Loss from Earnings of BreitBurn
Quicksilver reported a pre-tax loss of $16.0 million attributable to the company’s approximate 40% interest in BreitBurn Energy Partners L.P.’s (NASDAQ: BBEP) fourth-quarter 2009 results, including $22.8 million of interest rate and commodity derivative losses. During the first quarter of 2010, Quicksilver did not receive any cash distributions associated with its ownership of the BBEP units. On February 8, 2010, BBEP announced that it had reached agreement with Quicksilver to settle all litigation between Quicksilver and BBEP and in April, Quicksilver received $18 million in settlement of the litigation. On April 28, BBEP announced a cash distribution of $0.375 per unit for the first quarter of 2010, from which Quicksilver expects to receive a total distribution of approximately $8.0 million i n May.
Operational Update
In the Fort Worth Basin, the company drilled 28 (22.4 net) wells and connected 21 (16.9 net) wells to sales during the first quarter of 2010. The company has recently reduced its drilling activity in the basin and currently has three rigs working, including two rigs dedicated to the Alliance and Lake Arlington projects in the northern, dry gas portion of the basin and one rig in the southern portion of the basin, which has predominantly high-Btu gas. The company now expects to drill and complete a total of approximately 98 wells in the basin in 2010. The company also expects to complete approximately 25 additional wells this year from its existing inventory of drilled but uncompleted wells. Following this activity, the company expects to exit the year with approximately 120 drilled but uncompleted Fort Worth Basin wells in inventory, which provide ongoing opportunities to add production at reduced capital levels.
In Canada, the company participated in drilling five (4.25 net) wells in the Horseshoe Canyon area of Alberta during the first quarter of 2010. Drilling, completion and pipeline operations are currently suspended for the seasonal break-up period in Canada. In addition, Quicksilver finished exploratory drilling activities on two additional horizontal wells into the Muskwa formation in the Horn River Basin of northeast British Columbia. Completion activities on the first of these new wells are expected to begin in late summer, following the current break-up period, and completion of the second well is anticipated at year-end. In early 2011, the company expects to re-enter an existing well in the Horn River Basin to drill a horizontal test of the Exshaw oil formation, which the company has encounte red in each of its four wells drilled to date in the Horn River Basin.
During the first quarter of 2010, the company incurred capital costs of approximately $136 million, including approximately $26 million at the Horn River project and $18 million on additional leasehold in the Fort Worth Basin.
Second-Quarter 2010 Outlook
Second-quarter 2010 production volumes are expected to average in the range of 350 MMcfe to 360 MMcfe per day. Average unit expenses, on a Mcfe basis, are expected as follows:
| | · | | Production | $ | .55 | | - | | $ | .60 | |
| | · | | Gathering and processing | | .15 | | | | | .20 | |
| | · | | Transportation | | .40 | | | | | .45 | |
| | · | | Production taxes | | .25 | | - | | | .30 | |
| | · | | General and administrative | | .65 | | - | | | .70 | |
| | · | | Depletion, depreciation & accretion | | 1.50 | | - | | | 1.55 | |
The company has derivatives in place to cover approximately 68% of expected production for the remainder of 2010. For natural gas, collars with a weighted-average floor price of $7.40 per thousand cubic feet, are expected to cover approximately 65% of expected natural gas production for the remaining three quarters of 2010. For natural gas liquids (NGLs), the company has fixed-price swaps with a weighted-average price of $33.47 per barrel, which is anticipated to cover approximately 85% of NGL production for the remaining three quarters of 2010.
Conference Call
The company will host a conference call to discuss first-quarter 2010 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 44053991, 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 44053991. The replay will also be archived for 30 days on the company’s website.
Use of Non-GAAP Financial Measure
This news 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 news 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 news release are made only as of the date of this news 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.
