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Table of Contents
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2002
 
OR
 
¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                                to                                 
 
Commission file number: 001-14837
 
Quicksilver Resources Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of incorporation or organization)
 
75-2756163
(I.R.S. Employer Identification No.)
 
777 West Rosedale, Suite 300, Fort Worth, Texas 76104
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (817) 665-5000
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Name of each exchange on which registered
Common Stock, par value $0.01 per share
  
New York Stock Exchange
 
Securities registered pursuant to Section 12 (g) of the Act: None
 
        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x No  ¨
 
        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes  x No  ¨
 
        As of November 8, 2002, the registrant had 19,942,245 outstanding shares of its common stock, $0.01 par value.
 

Table of Contents
QUICKSILVER RESOURCES INC.
INDEX
 
    
Page
PART I.    FINANCIAL INFORMATION
     
Item 1.    Financial Statements
     
  
3
  
4
  
5
  
6
  
7
  
11
  
17
  
19
PART II.    OTHER INFORMATION
     
  
20
  
20
  
20
  
21
  
22

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Table of Contents
PART I.    FINANCIAL INFORMATION
 
ITEM 1.    Financial Statements
 
INDEPENDENT ACCOUNTANTS’ REPORT
 
To the Board of Directors and Stockholders of
Quicksilver Resources Inc.
Fort Worth, Texas
 
We have reviewed the accompanying condensed consolidated balance sheet of Quicksilver Resources Inc. (the Company) as of September 30, 2002, and the related condensed consolidated statements of income for the three and nine month periods ended September 30, 2002 and 2001 and cash flows for the nine month periods ended September 30, 2002 and 2001. These financial statements are the responsibility of the Company’s management.
 
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
 
Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
 
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of the Company as of December 31, 2001, and the related consolidated statements of income, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated March 8, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2001, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
 
 
/s/ DELOITTE & TOUCHE LLP
 
Fort Worth, Texas
November 8, 2002

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QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except for share data
 
    
September 30, 2002
     
December 31, 2001
  
    
(Unaudited)
         
ASSETS
                  
Current assets
                  
Cash and cash equivalents
   
$
12,223
 
   
$
8,726
 
Accounts receivable
   
 
19,371
 
   
 
21,489
 
Inventories and other current assets
   
 
5,786
 
   
 
5,079
 
    
  
Total current assets
   
 
37,380
 
   
 
35,294
 
Investments in and advances to equity affiliates
   
 
11,337
 
   
 
14,248
 
Properties, plant and equipment – net (“full cost”)
   
 
420,876
 
   
 
412,455
 
Other assets
   
 
4,479
 
   
 
7,247
 
    
  
    
$
474,072
 
   
$
469,244
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities
                  
Current portion of long-term debt
   
$
945
 
   
$
945
 
Accounts payable
   
 
10,572
 
   
 
12,168
 
Accrued derivative obligations
   
 
20,429
 
   
 
9,025
 
Accrued liabilities
   
 
24,110
 
   
 
34,937
 
    
  
Total current liabilities
   
 
56,056
 
   
 
57,075
 
Long-term debt
   
 
240,065
 
   
 
248,425
 
Unearned revenue
   
 
—  
 
   
 
4,561
 
Deferred derivative obligations
   
 
22,790
 
   
 
13,461
 
Other long-term liabilities
   
 
220
 
   
 
222
 
Deferred income taxes
   
 
48,523
 
   
 
51,113
 
Stockholders’ equity
                  
Preferred stock, $0.01 par value, 10,000,000 shares authorized, 1 share issued and outstanding
   
 
—  
 
   
 
—  
 
Common stock, $0.01 par value, 40,000,000 shares authorized, 23,632,864 and 22,534,875 shares issued, respectively
   
 
236
 
   
 
225
 
Paid in capital in excess of par value
   
 
94,804
 
   
 
77,814
 
Treasury stock of 3,714,752 and 3,751,852 shares, respectively
   
 
(14,490
)
   
 
(14,634
)
Accumulated other comprehensive income
   
 
(28,623
)
   
 
(14,007
)
Retained earnings
   
 
54,491
 
   
 
44,989
 
    
  
    
 
106,418
 
   
 
94,387
 
    
  
    
$
474,072
 
   
$
469,244
 
    
  
 
The accompanying notes are an integral part of these financial statements.

