Net cash provided by operating activities was $161.6 million for the fourth quarter of 2009, resulting in $612.2 million for the full year, up 34% from the full-year 2008 level.
Reconciliations of adjusted net income to net income are included in this news release.
“Quicksilver’s 2009 solid reserve and production growth, at very competitive costs, showed the efficient, low-cost structure of the company and highlighted the quality of our project inventory,” said Glenn Darden, Quicksilver president and chief executive officer. “We believe the Barnett will continue to be a high-margin development area for us, and our new projects in British Columbia and the U.S. Rockies could supplement additional Barnett reserve and production growth for years to come.”
Production
Average daily production grew 23% in 2009, as projected, even after the sale of a 27.5% interest in the company’s Alliance properties, located in the Fort Worth Basin. Production averaged 324 million cubic feet of natural gas equivalent (MMcfe) per day in the fourth quarter and averaged 325 MMcfe per day for the full year of 2009. This increase in production was driven by higher volumes from the Fort Worth Basin. The 2009 production volumes were comprised 73% from natural gas, 25% from natural gas liquids (NGL) and 2% from crude oil and condensate.
Revenue and Costs
Total revenue for the fourth quarter of 2009 was $234.1 million, up 12% from $208.9 million in the prior-year quarter. Sales of natural gas, NGLs and crude oil totaled $215.5 million in the fourth quarter of 2009, up approximately 5% from the 2008 quarter of $206.1 million. The increase was the result of a 5% increase in the average realized price per thousand cubic feet of natural gas equivalent (Mcfe) on relatively flat production. Total revenue for full-year 2009 was $832.7 million, an increase of 4% from 2008. The increase was primarily derived from the 23% increase in production volumes which was offset in part by a 17% decrease in the average realized price on a Mcfe basis.
Production expense of $34.8 million for the 2009 fourth quarter represents a $1.1 million decrease from the prior-year quarter. Unit production expense declined $0.02 per Mcfe to $1.17 per Mcfe in the fourth quarter of 2009 and averaged just $1.08 per Mcfe for the full year of 2009, down 23% from the 2008 rate.
Capital Structure
At December 31, 2009, the company’s total debt outstanding was approximately $2.4 billion, including $125 million of debt of the company’s publicly traded master limited partnership, Quicksilver Gas Services, which is non-recourse to the company. Currently, Quicksilver Resources has approximately $405 million drawn under its $1 billion senior secured revolving credit facility.
Operational Update
In the Fort Worth Basin, the company drilled 32 (26.0 net) operated wells and connected 36 (25.1 net) operated wells to sales during the fourth quarter. For the full year of 2009, the company drilled 119 (92.2 net) operated wells and connected 96 (80.5 net) operated wells to sales. At year end, Quicksilver had an inventory of approximately 100 wells, in excess of normal operations, that were drilled and cased but awaiting completion in the Fort Worth Basin. In the Horseshoe Canyon area of Alberta, Canada, the company drilled two (0.8 net) operated wells during the fourth quarter of 2009, resulting in 55 (30 net) operated wells in this area for the full year of 2009.
Total company capital expenditures for the fourth quarter of 2009 were approximately $128 million, of which 62% was associated with drilling and completion activities, 30% was for midstream activities, 7% was for acreage purchases and 1% was for corporate. For the year, capital incurred totaled approximately $600 million.
For 2010, the company has revised its 2010 operating program and now expects to drill approximately 100 operated wells, utilizing four rigs, and expects to complete approximately 130 operated wells in the Fort Worth Basin. In Canada, approximately 36 (29.0 net) operated wells are planned in the Horseshoe Canyon area. In addition, the company has drilled two additional exploratory wells on its 130,000 acres in the Horn River Basin and expects to complete these wells during the second half of 2010. From this revised drilling and completion program, the company still expects to grow total production more than 20% in 2010.
