Exhibit 99.1
N e w s R e l e a s e
QUICKSILVER RESOURCES INC.
777 West Rosedale Street
Fort Worth, TX 76104
www.qrinc.com
Quicksilver Resources Reports Record Quarterly Results
Organic Growth Fuels 17th Consecutive Quarterly Production Increase
Net Income Increases 25% to $28.7 Million
FORT WORTH, TEXAS (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
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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/d | ||||||||||||
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.
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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.
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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.
Investor & Media Contact:
Quicksilver Resources Inc.
Rick Buterbaugh
(817) 665-4835
KWK 07-21
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QUICKSILVER RESOURCES INC. | ||||||||||||||||
Unaudited Selected Operating Results | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended 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 | ||||||||
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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 |
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QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF 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 | |||||||||||||
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 |
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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 | ||||
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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 | ||||||||||||
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