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Quicksilver Resources Announces Filing of 2012 Financial Report

FORT WORTH, Texas, March 22, 2013 (GLOBE NEWSWIRE) -- Quicksilver Resources Inc. (NYSE:KWK) announced today the company has filed its 2012 Form 10-K.

Net income for the fourth quarter and full-year 2012 as reported today in the company's selected financial information is higher than that reported in the press release issued February 25, 2013. During the preparation of the 2012 financial statements, the company determined that certain hedges did not qualify for hedge accounting at their designation dates. Consequently, the unrealized gains and losses on these derivatives since their designation have been recognized in earnings rather than deferred through other comprehensive income. Further, this treatment disqualifies their inclusion in the computation of the full-cost ceiling. The ceiling impairments also had an effect on the depletion rate in subsequent quarters. All of these factors caused a change in the company's results before income tax and the resulting tax provision. The company also recognized a valuation allowance for its Canadian net deferred tax assets.

The company has retroactively applied the revised accounting treatment for these derivatives, which resulted in restatements in each quarter of 2012 to revenue, impairment, and income taxes; DD&A was restated in the second, third, and fourth quarters of 2012. The restatement also affects the balance sheet for property, plant, and equipment, deferred taxes, AOCI and retained earnings. Details of these changes, including their cash flow effects, are included in the tables following this press release.

All adjustments described above are non-cash. The company is not filing amended quarterly reports on Form 10-Q for each of the interim quarters for 2012 as restated quarterly results are included within the 2012 annual report along with accompanying disclosures. A more complete explanation of the restatement is also included in the foreword to the MD&A section of the 2012 10-K filed today.

Final net loss for the fourth quarter 2012 was $548 million, or $3.22 per diluted share, and $2.4 billion, or $13.83 per diluted share for full-year 2012. Previously, the company reported a net loss for the fourth quarter 2012 of $1.1 billion, and a net loss of $2.5 billion for full-year 2012.

Final adjusted net income for the fourth quarter of 2012, a non-GAAP financial measure, was $9 million, or $0.05 per diluted share, and full-year 2012 adjusted net loss was $8 million, or $0.05 per diluted share. Revised details of adjusted net income are included in the tables following this press release.

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"). Non-GAAP financial measures 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 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.

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

KWK 13-04

QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In thousands, except for per share data
For the quarter ended December 31, 2012 For the year ended December 31, 2012
Preliminary
Unaudited

Adjustments

Final
Preliminary
Unaudited

Adjustments

Final
Revenue
Production $ 156,294 $ 1,601 $ 157,895 $ 636,316 $ (5,369) $ 630,947
Sales of purchased natural gas 19,564 19,564 62,405 62,405
Derivative gains (losses) 45,345 45,345 11,444 11,444
Other 3,214 (2,052) 1,162 (27,916) 32,158 4,242
Total revenue 179,072 44,894 223,966 670,805 38,233 709,038
Operating expense
Lease operating 22,927 22,927 95,333 95,333
Gathering, processing and transportation 39,277 39,277 166,316 166,316
Production and ad valorem taxes 4,562 4,562 25,395 25,395
Costs of purchased natural gas 19,513 19,513 62,041 62,041
Depletion, depreciation and accretion 35,677 (8,521) 27,156 185,266 (21,642) 163,624
Impairment 1,162,961 (605,820) 557,141 2,764,464 (138,536) 2,625,928
General and administrative 20,861 20,861 75,697 75,697
Other operating 742 742 1,562 1,562
Total expense 1,306,520 (614,341) 692,179 3,376,074 (160,178) 3,215,896
Crestwood earn-out 41,097 41,097
Operating income (loss) (1,127,448) 659,235 (468,213) (2,664,172) 198,411 (2,465,761)
Other income (expense) - net 1,345 1,345 1,108 1,108
Fortune Creek accretion (4,923) (4,923) (19,472) (19,472)
Interest expense (41,703) (41,703) (164,051) (164,051)
Income (loss) before income taxes (1,172,729) 659,235 (513,494) (2,846,587) 198,411 (2,648,176)
Income tax (expense) benefit 71,807 (106,812) (35,005) 361,438 (65,868) 295,570
Net income (loss) $ (1,100,922) $ 552,423 $ (548,499) $ (2,485,149) $ 132,543 $ (2,352,606)
Earnings (loss) per common share - basic $ (6.47) $ 3.25 $ (3.22) $ (14.61) $ 0.78 $ (13.83)
Earnings (loss) per common share - diluted $ (6.47) $ 3.25 $ (3.22) $ (14.61) $ 0.78 $ (13.83)
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except share data
As of December 31, 2012
Preliminary
Unaudited

