FORT WORTH, TX — (Marketwire) — 05/08/12 — Quicksilver Resources Inc. (NYSE: KWK) today announced preliminary 2012 first-quarter results. Net loss for the first quarter was $60 million, or $0.35 per diluted share, compared to a net loss of $71 million, or $0.42 per diluted share, in the prior-year period. First quarter 2012 results were negatively impacted by a $63 million non-cash impairment of oil and gas properties due to lower average natural gas prices compared to December 31, 2011, a non-cash loss of $15 million related to the restructure of the hedge platform, and a $22 million non-cash charge related to an unrealized loss on new 10-year hedges. Earnings were improved by a $41 million earn-out payment from Crestwood Midstream Partners LP. Excluding these items, first-quarter 2012 adjusted net loss, a non-GAAP financial measure, was $15 million, or $0.09 per diluted share, compared to adjusted net income of $3 million, or $0.02 per diluted share in the 2011 period. Further details of adjusted net income are included in the tables following this earnings release.
“Quicksilver has reduced activity devoted to dry gas production. With respect to dry gas we are only spending capital on certain lease and pipeline commitment areas. Our focus is spending within cash inflows and reducing debt through joint ventures and the new MLP,” said President and CEO Glenn Darden. “The joint venture discussions are on track and we anticipate launching the MLP this summer. The company–s production is well hedged in 2012 and 2013 and we are advancing our grass roots oil projects. Despite current gas prices we believe we will significantly improve the strength of this company as the year progresses.”
Production averaged 377 million cubic feet of natural gas equivalent (MMcfe) per day during the first quarter, down from 392 MMcfe per day in the prior-year quarter. The decline is primarily due to the natural production decline of existing wells, a reduction of drilling and completion activity in the Barnett Shale, as 50 wells were connected to sales in the first quarter of 2011 versus 8 wells connected to sales in the first quarter of 2012. The production volumes for the 2012 quarter were 80% natural gas and 20% natural gas liquids (NGLs), crude oil and condensate.
Total revenue for the first quarter of 2012 was $145 million compared to $212 million from the prior-year quarter. Production revenue for the first quarter of 2012 was $172 million, down 10% from the prior-year quarter. The decrease in production revenue was caused by lower realized prices for natural gas — including the effects of hedging — and lower natural gas volumes from the Barnett Shale due to the reduction in well completions, natural production decline and the reduced capital spending program for 2012.
In February 2012, Quicksilver received a $41 million earn-out payment from Crestwood Midstream Partners LP in accordance with the sale terms of Quicksilver–s interest in KGS. The company has the right to earn up to an additional $31 million in future earn-out payments in 2013 based on volume throughput this year.
Lease operating expense for the first quarter of 2012 was $29 million, or $0.84/Mcfe, compared to $22 million, or $0.61/Mcfe in the prior-year quarter. The increase is largely due to higher salt-water disposal expense and artificial gas lift expense on older Barnett wells compared to the prior-year period.
Interest expense for the first quarter of 2012 was $40 million, or $1.17/Mcfe, compared to $46 million, or $1.31/Mcfe in the prior-year quarter. The decline is primarily related to lower amortization of deferred financing costs due to acceleration of credit facility fees in the fourth quarter of 2011.
At March 31, 2012, Quicksilver–s total debt was approximately $2 billion, and the company had approximately $680 million available under its combined $1.1 billion U.S and Canadian credit facilities. The semi-annual re-determination of the company–s global borrowing base is expected to be completed by the end of May 2012, with no expected revisions to its borrowing base.
United States – Barnett Shale
Quicksilver drilled 12 (10.6 net) wells and connected 8 (8 net) wells to sales in the first quarter. At March 31, 2012, Quicksilver had a remaining uncompleted well inventory of 54 gross operated wells that have been drilled in the Barnett Shale but await completion or connection to sales lines.
As of March 31, 2012, the company is operating one rig in the Barnett Shale. The company plans to drill an additional 13 (9.4 net) wells and complete 28 (23 net) wells in 2012, a substantial portion of which will be concentrated in the high-btu acreage where pricing margins are significantly higher.
United States – Sandwash Basin
The company expects to drill up to seven vertical and horizontal wells in the Sandwash Basin and to install gathering infrastructure during 2012. Quicksilver expects to begin the drilling program later this month.
