Quicksilver Resources Reports Third-Quarter 2009 Results
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FORT WORTH, TX -- (MARKET WIRE) -- 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:
-- Production $.55 - $.60 -- Gathering and processing .15 - .18 -- Transportation .30 - .35 -- Production taxes .20 - .25 -- General and administrative .55 - .60 -- Depletion, depreciation & accretion 1.55 - 1.60
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 http://www.qrinc.com/investor_relations/sec_financial_info/financials/Outstanding-web.pdf.
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 http://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:
-- Canaccord Adams Global Energy Conference on December 1, 2009;
-- Bank of America Merrill Lynch Credit Conference on December 2, 2009;
and
-- Capital One Southcoast Energy Conference on December 8, 2009
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.
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.
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
In thousands, except for per share data - Unaudited
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
-------------------- ---------------------
2009 2008 2009 2008
--------- --------- ---------- ---------
Revenue
Natural gas, NGL and crude
oil $ 198,287 $ 218,214 $ 581,156 $ 574,717
Sales of purchased natural
gas 5,964 - 11,181 -
Other 2,406 18,048 6,293 17,063
--------- --------- ---------- ---------
Total revenue 206,657 236,262 598,630 591,780
--------- --------- ---------- ---------
Operating expenses
Oil and gas production
expense 29,064 33,068 92,938 98,443
Production and ad valorem
taxes 6,630 4,944 18,437 10,684
Costs of purchased natural
gas 2,964 - 11,546 -
Other operating costs 2,066 878 5,337 2,679
Depletion, depreciation and
accretion 44,548 51,777 155,210 125,756
General and administrative 17,682 25,605 59,452 56,402
--------- --------- ---------- ---------
Total expenses 102,954 116,272 342,920 293,964
Impairment related to oil and
gas properties - - (967,126) -
--------- --------- ---------- ---------
Operating income (loss) 103,703 119,990 (711,416) 297,816
Loss from earnings of BBEP -
net (43,685) (89,814) (24,669) (93,864)
Other expense - net (645) (2,113) (739) (1,055)
Interest expense (41,619) (35,988) (149,901) (65,521)
--------- --------- ---------- ---------
Income (loss) before income
taxes 17,754 (7,925) (886,725) 137,376
Income tax (expense) benefit (15,595) 5,295 301,125 (46,041)
--------- --------- ---------- ---------
Net income (loss) 2,159 (2,630) (585,600) 91,335
Net income attributable to
noncontrolling interests (1,429) (1,125) (4,411) (2,621)
--------- --------- ---------- ---------
Net income (loss) attributable
to Quicksilver $ 730 $ (3,755) $ (590,011) $ 88,714
========= ========= ========== =========
Earnings (loss) per common
share - basic $ - $ (0.02) $ (3.49) $ 0.55
Earnings (loss) per common
share - diluted $ - $ (0.02) $ (3.49) $ 0.55
Basic weighted average shares
outstanding 169,021 164,439 168,917 160,293
Diluted weighted average
shares outstanding 170,657 164,439 168,917 171,099
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except share data - Unaudited
September 30, December 31,
2009 2008
------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 1,568 $ 2,848
Accounts receivable, net of allowance for
doubtful accounts 75,225 143,315
Derivative assets at fair value 147,815 171,740
Other current assets 57,066 75,433
------------ ------------
Total current assets 281,674 393,336
Investment in BBEP 114,733 150,503
Property, plant and equipment
Oil and gas properties, full cost method
(including unevaluated costs of $497,301
and $543,533, respectively) 2,261,930 3,142,608
Other property and equipment 731,870 655,107
------------ ------------
Property, plant and equipment, net 2,993,800 3,797,715
Derivative assets at fair value 34,170 116,006
Deferred income taxes 143,450 -
Other assets 47,728 40,648
------------ ------------
$ 3,615,555 $ 4,498,208
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ - $ 6,579
Accounts payable 143,989 282,636
Income taxes payable 5,583 40
Accrued liabilities 152,205 66,923
Derivative liabilities at fair value 871 9,928
Deferred income taxes 63,394 52,393
------------ ------------
Total current liabilities 366,042 418,499
Long-term debt 2,531,632 2,586,046
Asset retirement obligations 44,902 34,753
Other liabilities 30,049 12,962
Deferred income taxes 36,542 234,385
Stockholders' equity
Preferred stock, par value $0.01, 10,000,000
shares authorized, none outstanding - -
Common stock, $0.01 par value, 400,000,000
shares authorized; 173,997,988 and 171,742,699
shares issued, respectively 1,740 1,717
Paid in capital in excess of par value 672,475 656,958
Treasury stock of 4,700,355 and 4,572,795
shares, respectively (36,309) (35,441)
Accumulated other comprehensive income 156,973 185,104
Retained earnings (deficit) (213,523) 376,488
------------ ------------
Quicksilver stockholders' equity 581,356 1,184,826
Noncontrolling interests 25,032 26,737
------------ ------------
Total equity 606,388 1,211,563
------------ ------------
$ 3,615,555 $ 4,498,208
============ ============
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands - Unaudited
For the Nine Months Ended
September 30,
----------------------
2009 2008
---------- ----------
Operating activities:
Net income (loss) $ (585,600) $ 91,335
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Impairment related to oil and gas properties 967,126 -
Depletion, depreciation and accretion 155,210 125,756
Deferred income tax expense (benefit) (313,556) 43,322
Loss from BBEP in excess of cash
distributions, net of impairment 35,770 93,864
Non-cash interest expense 40,553 8,085
Stock-based compensation 16,007 11,810
Non-cash (gain) loss from hedging and
derivative activities 2,845 (2,065)
Other 684 1,288
Changes in assets and liabilities:
Accounts receivable 67,555 (16,532)
Derivative assets at fair value 54,896 -
Other assets 4,490 (4,819)
Accounts payable (34,543) (9,619)
Income taxes payable 5,542 (46,414)
Accrued and other liabilities 33,614 (21,891)
---------- ----------
Net cash provided by operating activities 450,593 274,120
---------- ----------
Investing activities:
Purchases of property, plant and equipment (561,120) (985,124)
Alliance Acquisition - (990,649)
Proceeds from sales of property, plant and
equipment 221,038 818
Return of investment from BBEP - 31,435
---------- ----------
Net cash used for investing activities (340,082) (1,943,520)
---------- ----------
Financing activities:
Issuance of debt 1,377,525 2,472,119
Repayment of debt (1,507,137) (781,988)
Debt issuance costs (30,995) (24,545)
Gas Purchase Commitment, net 54,488 -
Noncontrolling interest distributions (7,344) (6,343)
Other (107) (1,995)
---------- ----------
Net cash provided by (used for) financing
activities (113,570) 1,657,248
---------- ----------
Effect of exchange rate changes in cash 1,779 (2,609)
---------- ----------
Net decrease in cash (1,280) (14,761)
Cash and cash equivalents at beginning of period 2,848 28,226
---------- ----------
Cash and cash equivalents at end of period $ 1,568 $ 13,465
========== ==========
QUICKSILVER RESOURCES INC.
