U.S. Markets closed

Quicksilver Resources Reports 2012 Third-Quarter Results

FORT WORTH, TX--(Marketwire - Nov 6, 2012) - Quicksilver Resources Inc. ( NYSE : KWK ) today announced preliminary 2012 third-quarter results.

Third-quarter highlights:

  • Completed an eight-well pad in the Horn River Basin in British Columbia; the company's wells in the Horn River Basin are estimated to be capable of producing in excess of 150 MMcfd
  • Signed agreement with SWEPI LP, a subsidiary of Royal Dutch Shell, to jointly develop approximately 330,000 acres in the Sand Wash Basin in Colorado
  • Advanced West Texas Project -- completed Price Ranch #1 horizontal well in Pecos County with an initial production rate of 300 Boed; currently completing Vande Ranch State 1H horizontal well in Upton County
  • Entered into new multi-year hedges; majority of expected 2013 and 2014 volumes hedged at a price in excess of $5 per Mcf
  • Secured C$39 million reduction in letter of credit obligations in Horn River Basin and deferred pipeline completion to mid-2015
  • Secured financial covenant flexibility in Combined Credit Agreements, providing time to manage the balance sheet
  • Advanced negotiations on two joint ventures

"Quicksilver has made very good progress on reducing capital commitments, locking in solid price protection for the majority of the company's gas production for the next couple of years, relaxing debt covenants with our bank group, and attracting partners in our key development areas," said Glenn Darden, Quicksilver's President and CEO. "We anticipate significantly reducing company debt with the proceeds from transactions we are currently working on."

Financial Results

Adjusted net loss for the third quarter, a non-GAAP financial measure, was $8 million, or $0.04 per diluted share, compared to adjusted net income of $6 million, or $0.03 per diluted share in the 2011 period. Including the impact of non-operational items, the net loss for the third quarter was $652 million, or $3.83 per diluted share, compared to net income of $29 million, or $0.17 per diluted share, in the prior-year period. Third-quarter 2012 results were impacted by a $547 million non-cash impairment of properties primarily due to lower average natural gas and NGL prices compared to the 12 months ended June 30, 2012, and a $284 million non-cash valuation allowance of U.S. deferred tax assets related to reduced likelihood of recoverability of future tax assets. Further details of adjusted net income are included in the tables following this earnings release.

Production

Production averaged 362 million cubic feet of natural gas equivalent per day (MMcfed) during the third quarter, which is 23 MMcfed lower than the bottom range of previous guidance. The variance from prior guidance results from the company restricting production in the Horn River Basin to match its contractual commitment in an existing third-party treating facility. The company expected the third party to commission a second treating facility, but the facility was delayed to an expected commissioning near year-end 2012, and may be further delayed into 2013. Accordingly, to mitigate the effects of this delay, the company is securing alternative treating and transportation arrangements on an interim and interruptible basis in the existing third party treating facility that will allow Horn River Basin production to be increased up to an additional 50 MMcfd beginning in December 2012.

Third-quarter 2012 production is down from 427 MMcfed in the prior-year quarter, but is up from 359 MMcfed compared to the second quarter of 2012. The decline from the prior-year quarter is primarily due to a reduction in capital activity, the natural production decline of existing wells, and the impact of completion activities in the Barnett Shale. The increase from the second quarter of 2012 is due to production growth from the Horn River Basin as the new pad was produced at elevated levels during the flowback period.

Revenue and Expenses

Production revenue for the third quarter of 2012 was $158 million, down 24% from the prior-year quarter and up 5% from the second quarter of 2012. The decrease in production revenue from the prior-year quarter was caused by the production declines described earlier and lower realized prices for natural gas and NGLs. The increase in production revenue from the second quarter of 2012 was caused by higher realized prices for natural gas and slightly higher production volumes.

The average realized price for the third quarter was $4.73 per Mcfe, which excludes approximately $18 million, or $0.54 per Mcfe, of cash proceeds from certain previously restructured commodity derivative settlements that are not currently recognized in production revenue due to the impact of the hedge restructuring program from the first quarter of 2012.

