March 2013 NYSE: KWK

Transcription

1 March 2013 NYSE: KWK

2 Forward-looking Statements Forward-Looking Statements The statements in this presentation regarding future events, occurrences, circumstances, activities, performance, outcomes and results are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Although these statements reflect the current views, assumptions and expectations of Quicksilver s management, the matters addressed herein are subject to numerous risks and uncertainties, which could cause actual activities, performance, outcomes and results to differ materially from those indicated. Factors that could result in such differences or otherwise materially affect Quicksilver s financial condition, results of operations and cash flows 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, NGLs and oil reserves and predicting natural gas, NGL and oil reservoir performance; effects of hedging natural gas, NGLs and oil prices; fluctuations in the value of certain of Quicksilver s assets and liabilities; competitive conditions in Quicksilver s 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 and treating facilities; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond Quicksilver s control; failure or delay in completing strategic transactions; failure or delays in completing Quicksilver s proposed master limited partnership financings for certain of its Barnett Shale assets; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; the effects of existing or future litigation; as well as other factors disclosed in Quicksilver s filings with the U.S. Securities and Exchange Commission. The forward-looking statements included in this presentation are made only as of the date of this presentation, 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. Estimates of resource potential or upside were made by our internal engineers without review by an independent petroleum engineering firm. The Securities and Exchange Commission has generally permitted oil and gas companies, in their filings made with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation test to be economically and legally producible under existing economic and operating conditions. We use the terms resource "potential" or "upside" or other descriptions of volumes of reserves potentially recoverable through additional drilling or recovery techniques that the SEC's guidelines may prohibit us from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the company. NYSE: KWK 2

3 2012 RECAP NYSE: KWK 3

4 2012 Accomplishments Produced 132 Bcf of natural gas equivalent Generated $263MM of operating cash flow and $336MM of total cash flow Posted stellar results from Quicksilver s first multi-well pad in the Horn River Established oil production in two U.S. projects Advanced negotiations in Barnett minority interest sale and Horn River joint venture Reduced near-term capital and letter-of-credit obligations in the Horn River Basin Secured financial covenant flexibility Closed Sand Wash Basin Acquisition and Exploration Agreement with Shell Reduced overall company cost structure Increased hedge portfolio covering nearly 70% of expected 2013 natural gas production at $5.10/Mcf NYSE: KWK 4

5 2012 Realizations $6 $5 Cash Average Realized Prices and Recurring Unlevered Margins, per Mcfe $4 $ $2 $1 $0 Q1 Q2 Q3 Q4 Cash Revenue Cash Margin NYSE: KWK 5

6 Reserves (Bcfe) Reserves 3,000 2,500 2,000 1,500 1, Actual Reserves 2,791 Gas Price (33)% NGL Price (28)% 1,467 YE Price $4.12 2,791 Sensitivity Cases YE Price $2.76 1,467 ~1,800 ~1,300 ~2, A 2012A 2011A 2012A +$0.50 gas / +$5 oil -$0.50 gas / -$5 oil $4.88 gas / $88 oil Change in reserves from YE11 to YE12 attributable to revisions for price, technical, reclassification of 5-yr. PUDs and production As prices improve, certain proved reserves previously reclassified as probable may be booked as proved reserves again NYSE: KWK 6

7 Reserves Comparison Proved Reserves in Bcfe YE2011 YE ,925 1,290 PUD PDP PUD PDP NYSE: KWK 7

8 Reserves Comparison by Country Proved Reserves in Bcfe YE2011 YE ,460 1,200 Canada United States Canada United States NYSE: KWK 8

9 Q Non-Cash Impairment Recorded a $1.16B non-cash impairment of the full-cost pool in Q412 Two items comprised 99% of the impairment amount ~62% related to a change in accounting treatment for hedges Value of hedges calculated under SEC reserve pricing is no longer included in ceiling test ~37% related to reclassification of undeveloped reserves (PUDs) SEC places a limitation on PUDs that require their development within 5 years of initial recognition Delayed drilling due to depressed commodity prices causes planned development of PUDs to fall outside the 5 year window Expect to re-recognize reserves those PUDs in Q Impairment says little about the long-term value of the assets NYSE: KWK 9

