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Quicksilver Resources Reports Preliminary 2012 Fourth-Quarter And Full-Year Results

Stocks in this article: KWK

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.

Investor & Media Contact: David Erdman (817) 665-4023

KWK 13-03

QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In thousands, except for per share data - Unaudited
         
  For the quarter ended December 31, For the year ended December 31,
Revenue 2012 2011 2012 2011
Production  $ 156,294  $ 194,473  $ 636,316  $ 800,543
Sales of purchased natural gas  19,564  26,529  62,405  86,645
Other  3,214  2,095  (27,916)  56,435
Total revenue  179,072  223,097  670,805  943,623
Operating expense        
Lease operating  22,927  29,508  95,333  102,874
Gathering, processing and transportation  39,277  48,359  166,316  190,560
Production and ad valorem taxes  4,562  5,382  25,395  29,226
Costs of purchased natural gas  19,513  26,144  62,041  85,398
Depletion, depreciation and accretion  35,677  60,902  185,266  225,763
Impairment  1,162,961  57,996  2,764,464  107,059
General and administrative  20,861  17,837  75,697  79,582
Other operating  742  229  1,562  557
Total expense  1,306,520  246,357  3,376,074  821,019
Crestwood earn-out  —  —  41,097  —
Operating income (loss)  (1,127,448)  (23,260)  (2,664,172)  122,604
Income (loss) from earnings of BBEP  —  24,282  —  (8,439)
Other income (expense) - net  1,345  84,327  1,108  219,768
Fortune Creek accretion  (4,923)  —  (19,472)  —
Interest expense  (41,703)  (43,901)  (164,051)  (186,024)
Income (loss) before income taxes  (1,172,729)  41,448  (2,846,587)  147,909
Income tax (expense) benefit  71,807  (17,917)  361,438  (57,863)
Net income (loss)  (1,100,922)  23,531  (2,485,149)  90,046
         
Earnings (loss) per common share - basic  $ (6.47)  $ 0.14  $ (14.61)  $ 0.53
Earnings (loss) per common share - diluted  $ (6.47)  $ 0.14  $ (14.61)  $ 0.52
         
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except share data - Unaudited
     
  As of December 31,
  2012 2011
ASSETS
Current assets    
Cash and cash equivalents  $ 4,951  $ 13,146
Accounts receivable - net of allowance for doubtful accounts  64,149  95,282
Derivative assets at fair value  113,367  162,845
Other current assets  25,046  29,154
Total current assets  207,513  300,427
Property, plant and equipment - net    
Oil and gas properties, full cost method (including unevaluated costs of $307,267 and $433,341, respectively)  622,519  3,226,476
Other property and equipment  248,098  234,043
Property, plant and equipment - net  870,617  3,460,519
Derivative assets at fair value  105,270  183,982
Deferred income taxes  65,135  —
Other assets  39,947  50,534
   $ 1,288,482  $ 3,995,462
LIABILITIES AND EQUITY
Current liabilities    
Current portion of long-term debt  $ —  $ 18
Accounts payable  37,131  142,672
Accrued liabilities  130,660  142,193
Derivative liabilities at fair value  —  4,028
Current deferred tax liability  3,891  45,262
Total current liabilities  171,682  334,173
Long-term debt  2,063,206  1,903,431
Partnership liability  130,912  122,913
Asset retirement obligations  115,949  85,568
Derivative liabilities at fair value  17,485  —
Other liabilities  19,242  28,461
Deferred income taxes  —  258,997
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, and 179,015,118 and 176,980,483 shares issued, respectively  1,790  1,770
Additional paid in capital  760,341  737,015
Treasury stock of 5,921,102 and 5,379,702 shares, respectively  (49,495)  (46,351)
Accumulated other comprehensive income  187,892  214,858
Retained earnings (deficit)  (2,130,522)  354,627
Total stockholders' equity  (1,229,994)  1,261,919
   1,288,482  3,995,462
     
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands - Unaudited
     
  For the year ended December 31,
  2012 2011
     
Operating activities:    
Net income (loss)  $ (2,485,149)  $ 90,046
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depletion, depreciation and accretion  185,266  225,763
Impairment expense  2,764,464  107,059
Crestwood earn-out  (41,097)  —
Deferred income tax expense (benefit)  (356,937)  64,492
Non-cash (gain) loss from hedging and derivative activities  96,058  (51,780)
Stock-based compensation  22,246  20,862
Non-cash interest expense  9,854  16,510
Fortune Creek accretion  19,472  —
Gain on disposition of BBEP units  —  (217,893)
Loss (income) from BBEP in excess of cash distributions  —  28,269
Other  1,037  1,311
Changes in assets and liabilities    
Accounts receivable  30,950  (31,803)
Derivative assets at fair value  —  —
Prepaid expenses and other assets  3,070  (6,017)
Accounts payable  (13,317)  (11,434)
Income taxes payable  1,183  (4,803)
Accrued and other liabilities  (14,884)  22,471
Net cash provided by operating activities  222,216  253,053
Investing activities:    
Capital expenditures  (481,057)  (690,607)
Proceeds from Crestwood earn-out  41,097  —
Proceeds from sale of BBEP units  —  272,965
Proceeds from sale of properties and equipment  72,725  4,163
Net cash provided (used) by investing activities  (367,235)  (413,479)
Financing activities:    
Issuance of debt  467,959  855,822
Repayments of debt  (310,430)  (843,108)
Debt issuance costs paid  (3,022)  (12,506)
Partnership funds received  —  122,913
Distribution of Fortune Creek Partnership funds  (14,285)  —
Proceeds from exercise of stock options  11  1,299
Excess tax benefits on stock compensation  1,089  —
Purchase of treasury stock  (3,144)  (4,864)
Net cash provided (used) by financing activities  138,178  119,556
Effect of exchange rate changes in cash  (1,354)  (921)
Net change in cash  (8,195)  (41,791)
Cash and cash equivalents at beginning of period  13,146  54,937
Cash and cash equivalents at end of period  $ 4,951  $ 13,146
     
