Quicksilver Resources Reports 2010 Fourth-Quarter and Full-Year Results
FORT WORTH, TX -- (Marketwire) -- 02/28/11 -- Quicksilver Resources Inc. (NYSE: KWK) today
reported net income of $318.3 million ($1.77 per diluted share) in the 2010
fourth quarter as compared to net income of $32.5 million ($0.19 per
diluted share) in the prior-year period. For all of 2010, the company
reported net income of $435.1 million ($2.45 per diluted share) as compared
to a net loss of $557.5 million (a loss of $3.30 per diluted share) for
2009.
Fourth-quarter 2010 adjusted net income, a non-GAAP financial measure, was
$30.0 million ($0.18 per diluted share), as compared to adjusted net income
of $47.3 million ($0.27 per diluted share) in the 2009 period. Adjusted
net income for full-year 2010 was $119.9 million ($0.70 per diluted share)
as compared to $148.4 million ($0.86 per diluted share) for the prior year.
Details of adjusted net income are included in the tables at the end of
this news release.
2010 Highlights
-- Produced record volumes of 355 MMcfe per day -- up 9% year-over-year
-- Increased reserves 20% to 2.9 Tcfe -- 68% are proved developed
-- Replaced 475% of production
-- Reduced lease operating expense to $0.65 per Mcfe -- down 3%
year-over-year
-- Acquired additional interests in core properties at Lake Arlington
and Horseshoe Canyon
-- Proved additional Horn River acreage potential
-- Completed divestment of all interests in Quicksilver Gas Services
-- Increased exposure to high-potential oil plays
-- Self-funded all capital investments
-- Reduced total debt by $537 million -- total debt of $0.65 per Mcfe
of proved reserve
Production
Production averaged a record 389.2 million cubic feet of natural gas
equivalent (MMcfe) per day during the fourth quarter, up 20% from the
prior-year quarter. For full-year 2010, production averaged 355.2 MMcfe
per day, up 9% from the 2009 total. The increase in production was
primarily driven by higher volumes from the Barnett Shale. The 2010
production volumes were comprised 79% from natural gas, 20% from natural
gas liquids (NGLs) and 1% from crude oil and condensate.
Revenue and Expenses
Sales of natural gas, NGLs and crude oil for the fourth quarter of 2010
were $224.9 million, up 4% from $215.5 million in the prior-year quarter.
Sales of natural gas, NGLs and crude oil totaled $856.3 million for
full-year 2010, up approximately 7% from 2009. The increase in product
sales was primarily derived from the 9% increase in production volumes
coupled with increased realized prices for NGLs and crude oil, which were
offset in part by lower realized prices on natural gas.
Unit lease operating expense declined $0.05 per thousand cubic feet of
natural gas equivalents (Mcfe) to $0.62 per Mcfe in the fourth quarter of
2010 and averaged $0.65 per Mcfe for full-year 2010, down 3% from the 2009
rate. Unit gathering, processing and transportation expense was $1.20 per
Mcfe and $0.73 per Mcfe for the fourth quarter and full year of 2010,
respectively. Both periods reflect the higher reported costs of these
activities following the sale of the company's interests in Quicksilver Gas
Services on October 1, 2010.
Impact from BreitBurn Ownership
For the 2010 fourth quarter, Quicksilver reported a loss of $1.9 million
attributable to the company's approximate 29% interest in BreitBurn Energy
Partners L.P.'s (NASDAQ: BBEP) third-quarter 2010 results, including losses
of approximately $9.5 million from derivatives. During the fourth quarter
of 2010, Quicksilver received approximately $6.1 million in cash
distributions associated with its ownership of BreitBurn units. For
full-year 2010, Quicksilver received $20.9 million in distributions and an
additional $18 million related to the settlement of the BreitBurn
litigation.
Total Debt
At December 31, 2010, the company's total debt was approximately $1.9
billion, a reduction of approximately $537 million from year-end 2009.