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Table of Contents
 
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In thousands, except for per share data – Unaudited
 
    
For the Three Months Ended September 30,
     
For the Nine Months Ended September 30,
  
    
2002
   
2001
     
2002
     
2001
  
Revenues
                                  
Oil, gas and related product sales
   
$
28,959
   
$
28,381
 
   
$
81,078
 
   
$
100,291
 
Other revenue
   
 
1,484
   
 
3,847
 
   
 
9,235
 
   
 
13,656
 
    
  
  
  
Total revenues
   
 
30,443
   
 
32,228
 
   
 
90,313
 
   
 
113,947
 
Expenses
                                  
Oil and gas production costs
   
 
9,608
   
 
11,639
 
   
 
31,213
 
   
 
40,190
 
Other operating costs
   
 
407
   
 
363
 
   
 
1,050
 
   
 
1,057
 
Depletion and depreciation
   
 
7,805
   
 
7,168
 
   
 
22,611
 
   
 
21,615
 
Provision for doubtful accounts
   
 
—  
   
 
—  
 
   
 
—  
 
   
 
(1,071
)
General and administrative
   
 
1,578
   
 
2,187
 
   
 
5,934
 
   
 
6,713
 
    
  
  
  
Total expenses
   
 
19,398
   
 
21,357
 
   
 
60,808
 
   
 
68,504
 
    
  
  
  
Operating income
   
 
11,045
   
 
10,871
 
   
 
29,505
 
   
 
45,443
 
Other (income) expense-net
   
 
81
   
 
(36
)
   
 
(367
)
   
 
(408
)
Interest expense
   
 
5,188
   
 
6,002
 
   
 
15,026
 
   
 
18,544
 
    
  
  
  
Income before income taxes
   
 
5,776
   
 
4,905
 
   
 
14,846
 
   
 
27,307
 
Income tax expense
   
 
2,136
   
 
1,785
 
   
 
5,344
 
   
 
9,779
 
    
  
  
  
Net income
   
$
3,640
   
$
3,120
 
   
$
9,502
 
   
$
17,528
 
    
  
  
  
Basic earnings per share
   
$
0.18
   
$
0.17
 
   
$
0.48
 
   
$
0.94
 
Diluted earnings per share
   
$
0.18
   
$
0.16
 
   
$
0.47
 
   
$
0.91
 
Basic weighted average shares outstanding
   
 
19,894
   
 
18,686
 
   
 
19,598
 
   
 
18,623
 
Diluted weighted average shares outstanding
   
 
20,411
   
 
19,284
 
   
 
20,197
 
   
 
19,170
 
 
The accompanying notes are an integral part of these financial statements.

5

Table of Contents
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands – Unaudited
 
    
For the Nine Months Ended September 30,
  
    
2002
     
2001
  
Operating activities:
                  
Net income
   
$
9,502
 
   
$
17,528
 
Charges and credits to net income not affecting cash
                  
Depletion and depreciation
   
 
22,611
 
   
 
21,615
 
Deferred income taxes
   
 
5,295
 
   
 
9,362
 
Recognition of unearned revenues
   
 
(4,561
)
   
 
(7,087
)
Other
   
 
1,390
 
   
 
326
 
Changes in assets and liabilities
                  
Accounts receivable
   
 
2,142
 
   
 
4,573
 
Inventory, prepaid expenses and other
   
 
(1,303
)
   
 
(1,917
)
Accounts payable
   
 
(1,647
)
   
 
13
 
Accrued and other liabilities
   
 
(10,653
)
   
 
(1,877
)
    
  
Net cash from operating activities
   
 
22,776
 
   
 
42,536
 
    
  
Investing activities:
                  
Development and exploration costs and other property additions
   
 
(32,164
)
   
 
(46,959
)
Advances from (to) equity affiliates – net
   
 
2,842
 
   
 
(1,122
)
Proceeds from sale of assets
   
 
1,263
 
   
 
40
 
    
  
Net cash used for investing activities
   
 
(28,059
)
   
 
(48,041
)
    
  
Financing activities:
                  
Notes payable, bank proceeds
   
 
7,000
 
   
 
10,000
 
Principal payments on long-term debt
   
 
(14,481
)
   
 
(14,427
)
Deferred financing costs
   
 
(1,362
)
   
 
—