Lease operating expense for the third quarter of 2012 was $22 million, or $0.66/Mcfe, compared to $28 million, or $0.70/Mcfe in the prior-year quarter and $22 million, or $0.66/Mcfe in the second quarter of 2012. The Barnett Shale experienced lower water hauling, compression and gas lift expense compared to the 2011 quarter resulting from cost containment initiatives and as certain higher cost wells remained shut-in during the third quarter. Lease operating expense in Canada decreased compared to the 2011 quarter due to a decline in well and compressor repair and maintenance expense. Lease operating expense is flat compared to the second quarter of 2012, but is $0.02/Mcfe higher than the upper-end of previous guidance due to restricted volume flow in the Horn River Basin.

Debt

At September 30, 2012, Quicksilver's total debt was approximately $2.2 billion. The company has approximately $552 million utilized under its Combined Credit Agreements as of that date.

In September 2012, Quicksilver and NOVA Gas Transmission Ltd. ("NGTL"), a subsidiary of TransCanada Pipelines Limited, entered into an agreement to delay the targeted in-service date of the Komie North pipeline and related facilities from May 1, 2014 to August 1, 2015 and revise NGTL's spend profile and Quicksilver's obligations to provide related financial assurances in the form of letters of credit. As a direct result, NGTL released C$39 million of letters of credit that were previously posted to the project. The next scheduled date to supplement letters of credit is April 1, 2014.

In August 2012, Quicksilver amended its Combined Credit Agreements, and as part of that process, accelerated the fall redetermination. Based on reserves at June 30, 2012, the redetermined global borrowing base was set at $850 million, the interest coverage covenant was adjusted downward to provide increased flexibility and other limitations were introduced, including increased interest margins and additional financial and other covenants.

Operational Update

Canada - Horn River Basin

During the third quarter, the new eight-well drilling pad began flowback activities, and each well is now capable of production. All eight wells significantly exceeded initial production expectations with individual flow rates between 23 MMcfd and 34 MMcfd at very high flowing pressures. Based on the strong initial flow tests, Quicksilver expects to see a significant improvement in the type curves, most notably for the Klua primary pay sections. Five Muskwa and three Klua wells were drilled on the pad. No further wells are planned to be drilled in the basin for the remainder of 2012 due to the productive capabilities of the eight-well pad.

The company believes the results from these wells, the continuous nature of the pay sections as shown in 3-D seismic and the pay mapping from the six exploration wells drilled on the northern part of Quicksilver's acreage are indicative of the continuity of the formation throughout the company's 130,000 net acre position.

United States - Barnett Shale

Quicksilver drilled 3 gross (3 net) wells and connected 9 gross (8.1 net) wells to sales in the third quarter. At September 30, 2012, Quicksilver had a remaining uncompleted well inventory of 23 gross operated wells that have been drilled in the Barnett Shale but await completion or connection to sales lines.

United States - Sand Wash Basin

In September, Quicksilver and SWEPI LP, a subsidiary of Royal Dutch Shell, signed an Acquisition and Exploration Agreement to jointly develop acreage in the Sand Wash Basin and to establish an Area of Mutual Interest covering in excess of 850,000 acres in the basin. SWEPI will pay Quicksilver an equalization payment for the excess acreage to be contributed. Closing is expected in the fourth quarter of 2012, subject to customary due diligence and other closing conditions.

In conjunction with the closing of the agreement with SWEPI, the company plans to participate in the drilling and completion of up to 5 gross (2.5 net) wells during the fourth quarter of 2012.

During the third quarter, the company drilled one well, completed one well, and re-completed one well. The two completions are currently on flowback and are being evaluated.

Quicksilver currently holds approximately 210,000 net acres in the Sand Wash Basin of Northwest Colorado, which the company believes are situated in the oil window prospective of the Niobrara formation. Upon closing of the Acquisition and Exploration Agreement with SWEPI, Quicksilver will hold a 50% interest in approximately 330,000 net acres in the basin.