Total debt per proved reserve equivalent has been reduced to $0.65 per
Mcfe. Currently, Quicksilver Resources has approximately $836 million
available under its $1 billion senior secured revolving credit facility.
Operational Update
In the Barnett Shale, the company drilled 20 (17.8 net) operated wells and
connected 38 (27.3 net) operated wells to sales during the fourth quarter.
For full-year 2010, the company drilled 96 (81.6 net) operated wells and
connected 116 (93.2 net) operated wells to sales. At year end 2010,
Quicksilver had an inventory of 121 operated wells that were drilled but
uncompleted in the Barnett Shale.
During 2010 in the Horseshoe Canyon area of Alberta, Canada, the company
drilled 14 (9.9 net) wells and connected 54 (36.6 net) wells to sales
lines. As previously announced, in October 2010, Quicksilver acquired
interests in an additional 47,000 gross (21,700 net) acres in the Joffre
area of the Horseshoe Canyon, where the company already operates. The $22
million acquisition included approximately 23 billion cubic feet of proved
developed natural gas reserves and net production of approximately 5
million cubic feet (MMcf) per day of natural gas.
In the Horn River Basin of northeast British Columbia, Quicksilver has now
drilled six horizontal wells into the Muskwa and Klua formations and four
wells have commenced production. The company expects to finish drilling
activities on two additional Muskwa wells before spring break-up begins in
late March. In addition the company has drilled its first horizontal well
into the Exshaw formation. Completion activities on the most recent four
Muskwa wells and Exshaw well are anticipated to begin this summer.
Capital
During the fourth quarter of 2010, the company incurred capital costs of
approximately $180 million. This resulted in total capital costs for the
year of approximately $588 million, of which approximately 77% was
associated with drilling and completion activities, approximately 13% for
midstream activities, approximately 8% for acreage purchases and
approximately 2% for other assets. In addition, the company completed
acquisitions totaling $147 million for additional interests in the Lake
Arlington project in the Barnet Shale and the Joffre property in Horseshoe
Canyon.
First-Quarter 2011 Outlook
First-quarter 2011 production volume is expected to average in the range of
390 MMcfe to 400 MMcfe per day. Average unit expenses, on a Mcfe basis,
are expected as follows:
Lease operating expense $ .59 - $ .64
Gathering, processing & transportation 1.22 - 1.27
Production taxes .24 - .26
General and administrative .57 - .60
Depletion, depreciation & accretion 1.45 - 1.50
The company has hedges in place to cover approximately 64% of expected
production for the first quarter of 2011. A total of 190 MMcf per day of
natural gas is covered by collars with a weighted-average floor price of
$5.95 per thousand cubic feet (Mcf) and 10,500 barrels per day of NGLs are
covered by fixed-price swaps with a weighted-average price of $38.84 per
barrel for the first quarter and full year of 2011.
Conference Call
The company will host a conference call to discuss fourth-quarter and
full-year 2010 operating and financial results and its outlook for the
future at 11:00 a.m. eastern time today.
Quicksilver invites interested parties to listen to the call via the
company's website at www.qrinc.com or by calling 1-877-313-7932, using the
conference ID number 33138903, approximately 10 minutes before the call. A
digital replay of the conference call will be available at 3:00 p.m.
Eastern time the same day, and will remain available for 30 days. The
replay can be dialed at 1-800-642-1687 and reference should be made to the
conference ID number 33138903. 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 an independent oil and gas
company engaged in the exploration, exploitation, development and
acquisition of oil and gas, primarily from unconventional reservoirs
including gas from shales, coal beds and tight sands 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; the effects of existing or
future litigation; failure to receive a proposal for a transaction to
pursue strategic alternatives for us or that any transaction will be
approved or consummated; costs and expenses associated with our
consideration of potential strategic alternatives, including without
limitation, any related litigation expense; 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.