10 2013 Goals Much accomplished in 2012, still more to do Monetize Barnett Shale assets via MLP or asset sale Continue to de-risk West Texas and Colorado projects Secure upstream joint ventures Continue to attack cost structure to maximize margins Generate free cash flow Reduce debt NYSE: KWK 10

11 Asset Overview Horseshoe Canyon CBM Horn River Basin 130,000 net acres 105 Bcfe of 12/12 >10 Tcf resource potential 330,000 net acres 162 Bcfe of 12/12 5 to 6-year potential inventory Sand Wash Basin - Niobrara So. Alberta Basin 170,000 net acres Midland/Delaware Basin 150,000 net acres >400 MM BOE resource Development / production Exploration / assessment NYSE: KWK 160,000 net acres (oil) 850,000 acre AMI with SWEPI >300 MM BOE resource Developing with SWEPI Ft. Worth Basin - Barnett 140,000 net acres 1.2 Tcfe of 12/12 >+1.5 Tcfe resource potential ~60% of acreage is developed >10-year project inventory Tight Gas Plays Shale Plays Tight Gas Basins Shale Basins 11

12 BARNETT NYSE: KWK 12

13 Barnett Update 2012 Activity Drilled 22 gross wells and connected 31 gross wells Inventory of 25 drilled but uncompleted wells at YE2012 Expecting to drill and complete <10 wells in 2013 Ability to quickly ramp-up activity to meet potential partner requirements or as prices warrant Well costs are ~$3.0MM - $3.5MM Results in ~9% Barnett production decline YOY ~60% of the Barnett acreage is held by production NYSE: KWK 13

14 CANADA NYSE: KWK 14

15 Horn River Update Current raw production at 100 MMcfd from 10 wells Four legacy wells producing 18+ ~15 MMcfd; six wells from d-50 pad ~85 MMcfd; two wells remains shut-in Expected to generate cash margin of $2.25/Mcf on production in excess of 30 MMcfd (current baseline treating/transportation commitment) Expecting minimal capital in 2H13 to prepare to drill a 4-6 well pad in early 2014 NYSE: KWK 15

16 Horn River d50 Pad Completed an 8-well pad in July/August 2012 Individual wells have produced at a rate of between MMcfd >50% improvement in peak gas rate compared to first four wells New vs. existing wells exhibiting similar normalized production rate (Mcfd per foot) IP trending to ~2.9 Mcfd per foot vs Mcfd per foot in Barnett Lateral lengths (avg.) increased from 4,200 (existing) to 7,400 (new) +15Bcf of performance revisions from d50 pad booked in 2012 NYSE: KWK 16

17 HRB Type Curves: First Four Wells NYSE: KWK 17

18 Komie North pipeline delayed until at least 2017 Horn River Update Komie North Extension National Energy Board requires greater commercial support Future financial assurances expected to be reduced in proportion to third-party support Treating and transportation commitment remains at 100 MMcfd until Komie is operational Annual drilling plan now designed to keep production flat to meet treating and transportation commitment through 2018 Defers >$100MM of 2014 drilling capital for at least two years Delay in commissioning treating facility defers significant capex The pipeline delay defers significant capital that was earmarked for 2013 and 2014 and reduces letter-of-credit obligations by >$200MM NYSE: KWK 18

19 MMcfd Horn River Treating Commitments Current treating commitment 30 MMcfd May-11 May-12 May-13 May-14 May-15 May-16 May-17 May-18