United States - West Texas

In August, the Price Ranch #1 well in Pecos County was re-completed with a 1,500-foot lateral in the Third Bone Springs formation. The well produced at an initial rate of 300 Boed with 80% oil and 20% high-BTU natural gas.

The Vande Ranch State 1H well in Upton County was re-entered during the third quarter and is currently being completed with a 2,500-foot lateral into the Wolfcamp formation.

Quicksilver holds approximately 155,000 net acres across the Delaware and Midland basins of West Texas, of which the company believes approximately 105,000 net acres are situated in the oil window of the Wolfcamp and Bone Springs formations.

Canada - Horseshoe Canyon

Production from Horseshoe Canyon was 54 MMcfd during the third quarter. The company does not expect to drill any additional wells in Horseshoe Canyon during the remainder of 2012.

Capital Program

During the third quarter of 2012, the company incurred approximately $68 million of capital expenditures, of which approximately $48 million was associated with drilling and completion activities, $2 million for midstream activities, $7 million for acreage purchases, and $11 million for corporate and other purposes. For the nine months ended September 30, 2012, total capital incurred was $359 million.

Capital incurred is projected to be approximately $389 million for full-year 2012, or $29 million greater than previous full-year guidance, which is due to incremental spending for drilling and completion activities and lease renewals in the Sand Wash Basin and West Texas, and incremental capitalized overhead related to the company's exploratory programs.

Hedging

In the third quarter, Quicksilver entered into new multi-year hedges. As of November 5, 2012, the company has 267 MMcfed of hedges in place for 2012 at a weighted average price of $6.02 per Mcfe, which covers approximately 80% of expected total equivalent production for the fourth quarter of 2012. The company's post-2012 natural gas swaps are as follows: 200 MMcfd for 2013 at $5.10 per Mcf, 170 MMcfd for 2014 at $5.08 per Mcf, 150 MMcfd for 2015 at $5.23 per Mcf, and 40 MMcfd for 2016-2021 at $4.48 per Mcf.

Fourth Quarter Outlook

Fourth-quarter average daily production volume is expected to be 330-340 MMcfe per day, resulting in full-year 2012 average production volume at 350-365 MMcfe per day.

For the fourth-quarter 2012, average unit expenses, on a Mcfe basis, are expected as follows:

Lease operating expense $0.70 - $0.75
Gathering, processing & transportation 1.22 - 1.26
Production and ad-valorem taxes 0.20 - 0.22
General and administrative 0.50 - 0.53
Depletion, depreciation & accretion 1.10 - 1.14

This guidance does not account for potential incremental volumes from the Horn River Basin if alternative treating and transportation options are secured.

Conference Call

The company will host a conference call to discuss third-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 www.qrinc.com or by calling 1-877-313-7932, using the conference ID number 41140586, 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 41140586. 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, development and acquisition of oil and gas, primarily from unconventional reservoirs including gas from shales and coal beds in North America. The company has major U.S. offices in Fort Worth, Texas; Glen Rose, Texas; Craig, Colorado; 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 www.qrinc.com.

Forward-Looking Statements
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 materially 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; failure or delay in completing strategic transactions; 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.

   
QUICKSILVER RESOURCES INC.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
In thousands, except for per share data - Unaudited  
               
    For the Three Months Ended     For the Nine Months Ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
Revenue:                                
  Production   $ 157,699     $ 208,064     $ 480,021     $ 606,070  
  Sales of purchased natural gas     21,313       20,130       42,842       60,116  
  Other     (1,310 )     31,699       (31,130 )     54,340  
    Total revenue     177,702       259,893       491,733       720,526  
                                 
