Quicksilver Resources Inc.
FOR RELEASE AFTER MARKET CLOSE
October 31, 2006
QUICKSILVER RESOURCES REPORTS
THIRD QUARTER 2006 FINANCIAL RESULTS
Production Increases 24% over Prior-year Period and 6% over Prior Quarter;
Year over Year Cash Flow from Operations Increases 119%
FORT WORTH (October 31, 2006) - Quicksilver Resources Inc. (NYSE: KWK) today reported net income for the third quarter of 2006 of $22.9 million, or $0.28 per diluted share, on revenues of $99.2 million. Earnings per share for the company’s third quarter of 2005 were $0.31 per share on revenues of $83.8 million.
Net income for the first nine months of 2006 was $74.0 million, or $0.91 per diluted share, on revenues of $288.3 million. Earnings per share increased 38 percent in comparison to earnings of $0.66 per diluted share for the first nine months 2005 on net income of $52.7 million and revenues of $207.6 million. For the nine-month period ended September 2006, net cash from operating activities, as presented in the attached Condensed Consolidated Statement of Cash Flows, was $187.7 million, compared to $85.9 million for the same period in 2005, which represents an increase of 119 percent.
Production
For the third quarter of 2006, total average production rose to 174.5 million cubic feet equivalent per day (MMcfe/d), a 24 percent increase over the prior-year period of 141 MMcfe/d and a six percent increase over the second quarter 2006 average of 164.2 MMcfe/d. For the nine months ended September 30, 2006, total production averaged 164.4 MMcfe/d in comparison to 137.7 MMcfe/d in the prior-year nine-month period, a 19 percent increase. Production in Canada averaged 49.2 MMcfe/d for the third quarter compared to 40.8 MMcfe/d in the same period in 2005, a 21 percent increase. Texas production increased to an average of 40.5 MMcfe/d in the quarter ended September 30, 2006 as compared to an average of 11.4 MMcfe/d in the comparable prior-year quarter, a 255 percent increase.
President and CEO, Glenn Darden, commented, “Quicksilver’s strong production gains come entirely from internally generated projects. We anticipate that this strategy of ‘growth by the drillbit’ will not only build a significant reserve base but will also generate excellent returns on our capital. We plan to accelerate the Barnett drilling in the Fort Worth Basin which should increase this growth rate.”
Production on an Mcfe/d basis for the company’s three major production areas for the nine months ended September 30 was as follows:
Area | | 2005 | | 2006 | | Change | |
| Canada | | | 39,415 | | | 49,018 | | | 24 | % |
| Texas | | | 7,953 | | | 31,490 | | | 296 | % |
| Michigan | | | 81,130 | | | 75,661 | | | (7 | %) |
Natural gas production for the third quarter of 2006 was 13.8 billion cubic feet (Bcf), or an average of 150 million cubic feet per day (MMcf/d), as compared to production of 11.8 Bcf, or an average of 128 MMcf/d, for the same period in 2005, a 17 percent increase. The price realized for the company’s natural gas production in the third quarter of 2006, after adjusting for the effects of hedging, averaged $5.73 per thousand cubic feet (Mcf) as compared to the prior-year period amount of $6.12. Natural gas, including natural gas liquids (NGL), constituted 94 percent of the company’s total production in the third quarter of 2006.
Natural gas liquids production for the third quarter of 2006 was 229,000 barrels compared to 64,000 barrels in the third quarter of 2005, an increase of 258 percent over the prior-year third quarter and an increase of 53 percent in comparison to second quarter 2006 NGL production of 150,000 barrels. The increase in the NGL production is directly related to the increased throughput at the company’s Cowtown cryogenic gas plant in the Fort Worth Basin. The company realized an average $41.91 per barrel for natural gas liquids in the third quarter of 2006, compared to the average of $35.96 per barrel realized in the third quarter of 2005.
Oil and condensate production for the third quarter of 2006 was 148,000 barrels, or 1,603 barrels per day, as compared to 139,000 barrels of production in the third quarter of 2005. Oil and condensate prices realized for the third quarter of 2006, after adjusting for the effects of hedging, averaged $64.74 per barrel compared to $57.31 per barrel for the prior-year third quarter.
Operations Update
Quicksilver Resources’ operations in the Fort Worth Basin Barnett Shale continue to grow with Texas production averaging 40.5 MMcfe/d in the third quarter versus an average of 31 MMcfe/d in the second quarter ended June 30, 2006, a 30% increase quarter to quarter. With 11 rigs currently operating in the Fort Worth Basin, Quicksilver has drilled 94 gross (84 net) wells year to date and is estimated to drill over 100 gross wells this year. Current net production is approximately 53 MMcfe/d with 91 gross (71 net) wells completed and tied into sales.
In Canada, the company has drilled 313 gross (170 net) wells year to date and has tied in 210 gross (110 net) wells into sales. Current net production is 53 MMcf/d. Quicksilver has slowed drilling activity in the Horseshoe Canyon area this year and has redeployed the capital to the Barnett Shale in Texas. This operational change is a result of high Canadian service costs, unusually wet weather in Canada, and the higher rates of return in
the Texas project. The company still projects Canadian production growth of 20 percent year over year. Completion operations are progressing for the company’s two recently drilled horizontal Mannville wells, and the company anticipates providing results by year-end.
In Michigan, Quicksilver Resources has completed 23 horizontal re-entry wells in the Antrim Shale program year to date, and these re-entries have added to both production and reserves. The company has an additional five wells planned for the remainder of the year. Two new horizontal Antrim wells have been successfully drilled and completed with a Barnett-style hydraulic fracture treatment. Both wells are making gas and are about half way through recovery of the treatment water. A third horizontal well of this type is currently being drilled.
