Exhibit 99.3
QUICKSILVER RESOURCES INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The accompanying unaudited pro forma condensed consolidated financial statements of Quicksilver Resources Inc. (the “Company”) are presented to display the effects of the November 1, 2007 disposition of its Michigan, Indiana and Kentucky properties on its historical financial position and operating results. Net cash proceeds received from the sale of these properties were approximately $740.0 million, reflecting $10.0 million of transaction costs. These proceeds are expected to be used to repay outstanding borrowings on the Company’s revolving credit facility, pay taxes on the disposition, employee severance costs of approximately $5.4 million, and for other various working capital purposes.
The unaudited pro forma condensed consolidated balance sheet as of June 30, 2007 has been prepared based on the historical condensed consolidated balance sheet of the Company assuming that the disposition closed on June 30, 2007. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2006 and the six months ended June 30, 2007 have been prepared based on the historical condensed consolidated statements of operations of the Company for such periods and assume that the transaction closed on January 1, 2006.
These unaudited pro forma financial statements are provided for illustrative purposes and do not purport to represent what the Company’s results of operations or financial position would have been if such disposition had occurred on the above mentioned dates. The use of estimates is required and actual results could differ from the estimates used. The Company believes the assumptions used provide a reasonable basis for presenting the significant effects directly attributable to the disposition. These unaudited pro forma consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
QUICKSILVER RESOURCES INC. | |||||||||||||
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||||||
JUNE 30, 2007 | |||||||||||||
In thousands, except for share data – Unaudited | |||||||||||||
Pro Forma | |||||||||||||
Historical | Adjustments | Pro Forma | |||||||||||
ASSETS | |||||||||||||
Current assets | |||||||||||||
Cash and cash equivalents | $ | 3,258 | $ | 740,000 | (a) | $ | 271,858 | ||||||
(466,000 | ) | (b) | |||||||||||
(5,400 | ) | (c) | |||||||||||
Accounts receivable, net of allowance for doubtful accounts | 67,076 | 67,076 | |||||||||||
Current derivative assets | 25,968 | 25,968 | |||||||||||
Other current assets | 32,091 | 32,091 | |||||||||||
Total current assets | 128,393 | 268,600 | 396,993 | ||||||||||
Investments in and advances to equity affiliates | 7,333 | 444,669 | (d) | 452,002 | |||||||||
Property, plant and equipment – net (“full cost”) | 2,099,055 | (599,754 | ) | (e) | 1,499,301 | ||||||||
Non-current derivative assets | - | - | |||||||||||
Other assets | 22,834 | (7,338 | ) | (e) | 15,496 | ||||||||
$ | 2,257,615 | $ | 106,177 | $ | 2,363,792 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||
Current liabilities | |||||||||||||
Current portion of long-term debt | $ | 220 | $ | - | $ | 220 | |||||||
Accounts payable | 137,888 | 137,888 | |||||||||||
Accrued liabilities | 40,887 | 40,887 | |||||||||||
Derivative obligations | 882 | 882 | |||||||||||
Current taxes payable | - | 50,000 | (f) | 50,000 | |||||||||
Current deferred income taxes | 7,923 | 7,923 | |||||||||||
Total current liabilities | 187,800 | 50,000 | 237,800 | ||||||||||
Long-term debt | 1,217,472 | (466,000 | ) | (b) | 751,472 | ||||||||
Derivative obligations | 6,018 | 6,018 | |||||||||||
Asset retirement obligations | 28,666 | 28,666 | |||||||||||
Deferred income taxes | 180,311 | 150,262 | (f) | 330,573 | |||||||||
Minority interest | 7,892 | 7,892 | |||||||||||
