Quicksilver Resources Announces 2011 Third-Quarter Results
Sets Another Production Record and Reduces Unit Operating Costs
(firmenpresse) - FORT WORTH, TX -- (Marketwire) -- 11/07/11 -- Quicksilver Resources Inc. (NYSE: KWK) today announced third quarter 2011 results.
Highlights:
Produced a record 427 million cubic feet of natural gas equivalents (MMcfed), an 18% increase over the same prior-year period and a 2.5% increase over the previous quarter. The year-over-year increase is a result of a 19% increase in production from our Barnett Shale asset and an increase of over 200% in our Horn River Asset in Northeast British Columbia
Reduced unit operating costs from the prior-year quarter
Drilled 13 new wells and connected 44 wells in the Barnett Shale asset
Increased total revenue for the quarter ended September 30, 2011 to $260 million from $238 million in the prior-year quarter
Reduced debt $317 million from the prior-year quarter
Secured new U.S. and Canadian credit facilities with combined availability of approximately $1.1 billion. Both facilities were oversubscribed, with lower interest rate spreads than the previous facility
Acquired additional oil-prospective acreage in the Permian and Delaware basins of West Texas, bringing our land position in the Bone Springs/Wolfcamp play to approximately 150,000 net acres and increasing our footprint in new projects
"Our goals for Quicksilver remain: to increase production in our core projects, continue to knock down unit operating costs, establish new oil and gas production areas, and significantly improve the company's balance sheet. I can say that we are moving forward on all fronts," said Glenn Darden, Quicksilver's President and CEO.
Net income for the third quarter was $29 million, or $0.17 per diluted share, compared to net income of $22 million, or $0.13 per diluted share, in the prior-year quarter. Third-quarter 2011 adjusted net income, a non-GAAP measure, was $6 million, or $0.03 per diluted share, compared to $29 million, or $0.17 per diluted share, in the prior year quarter. Financial results for the current quarter were impacted by a non-cash gain of $30 million related to the mark-to-market impact of long-term derivatives, a non-cash gain of $12 million associated with the company's equity interest in BreitBurn Energy Partners' (NASDAQ: BBEP) second-quarter 2011 unrealized derivative adjustments, a gain of $10 million for the sale of BBEP units, and a loss of $15 million for acceleration of unamortized debt issuance costs, professional services in connection with strategic transactions, and to settle pending claims associated with the Eagle litigation as previously disclosed in regulatory filings. Details of adjusted net income are included in the attached tables of this earnings release.
Total revenue for the third quarter of 2011 increased to $260 million from $238 million from the prior-year quarter. Production revenue for the third quarter of 2011 was $208 million, down 5% from the prior-year quarter. The decrease in production revenue was due to lower realized prices for natural gas including the effects of hedging, partially offset by higher sales volumes of natural gas and higher realized prices for NGLs and crude oil.
Lease operating expense for the third quarter of 2011 was $28 million, or $0.70/Mcfe, versus $21 million, or $0.63/Mcfe in the prior-year quarter. The increase on a unit basis is largely due to higher spending on well work-over activity and gas lift expenses compared to the prior-year period. In the third quarter of 2011, on a unit of production basis, production and ad valorem tax expense declined 29%; depletion, depreciation and accretion expense declined 7%; general and administrative expense declined 3% and interest expense declined 20% versus the prior-year quarter, resulting in a total cost reduction of $0.53 per Mcfe across these categories. Gathering, processing and transportation expense was $1.30 per Mcfe for the third quarter of 2011.
Quicksilver received $3 million in cash distributions and reported income of $14 million attributable to its interest in BreitBurn Energy Partners' second quarter 2011 results, including our share of BBEP net unrealized derivative gains of approximately $12 million. Quicksilver owns approximately 8 million units of BBEP, representing a 13.6% interest.
At September 30, 2011, the company's total debt was approximately $2.1 billion, a reduction of approximately $317 million from the September 30, 2010 balance. On September 30, 2011, Quicksilver notified holders of its 1.875% convertible notes of the right to require the company to repurchase the notes on November 1, 2011 at par. We repaid debenture holders approximately $150 million for notes presented to us for repurchase. Because interest expense on the convertible notes was recognized at an effective rate of 6.75%, noncash interest will decrease approximately $1 million in the fourth quarter. As a result of the repurchase and cancellation of the convertible notes beginning on November 1, 2011, our diluted earnings per share calculation will exclude the conversion effects of 9.8 million shares that were associated with the notes.