Earnings per Share Calculation
For the quarter, the diluted net income per common share is calculated assuming conversion of the entire $150 million principal amount of outstanding convertible debentures in addition to outstanding in-the-money options. For purposes of this calculation, net income is increased by $475,000 per quarter, which is the interest that was paid on the convertible debentures offset by the related income tax benefit.
Conference Call
The company’s conference call to discuss operational and financial results for the third quarter 2006 is scheduled for Wednesday, November 1, 2006 at 9:00 a.m. central time.
Quicksilver invites interested persons to participate in the third quarter call by dialing (877) 313-7932, ID number 4077246 prior to 8:55 a.m. A digital replay of the conference call will be available at 1:00 p.m. central time the same day, and will remain available for one week. The replay can be dialed at (800) 642-1687 and reference should be made to the conference ID number 4077246. The call will also be broadcast live via Internet webcast on the company’s website, www.qrinc.com, linking through the “Investor Relations” page and the “Presentations & Conference Calls” link located in the “More Information” box.
About Quicksilver Resources
Fort Worth, Texas-based Quicksilver Resources is a natural gas and crude oil production company engaged in the development and production of unconventional natural gas reserves, including coal bed methane, shale gas, and tight sands gas. It has U.S. offices in Fort Worth, Texas; Granbury, Texas; Gaylord, Michigan; Corydon, Indiana and Cut Bank, Montana. Quicksilver also has a Canadian subsidiary, Quicksilver Resources Canada Inc., located in Calgary, Alberta. For more information about Quicksilver Resources, visit www.qrinc.com.
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; uncertainties inherent in estimates of natural gas and crude oil reserves and predicting natural gas and crude oil reservoir performance; effects of hedging natural gas and crude oil prices; competitive conditions in our industry; actions taken by third-party operators, processors and transporters; changes in the availability and cost of capital; 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.
QUICKSILVER RESOURCES INC. | |
Unaudited Selected Operating Results | |
| | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | | 2006 | | 2005 | | 2006 | | 2005 | |
Production: | | | | | | | | | | | | | |
| Natural gas (MMcf) | | | 13,794 | | | 11,762 | | | 39,430 | | | 34,287 | |
| Oil (MBbls) | | | 148 | | | 139 | | | 444 | | | 410 | |
| NGL (MBbls) | | | 229 | | | 64 | | | 464 | | | 141 | |
| Total (MMcfe) | | | 16,055 | | | 12,975 | | | 44,878 | | | 37,592 | |
| | | | |
| United States (MMcfe) | | | 11,528 | | | 9,223 | | | 31,496 | | | 26,832 | |
| Canada (MMcfe) | | | 4,527 | | | 3,752 | | | 13,382 | | | 10,760 | |
| Total (MMcfe) | | | 16,055 | | | 12,975 | | | 44,878 | | | 37,592 | |
| | | | |
Average Daily Production: | | | |
| Natural gas (Mcfd) | | | 149,939 | | | 127,846 | | | 144,431 | | | 125,595 | |
| Oil (Bbld) | | | 1,603 | | | 1,507 | | | 1,628 | | | 1,501 | |
| NGL (Bbld) | | | 2,491 | | | 691 | | | 1,698 | | | 516 | |
| Total (Mcfed) | | | 174,506 | | | 141,033 | | | 164,387 | | | 137,699 | |
| | | | |
Average Sales Price Per Unit (excluding effects of hedging): | |
| Natural gas (per Mcf) | | $ | 5.35 | | $ | 6.66 | | $ | 5.88 | | $ | 5.80 | |
| Oil (per Bbl) | | $ | 64.74 | | $ | 60.52 | | $ | 62.85 | | $ | 51.86 | |
| NGL (per Bbl) | | $ | 41.91 | | $ | 35.96 | | $ | 41.51 | | $ | 34.41 | |
| Total (per Mcfe) | | $ | 5.79 | | $ | 6.86 | | $ | 6.22 | | $ | 5.99 | |
| | | | |
Average Sales Price Per Unit (including effects of hedging): | |
| Natural gas (per Mcf) | | $ | 5.73 | | $ | 6.12 | | $ | 6.05 | | $ | 5.24 | |
| Oil (per Bbl) | | $ | 64.74 | | $ | 57.31 | | $ | 61.84 | | $ | 49.50 | |
| NGL (per Bbl) | | $ | 41.91 | | $ | 35.96 | | $ | 41.51 | | $ | 34.41 | |
| Total (per Mcfe) | | $ | 6.11 | | $ | 6.34 | | $ | 6.36 | | $ | 5.45 | |
| | | | |
Expense per Mcfe: | | | |
| United States production cost | | $ | 1.56 | | $ | 1.69 | | $ | 1.67 | | $ | 1.59 | |
| Canada production cost | | $ | 1.45 | | $ | 1.02 | | $ | 1.31 | | $ | 1.00 | |
| Total production cost | | $ | 1.53 | | $ | 1.50 | | $ | 1.56 | | $ | 1.42 | |
| | | | | | | | | | | | | | |
| Production and ad valorem taxes | | $ | 0.28 | | $ | 0.29 | | $ | 0.24 | | $ | 0.26 | |
| General and administrative expenses | | $ | 0.39 | | $ | 0.41 | | $ | 0.40 | | $ | 0.35 | |
| Depletion, depreciation and accretion | | $ | 1.24 | | $ | 1.07 | | $ | 1.24 | | $ | 1.04 | |
| | | | | | | | | | | | | | |
