                (269,752)   (612,025)
                                                    ----------  ----------

Financing activities:
  Issuance of debt                                     817,821     694,682
  Repayments of debt                                  (968,557)   (350,754)
  Debt issuance costs                                   (5,130)     (9,213)
  Minority interest contributions                      109,809       7,291
  Minority interest distributions                       (8,794)          -
  Proceeds from exercise of stock options               21,387      19,689
  Excess tax benefits on exercise of stock options       2,755           -
  Purchase of treasury stock                            (1,567)       (384)
                                                    ----------  ----------
Net cash (used for) provided by financing
 activities                                            (32,276)    361,311
                                                    ----------  ----------

Effect of exchange rate changes in cash                  5,869        (509)
                                                    ----------  ----------

Net decrease in cash and cash equivalents               22,945      (9,037)

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

Cash and cash equivalents at end of period          $   28,226  $    5,281
                                                    ==========  ==========





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

                                For the Three Months     For the Year
                                   Ended Dec. 31,        Ended Dec. 31,
                                --------------------  --------------------
                                  2007        2006      2007        2006
                                ---------  ---------- ---------  ----------

Net income                      $ 396,077  $   19,715 $ 479,378  $   93,719
                                ---------  ---------- ---------  ----------

Adjustments for divestment of
 Northeastern Operations
  Related hedges (other
   revenue)                             -           -    (2,000)          -
  Termination-related expense
   (production costs)                 910           -     6,306           -
  Divestiture-related expense
   (G&A)                                -           -     2,000           -
  Gain on sale of oil and gas
   properties                    (628,709)          -  (628,709)          -
  Loss on natural gas sales
   contract                        63,525           -    63,525           -
                                ---------  ---------- ---------  ----------
      Total adjustments before
       income tax expense        (564,274)          -  (558,878)          -
  Income tax expense              197,496           -   195,607           -
                                ---------  ---------- ---------  ----------
Adjustments for divestment,
 after income taxes              (366,778)          -  (363,271)          -
                                ---------  ---------- ---------  ----------

Adjusted net income             $  29,299  $   19,715 $ 116,107  $   93,719
                                =========  ========== =========  ==========

Adjusted net income per common
 share - Diluted                $    0.18  $     0.12 $    0.70  $     0.58
                                =========  ========== =========  ==========

Diluted weighted average common
 shares outstanding               168,818     166,776   168,029     166,266

Contact Information

  • Investor & Media Contact:
    Rick Buterbaugh
    (817) 665-4835