Quicksilver Resources Reports Third-Quarter 2009 Results

2009-11-09 13:43:02 -

FORT WORTH, TX -- (Marketwire) -- 11/09/09 -- Quicksilver Resources Inc. (NYSE: KWK) today reported operating and financial results for the 2009 third quarter.

Third-Quarter 2009 Highlights

--  Produced volumes of approximately 311 MMcfe per day; up 12% year-over-
    year
--  Reduced oil and gas production expense to $1.02 per Mcfe; down 22%
    year-over-year
--  Increased Fort Worth Basin daily production volumes 14% year-over-year
--  Increased Canadian daily production volumes 9% year-over-year
--  Drilled 32 horizontal wells in the Fort Worth Basin
--  Completed successful test of first Horn River Basin well

"For the nine months ended September 30, Quicksilver generated record cash flow through operating activities, reduced unit production costs nearly 30%, and is on pace for a record production year," said Glenn Darden, Quicksilver president and chief executive officer. "All of this has been accomplished while limiting capital expenditures below cash inflows."

Financial Results

Third-quarter 2009 adjusted net income, a non-GAAP measure, was $42.7 million ($.25 per diluted share) compared to adjusted net income of $69.8 million ($.40 per diluted share) in the 2008 period. Adjusted net income excludes the following items:

--  net charges of $49.9 million ($32.5 million after tax) in the 2009
    quarter associated with the company's ownership in BreitBurn Energy
    Partners that included gains related to the early settlement of hedges and
    interest rate swaps, and a charge for the unrealized mark-to-market loss on
    oil and gas derivative positions;
--  an income tax expense of $9.6 million in the 2009 quarter associated
    with the tax rate change to prior quarters;
--  a charge of $103.5 million ($67.3 million after tax) in the 2008
    quarter related to the unrealized mark-to-market loss of derivative
    positions held by BreitBurn Energy Partners, associated with the company's
    ownership in BreitBurn Energy Partners; and
--  a charge of $9.6 million ($6.2 million after tax) in the 2008 quarter
    related to the company's settlement of litigation.

Including the items noted above, Quicksilver reported net income of $0.7 million in the 2009 third quarter as compared to a net loss of $3.8 million (a loss of $.02 per diluted share) in the prior-year period.

Production

For the third quarter of 2009, average daily production was approximately 311 million cubic feet of natural gas equivalent (MMcfe) per day compared to approximately 277 MMcfe per day for the same period in 2008, an increase of approximately 12%. Total production for the third quarter of 2009 was approximately 28.6 billion cubic feet of natural gas equivalent (Bcfe) compared to approximately 25.5 Bcfe for the third quarter of 2008. The 2009 production volumes were comprised of approximately 71% natural gas, approximately 27% natural gas liquids (NGLs) and approximately 2% crude oil and condensate. Increased activities at the company's Lake Arlington and Alliance projects in the northern portion of its Fort Worth Basin acreage resulted in increased production of dry gas as a percent of total production in the 2009 quarter as compared to the 2008 quarter.

Revenues and Costs

Sales of natural gas, NGLs and crude oil totaled $198.3 million in the third quarter of 2009, down approximately $20.0 million from the prior-year quarter. Sales from increased production volumes attributable to the company's properties in the Fort Worth Basin in Texas and Horseshoe Canyon area in Alberta, Canada were more than offset by lower average realized prices for all commodities, which resulted in an approximate 19% decrease in the average realized price per thousand cubic feet of natural gas equivalent (Mcfe) after hedge consideration.

Total production expense was $29.1 million for the 2009 third quarter, down $4.0 million from the prior-year quarter even though total production increased more than 12%. Unit production expense, including production, gathering and processing and transportation expense, decreased to $1.02 per Mcfe during the third quarter of 2009, a 22% reduction from $1.30 per Mcfe reported in the prior-year period. Quicksilver's ongoing efforts to reduce and control costs enabled the company to remain one of the lowest-cost operators in North America.

Income from Earnings of Unconsolidated Affiliate

Quicksilver reported a $43.7 million loss attributable to the company's approximate 40% interest in BreitBurn Energy Partners L.P.'s (BBEP) second-quarter 2009 results, including income of $10.1 million from the early settlement of derivative positions and $0.1 million on interest rate derivatives and a loss of $60.2 million on the unrealized mark-to-market of commodity derivative positions. On April 17, 2009, BBEP announced that it was suspending its distributions and, therefore, Quicksilver did not receive any cash distributions from this partnership during the third quarter of 2009.

Interest Expense and Debt

Third-quarter 2009 interest expense increased to $41.6 million, compared with the 2008 quarter, primarily due to a higher weighted-average interest rate and slightly higher average debt balances. During the 2009 third quarter, the company issued $300 million of senior notes due 2019 and used the proceeds to repay a portion of its senior credit facility. In October, Quicksilver's bank group affirmed the borrowing base under the company's senior secured credit facility at $1 billion. The company currently has approximately $514 million drawn on this facility.

Third-Quarter 2009 Operations

During the third quarter of 2009, Quicksilver drilled 32 (23.7 net) operated wells and connected 11 (9.35 net) operated wells to sales in the Fort Worth Basin. The company currently has five rigs working in the basin, including three rigs dedicated to the Lake Arlington and Alliance areas in Tarrant and Denton counties.

In Canada, the company drilled four (2.9 net) operated wells during the third quarter of 2009 in the Horseshoe Canyon area and expects to drill three (1.8 net) operated wells for the remainder of this year. The company now expects to participate in a total of 145 (42.2 net) wells in this area for the full year of 2009.

During the third quarter of 2009, the company incurred costs of approximately $139 million, including approximately $79 million for drilling and completion activities, $44 million for midstream activities, approximately $12 million for leasehold and approximately $4 million for other corporate items. The company expects to incur an additional $75 million of capitalized costs during the 2009 fourth quarter.

Fourth-Quarter 2009 Outlook

Fourth-quarter 2009 production volumes are expected to average in the range of 330 MMcfe to 340 MMcfe per day. Average unit expenses, on a Mcfe basis, are expected as follows:

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The company has derivatives covering 190 million Btu (MMBtu) per day of natural gas that have a weighted-average floor price of $8.75 per MMBtu for the fourth quarter of 2009. Details of all of the company's outstanding commodity derivatives are available on the company's website at www.qrinc.com/investor_relations/sec_financial_info/financials/O .. :

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Conference Call

The company will host a conference call to discuss third-quarter 2009 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 www.qrinc.com :

or by calling 1-877-313-7932, using the conference ID number 80367983 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 80367983.
The replay will also be archived for 30 days on the company's website.

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 reconciliations 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 GAAP measures such as net income or operating income or any other GAAP measure of liquidity or financial performance. The company uses cash flow through operating activities and net cash provided by operating activities interchangeably.

Upcoming Corporate Presentations

The company also announced that members of its senior management team expect to present at several upcoming energy conferences, including:

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A link to the live webcast presentations will be available at www.qrinc.com :

, where a replay will also be available soon after the presentations.

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 coalbed 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 :

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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 exploration and development projects; 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 prices; fluctuations in the value of certain of our assets and liabilities; competitive conditions in our industry; actions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters, customers and counterparties; 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.
The forward-looking statements included in this press release are made only as of the date of this press release, and we undertake no obligation to update any of these forward-looking statements to reflect subsequent events or circumstances except to the extent required by applicable law.

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KWK 09-20

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