Operating expense:                                
  Lease operating     22,115       27,673       72,405       73,366  
  Gathering, processing and transportation     41,338       51,113       127,040       142,201  
  Production and ad valorem taxes     6,881       7,757       20,833       23,844  
  Costs of purchased natural gas     21,254       19,954       42,528       59,254  
  Depletion, depreciation and accretion     43,209       57,686       149,590       164,861  
  Impairment     546,835       -       1,601,502       49,063  
  General and administrative     17,335       27,584       54,836       61,745  
  Other operating     670       145       820       328  
    Total expense     699,637       191,912       2,069,554       574,662  
Crestwood earn-out     -       -       41,097       -  
Operating income (loss)     (521,935 )     67,981       (1,536,724 )     145,864  
Loss from earnings of BBEP     -       14,370       -       (32,721 )
Other income - net     (395 )     11,142       (237 )     135,441  
Fortune Creek accretion     (4,978 )     -       (14,549 )     -  
Interest expense     (42,102 )     (48,393 )     (122,348 )     (142,123 )
Income (loss) before income taxes     (569,410 )     45,100       (1,673,858 )     106,461  
Income tax (expense) benefit     (82,352 )     (16,414 )     289,631       (39,946 )
Net income (loss)   $ (651,762 )   $ 28,686     $ (1,384,227 )   $ 66,515  
                                 
Earnings (loss) per common share - basic   $ (3.83 )   $ 0.17     $ (8.14 )   $ 0.39  
                                 
Earnings (loss) per common share - diluted   $ (3.83 )   $ 0.17     $ (8.14 )   $ 0.39  
                                 
Basic weighted average shares outstanding     170,179       169,031       170,054       168,963  
                                 
Diluted weighted average shares outstanding     170,179       169,736       170,054       169,768  
   
   
QUICKSILVER RESOURCES INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
In thousands, except share data - Unaudited  
             
    September 30, 2012     December 31, 2011  
             
ASSETS  
Current assets                
  Cash   $ 7,436     $ 13,146  
  Accounts receivable - net of allowance for doubtful accounts     67,951       95,282  
  Derivative assets at fair value     126,075       162,845  
  Other current assets     41,575       29,154  
    Total current assets     243,037       300,427  
                 
Property, plant and equipment - net                
  Oil and gas properties, full cost method (including unevaluated costs of $439,767 and $433,341, respectively)     1,846,028       3,226,476  
  Other property and equipment     248,021       234,043  
Property, plant and equipment - net     2,094,049       3,460,519  
Derivative assets at fair value     109,313       183,982  
Deferred income taxes     -       -  
Other assets     43,845       50,534  
    $ 2,490,244     $ 3,995,462  
   
LIABILITIES AND EQUITY  
Current liabilities                
  Current portion of long-term debt   $ -     $ 18  
  Accounts payable     48,143       142,672  
  Accrued liabilities     123,661       142,193  
  Derivative liabilities at fair value     -       4,028  
  Current deferred tax liability     3,243       45,262  
    Total current liabilities     175,047       334,173  
                 
Long-term debt     2,165,384       1,903,431  
                 
Partnership Liability     135,446       122,913  
Asset retirement obligations     97,771       85,568  
Derivative Liabilities at fair value     42,538          
Other liabilities     19,242       28,461  
Deferred income taxes     1,518       258,997  
Commitments and contingencies                
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; 178,770,278 and 176,980,483 shares issued, respectively     1,788       1,770  
  Paid in capital in excess of par value     755,080       737,015  
  Treasury stock of 5,816,293 and 5,379,702 shares, respectively     (49,161 )     (46,351 )
  Accumulated other comprehensive income     175,191       214,858  
  Retained earnings     (1,029,600 )     354,627  
    Total stockholders' equity     (146,702 )     1,261,919  
    $ 2,490,244     $ 3,995,462  
   
   
QUICKSILVER RESOURCES INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
In thousands - Unaudited  
             
