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 First-Quarter 2009 Results
Achieves Record Production Driven by 82% Increase From Fort Worth Basin
FORT WORTH, TEXAS (May 6, 2009) – Quicksilver Resources Inc. (NYSE: KWK) today reported operating and financial results for the 2009 first quarter.
First-Quarter 2009 Highlights
· | Produced record volumes of approximately 332 MMcfe per day |
· | Reduced oil and gas production expense to $1.10 per Mcfe; down 35% year-over-year |
· | Increased Fort Worth Basin daily production volumes 82% year-over-year |
· | Increased Canadian daily production volumes 4% year-over-year |
· | Drilled 26 horizontal wells in the Fort Worth Basin; connected 22 wells to sales |
“Quicksilver delivered strong operating results, despite the challenging environment our industry is experiencing,” said Glenn Darden, Quicksilver president and chief executive officer. “Our continued focus on cost control, coupled with our attractive hedge position, helped to mitigate the dramatic reduction in energy prices during the past year. Although we are significantly reducing capital expenditures for the remainder of the year to ensure we operate within our total cash inflows, we still anticipate being able to maintain production at the current levels.”
Financial Results
First-quarter 2009 adjusted net income, a non-GAAP measure, was $26.6 million ($.16 per diluted share) compared to adjusted net income of $41.6 million ($.25 per diluted share) in the 2008 period. Adjusted net income excludes the following items:
· | A noncash impairment charge of $593.8 million in the 2009 quarter related to the company’s oil and gas properties; |
· | net income of $64.5 million in the 2009 quarter related to the unrealized mark-to-market gain on oil and gas derivative positions, a loss on interest rate swaps and a property impairment charge on oil and gas properties held by BreitBurn Energy Partners, all noncash items associated with the company’s ownership in BreitBurn Energy Partners; |
· | a noncash impairment charge of $66.3 million in the 2009 quarter related to the company’s equity investment in BreitBurn Energy Partners; and |
· | a noncash charge of $.5 million in the 2008 quarter related to the unrealized mark-to-market of derivative positions held by BreitBurn Energy Partners, associated with the company’s ownership in BreitBurn Energy Partners. |
Including the items noted above, Quicksilver reported a net loss of $569.0 million (a loss of $3.37 per diluted share) in the 2009 first quarter as compared to net income of $41.1 million ($.25 per diluted share) in the prior-year period.
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Production
For the first quarter of 2009, average daily production was approximately 332 million cubic feet of natural gas equivalent (MMcfe) per day compared to approximately 211 MMcfe per day for the same period in 2008, an increase of approximately 57%. Total production for the first quarter of 2009 was approximately 29.8 billion cubic feet of natural gas equivalent (Bcfe) compared to approximately 19.2 Bcfe for the first quarter of 2008. The 2009 production volumes were comprised of approximately 73% natural gas, approximately 24% natural gas liquids (NGL) and approximately 3% crude oil and condensate. Increased activities at the company’s Lake Arlington and Alliance projects in the northern portion of its Fort Worth Basin acreage resulted in increased production of dry gas.
Revenues and Costs
Sales of natural gas, NGLs and crude oil increased approximately 16% to $183.6 million in the first quarter of 2009 as compared to $158.4 million in the 2008 quarter. The increase reflects a 57% increase in equivalent daily production volumes, primarily due to increased production volumes from the Fort Worth Basin in Texas, that more than offset an approximate 25% decrease in the average realized price per Mcfe.
Total production expense of $32.7 million for the 2009 first quarter was essentially unchanged from the prior-year quarter, due to the company’s ongoing focus on cost control, despite a 57% increase in production. As a result, unit production expense, including production, gathering and processing and transportation expense, declined 35% to $1.10 per Mcfe during the first quarter of 2009 as compared to $1.69 per Mcfe in the prior-year period.