Finding and Development Costs
The company’s all-in finding and development cost (F&D) for 2009 has been finalized based upon the total 2009 capital expenditures. All-in F&D cost for 2009 was $1.25 per Mcfe, before pricing revisions and $0.80 per Mcfe after pricing revisions. A reconciliation of the “2009 Finding & Development Cost” 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 2010 Outlook
First-quarter 2010 production volumes are expected to average in the range of 310 MMcfe to 320 MMcfe per day. Average unit expenses, on a Mcfe basis, are expected to be in the following ranges:
| | · | | Production costs | $ | 1.05 | | - | | $ | 1.15 | |
| | · | | Production taxes | | .25 | | - | | | .30 | |
| | · | | General and administrative | | .60 | | - | | | .65 | |
| | · | | Depletion, depreciation & accretion | | 1.50 | | - | | | 1.55 | |
Conference Call and Investor Meeting
The company will host a conference call to discuss operating and financial results for the fourth quarter and full year of 2009 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 80367072, 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 using the conference ID number 80367072. 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.
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, including environmental and climate change requirements; 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.
F&D Costs
Finding and development cost, or F&D cost, is calculated by dividing (x) development, exploitation, and exploration 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, excluding acquired reserves. Our calculation of “all-in” F&D cost include costs and reserve additions related to the purchase of proved reserves. The methods we use to calculate our F&D and FD&A costs may differ significantly from methods used by other companies to compute similar measures. As a result, our F&D and FD&A costs may not be comparable to similar measures provided by other companies. We believe that providing a measure of F&D and FD&A costs is useful in evaluating the costs, on a per thousand cubic feet of natural gas equivalent basis, to add proved reserves.
However, these measures are 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 and FD&A 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 and FD&A costs will not differ materially from those presented.
A reconciliation of F&D and FD&A costs is available on the company’s website at www.qrinc.com.
# # #
Investor & Media Contact:
Rick Buterbaugh
(817) 665-4835
KWK 10-03
QUICKSILVER RESOURCES INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
In thousands, except for per share data - Unaudited
| | | For the Three Months Ended | | | For the Year Ended | |
| | | December 31, | | | December 31, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| Revenue | | | | | | | | | | | | |
| Natural gas, NGL and crude oil | | $ | 215,542 | | | $ | 206,071 | | | $ | 796,698 | | | $ | 780,788 | |
| Sales of purchased natural gas | | | 12,473 | | | | - | | | | 23,654 | | | | - | |
| Other | | | 6,090 | | | | 2,790 | | | | 12,383 | | | | 19,853 | |
| Total revenue | | | 234,105 | | | | 208,861 | | | | 832,735 | | | | 800,641 | |
| | | | | | | | | | | | | | | | | |
| Operating expense | | | | | | | | | | | | | | | | |
| Oil and gas production expense | | | 34,777 | | | | 35,859 | | | | 127,715 | | | | 134,302 | |
| Production and ad valorem taxes | | | 5,444 | | | | 8,050 | | | | 23,881 | | | | 18,734 | |
| Costs of purchased natural gas | | | 18,612 | | | | - | | | | 30,158 | | | | - | |
| Other operating expense | | | 1,347 | | | | 658 | | | | 6,684 | | | | 3,337 | |
| Depletion, depreciation and accretion | | | 46,177 | | | | 62,440 | | | | 201,387 | | | | 188,196 | |
| General and administrative expense | | | 17,791 | | | | 15,852 | | | | 77,243 | | | | 72,254 | |
| Total expense | | | 124,148 | | | | 122,859 | | | | 467,068 | | | | 416,823 | |
| Impairment related to oil and gas properties | | | (12,414 | ) | | | (633,515 | ) | | | (979,540 | ) | | | (633,515 | ) |
| Operating income (loss) | | | 97,543 | | | | (547,513 | ) | | | (613,873 | ) | | | (249,697 | ) |