    For the Nine Months Ended September 30,  
    2012     2011  
Operating activities:                
  Net income (loss)   $ (1,384,227 )   $ 66,515  
  Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
    Depletion, depreciation and accretion     149,590       164,861  
    Impairment expense     1,601,502       49,063  
    Crestwood earn-out     (41,097 )     -  
    Deferred income tax expense (benefit)     (285,204 )     50,960  
    Non-cash (gain) loss from hedging and derivative activities     82,252       (50,550 )
    Stock-based compensation     16,983       15,475  
    Non-cash interest expense     8,060       13,109  
    Fortune Creek accretion     14,549       -  
    Gain on disposition of BBEP units     -       (133,248 )
    Loss from BBEP in excess of cash distributions     -       49,065  
    Other     495       (897 )
  Changes in assets and liabilities:                
    Accounts receivable     27,259       2,101  
    Prepaid expenses and other assets     (4,503 )     (20,791 )
    Accounts payable     (24,329 )     (29,430 )
    Accrued and other liabilities     (19,954 )     (1,567 )
Net cash provided by operating activities     141,376       174,666  
                 
Investing activities:                
  Purchases of property, plant and equipment     (437,172 )     (550,954 )
  Proceeds from Crestwood earn-out     41,097       -  
  Proceeds from sale of BBEP units     -       145,799  
  Proceeds from sales of property and equipment     3,843       3,719  
Net cash used for investing activities     (392,232 )     (401,436 )
                 
Financing activities:                
  Issuance of debt     367,646       648,819  
  Repayments of debt     (111,115 )     (455,886 )
  Debt issuance costs paid     (3,048 )     (10,276 )
  Distribution of Fortune Creek Partnership funds     (6,520 )     -  
  Proceeds from exercise of stock options     11       733  
  Excess tax deductions on stock compensation     1,089       -  
  Purchase of treasury stock     (2,810 )     (4,841 )
Net cash provided by financing activities     245,253       178,549  
                 
Effect of exchange rate changes in cash     (107 )     (114 )
                 
Net increase (decrease) in cash     (5,710 )     (48,335 )
                 
Cash at beginning of period     13,146       54,937  
                 
Cash at end of period   $ 7,436     $ 6,602  
   
   
QUICKSILVER RESOURCES INC.  
Unaudited Selected Operating Results  
                         
    Three Months Ended Sept 30,     Nine Months Ended Sept 30,  
    2012     2011     2012     2011  
Average Daily Production:                
Natural Gas (MMcfd)     291.3       351.6       293.2       334.6  
NGL (Bbld)     11,073       11,945       11,321       12,234  
Oil (Bbld)     761       696       804       745  
  Total (MMcfed)     362.4       427.4       366.0       412.4  
                                 
Average Realized Prices, including hedging:                                
Natural Gas (per Mcf)   $ 4.23     $ 4.96     $ 4.19     $ 5.02  
NGL (per Bbl)     37.75       38.68       40.06       38.67  
Oil (per Bbl)     83.88       82.58       88.24       89.05  
  Total (Mcfe)     4.73       5.29       4.79       5.38  
                                 
Expense per Mcfe:                                
Lease operating expense:                                
  Cash expense   $ 0.65     $ 0.69     $ 0.71     $ 0.64  
  Equity compensation     0.01       0.01       0.01       0.01  
Total lease operating expense:   $ 0.66     $ 0.70     $ 0.72     $ 0.65  
                                 
Gathering, processing and transportation expense   $ 1.24     $ 1.30     $ 1.27     $ 1.26  
                                 
Production and ad valorem taxes   $ 0.21     $ 0.20     $ 0.20     $ 0.21  
                                 
Depletion, depreciation and accretion   $ 1.30     $ 1.47     $ 1.49     $ 1.46  
                                 
General and administrative expense:                                
  Cash expense   $ 0.27     $ 0.28     $ 0.33     $ 0.30  
  Audit and accounting fees     0.03       0.01       0.05       0.01  
  Strategic transaction costs     0.03       0.08       0.01       0.04  
  Litigation settlement     -       0.22       -       0.08  
  Equity compensation     0.20       0.11       0.16       0.12  
Total general and administrative expense   $ 0.53     $ 0.70     $ 0.55     $ 0.55  
                                 