Stockholders’ equity | |||||||||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding | - | - | |||||||||||
Common stock, $0.01 par value, 200,000,000 shares authorized and 81,207,935 shares issued | 812 | 812 | |||||||||||
Paid in capital in excess of par value | 256,528 | 256,528 | |||||||||||
Treasury stock of 2,600,536 shares | (11,558 | ) | (11,558 | ) | |||||||||
Accumulated other comprehensive income | 41,998 | 41,998 | |||||||||||
Retained earnings | 341,676 | 577,577 | (g) | 713,591 | |||||||||
(5,400 | ) | (c) | |||||||||||
(200,262 | ) | (f) | |||||||||||
Total stockholders’ equity | 629,456 | 371,915 | 1,001,371 | ||||||||||
$ | 2,257,615 | $ | 106,177 | $ | 2,363,792 | ||||||||
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. |
QUICKSILVER RESOURCES INC. | |||||||||||||
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME | |||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, 2007 | |||||||||||||
In thousands, except for per share data – Unaudited | |||||||||||||
Pro Forma | |||||||||||||
Historical | Adjustments | Pro Forma | |||||||||||
Revenues | |||||||||||||
Oil, gas and related product sales | $ | 247,251 | $ | (75,416 | ) | (h) | $ | 171,835 | |||||
Other revenue | 5,727 | (754 | ) | (h) | 4,973 | ||||||||
Total revenues | 252,978 | (76,170 | ) | 176,808 | |||||||||
Expenses | |||||||||||||
Oil and gas production costs | 60,558 | (25,090 | ) | (h) | 35,468 | ||||||||
Production and ad valorem taxes | 8,702 | (4,993 | ) | (h) | 3,709 | ||||||||
Other operating costs | 1,085 | (105 | ) | (h) | 980 | ||||||||
Depletion, depreciation and accretion | 52,499 | (14,790 | ) | (m) | 37,709 | ||||||||
Provision for bad debts | (264 | ) | - | (264 | ) | ||||||||
General and administrative | 20,260 | 2,170 | (i) | 22,430 | |||||||||
Total expenses | 142,840 | (42,808 | ) | 100,032 | |||||||||
Income (loss) from equity affiliates | 397 | (397 | ) | (j) | - | ||||||||
Operating income | 110,535 | (33,759 | ) | 76,776 | |||||||||
Income from BreitBurn Energy Partners L.P. investment | - | 2,719 | (n) | 2,719 | |||||||||
Other income-net | (1,471 | ) | 97 | (k) | (1,374 | ) | |||||||
Interest expense | 33,168 | (11,207 | ) | 21,961 | |||||||||
Income before income taxes and minority interest | 78,838 | (19,930 | ) | 58,908 | |||||||||
Income tax expense | 24,065 | (7,005 | ) | (l) | 17,060 | ||||||||
Minority interest | 191 | - | 191 | ||||||||||
Net income | $ | 54,582 | $ | (12,925 | ) | $ | 41,657 | ||||||
Basic net income per common share | $ | 0.71 | $ | 0.54 | |||||||||
Diluted net income per common share | $ | 0.66 | $ | 0.51 | |||||||||
Weighted average common shares outstanding | |||||||||||||
Basic | 77,396 | 77,396 | |||||||||||
Diluted | 84,029 | 84,029 | |||||||||||
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. |
QUICKSILVER RESOURCES INC. | |||||||||||||
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME | |||||||||||||
FOR THE YEAR ENDED DECEMBER 31, 2006 | |||||||||||||
In thousands, except for per share data – Unaudited | |||||||||||||
Pro Forma | |||||||||||||
Historical | Adjustments | Pro Forma | |||||||||||
Revenues | |||||||||||||
Oil, gas and related product sales | $ | 386,540 | $ | (164,060 | ) | (h) | $ | 222,480 | |||||
Other revenue | 3,822 | (1,502 | ) | (h) | 2,320 | ||||||||
Total revenues | 390,362 | (165,562 | ) | 224,800 | |||||||||
Expenses | |||||||||||||
Oil and gas production costs | 95,176 | (44,921 | ) | (h) | 50,255 | ||||||||
Production and ad valorem taxes | 15,619 | (10,659 | ) | (h) | 4,960 | ||||||||
Other operating costs | 1,461 | (1,081 | ) | (h) | 380 | ||||||||
Depletion, depreciation and accretion | 78,800 | (27,708 | ) | (m) | 51,092 | ||||||||
Provision for bad debts | 700 | - | 700 | ||||||||||
General and administrative | 24,936 | 4,160 | (i) | 29,096 | |||||||||