QUICKSILVER RESOURCES INC.
Unaudited Selected Operating Results
         
  Quarter ended December 31, Year ended December 31,
  2012 2011 2012 2011
Average Daily Production:        
Natural Gas (MMcfd)  274.9  336.6  288.5  335.1
NGL (Bbld)  10,525  11,892  11,121  12,147
Oil (Bbld)  725  759  784  748
Total (MMcfed)  342.4  412.5  360.0  412.4
         
Average Realized Prices, including hedging:        
Natural Gas (per Mcf)  $ 4.50  $ 4.73  $ 4.26  $ 4.95
NGL (per Bbl)  38.50  38.50  39.69  38.63
Oil (per Bbl)  78.55  85.55  85.98  88.15
Total (Mcfe)  4.96  5.12  4.83  5.32
         
Average Realized Prices, excluding hedging:        
Natural Gas (per Mcf)  $ 3.20  $ 3.40  $ 2.59  $ 3.88
NGL (per Bbl) 29.85 50.82 33.91 49.00
Oil (per Bbl) 77.96 85.93 86.08 88.27
Total (Mcfe) 3.65 4.40 3.31 4.75
         
Expense per Mcfe:        
Lease operating expense:        
Cash expense  $ 0.72  $ 0.77  $ 0.71  $ 0.67
Equity compensation  0.01  0.01  0.01  0.01
Total lease operating expense:  $ 0.73  $ 0.78  $ 0.72  $ 0.68
         
Gathering, processing and transportation expense  $ 1.25  $ 1.27  $ 1.26  $ 1.27
         
Production and ad valorem taxes  $ 0.14  $ 0.14  $ 0.19  $ 0.19
         
Depletion, depreciation and accretion  $ 1.13  $ 1.60  $ 1.41  $ 1.50
         
General and administrative expense:        
Cash expense  $ 0.21  $ 0.32  $ 0.31  $ 0.31
Audit and accounting fees  0.03  0.01  0.05  0.01
Strategic transaction costs  0.26  0.01  0.06  0.03
Litigation settlement  —  —  —  0.06
Equity compensation  0.16  0.13  0.16  0.12
Total general and administrative expense  $ 0.66  $ 0.47  $ 0.58  $ 0.53
         
Interest Expense:        
Cash expense on debt outstanding  $ 1.39  $ 1.12  $ 1.31  $ 1.15
Add:        
Fees paid on letters of credit outstanding  0.01  0.01  —  0.01
Cash premium on early debt extinguishment  —  —  —  0.02
Non-cash interest  0.05  0.09  0.07  0.11
Capitalized interest  (0.13)  (0.06)  (0.14)  (0.05)
Total interest expense  $ 1.32  $ 1.16  $ 1.24  $ 1.24
         
QUICKSILVER RESOURCES INC.
Production, on a million cubic feet of natural gas equivalent (MMcfe)
per day basis, by operating area
         
  Quarter ended December 31, Year ended December 31,
  2012 2011 2012 2011
Barnett Shale  247.1  338.0  274.8  336.6
Other U.S.  3.3  3.2  3.5  3.3
Total U.S.  250.4  341.2  278.3  339.9
Horseshoe Canyon  53.7  58.5  54.6  58.3
Horn River  38.3  12.8  27.1  14.2
Total Canada  92.0  71.3  81.7  72.5
Total Company  342.4  412.5  360.0  412.4
         
QUICKSILVER RESOURCES INC.
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
In thousands, except per share data - Unaudited
         
  Quarter Ended December 31, Year Ended December 31,
  2012 2011 2012 2011
         
Net income (loss)  (1,100,922)  23,531  (2,485,149)  90,046
         
Adjustments        
Unrealized (gain)/loss on commodity derivatives 3,000 (45,852)
Restructure of hedge contracts  200  —  14,755  —
Loss (gain) from hedge ineffectiveness  (2,526)  —  (4,594)  —
Impairment of assets  1,162,961  57,996  2,764,464  107,059
Crestwood earn-out  —  —  (41,097)  —
Inception loss on 10-year hedges  —  —  21,670  —
Equity portion of interest rate derivatives from BBEP  —  38  —  (739)
Equity portion of commodity derivatives from BBEP  —  (23,609)  —  20,063
Equity portion -loss from sale of properties from BBEP  —  —  —  —
Gain on BBEP units sold and conveyed  —  (84,646)  —  (217,894)
Inventory adjustment  —  1,708  —  1,708
Debt retirement - related expenses  —  —  —  2,943
Interest expense related to debt restructure  —  1,030  2,789  2,047
Strategic transaction costs  7,505  446  8,503  4,978
Eagle legal settlement  —  —  —  8,500
Audit and accounting fees  —  —  3,479  —
Valuation allowance on deferred tax asset  325,847  —  609,477  —
Reduction of uncertain tax position liability  —  —  (9,219)  —
Acceleration of stock compensation expense  900  —  4,137  —
Other  —  —  1,130  —
Total adjustments before income tax expense  1,494,887  (44,037)  3,375,494  (117,187)
Income tax expense for above adjustments  (396,362)  20,135  (936,724)  47,566
Total adjustments after tax  1,098,525  (23,902)  2,438,770  (69,621)
Adjusted net income  (2,397)  (371)  (46,379)  20,425
         
Adjusted net income per common share - diluted  $ (0.01)  $ —  $ (0.27)  $ 0.12
         
Diluted weighted average common shares outstanding  170,260  169,409  170,106  169,375
         

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