20 Horn River Multiple Take-away Options SMR KWK 20 KWK Pipeline EOG RAMSHORN PROPOSED KWK GAS PLANT DEVON KWK Acreage KWK 20 line TCPL Horn River Extension STORM ENERGY B R I T I S H C O L U M B I A CONOCO DEVON NEXEN Horn River Basin ECA & Spectra Cabin Gas Plant ENCANA & APACHE CABIN DEEP CUT Ft. Nelson Gas Plant TCPL Horn River Extension 2014 ENCANA Aitken Creek Gas Plant Boundary Lake EXXON CABIN ACID GAS PLANT Montney Shale Low-cost transportation solution to multiple markets Komie delayed to at least 2017 Developing alternative downstream solution T A K E - A W A Y NYSE: KWK

21 COLORADO NYSE: KWK 21

22 Colorado Summary C O L O R A D O 320,000 gross acres; 160,000 KWK net acres Average NRI ~ 81% >300 MM Bbls of oil equivalent resource potential Estimated per well EUR >200 MBbls Sweet crude +/- 40 gravity, low GOR (~65% oil) KWK-SWEPI Acreage NYSE: KWK 22

23 Sand Wash Acquisition & Exploration Agreement Quicksilver and Shell will jointly develop 320,000 acres 50/50 sharing Shell will operate a majority of the acreage; Quicksilver retains operatorship on wells drilled (and surrounding acreage) prior to execution of AEA Deal closed in December 2012 Shell paid Quicksilver a cash sum to compensate for the excess acreage contributed to the AEA Benefits to Quicksilver: Quicksilver s position now more attractive to a third-party for a potential JV Ability to unitize intertwined acreage to hold a larger number of leases with less drilling and to lay out a more orderly development of the play Shell and Quicksilver s combined technical expertise will help advance and expand the project NYSE: KWK 23

24 Oil (bbl/d) Composite Type Curve 80 Vintage Wells c Forecast Qi = 60 Dei = 25 b = 1.2 Demin = 3 Lat Length = n/a EUR 193,837 bbl Zerotime Average Curve Fit Months The average production of the existing Niobrara oil wells is shown and a type curve generated. Vertical wells inadequately stimulated. NYSE: KWK 24

25 Colorado Update 2012 activity Drilled 3 wells, and refracked two wells with treated slickwater Recent verticals IP averaging 100 Boed on shallow declines Completed vertical well in 400 Boed (60% oil) IP and 90-day rate of 138 Boed Expecting to participate in up to 8 wells in 2013 Quicksilver has found productive Niobrara across a distance of 35 miles in an east-to-west band and 7 miles in a north-to-south band across the company s Sand Wash leasehold Well costs estimated to be in the range of $15/Boe 1,200 of Niobrara discovered across the acreage NYSE: KWK 25

26 WEST TEXAS NYSE: KWK 26

27 West Texas Wolfpack T E X A S COMSTOCK PIONEER CWI WHITING CONOCO -PHILLIPS BHP BILLITON EOG FOREST OIL EL PASO CONCHO SANTA RITA APPROACH RESOURCES BALMORHEA EXXON MOBILE/XTO LEON VALLEY PRESIDIO KWK Acreage ~105,000 net acres; 78% NRI Additional ~50,000 net acres in Presidio County NYSE: KWK 27

28 West Texas Update Vande Ranch well drilled in 4Q12 is producing 38 Boed and continues to improve 32% of load water recovered from a 2,400 horizontal well bore targeting the Wolfcamp formation Price Ranch #1 drilled in 3Q12 with IP rate of 300 Boed targeting the Bone Springs; 100-day rate of 129 Boed Completed with a 1,500 lateral 80% oil, 20% high-btu natural gas ~45k undeveloped acres surrounding Price Ranch #1 Additional wells expected to be completed with 6,000 7,500 laterals and at least 20 fracture stages; should translate into greater production volumes NYSE: KWK 28

29 FINANCIAL NYSE: KWK 29

30 Financial Flexibility $120 MM 2013 capital budget, in line with projected operating cash flows 2013 total production expected to decline 5% despite minimal drill bit capital harvesting the capital investment Komie North delay significantly defers and reduces capital spending and financial assurances in Horn River Basin Adequate flexibility and liquidity in Combined Credit Agreements Interest coverage ratio of 1.5x through March 2014; steps up to 2.0x in June 2014 and to original 2.5x in September 2014 NYSE: KWK 30