Total expenses | 216,692 | (80,209 | ) | 136,483 | |||||||||
Income (loss) from equity affiliates | 526 | (526 | ) | (j) | - | ||||||||
Operating income | 174,196 | (85,879 | ) | 88,317 | |||||||||
Income from BreitBurn Energy Partners L.P. Investment | - | 21,546 | (n) | 21,546 | |||||||||
Other income-net | (1,825 | ) | 42 | (k) | (1,783 | ) | |||||||
Interest expense | 44,061 | (5,593 | ) | 38,468 | |||||||||
Income before income taxes and minority interest | 131,960 | (58,782 | ) | 73,178 | |||||||||
Income tax expense | 38,150 | (20,662 | ) | (l) | 17,488 | ||||||||
Minority interest | 91 | - | 91 | ||||||||||
Net income | $ | 93,719 | $ | (38,120 | ) | $ | 55,599 | ||||||
Basic net income per common share | $ | 1.22 | $ | 0.72 | |||||||||
Diluted net income per common share | $ | 1.15 | $ | 0.69 | |||||||||
Weighted average common shares outstanding | |||||||||||||
Basic | 76,707 | 76,707 | |||||||||||
Diluted | 83,133 | 83,133 | |||||||||||
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. |
QUICKSILVER RESOURCES INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The unaudited pro forma condensed consolidated balance sheet at June 30, 2007 reflects the following adjustments:
(a) | Adjustments for the net cash proceeds of $740.0 million, which is the cash portion of the consideration received by Quicksilver less $10.0 million in transaction fees. |
(b) | Adjustments to reflect the repayment of the balance outstanding at June 30, 2007 under the U.S. revolving loan agreement which was anticipated in planning the divestment of the assets. |
(c) | Adjustment to reflect the payment of severance benefits to employees at closing of the transaction. |
(d) | Adjustment to reflect the receipt of 21,347,972 units of BreitBurn Energy Partners L.P. as the equity portion of the consideration received from the contribution of assets to BreitBurn Operating L.P. The value of the equity proceeds and the carrying value of the equity investment is reduced to reflect the deferral of gain of $279.5 million from the disposition proportionate to the equity ownership percentage which Quicksilver will have in BreitBurn Energy Partners L.P. of approximately 31.6 percent. |
(e) | Adjustments to reflect the basis of the net property and equipment and other assets contributed to BreitBurn Operating L.P. |
(f) | Adjustments to reflect a current income tax liability of $50.0 million and a deferred tax liability of $150.3 million related to the gain on the disposition and the tax reduction from transaction fees and employee severance fees paid. |
(g) | Adjustment to record the estimated gain on sale of properties which has been calculated as follows: |
(in millions) | ||||
Proceeds (net of gain deferral of $279.5 million) | $ | 1,194.7 | ||
Net basis of assets sold | 607.1 | |||
Transaction fees | 10.0 | |||
Pre-tax gain | $ | 577.6 | ||
Income taxes at 35.0% | 202.2 | |||
Pro forma gain on disposition, net of tax | $ | 375.4 |
The unaudited pro forma condensed consolidated statements of income for the year ended December 31, 2006 and the six months ended June 30, 2007 reflect the following adjustments:
(h) | Adjustments to reverse the revenues and operating expenses of the properties contributed. |
(i) | Adjustment to reverse the COPAS overhead recoveries attributed to general and administrative expense. |
(j) | Adjustment to reverse income from equity affiliates. |
(k) | Adjustment to reverse other income. |
(l) | Adjustment for the income tax consequences of the pro forma adjustments at the estimated effective tax rate for the assets contributed. |
(m) | Adjustment to depletion, depreciation and accretion for properties contributed. |
(n) | Adjustment to reflect 31.6 percent of the pro forma net income of BreitBurn Energy Partners L.P. |