Income from Earnings of Unconsolidated Affiliate
Quicksilver reported $102.1 million of pre-tax earnings attributable to the company’s approximate 41% interest in BreitBurn Energy Partners L.P.’s (BBEP) fourth-quarter 2008 results, including $140.5 million of derivative income, a $6.1 million loss on interest rate swaps and an impairment charge of $35.0 million on oil and gas properties. The reported earnings from BBEP were offset by an impairment charge of $102.1 million taken on Quicksilver’s equity investment in BBEP. During the first quarter of 2009, Quicksilver received approximately $11 million of cash distributions associated with the ownership of the BBEP units. On April 17, 2009, BBEP announced that it was suspending its distributions.
Operational Update
Quicksilver continued to focus on the exploitation and development of the 175,000 net acres in its core fairway within the Barnett Shale formation of the Fort Worth Basin. During the first quarter of 2009, the company drilled 26 (23.5 net) wells and connected 22 (20.8 net) wells to sales. At March 31, 2009, the company had five rigs working in the basin, including four rigs dedicated to the Lake Arlington/Alliance area in Tarrant and Denton counties.
In Canada, the company participated in drilling 129 (32.2 net) wells in the Horseshoe Canyon area during the first quarter of 2009. Drilling, completion and pipeline operations are currently suspended for the seasonal break-up period in Canada. The company now anticipates participating in a total of 145 (42.2 net) wells in this area for the full year of 2009. In addition, Quicksilver finished exploratory
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drilling activities on two horizontal wells as well as road and pipeline construction in the Horn River Basin of northeast British Columbia. The company expects to conduct completion activities on these wells following the spring break-up period.
During the first quarter of 2009, the company incurred costs of approximately $190 million, including approximately $30 million at the Horn River project, of its total projected $500 million capital program for 2009.
Second-Quarter 2009 Outlook
Second-quarter 2009 production volumes are expected to average in the range of 330 MMcfe to 335 MMcfe per day. Average unit expenses, on a Mcfe basis, are expected as follows:
· | Production | $ | .60 | - | $ | .65 | |||||
· | Gathering and processing | .15 | - | .17 | |||||||
· | Transportation | .30 | - | .35 | |||||||
· | Production taxes | .14 | - | .16 | |||||||
· | General and administrative | .55 | - | .60 | |||||||
· | Depletion, depreciation & accretion | 1.70 | - | 1.75 |
Conference Call
The company will host a conference call to discuss first-quarter 2009 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 80367473, 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 80367473. 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.
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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; 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:
Rick Buterbaugh
(817) 665-4835
KWK 09-05
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QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
In thousands, except per share data - Unaudited
Three Months Ended March 31, | ||||||||
2009 | 2008 | |||||||
Revenue | ||||||||
Natural gas, NGL and crude oil | $ | 183,554 | $ | 158,356 | ||||
Other | 2,378 | (739 | ) | |||||
Total revenue | 185,932 | 157,617 | ||||||
Operating expenses | ||||||||
Oil and gas production expense | 32,734 | 32,530 | ||||||
Production and ad valorem taxes | 4,366 | 2,659 | ||||||
Other operating costs | 964 | 1,231 | ||||||
Depletion, depreciation and accretion | 59,696 | 35,059 | ||||||
General and administrative | 17,381 | 15,415 | ||||||
Total expenses | 115,141 | 86,894 | ||||||
Impairment related to oil and gas properties | (896,483 | ) | - | |||||
Operating income (loss) | (825,692 | ) | 70,723 | |||||
Income from earnings of BBEP, net | - | 6,219 | ||||||
Other income - net | 761 | 1,486 | ||||||
Interest expense | (40,201 | ) | (13,435 | ) | ||||
Income (loss) before income taxes | (865,132 | ) | 64,993 | |||||
Income tax (expense) benefit | 297,823 | (23,351 | ) | |||||
Net income (loss) | (567,309 | ) | 41,642 | |||||
Net income attributable to noncontrolling interests | (1,670 | ) | (508 | ) | ||||
Net income (loss) attributable to Quicksilver | $ | (568,979 | ) | $ | 41,134 | |||
Earnings (loss) per common share - basic | $ | (3.37 | ) | $ | 0.26 | |||
Earnings (loss) per common share - diluted | $ | (3.37 | ) | $ | 0.25 | |||
Basic weighted average shares outstanding | 168,841 | 158,139 | ||||||
