Quicksilver Resources (KWK)

Q4 2010 Earnings Call

February 28, 2011 11:00 am ET


Philip Cook - Chief Financial Officer and Senior Vice President

Thomas Darden - Chairman of the Board, Chairman of the Board of MSR, Chief Executive Officer of MSR and President of MSR

Glenn Darden - Chief Executive Officer, President and Director

Richard Buterbaugh - Vice President of Investor Relations & Corporate Planning


Jason Horowitz - Muzinich

Scott Hanold - RBC Capital Markets, LLC

David Kistler - Simmons & Company International

Eli Kantor - Jefferies & Company, Inc.

David Tameron - Wells Fargo Securities, LLC

David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.

Michael Scialla - Stifel, Nicolaus & Co., Inc.

Michael Bodino - Global Hunter Securities, LLC

Noel Parks - Ladenburg Thalmann & Co. Inc.



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Previous Statements by KWK
» Quicksilver Resources Inc. Q2 2010 Earnings Call Transcript
» Quicksilver Resources Q1 2010 Earnings Call Transcript
» Quicksilver Resources Inc. Q4 2009 Earnings Call Transcript

Good morning and welcome to the Quicksilver Fourth Quarter 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to our host, Rick Buterbaugh, Vice President of Investor Relations and Corporate Planning.

Thank you Mr. Buterbaugh, you may begin your conference.

Richard Buterbaugh

Thank you, Rachel and good morning. Joining me once again today are Toby Darden, Chairman of Quicksilver Resources; Glenn Darden, President and Chief Executive Officer; and Phil Cook, Senior Vice President and Chief Financial Officer.

This morning, the company issued a press release detailing Quicksilver's results for the fourth quarter of 2010. If you do not have a copy of the release, you may retrieve a copy on the company's website at www.qrinc.com under the News and Updates tab.

During today's call, the company will be making forward-looking statements which are subject to risks and uncertainties. Actual results might differ materially from those projected in these forward-looking statements. Additional information concerning risk factors that could cause such differences is detailed in the company's filings with the SEC.

Today's presentation will include information regarding adjusted net income, which is a non-GAAP financial measure. As required by SEC rules, reconciliations of adjusted net income to the most directly comparable GAAP measures are available on our website under the Investor Relations tab.

Let me once again add at the onset of this call that neither the company nor the Darden family will be commenting on any communications that the Board of Directors has had with any investor group beyond what has already been publicly disclosed. So we will not be taking questions on that subject.

At this time, I'll turn the call over to Glenn Darden to review our financial and operating activities in more detail.

Glenn Darden

Thank you, Rick. Good morning.

Quicksilver Resources reported net income of $318 million or $1.77 per diluted share in the fourth quarter of 2010 as compared to net income of $32.5 million in the prior year period. This income included proceeds from the sale of the company's Quicksilver Gas Services assets. Fourth quarter adjusted net income was $30 million compared to $47 million in the 2009 period. For all of 2010, Quicksilver reported net income of $435 million. Adjusted net income was $119.9 million or $0.70 per diluted share.

Quicksilver had another good year increasing production volumes to 355 million cubic feet equivalent per day, up 9% year-over-year, increasing reserves 20% to 2.9 trillion cubic feet equivalent, of which 68% of proved developed and proving additional Horn River Basin potential. The company replaced 475% of its production with the reserve adds at an all end finding development and acquisition cost of $1.29 per Mcf equivalent. Once again, Quicksilver continues to be among the lowest-cost companies in the industry and our reserve bookings are only 32% proved undeveloped.

Also once again, we self-funded all capital expenditures within cash inflows. With the sale of the Quicksilver Gas Services assets, Quicksilver reduced its debt by approximately $537 million, ending the year with a debt balance of approximately $1.9 billion. Today, we have over $800 million available on our $1 billion credit facility.

The company previously announced a capital budget of $455 million for 2011. We intend to stay within cash inflows and to remain disciplined with our spending.

The company projects production growth of approximately 20% for 2011.

On the operational side, the company drilled 20 operated wells in the Barnett and connected 38 total wells in the Barnett in the fourth quarter. For the year, Quicksilver drilled 96 wells and connected 116. We had an inventory of approximately 121 wells drilled but not completed at year end.

The company drilled 14 wells in the Horseshoe Canyon coal play in Alberta and connected 38 operated wells. We shifted a portion of the Canadian budget to acquiring additional acreage production in reserves in the Horseshoe Canyon on properties we already operate. This $22 million purchase added approximately 23 Bcf of gas in the proved developed column of reserves and approximately 5 million cubic feet of gas production on a daily basis.

In the Horn River Basin, Quicksilver has now drilled six horizontal wells into the Muskwa and Klua shales. Four of these wells have been completed with initial production rates per well topping 15 million cubic feet a day. We are currently expanding our gathering system to bring all of these wells in this gas to market. We expect to finish drilling two additional Muskwa wells before the seasonal spring breakup begins in late March. Only three more wells will be required over the next year to convert the company's 130,000 net acre exploratory license block into 10-year leases. Quicksilver also has drilled its first horizontal well into the shallow Exshaw formation in the search for oil production in the Horn River.

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