KWK 11-03
QUICKSILVER RESOURCES INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
In thousands, except for per share data - Unaudited
For the Three Months For the Year
Ended December 31, Ended December 31,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Revenue
Natural gas, NGL and oil $ 224,850 $ 215,542 $ 856,349 $ 796,698
Sales of purchased
natural gas 14,062 12,473 64,089 23,654
Other 991 6,090 7,893 12,383
---------- ---------- ---------- ----------
Total revenue 239,903 234,105 928,331 832,735
---------- ---------- ---------- ----------
Operating expenses
Lease operating expenses 22,323 19,931 84,836 79,027
Gathering, processing and
transportation expense 42,928 14,846 94,008 48,688
Production and ad valorem
taxes 7,614 5,444 34,156 23,881
Costs of purchased
natural gas 13,620 18,612 65,321 30,158
Other operating expenses 978 1,347 4,522 6,684
Depletion, depreciation
and accretion 52,635 46,177 202,603 201,387
Impairment expense 16,466 12,414 47,997 979,540
General and
administrative expense 18,362 17,791 80,107 77,243
---------- ---------- ---------- ----------
Total expense 174,926 136,562 613,550 1,446,608
Gain on sale of KGS 473,204 - 473,204 -
---------- ---------- ---------- ----------
Operating income (loss) 538,181 97,543 787,985 (613,873)
Income from earnings of
BBEP (1,880) (1,971) 22,323 75,444
Impairment of investment in
BBEP - - - (102,084)
Other income (expense) - net 8,078 (503) 75,724 (1,242)
Interest expense (46,182) (45,200) (188,353) (195,101)
---------- ---------- ---------- ----------
Income (loss) before income
taxes 498,197 49,869 697,679 (836,856)
Income tax (expense)
benefit (181,317) (9,508) (252,886) 291,617
---------- ---------- ---------- ----------
Net income (loss) 316,880 40,361 444,793 (545,239)
Net income attributable to
noncontrolling interests 1,395 (7,823) (9,724) (12,234)
---------- ---------- ---------- ----------
Net income (loss)
attributable to
Quicksilver $ 318,275 $ 32,538 $ 435,069 $ (557,473)
========== ========== ========== ==========
Earnings (loss) per common
share - basic $ 1.87 $ 0.19 $ 2.56 $ (3.30)
Earnings (loss) per common
share - diluted $ 1.77 $ 0.19 $ 2.45 $ (3.30)
Basic weighted average
shares outstanding 170,283 169,275 170,186 169,004
Diluted weighted average
shares outstanding 180,978 180,894 180,804 169,004
QUICKSILVER RESOURCES INC.
CONSOLIDATED BALANCE SHEETS
In thousands, except share data - Unaudited
December 31, December 31,
2010 2009
------------- -------------
ASSETS
Current assets
Cash and cash equivalents $ 54,937 $ 1,037
Accounts receivable - net of allowance
for doubtful accounts 63,380 63,738
Derivative assets at fair value 89,205 97,957
Other current assets 30,650 54,652
------------- -------------
Total current assets 238,172 217,384
Investments in equity affiliates 83,341 112,763
Property, plant and equipment - net
Oil and gas properties, full cost method
(including unevaluated costs of $314,543
and $458,037, respectively) 2,844,919 2,338,244
Other property and equipment 222,926 204,601
------------- -------------
Property, plant and equipment - net 3,067,845 2,542,845
Assets of midstream operations held for sale 27,178 548,508
Derivative assets at fair value 57,557 14,427
Deferred income taxes - 133,051
Other assets 38,241 43,904
------------- -------------
$ 3,512,334 $ 3,612,882
============= =============
LIABILITIES AND EQUITY
Current liabilities
Current portion of long-term debt $ 143,478 $ -
Accounts payable 167,857 149,766
Accrued liabilities 122,904 153,598