Diluted weighted average shares outstanding | 168,841 | 169,060 |
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QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except share data - Unaudited
March 31, | December 31, | |||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 430 | $ | 2,848 | ||||
Accounts receivable - net of allowance for doubtful accounts | 109,694 | 143,315 | ||||||
Derivative assets at fair value | 261,216 | 171,740 | ||||||
Other current assets | 66,496 | 75,433 | ||||||
Total current assets | 437,836 | 393,336 | ||||||
Investment in Breitburn Energy Partners | 139,402 | 150,503 | ||||||
Property, plant and equipment | ||||||||
Oil and gas properties, full cost method (including unevaluated costs of $577,391 and $543,533, respectively) | 2,357,275 | 3,142,608 | ||||||
Other property and equipment | 670,032 | 655,107 | ||||||
Property, plant and equipment - net | 3,027,307 | 3,797,715 | ||||||
Derivative assets at fair value | 81,959 | 116,006 | ||||||
Deferred income taxes | 108,779 | - | ||||||
Other assets | 36,273 | 40,648 | ||||||
$ | 3,831,556 | $ | 4,498,208 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Current portion of long-term debt | $ | 6,579 | $ | 6,579 | ||||
Accounts payable | 193,954 | 282,636 | ||||||
Accrued liabilities | 54,211 | 66,963 | ||||||
Derivative liabilities at fair value | 852 | 9,928 | ||||||
Deferred income taxes | 90,036 | 52,393 | ||||||
Total current liabilities | 345,632 | 418,499 | ||||||
Long-term debt | 2,687,214 | 2,586,046 | ||||||
Asset retirement obligations | 39,276 | 34,753 | ||||||
Other liabilities | 12,996 | 12,962 | ||||||
Deferred income taxes | 35,052 | 234,385 | ||||||
Stockholders' 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; 173,945,114 and 171,742,699 shares issued, respectively | 1,739 | 1,717 | ||||||
Paid in capital in excess of par value | 662,256 | 656,958 | ||||||
Treasury stock of 4,673,730 and 4,752,795 shares, respectively | (36,064 | ) | (35,441 | ) | ||||
Accumulated other comprehensive income | 249,569 | 185,104 | ||||||
Retained earnings (deficit) | (192,491 | ) | 376,488 | |||||
Quicksilver stockholders' equity | 685,009 | 1,184,826 | ||||||
Noncontrolling interests | 26,377 | 26,737 | ||||||
Total equity | 711,386 | 1,211,563 | ||||||
$ | 3,831,556 | $ | 4,498,208 |
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QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands - Unaudited
Three Months Ended March 31, | ||||||||
2009 | 2008 | |||||||
Operating activities: | ||||||||
Net income (loss) | $ | (567,309 | ) | $ | 41,642 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depletion, depreciation and accretion | 59,696 | 35,059 | ||||||
Impairment related to oil and gas properties | 896,483 | - | ||||||
Deferred income taxes expense (benefit) | (304,639 | ) | 22,455 | |||||
Non-cash loss from hedging and derivative activities | 1,128 | 5,735 | ||||||
Stock-based compensation | 5,727 | 4,009 | ||||||
Non-cash interest expense | 4,139 | 2,220 | ||||||
Income from BBEP in excess of cash distributions, net of impairment | 11,101 | - | ||||||
Other | 91 | 627 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 33,536 | (5,226 | ) | |||||
Derivative assets at fair value | 54,896 | - | ||||||
Other assets | 1,566 | (1,109 | ) | |||||
Accounts payable | (21,436 | ) | 5,027 | |||||
Income taxes payable | - | (45,144 | ) | |||||
Accrued and other liabilities | (25,692 | ) | (22,011 | ) | ||||
Net cash provided by operating activities | 149,287 | 43,284 | ||||||
Investing activities: | ||||||||
Purchase of property, plant and equipment | (255,984 | ) | (331,936 | ) | ||||
Proceeds from sales of property, plant and equipment | 416 | - | ||||||
Advances to BBEP | - | (50,150 | ) | |||||
Return of investment from BBEP | - | 3,440 | ||||||
Net cash used for investing activities | (255,568 | ) | (378,646 | ) | ||||
Financing activities: | ||||||||
Issuance of debt | 208,374 | 330,741 | ||||||
Repayments of debt | (101,188 | ) | (18,061 | ) | ||||
Debt issuance costs | (39 | ) | - | |||||
Noncontrolling interest distributions | (2,448 | ) | (1,972 | ) | ||||
Proceeds from exercise of stock options | 11 | 858 | ||||||
Purchase of treasury stock | (623 | ) | (1,980 | ) | ||||
Net cash provided by financing activities | 104,087 | 309,586 | ||||||
Effect of exchange rate changes in cash | (224 | ) | (474 | ) | ||||
Net decrease in cash | (2,418 | ) | (26,250 | ) | ||||
Cash and cash equivalents at beginning of period | 2,848 | 28,226 | ||||||
Cash and cash equivalents at end of period | $ | 430 | $ | 1,976 |
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QUICKSILVER RESOURCES INC.