Production, on a million cubic feet of natural gas equivalent (MMcfe) per
day basis, by operating area
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2009 2008 Change 2009 2008 Change
-------- -------- ------- -------- -------- -------
Texas 240.2 211.2 14% 255.3 175.6 45%
Other U.S. 3.2 3.3 -3% 3.2 3.4 -6%
-------- -------- -------- --------
243.4 214.5 13% 258.5 179.0 44%
Canada 67.8 62.5 9% 66.1 62.5 6%
-------- -------- -------- --------
Total 311.2 277.0 12% 324.6 241.5 34%
======== ======== ======== ========
QUICKSILVER RESOURCES INC.
Unaudited Selected Operating Results
Three Months Nine Months
Ended Ended
September 30, September 30,
--------------- ---------------
2009 2008 2009 2008
------- ------- ------- -------
Average Daily Production:
Natural Gas (Mcfd) 221,168 199,820 232,728 167,393
NGL (Bbld) 14,024 11,534 14,074 11,018
Oil (Bbld) 981 1,334 1,236 1,326
Total (Mcfed) 311,196 277,031 324,590 241,458
Average Realized Prices:
Natural Gas (per Mcf) $ 7.69 $ 8.20 $ 7.41 $ 8.40
NGL (per Bbl) $ 28.15 $ 53.82 $ 24.57 $ 52.69
Oil (per Bbl) $ 60.55 $ 84.80 $ 47.44 $ 83.70
Total (Mcfe) $ 6.93 $ 8.56 $ 6.56 $ 8.69
Expense per Mcfe:
Oil and gas production expense:
Cash expense $ 0.99 $ 1.26 $ 1.02 $ 1.45
Stock-based compensation 0.03 0.04 0.03 0.04
------- ------- ------- -------
Total oil and gas production expense: $ 1.02 $ 1.30 $ 1.05 $ 1.49
Production and ad valorem taxes $ 0.23 $ 0.19 $ 0.21 $ 0.16
Depletion, depreciation and accretion $ 1.56 $ 2.03 $ 1.75 $ 1.90
General and administrative expense:
Cash expense $ 0.46 $ 0.49 $ 0.45 $ 0.55
Litigation settlement 0.03 0.38 0.07 0.15
Equity compensation 0.13 0.13 0.15 0.15
------- ------- ------- -------
Total general and administrative expense $ 0.62 $ 1.00 $ 0.67 $ 0.85
QUICKSILVER RESOURCES INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME
In thousands, except per share data - Unaudited
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net income (loss) $ 730 $ (3,755) $ (590,011) $ 88,714
---------- ---------- ---------- ----------
Adjustments
Impairment of E&P
Properties - - 967,126 -
Impairment of investment
in BBEP - - 102,084 -
Equity portion of BBEP
impairment of E&P
properties - - 35,044 -
Equity portion of early
settlement of hedges
from BBEP (10,094) - (28,602) -
Equity portion of interest
rate derivative loss from
BBEP (136) - 6,841 -
Equity portion of
commodity derivative
loss (income) from BBEP 60,160 103,520 (78,663) 126,360
Debt termination-related
expenses (interest
expense) - - 27,122 -
Legal settlement (G&A) - 9,633 5,000 9,633
---------- ---------- ---------- ----------
Total adjustments before
income tax expense 49,930 113,153 1,035,952 135,993
Income tax expense for
above adjustments (17,475) (39,604) (344,896) (47,598)
---------- ---------- ---------- ----------
Adjustments for above
adjustments after taxes 32,455 73,549 691,056 88,395
Current quarter effect of
tax rate change to prior
quarters 9,553 - - -
---------- ---------- ---------- ----------
Total adjustments after tax 42,008 73,549 691,056 88,395
Adjusted net income $ 42,738 $ 69,794 $ 101,045 $ 177,109
========== ========== ========== ==========
Adjusted net income per
common share - Diluted $ 0.25 $ 0.40 $ 0.58 $ 1.04
Diluted weighed average
common shares outstanding 180,474 175,770 179,972 171,099
KWK 09-20
Investor & Media Contact: Rick Buterbaugh (817) 665-4835
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