Derivative liabilities at fair value - 395
Current deferred tax liability 28,861 51,675
------------- -------------
Total current liabilities 463,100 355,434
------------- -------------
Long-term debt 1,746,716 2,302,123
Liabilities of midstream operations held
for sale 1,431 148,191
Asset retirement obligations 56,235 48,472
Other liabilities 28,461 20,691
Deferred income taxes 156,983 41,149
Commitments and contingencies
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, and 175,524,816 and
174,469,836 shares issued, respectively 1,755 1,745
Paid in capital in excess of par value 714,869 730,265
Treasury stock of 5,050,450 and 4,704,448
shares, respectively (41,487) (36,363)
Accumulated other comprehensive income 130,187 121,336
Retained earnings (deficit) 254,084 (180,985)
------------- -------------
Quicksilver stockholders' equity 1,059,408 635,998
Noncontrolling interests - 60,824
------------- -------------
Total equity 1,059,408 696,822
------------- -------------
$ 3,512,334 $ 3,612,882
============= =============
QUICKSILVER RESOURCES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands - Unaudited
For the Year Ended
December 31,
----------------------
2010 2009
---------- ----------
Operating activities:
Net income (loss) $ 444,793 $ (545,239)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depletion, depreciation and accretion 202,603 201,387
Impairment expense 47,997 979,540
Deferred income tax expense (benefit) 179,715 (291,414)
Non-cash (gain) loss from hedging and
derivative activities (58,892) 6,756
Gain on sale of KGS (473,204) -
Divestiture expenses 2,555 -
Stock-based compensation 25,990 20,815
Non-cash interest expense 17,226 45,532
Gain on disposition of BBEP units (57,584) -
Income from BBEP in excess of cash
distributions (1,417) (64,344)
Impairment of investment in BBEP - 102,084
Other (168) 747
Changes in assets and liabilities
Accounts receivable (9,501) 77,527
Derivative assets at fair value 30,816 54,896
Prepaid expenses and other assets 6,364 3,061
Accounts payable 33,957 (12,320)
Income taxes payable 4,611 60
Accrued and other liabilities 1,859 33,215
---------- ----------
Net cash provided by operating activities 397,720 612,303
---------- ----------
Investing activities:
Purchases of property, plant and equipment (695,114) (693,838)
Proceeds from sale of KGS 699,973 -
Proceeds from sale of BBEP units 34,016 -
Proceeds from sale of properties and equipment 9,953 220,974
---------- ----------
Net cash provided (used) by investing activities 48,828 (472,864)
---------- ----------
Financing activities:
Issuance of debt 690,058 1,420,727
Repayments of debt (1,031,736) (1,649,630)
Debt issuance costs paid (3,111) (32,472)
Gas Purchase Commitment assumed - 58,294
Gas Purchase Commitment repayments (44,119) (14,175)
Issuance of KGS common units - net of offering
costs 11,054 80,729
Distributions paid on KGS common units (13,550) (9,925)
Proceeds from exercise of stock options 1,801 4,046
Excess tax benefits on exercise of stock options 3,513 -
Taxes paid on vesting of KGS equity compensation (1,144) (63)
Purchase of treasury stock (4,910) (922)
---------- ----------
Net cash provided (used) by financing activities (392,144) (143,391)
---------- ----------
Effect of exchange rate changes in cash (1,252) 2,889
---------- ----------
Net increase (decrease) in cash 53,152 (1,063)
Cash and cash equivalents at beginning of period 1,785 2,848
---------- ----------
Cash and cash equivalents at end of period $ 54,937 $ 1,785
========== ==========
QUICKSILVER RESOURCES INC.