Quicksilver holds approximately 260,000 net acres across approximately 936 square miles in the Sandwash Basin of Northwest Colorado, of which the company believes approximately 210,000 net acres are situated in the oil window and are prospective to the Niobrara and Lower Mancos formations.
United States – Delaware and Midland Basins
Quicksilver holds approximately 155,000 net acres across the Delaware and Midland basins of West Texas, of which the company believes 105,000 net acres is prospective for oil from the Wolfcamp and Bone Springs formations. The company has commenced drilling operations and plans to drill six wells in this area in 2012.
During the first quarter, the company retained an investment bank to help evaluate the opportunities for a joint venture partner to acquire an interest in and participate in the development of the West Texas acreage. The company anticipates completing the process this summer.
Canada – Horn River Basin
Quicksilver drilled four Horn River wells in the first quarter to complete its 2011/2012 winter drilling program. All of Quicksilver–s exploratory licenses have now been converted into 10-year leases.
Average daily production in the first quarter 2012 was 11.3 MMcfd. The company expects to bring as many as eight wells online in June, and drill up to another eight by the end of 2012.
During the first quarter, the company retained an investment bank to help evaluate the opportunities for a joint venture partner to help exploit the Horn River acreage.
Canada – Horseshoe Canyon
Quicksilver connected 5 (4.3 net) wells to sales in the first quarter. The company expects to drill up to 14 wells in the Horseshoe Canyon by the end of the year.
During the first quarter of 2012, the company incurred approximately $136 million of capital, of which approximately 80% was associated with drilling and completion activities, 4% for midstream activities, 6% for acreage purchases and 10% for capitalized costs and other assets. The outlook for full-year spending on drilling, completion and oil-and-gas related activity continues to be approximately $370 million.
In response to lower natural gas prices, the company slowed drilling and completion activities of natural gas wells in the Barnett Shale. Second-quarter average daily production volume is expected to be 375-385 MMcfe per day.
For the second-quarter 2012, average unit expenses, on a Mcfe basis, are expected as follows:
The company has hedges in place to cover approximately 65% of expected total equivalent production for remainder of 2012 at a weighted average price of $6.02 per Mcfe.
The company will host a conference call to discuss first-quarter operating and financial results at 10:00 a.m. central time today.
Quicksilver invites interested parties to listen to the call via the company–s website at or by calling 1-877-313-7932, using the conference ID number 41140318, approximately 10 minutes before the call. A digital replay of the conference call will be available at 2:00 p.m. central time the same day, and will remain available for 30 days. The replay can be dialed at 1-855-859-2056 using the conference ID number 41140318. The replay will also be archived for 30 days on the company–s website.
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.
Fort Worth, Texas-based Quicksilver Resources is an independent oil and gas company engaged in the exploration, development and acquisition of oil and gas, primarily from unconventional reservoirs including gas from shales and coal beds in North America. The company has U.S. offices in Fort Worth, Texas; Glen Rose, Texas; Steamboat Springs, Colorado and Cut Bank, Montana. Quicksilver–s Canadian subsidiary, Quicksilver Resources Canada Inc., is headquartered in Calgary, Alberta. For more information about Quicksilver Resources, visit .
Certain statements contained in this press release and other materials we file with the SEC, or in other written or oral statements made or to be made by us, other than statements of historical fact, are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations or forecasts of future events. Words such as “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” or “continue,” and similar expressions are used to identify forward-looking statements. They can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ material from the results contemplated by such forward-looking statements include: changes in general economic conditions; fluctuations in natural gas, NGL and oil prices; failure or delays in achieving expected production from exploration and development projects; uncertainties inherent in estimates of natural gas, NGL and oil reserves and predicting natural gas, NGL and oil reservoir performance; effects of hedging natural gas, NGL and 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; delays in construction of transportation pipelines and gathering, processing and treating facilities; 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 or delays in completing Quicksilver–s proposed initial public offering of common units representing limited partner interests in a master limited partnership holding portions of our Barnett Shale assets; and additional factors described elsewhere in this press release.
This list of factors is not exhaustive, and new factors may emerge or changes to these factors may occur that would impact our business. Additional information regarding these and other factors may be contained in our filings with the SEC, especially on Forms 10-K, 10-Q and 8-K. All such risk factors are difficult to predict, and are subject to material uncertainties that may affect actual results and may be beyond our control. 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.
All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements.
KWK 12-10
John Hinton
(817) 665-4990