Production, on a thousand cubic feet of natural gas equivalent (Mcfe) per day basis, by operating area
Three Months Ended March 31, | ||||||||||||
2009 | 2008 | Change | ||||||||||
Texas | 263,319 | 145,023 | 82 | % | ||||||||
Other U.S. | 3,304 | 3,598 | -8 | % | ||||||||
266,623 | 148,621 | 79 | % | |||||||||
Canada | 64,927 | 62,529 | 4 | % | ||||||||
Total | 331,550 | 211,150 | 57 | % |
QUICKSILVER RESOURCES INC.
Unaudited Selected Operating Results
Three Months Ended March 31, | ||||||||
2009 | 2008 | |||||||
Average Daily Production: | ||||||||
Natural Gas (Mcfd) | 242,453 | 143,463 | ||||||
NGL (Bbld) | 13,354 | 10,030 | ||||||
Oil (Bbld) | 1,496 | 1,251 | ||||||
Total (Mcfed) | 331,550 | 211,150 | ||||||
Average Realized Prices: | ||||||||
Natural Gas (per Mcf) | $ | 7.04 | $ | 8.00 | ||||
NGL (per Bbl) | $ | 21.13 | $ | 49.36 | ||||
Oil (per Bbl) | $ | 34.42 | $ | 77.46 | ||||
Total (Mcfe) | $ | 6.15 | $ | 8.24 | ||||
Expense per Mcfe: | ||||||||
Oil and gas production cost | $ | 1.10 | $ | 1.69 | ||||
Production and ad valorem taxes | $ | 0.15 | $ | 0.14 | ||||
Depletion, depreciation and accretion | $ | 2.00 | $ | 1.82 | ||||
General and administrative expense: | ||||||||
Cash expense | $ | 0.42 | $ | 0.64 | ||||
Equity compensation | 0.16 | 0.16 | ||||||
Total general and administrative expense | $ | 0.58 | $ | 0.80 |
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QUICKSILVER RESOURCES INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME
In thousands, except per share data - Unaudited
Three Months Ended March 31, | ||||||||
2009 | 2008 | |||||||
Net income (loss) | $ | (568,979 | ) | $ | 41,134 | |||
Adjustments | ||||||||
Impairment of E&P properties | 896,483 | - | ||||||
Impairment of investment in BBEP | 102,084 | - | ||||||
Equity portion of BBEP impairment of E&P properties | 35,044 | - | ||||||
Equity portion of interest rate derivative loss from BBEP | 6,125 | |||||||
Equity portion of commodity derivative (income) loss from BBEP | (140,473 | ) | 707 | |||||
Total adjustments before income tax expense | 899,263 | 707 | ||||||
Income tax expense | (303,670 | ) | (247 | ) | ||||
Adjustments for items after taxes | 595,593 | 460 | ||||||
Adjusted net income | $ | 26,614 | $ | 41,594 | ||||
Adjusted net income per common share - Diluted | $ | 0.16 | $ | 0.25 | ||||
Diluted weighted average common shares outstanding | 178,973 | 169,060 |
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