| Loss from earnings of BBEP - net | | | (1,971 | ) | | | (133,225 | ) | | | (26,640 | ) | | | (227,089 | ) |
| Other income (expense) - net | | | (503 | ) | | | 1,862 | | | | (1,242 | ) | | | 807 | |
| Interest expense | | | (45,200 | ) | | | (43,577 | ) | | | (195,101 | ) | | | (109,098 | ) |
| Income (loss) before income taxes | | | 49,869 | | | | (722,453 | ) | | | (836,856 | ) | | | (585,077 | ) |
| Income tax (expense) benefit | | | (9,508 | ) | | | 257,496 | | | | 291,617 | | | | 211,455 | |
| Net income (loss) | | | 40,361 | | | | (464,957 | ) | | | (545,239 | ) | | | (373,622 | ) |
| Net income attributable to noncontrolling interests | | | (7,823 | ) | | | (2,033 | ) | | | (12,234 | ) | | | (4,654 | ) |
| Net income (loss) attributable to Quicksilver | | $ | 32,538 | | | $ | (466,990 | ) | | $ | (557,473 | ) | | $ | (378,276 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Earnings (loss) per common share - basic | | $ | 0.19 | | | $ | (2.79 | ) | | $ | (3.30 | ) | | $ | (2.33 | ) |
| | | | | | | | | | | | | | | | | |
| Earnings (loss) per common share - diluted | | $ | 0.19 | | | $ | (2.79 | ) | | $ | (3.30 | ) | | $ | (2.33 | ) |
| | | | | | | | | | | | | | | | | |
| Basic weighted average shares outstanding | | | 169,275 | | | | 167,086 | | | | 169,004 | | | | 162,004 | |
| | | | | | | | | | | | | | | | | |
| Diluted weighted average shares outstanding | | | 180,894 | | | | 167,086 | | | | 169,004 | | | | 162,004 | |
QUICKSILVER RESOURCES INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2009 AND 2008
In thousands, except share data - Unaudited
| | | 2009 | | | 2008 | |
| ASSETS | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 1,785 | | | $ | 2,848 | |
| Accounts receivable, net of allowance for doubtful accounts | | | 65,253 | | | | 143,315 | |
| Derivative assets at fair value | | | 97,957 | | | | 171,740 | |
| Other current assets | | | 54,943 | | | | 75,433 | |
| Total current assets | | | 219,938 | | | | 393,336 | |
| Investment in equity affiliates | | | 112,763 | | | | 150,503 | |
| Property, plant and equipment | | | | | | | | |
Oil and gas properties, full cost method (including unevaluated costs of $458,037 and $543,533, respectively) | | | 2,340,221 | | | | 3,142,608 | |
| Other property and equipment | | | 745,719 | | | | 655,107 | |
| Property, plant and equipment, net | | | 3,085,940 | | | | 3,797,715 | |
| Derivative assets at fair value | | | 14,427 | | | | 116,006 | |
| Deferred income taxes | | | 133,051 | | | | - | |
| Other assets | | | 46,763 | | | | 40,648 | |
| | | $ | 3,612,882 | | | $ | 4,498,208 | |
| LIABILITIES AND EQUITY | | | | | | | | |
| Current liabilities | | | | | | | | |
| Current portion of long-term debt | | $ | - | | | $ | 6,579 | |
| Accounts payable | | | 157,986 | | | | 282,636 | |
| Accrued liabilities | | | 156,604 | | | | 66,963 | |
| Derivative liabilities at fair value | | | 395 | | | | 9,928 | |
| Current deferred tax liability | | | 51,675 | | | | 52,393 | |
| Total current liabilities | | | 366,660 | | | | 418,499 | |
| Long-term debt | | | 2,427,523 | | | | 2,586,046 | |
| Asset retirement obligations | | | 59,268 | | | | 34,753 | |
| Other liabilities | | | 20,691 | | | | 12,962 | |
| Deferred income taxes | | | 41,918 | | | | 234,385 | |
| Equity | | | | | | | | |
| Preferred stock, par value $0.01, 10,000,000 shares authorized, none outstanding | | | - | | | | - | |
| Common stock, $0.01 par value, 400,000,000 and 200,000,000 shares authorized; | | | | | |
| 174,469,836 and 171,742,699 shares issued, respectively | | | 1,745 | | | | 1,717 | |
| Paid in capital in excess of par value | | | 730,265 | | | | 656,958 | |
| Treasury stock of 4,704,448 and 4,572,795 shares, respectively | | | (36,363 | ) | | | (35,441 | ) |
| Accumulated other comprehensive income | | | 121,336 | | | | 185,104 | |
| Retained earnings (deficit) | | | (180,985 | ) | | | 376,488 | |
| Quicksilver stockholders' equity | | | 635,998 | | | | 1,184,826 | |
| Noncontrolling interests | | | 60,824 | | | | 26,737 | |
| Total equity | | | 696,822 | | | | 1,211,563 | |
| | | $ | 3,612,882 | | | $ | 4,498,208 | |