Interest expense:                                
  Cash expense on debt outstanding   $ 1.32     $ 1.09     $ 1.28     $ 1.16  
  Fees paid on letters of credit outstanding     -       0.01       0.00       0.01  
  Premium on senior notes repurchased     -       0.05       -       0.02  
  Non-cash interest     0.14       0.13       0.08       0.12  
  Capitalized interest     (0.20 )     (0.05 )     (0.14 )     (0.05 )
Total interest expense   $ 1.26     $ 1.23     $ 1.22     $ 1.26  
 
 
QUICKSILVER RESOURCES INC.
Production, on a million cubic feet of natural gas equivalent (MMcfe)
per day basis, by operating area
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
    2012   2011   2012   2011
                 
Barnett Shale   261.5   350.9   284.1   336.1
Other U.S.   3.4   3.7   3.6   3.3
Total U.S.   264.9   354.6   287.7   339.4
Horseshoe Canyon   53.9   57.6   55.0   58.5
Horn River   43.6   15.2   23.3   14.5
Total Canada   97.5   72.8   78.3   73.0
  Total Company   362.4   427.4   366.0   412.4
                   
   
QUICKSILVER RESOURCES INC.  
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME  
In thousands, except per share data - Unaudited  
                   
    For the Three Months Ended September 30, 2012  
    As Reported     Adjustments     Adjusted Net Income  
Revenue:                        
  Production   $ 157,699     $ -     $ 157,699  
  Sales of purchased natural gas     21,313       -       21,313  
  Other     (1,310 )     2,831       1,521  
    Total revenue     177,702       2,831       180,533  
                         
Operating expense:                        
  Lease operating     22,115       -       22,115  
  Gathering, processing and transportation     41,338       -       41,338  
  Production and ad valorem taxes     6,881       -       6,881  
  Costs of purchased natural gas     21,254       -       21,254  
  Depletion, depreciation and accretion     43,209       -       43,209  
  Impairment     546,835       (546,835 )     -  
  General and administrative     17,335       (4,223 )     13,112  
  Other operating     670       -       670  
    Total expense     699,637       (551,058 )     148,579  
Crestwood earn-out     -       -       -  
Operating income (loss)     (521,935 )     553,889       31,954  
Income from earnings of BBEP     -       -       -  
Other income - net     (395 )     1,130       735  
Fortune Creek accretion     (4,978 )     -       (4,978 )
Interest expense     (42,102 )     2,789       (39,313 )
Income before income taxes     (569,410 )     557,808       (11,602 )
Income tax (expense) benefit     (82,352 )     86,413       4,061  
Net income (loss)   $ (651,762 )   $ 644,221     $ (7,541 )
                         
                         
Earnings (loss) per common share - diluted   $ (3.83 )           $ (0.04 )
Diluted weighted average shares outstanding     170,179               170,179  
                         
                         
QUICKSILVER RESOURCES INC.  
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME  
In thousands, except per share data - Unaudited  
                         
    For the Three Months Ended September 30, 2011  
    As Reported     Adjustments     Adjusted Net Income  
Revenue:                        
  Production   $ 208,064     $ -     $ 208,064  
  Sales of purchased natural gas     20,130       -       20,130  
  Other     31,699       (29,737 )     1,962  
    Total revenue     259,893       (29,737 )     230,156  
                         
Operating expense:                        
  Lease operating     27,673       -       27,673  
  Gathering, processing and transportation     51,113       -       51,113  
  Production and ad valorem taxes     7,757       -       7,757  
  Costs of purchased natural gas     19,954       -       19,954  
  Depletion, depreciation and accretion     57,686       -       57,686  
  Impairment     -       -       -  
  General and administrative     27,584       (11,555 )     16,029  
  Other operating     145       -       145  
    Total expense     191,912       (11,555 )     180,357  
Crestwood earn-out     -       -       -  
Operating income (loss)     67,981       (18,182 )     49,799  
Income (loss) from earnings of BBEP     14,370       (11,542 )     2,828  
Other income (loss) - net     11,142       (9,496 )     1,646  
Interest expense     (48,393 )     3,304       (45,089 )
Income before income taxes     45,100       (35,916 )     9,184  
Income tax expense     (16,414 )     12,969       (3,445 )
Net income (loss)   $ 28,686     $ (22,947 )   $ 5,739  
                         