Investor & Media Contact:
Rick Buterbaugh
(817) 665-4835
KWK 10-06
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
In thousands, except for per share data - Unaudited
| | | Three Months Ended March 31, | |
| | | 2010 | | | 2009 | |
| Revenue | | | | | | |
| Natural gas, NGL and crude oil | | $ | 201,563 | | | $ | 183,554 | |
| Sales of purchased natural gas | | | 16,224 | | | | - | |
| Other | | | 4,371 | | | | 2,378 | |
| Total revenue | | | 222,158 | | | | 185,932 | |
| | | | | | | | | |
| Operating expense | | | | | | | | |
| Oil and gas production expense | | | 35,989 | | | | 32,171 | |
| Production and ad valorem taxes | | | 8,483 | | | | 4,366 | |
| Costs of purchased natural gas | | | 33,307 | | | | - | |
| Other operating expense | | | 1,254 | | | | 1,527 | |
| Depletion, depreciation and accretion | | | 46,757 | | | | 59,696 | |
| General and administrative expense | | | 20,523 | | | | 17,381 | |
| Total expense | | | 146,313 | | | | 115,141 | |
| Impairment related to oil and gas properties | | | - | | | | (896,483 | ) |
| Operating income (loss) | | | 75,845 | | | | (825,692 | ) |
| Loss from earnings of BBEP - net | | | (15,989 | ) | | | - | |
| Other income (expense) - net | | | 343 | | | | 761 | |
| Interest expense | | | (44,517 | ) | | | (40,201 | ) |
| Income (loss) before income taxes | | | 15,682 | | | | (865,132 | ) |
| Income tax (expense) benefit | | | (5,082 | ) | | | 297,823 | |
| Net income (loss) | | | 10,600 | | | | (567,309 | ) |
| Net income attributable to noncontrolling interests | | | (2,412 | ) | | | (1,670 | ) |
| Net income (loss) attributable to Quicksilver | | $ | 8,188 | | | $ | (568,979 | ) |
| | | | | | | | | |
| | | | | | | | | |
| Earnings (loss) per common share - basic | | $ | 0.05 | | | $ | (3.37 | ) |
| | | | | | | | | |
| Earnings (loss) per common share - diluted | | $ | 0.05 | | | $ | (3.37 | ) |
| | | | | | | | | |
| Basic weighted average shares outstanding | | | 170,175 | | | | 168,841 | |
| | | | | | | | | |
| Diluted weighted average shares outstanding | | | 171,040 | | | | 168,841 | |
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except share data - Unaudited
| | | March 31, 2010 | | | December 31, 2009 | |
| ASSETS | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 601 | | | $ | 1,785 | |
| Accounts receivable - net of allowance for doubtful accounts | | | 60,348 | | | | 65,253 | |
| Derivative assets at fair value | | | 172,850 | | | | 97,957 | |
| Other current assets | | | 50,542 | | | | 54,943 | |
| Total current assets | | | 284,341 | | | | 219,938 | |
| Investment in BBEP | | | 96,774 | | | | 112,763 | |
| Property, plant and equipment | | | | | | | | |
Oil and gas properties, full cost method (including unevaluated costs of $392,272 and $458,037, respectively) | | | 2,428,099 | | | | 2,338,244 | |
| Other property and equipment | | | 765,789 | | | | 747,696 | |
| Property, plant and equipment - net | | | 3,193,888 | | | | 3,085,940 | |
| Derivative assets at fair value | | | 54,304 | | | | 14,427 | |
| Deferred income taxes | | | 118,203 | | | | 133,051 | |
| Other assets | | | 44,489 | | | | 46,763 | |
| | | $ | 3,791,999 | | | $ | 3,612,882 | |
| LIABILITIES AND EQUITY | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accounts payable | | $ | 150,532 | | | $ | 157,986 | |
| Accrued liabilities | | | 132,247 | | | | 156,604 | |
| Derivative liabilities at fair value | | | 812 | | | | 395 | |
| Deferred income taxes | | | 71,756 | | | | 51,675 | |
| Total current liabilities | | | 355,347 | | | | 366,660 | |
| Long-term debt | | | 2,510,494 | | | | 2,427,523 | |
| Asset retirement obligations | | | 61,822 | | | | 59,268 | |
| Other liabilities | | | 20,692 | | | | 20,691 | |
| Derivative liabilities at fair value | | | 654 | | | | - | |
| Deferred income taxes | | | 49,095 | | | | 41,918 | |
| 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; 175,439,552 and 174,469,836 shares issued, respectively | | | 1,754 | | | | 1,745 | |
| Paid in capital in excess of par value | | | 742,773 | | | | 730,265 | |
| Treasury stock of 5,022,244 and 4,704,448 shares, respectively | | | (41,129 | ) | | | (36,363 | ) |
| Accumulated other comprehensive income | | | 200,633 | | | | 121,336 | |
| Retained deficit | | | (172,797 | ) | | | (180,985 | ) |
| Quicksilver stockholders' equity | | | 731,234 | | | | 635,998 | |
| Noncontrolling interests | | | 62,661 | | | | 60,824 | |
| Total equity | | | 793,895 | | | | 696,822 | |
| | | $ | 3,791,999 | | | $ | 3,612,882 | |