31 Financial Flexibility (cont d) Strong natural gas hedge position in 2013 and beyond Executable deleveraging strategy No near-term debt maturities $438 MM 8/2015 $591 MM 1/2016 $350 MM 4/2016 $298 MM 8/2019 Evaluating near-term refinance strategies to enhance liquidity and extend maturities Opportunity to launch and fund an offering as early as 2Q13 Limitation on liens of $1.2B provides optionality NYSE: KWK 31

32 Hedge Volume (MMcfd) Strong Derivative Position Underpins capital program through stabilization and predictability of cash flow $5.10 $5.23 $5.08 $6.00 $ $4.00 $3.00 $ $ $0.00 Volume Feb 28, 2013 Strip Weighted Average Price NYSE: KWK 32

33 Compelling Investment Opportunity High-quality resource base 88% proved developed >12 Tcfe of proven unbooked resource potential Solid natural gas hedge position Large-scale resource inventory, largest in company history Asset size and quality ideal for joint ventures High full-cycle margins Option on developing oil plays NYSE: KWK 33

34 APPENDIX NYSE: KWK 34

35 First Quarter 2013 Guidance Production: MMcfd Lease Operating Expense: $ $0.82 Gathering, Processing, and Trans.: $ $1.22 Ad-Valorem Taxes: $ $0.16 General & Administrative: $ $0.57 DD&A: $ $.054 NYSE: KWK 35

36 Full-Year 2013 Guidance Production: MMcfd Barnett 65% Canada 33% Other U.S. 2% Natural gas: 82%, NGL/Oil, 18% Capital Spending: $120 Million NYSE: KWK 36

37 2012 Reserves Natural Gas (Bcf) Natural Gas Liquids (MBbl) Oil and Condensate (MBbl) Total (Bcfe) Proved Reserves, December 31, , ,156 3,035 2,791 Revisions (944) (45,378) (479) (1,219) Extensions, Discoveries, and Other Additions 26 3, Production (106) (4,070) (287) (132) Acquisitions & Dispositions, net (21) (42) (85) (22) Proved Reserves, December 31, ,115 56,184 2,529 1,467 Reserve pricing (first of month trailing 12-month average) Developed Barnett Shale , ,007 Sand Wash 85 1 West Texas 83 Other U.S , Total U.S ,284 2,416 1,023 Horn River Horseshoe Canyon Total Canada Total Quicksilver ,294 2,416 1,290 Undeveloped Barnett Shale 123 8, Total Quicksilver 123 8, Total Proved 1,115 56,184 2,529 1,467 NYSE: KWK 37

38 2012 Production Quarter Ended Dec 31, Year ended Dec 31, Average Daily Production: Natural Gas (MMcfd) NGL (Bbld) 10,525 11,892 11,121 12,147 Oil (Bbld) Total (MMcfed) Barnett Shale Other U.S Total U.S Horseshoe Canyon Horn River Total Canada Total Company NYSE: KWK 38

39 2012 Average Realized Price Average Realized Prices, including hedging: Natural Gas (per Mcf) $ 4.50 $ 4.73 $ 4.26 $ 4.95 NGL (per Bbl) Oil (per Bbl) Total (Mcfe) Average Realized Prices, excluding hedging: Quarter Ended Dec 31, Year ended Dec 31, Natural Gas (per Mcf) $ 3.20 $ 3.40 $ 2.59 $ 3.88 NGL (per Bbl) Oil (per Bbl) Total (Mcfe) NYSE: KWK 39

40 Derivative Portfolio Natural Gas - Thousand MMBtu/d Swaps $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Total WASP $ 5.10 $ 5.08 $ 5.23 $ 4.48 $ 4.48 $ 4.48 $ 4.48 $ 4.48 $ 4.48 NYSE: KWK 40

41 Quicksilver Resources 801 Cherry Street, Suite 3700, Unit 19 Fort Worth, TX Website: Investors: David Erdman Phone: NYSE: KWK