In September 2011, Quicksilver terminated and replaced its existing $1.0 billion global Senior Secured Credit Facility with two separate five-year syndicated senior secured revolving credit facilities for its U.S. and Canadian operations. The $1.25 billion U.S. credit facility has an initial borrowing base and commitments of $850 million, including letter of credit capacity of $75 million. The C$500 million Canadian credit facility has an initial borrowing base and commitments of C$225 million, including letter of credit capacity of C$100 million. Both facilities were oversubscribed by two times, and have lower interest rate spreads than the previous credit facility.
Currently, Quicksilver has a total of approximately $590 million available under its $1.1 billion U.S and Canadian credit facilities. The available capacity includes the $150 million repayment of the 1.875% convertible notes with the U.S. credit facility on November 1.
United States -- Barnett Shale
During the third quarter, Quicksilver's development activity was concentrated in its Barnett Shale asset. The company utilized two rigs in the basin, which drilled 13 (11.9 net) operated wells and also connected 44 (38.1 net) operated wells to sales. At September 30, 2011, Quicksilver had a remaining inventory of 53 gross operated wells that have been drilled in the Barnett Shale but await completion or connection to sales lines. The company expects to exit the year with an estimated 50 wells in its uncompleted well inventory.
United States -- Sandwash Basin
Quicksilver holds approximately 210,000 net acres in the Sandwash Basin in Northwest Colorado, and continues to drill test wells on its oil-prospective exploratory acreage position. Six vertical wells and one horizontal well have been drilled to date. Four of the vertical wells are in the early stages of completion and two are in flowback. The company expects to complete the horizontal well in the next few weeks and anticipates all seven wells to be online by the end of the year. We continue to be encouraged by the results of the test program, and anticipate disclosing well performance by year-end once more data is gathered and evaluated.
United States -- Delaware and Permian Basins
The company expanded its acreage position in West Texas during the third quarter to approximately 150,000 net acres in the Delaware and Permian Basins. The company plans to begin drilling and completion operations in the first quarter of 2012.
Canada -- Horseshoe Canyon
The company expects to drill 8 (6.6 net) more wells by the end of the year, resulting in a total of 16 (11.6 net) wells drilled for the full year. Current net production from the Horseshoe Canyon coal bed methane project is approximately 57 MMcfed.
Canada -- Horn River Basin
Quicksilver has drilled a total of eight horizontal wells into the Muskwa and Klua formations, of which four wells have commenced production. Only two additional wells are required to be drilled to validate virtually all of Quicksilver's exploratory licenses and convert all of our licenses, covering approximately 130,000 net acres, into 10-year development leases. The company has been pleased by the performance of its four producing wells. The actual average daily wellhead production through October 31, 2011 for the four wells on line was 18.4 MMcfd compared to the estimated production of 16.2 MMcfd in our December 31, 2010 reserve report, an increase of 14%. The company is drilling four additional wells in the fourth quarter of 2011 and plans to complete them by the end of the first quarter of 2012. The company has also begun testing of its first horizontal well drilled into the shallower Exshaw oil formation.
During the third quarter of 2011, the company invested approximately $165 million of capital, of which approximately 60% was for drilling and completion activities, 10% for midstream activities -- primarily for the Horn River gathering system -- and 30% for lease acquisition.
Total capital spending for the year is expected to be approximately $690 million, down slightly from the guidance provided in the second quarter.
Fourth-quarter average daily production volume is expected to be 425-435 MMcfe per day; full-year production guidance is 415-420 MMcfe per day.
Average unit expenses, on a Mcfe basis, are expected as follows:
The company has hedges in place to cover approximately 60% of expected production for the fourth quarter of 2011. A total of 190 MMcf per day of natural gas is covered by collars or fixed-price swaps 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.
The company will host a conference call to discuss third-quarter 2011 operating and financial results at 11:00 a.m. eastern 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 33143474, 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 1-855-859-2056 using the conference ID number 33143474. 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, coal beds and tight sands 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 .
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, NGLs and oil prices; failure or delays in achieving expected production from exploration and development projects; uncertainties inherent in estimates of natural gas, NGLs and oil reserves and predicting natural gas, NGLs and oil reservoir performance; effects of hedging natural gas, NGLs 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 and treating facilities; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; failure or inability to covert drilling licenses to leases and the exploration of our leases; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; 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.
KWK 11-17
John Hinton
(817) 665-4990
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Datum: 07.11.2011 - 11:30 Uhr
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