                         
Earnings (loss) per common share - diluted   $ 0.17             $ 0.03  
Diluted weighted average shares outstanding     169,736               169,736  
   
   
QUICKSILVER RESOURCES INC.  
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME  
In thousands, except per share data - Unaudited  
                   
    For the Nine Months Ended September 30, 2012  
    As Reported     Adjustments     Adjusted Net Income  
Revenue:                        
  Production   $ 480,021     $ -     $ 480,021  
  Sales of purchased natural gas     42,842       -       42,842  
  Other     (31,130 )     34,157       3,027  
    Total revenue     491,733       34,157       525,890  
                         
Operating expense:                        
  Lease operating     72,405       -       72,405  
  Gathering, processing and transportation     127,040       -       127,040  
  Production and ad valorem taxes     20,833       -       20,833  
  Costs of purchased natural gas     42,528       -       42,528  
  Depletion, depreciation and accretion     149,590       -       149,590  
  Impairment     1,601,502       (1,601,502 )     -  
  General and administrative     54,836       (7,714 )     47,122  
  Other operating     820       -       820  
    Total expense     2,069,554       (1,609,216 )     460,338  
Crestwood earn-out     41,097       (41,097 )     -  
Operating income (loss)     (1,536,724 )     1,602,276       65,522  
Income from earnings of BBEP     -       -       -  
Other income - net     (237 )     1,130       893  
Fortune Creek accretion     (14,549 )     -       (14,549 )
Interest expense     (122,348 )     2,789       (119,559 )
Income before income taxes     (1,673,858 )     1,606,195       (67,663 )
Income tax (expense) benefit     289,631       (265,949 )     23,682  
Net income (loss)   $ (1,384,227 )   $ 1,340,246     $ (43,981 )
                         
                         
Earnings (loss) per common share - diluted   $ (8.14 )           $ (0.26 )
Diluted weighted average shares outstanding     170,054               170,054  
                         
                         
QUICKSILVER RESOURCES INC.  
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME  
In thousands, except per share data - Unaudited  
                         
    For the Nine Months Ended September 30, 2011  
    As Reported     Adjustments     Adjusted Net Income  
Revenue:                        
  Production   $ 606,070     $ -     $ 606,070  
  Sales of purchased natural gas     60,116       -       60,116  
  Other     54,340       (48,852 )     5,488  
    Total revenue     720,526       (48,852 )     671,674  
                         
Operating expense:                        
  Lease operating     73,366       -       73,366  
  Gathering, processing and transportation     142,201       -       142,201  
  Production and ad valorem taxes     23,844       -       23,844  
  Costs of purchased natural gas     59,254       -       59,254  
  Depletion, depreciation and accretion     164,861       -       164,861  
  Impairment     49,063       (49,063 )     -  
  General and administrative     61,745       (13,032 )     48,713  
  Other operating     328       -       328  
    Total expense     574,662       (62,095 )     512,567  
Operating income     145,864       13,243       159,107  
Income (loss) from earnings of BBEP     (32,721 )     42,553       9,832  
Other income (loss) - net     135,441       (133,248 )     2,193  
Interest expense     (142,123 )     3,960       (138,163 )
Income before income taxes     106,461       (73,492 )     32,969  
Income tax expense     (39,946 )     27,576       (12,370 )
Net income (loss)   $ 66,515     $ (45,916 )   $ 20,599  
                         
                         
Earnings per common share - diluted   $ 0.39             $ 0.12  
Diluted weighted average shares outstanding     169,768               169,768  
                         

KWK 12-19