Unaudited Selected Operating Results
Three Months Ended Year Ended
December 31, December 31,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Average Daily Production:
Natural Gas (Mcfd) 312,050 244,621 278,532 235,725
NGL (Bbld) 12,095 12,331 11,946 13,635
Oil (Bbld) 766 955 830 1,165
Total (Mcfed) 389,214 324,337 355,185 324,526
Average Realized Price:
Natural Gas (per Mcf) $ 6.38 $ 7.46 $ 6.86 $ 7.42
NGL (per Bbl) $ 32.46 $ 36.60 $ 31.46 $ 27.32
Oil (per Bbl) $ 77.16 $ 68.79 $ 71.90 $ 51.85
Total (Mcfe) $ 6.28 $ 7.22 $ 6.61 $ 6.73
Expense per Mcfe:
Lease operating expense:
Cash expense 0.60 0.65 0.63 0.64
Equity compensation 0.02 0.02 0.02 0.03
---------- ---------- ---------- ----------
Total lease operating
expense $ 0.62 $ 0.67 $ 0.65 $ 0.67
GPT expense $ 1.20 $ 0.50 $ 0.73 $ 0.41
Production and ad valorem
taxes $ 0.21 $ 0.18 $ 0.26 $ 0.20
Depletion, depreciation and
accretion $ 1.47 $ 1.55 $ 1.56 $ 1.70
General and administrative
expense:
Cash expense $ 0.31 $ 0.46 $ 0.43 $ 0.47
Litigation settlement - - 0.02 0.04
Equity compensation 0.20 0.14 0.17 0.14
---------- ---------- ---------- ----------
Total general and
administrative expense $ 0.51 $ 0.60 $ 0.62 $ 0.65
QUICKSILVER RESOURCES INC.
Production, on a million cubic feet of natural gas equivalent (MMcfe)
per day basis, by operating area
Three Months Ended Year Ended
December 31, December 31,
2010 2009 Change 2010 2009 Change
------- ------- ------ ------- ------- ------
Barnett Shale 309.3 251.0 23% 281.9 254.2 11%
Other U.S. 3.4 3.9 -13% 4.1 3.4 21%
------- ------- ------- -------
Total U.S. 312.7 254.9 23% 286.0 257.6 11%
Horseshoe Canyon 62.8 63.8 -2% 61.2 64.9 -6%
Horn River 13.7 5.6 145% 8.0 2.0 300%
------- ------- ------- -------
Total Canada 76.5 69.4 10% 69.2 66.9 3%
------- ------- ------- -------
Total Company 389.2 324.3 20% 355.2 324.5 9%
======= ======= ======= =======
QUICKSILVER RESOURCES INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME
In thousands, except per share data - Unaudited
Three Months Ended Year Ended December
December 31, 31,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Net income (loss) $ 318,275 $ 32,538 $ 435,069 $ (557,473)
---------- ---------- ---------- ----------
Adjustments
Gain on sale of KGS (473,204) - (473,204) -
Impairment of assets 16,466 12,414 47,997 979,540
Impairment of investment
in BBEP - - - 102,084
Crestwood Transaction
expenses 2,186 - 4,746 -
Equity portion of BBEP
impairment of E&P
properties - - - 35,044
Equity portion of early
settlement of hedges
from BBEP - - - (28,602)
Equity portion of
interest rate
derivatives from BBEP (429) 1,534 (1,964) 8,375
Equity portion of
commodity derivatives
from BBEP 9,978 4,707 7,099 (73,956)
Equity portion of (gain)
loss from sale of
properties from BBEP (117) 2,213 262 2,213
BBEP settlement - - (18,000) -
Gain on BBEP units sold
and conveyed (7,734) - (57,584) -
Unrealized valuation gain
on Gas Purchase
Commitment (666) - (6,625) -
Debt termination-related
expenses - - - 27,122
Legal settlement 250 - 2,650 5,000
---------- ---------- ---------- ----------
Total adjustments before
income tax expense (453,270) 20,868 (494,623) 1,056,820
Income tax expense for
above adjustments 165,022 (6,062) 179,495 (350,958)
---------- ---------- ---------- ----------
Total adjustments after tax (288,248) 14,806 (315,128) 705,862
Adjusted net income $ 30,027 $ 47,344 $ 119,941 $ 148,389
========== ========== ========== ==========
Adjusted net income per
common share - Diluted $ 0.18 $ 0.27 $ 0.70 $ 0.86
Diluted weighed average
common shares outstanding 180,978 180,894 180,804 179,617
Media Contact:
Tom Johnson
Chuck Dohrenwend
The Abernathy MacGregor Group
(212) 371-5999
Investor Contact:
Rick Buterbaugh
(817) 665-4835
