Natural gas and crude oil explorer Quicksilver Resources Inc. (KWK) Monday turned in a modest profit for the third quarter, reflecting much lower one-time charges. Adjusted earnings declined year-over-year on lower revenues due mainly to lower average realized prices for all commodities.
For the third quarter, net income attributable to Quicksilver was $730 thousand or breakeven per share, compared to net loss of $3.76 million or $0.02 per share in the previous year.
The results of the latest quarter included, among others, pre-tax net charges of $49.9 million related to the company's 40% stake in BreitBurn Energy Partners, or BBEP. The charges included gains related to the early settlement of hedges and interest rate swaps, and a charge for the unrealized mark-to-market loss on oil and gas derivative positions.
The prior-year results included a charge of $103.5 million related to the unrealized mark-to-market loss of derivative positions held by BBEP and a charge of $9.6 million pertaining to the company's settlement of litigation.
Excluding items, net income came down to $42.74 million or $0.25 a share from $69.79 million or $0.40 a share in the year-ago period.
On average, 24 analysts polled by Thomson Reuters expected the company to report earnings of $0.22 per share for the third quarter. Analysts' estimate typically excludes special items.
Operating income decreased year-over-year to $103.70 million from $119.99 million.
Total revenue for the period dipped to $206.66 million from $236.26 million in the third quarter of the prior fiscal year. Fourteen analysts were expecting revenue of $206.10 in the third quarter.
Sale of Natural gas, natural gas liquids, or NGL, and crude oil fetched revenue of $198.28 million, compared to $218.21 million a year ago. Sales of purchased natural gas added $5.96 million to revenue of fiscal 2009 third quarter. Other revenues decreased to $2.41 million from $18.05 million.
Quicksilver noted that higher production volumes from its properties in the Fort Worth Basin in Texas and Horseshoe Canyon area in Alberta, Canada, and lower production costs were more than offset by lower average realized prices of the fossil fuels, which resulted in about a 19% decrease in the average realized price per thousand cubic feet of natural gas equivalent, or Mcfe, after hedge consideration.
Total average daily production climbed 12% to 311.2 million cubic feet of natural gas equivalent, or Mmcfe, per day from 277.0 Mmcfe per day in the prior-year quarter. Natural Gas production went up to 221,168 thousand cubic feet per day, or Mcfd, from 199,820 Mcfd. NGL production increased to 14.02 thousand barrels per day, or Bbld, from 11.53 Bbld, while Oil production dipped to 981 Bbld from 1,334 Bbld in the third quarter of the past year.
Total production for the third quarter of 2009 was around 28.6 billion cubic feet of natural gas equivalent, or Bcfe, compared to about 25.5 Bcfe for the third quarter of 2008. Increased activities at the company's Lake Arlington and Alliance projects in the northern portion of its Fort Worth Basin acreage resulted in increased production of dry gas as a percent of total production in the 2009 quarter as compared to the previous year.
Average realized prices of natural gas reduced to $7.69 per thousand cubic feet, or Mcf, from $8.20 Mcf. Prices of NGL dropped to $28.15 per Bbl from $53.82 per Bbl, while oil prices slid to $60.55 per barrel from $84.80 per barrel.
Total oil and gas production expense decreased 22% year-over-year to $1.02 per Mcfe from $1.30 per Mcfe. Total production expense for the third quarter was $29.1 million, down $4.0 million from the prior-year period.
During the quarter, Quicksilver drilled 23.7 net operated wells and connected 9.35 net operated wells to sales in the Fort Worth Basin. The company presently has 5 rigs working in the basin. In Canada, the company drilled 2.9 net operated wells in the Horseshoe Canyon area and expects to drill three 1.8 net operated wells for the remainder of this year.
Quicksilver also revealed that interest expense increased to $41.62 million from $35.98 million in the 2008 quarter, mainly because of a higher weighted-average interest rate and marginal rise in average debt balances.
For the nine-month period, net loss attributable to Quicksilver was $590.01 million or $3.49 per share, compared to net income of $88.71 million or $0.55 per share last year. Adjusted earnings dipped to $101.04 million or $0.58 a share from $177.11 million or $1.04 a share in the past year. Revenues grew to $598.63 million from $591.78 million in the same period last year.
Looking ahead, for the fourth quarter, Quicksilver expects average production volumes to range between 330 MMcfe and 340 MMcfe per day.
KWK is currently trading at $13.31, up $0.46 or 3.58%, on the NYSE.
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