Adjustments

Final
ASSETS
Current assets
Cash and cash equivalents $ 4,951 $ 4,951
Accounts receivable - net of allowance for doubtful accounts 64,149 64,149
Derivative assets at fair value 113,367 113,367
Other current assets 25,046 25,046
Total current assets 207,513 207,513
Property, plant and equipment - net
Oil and gas properties, full cost method (including unevaluated costs of $307,267) 622,519 158,441 780,960
Other property and equipment 248,098 248,098
Property, plant and equipment - net 870,617 158,441 1,029,058
Derivative assets at fair value 105,270 105,270
Deferred income taxes 65,135 (65,135)
Other assets 39,947 39,947
$ 1,288,482 $ 93,306 $ 1,381,788
LIABILITIES AND EQUITY
Current liabilities
Current portion of long-term debt $ — $ —
Accounts payable 37,131 37,131
Accrued liabilities 130,660 130,660
Derivative liabilities at fair value
Current deferred tax liability 3,891 (3,891)
Total current liabilities 171,682 (3,891) 167,791
Long-term debt 2,063,206 2,063,206
Partnership liability 130,912 130,912
Asset retirement obligations 115,949 115,949
Derivative liabilities at fair value 17,485 17,485
Other liabilities 19,242 19,242
Deferred income taxes
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 shares issued 1,790 1,790
Additional paid in capital 760,341 (8,947) 751,394
Treasury stock of 5,921,102 shares (49,495) (49,495)
Accumulated other comprehensive income 187,892 (26,399) 161,493
Retained earnings (deficit) (2,130,522) 132,543 (1,997,979)
Total stockholders' equity (1,229,994) 97,197 (1,132,797)
$ 1,288,482 $ 93,306 $ 1,381,788
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
For the year ended December 31, 2012
Preliminary
Unaudited

Adjustments

Final
Operating activities:
Net income (loss) $ (2,485,149) $ 132,543 $ (2,352,606)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and accretion 185,266 (21,642) 163,624
Impairment expense 2,764,464 (138,536) 2,625,928
Write-off of MLP filing fees 7,505 7,505
Crestwood earn-out (41,097) (41,097)
Deferred income tax expense (benefit) (356,937) 65,867 (291,070)
Non-cash (gain) loss from hedging and derivative activities 96,058 (38,232) 57,826
Stock-based compensation 22,246 22,246
Non-cash interest expense 9,854 9,854
Fortune Creek accretion 19,472 19,472
Other 1,037 1,037
Changes in assets and liabilities
Accounts receivable 30,950 30,950
Derivative assets at fair value
Prepaid expenses and other assets 3,070 (7,505) (4,435)
Accounts payable (13,317) 4,422 (8,895)
Income taxes payable 1,183 1,183
Accrued and other liabilities (14,884) 1,089 (13,795)
Net cash provided by operating activities 222,216 5,511 227,727
Investing activities:
Capital expenditures (481,057) (4,422) (485,479)
Proceeds from Crestwood earn-out 41,097 41,097
Proceeds from sale of properties and equipment 72,725 72,725
Net cash provided (used) by investing activities (367,235) (4,422) (371,657)
Financing activities:
Issuance of debt 467,959 467,959
Repayments of debt (310,430) (310,430)
Debt issuance costs paid (3,022) (3,022)
Distribution of Fortune Creek Partnership funds (14,285) (14,285)
Proceeds from exercise of stock options 11 11
Excess tax benefits on stock compensation 1,089 (1,089)
Purchase of treasury stock (3,144) (3,144)
Net cash provided (used) by financing activities 138,178 (1,089) 137,089
Effect of exchange rate changes in cash (1,354) (1,354)
Net change in cash (8,195) (8,195)
Cash and cash equivalents at beginning of period 13,146 13,146
Cash and cash equivalents at end of period $ 4,951 $ — $ 4,951
QUICKSILVER RESOURCES INC.
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
In thousands, except per share data
Quarter Ended December 31, 2012 Twelve Months Ended December 31, 2012
Preliminary
Unaudited

Adjustments

Final
Preliminary
Unaudited

Adjustments

Final
Net income (loss) $ (1,100,922) $ 552,423 $ (548,499) $ (2,485,149) $ 132,543 $ (2,352,606)
Adjustments
Unrealized (gain)/loss on commodity derivatives (38,266) (38,266) 17,880 17,880
Restructure of hedge contracts 200 200 14,755 14,755
Loss (gain) from hedge ineffectiveness (2,526) 2,266 (260) (4,594) 3,313 (1,281)
Impairment of assets 1,162,961 (605,820) 557,141 2,764,464 (138,536) 2,625,928
Crestwood earn-out (41,097) (41,097)
Inception loss on 10-year hedges 21,670 (21,670)
Interest expense related to debt restructure 2,789 2,789
Strategic transaction costs 7,505 7,505 8,503 8,503
Audit and accounting fees 3,479 3,479
Valuation allowance on deferred tax asset 325,847 (118,739) 207,108 609,477 (14,260) 595,217
Reduction of uncertain tax position liability (9,219) (9,219)
Acceleration of stock compensation expense 900 900 4,137 4,137
Other 1,130 1,130
Total adjustments before income tax expense 1,494,887 (760,559) 734,328 3,375,494 (153,273) 3,222,221
Income tax expense for above adjustments (396,362) 219,455 (176,907) (936,724) 59,339 (877,385)
Total adjustments after tax 1,098,525 (541,104) 557,421 2,438,770 (93,934) 2,344,836
Adjusted net income $ (2,397) $ 11,319 $ 8,922 $ (46,379) $ 38,609 $ (7,770)
Adjusted net income per common share - diluted $ (0.01) $ 0.06 $ 0.05 $ (0.27) $ 0.22 $ (0.05)
Diluted weighted average common shares outstanding 170,260 170,260 170,106 170,106

Source:Quicksilver Resources