With its coal bed methane production beating even its own estimates, Quicksilver Resources Inc. Monday reported third quarter 2003 net income of $5.2 million ($0.23/share) on revenues of $33.5 million, marking a fairly significant increase over third quarter 2002 net income of $3.6 million ($0.18/share) on revenues of $30.3 million.

The strong results follow last week’s anointing of Quicksilver Resources as one of the top four performing exploration and production companies by Southwest Securities analyst John Gerdes (see Daily GPI, Nov. 4). He said reserve replacement and low finding and development costs are the key predictors in determining how an exploration and production company will do in the stock market these days.

Natural gas production for the third quarter of 2003 was 8.5 Bcf, or 93 MMcf/d, versus 8.4 Bcf, 91 MMcf/d for the same period in 2002. Quicksilver said the company’s gas production in the third quarter of 2003 — including the effects of hedging — brought in an average of $3.27/Mcf) compared to $2.72/Mcf received in the same period of 2002. Natural gas, including natural gas liquids, comprised 88% of the company’s total production in the third quarter of 2003.

Natural gas liquids production for the third quarter 2003 was 34,000 barrels versus 49,000 barrels in the third quarter of 2002. The price realized for natural gas liquids averaged $18.15 in the third quarter of 2003 compared to the average $15.77 realized in the third quarter of 2002. Quicksilver’s crude oil production for the 2003 third quarter was 192,000 barrels, or 2,088 b/d as compared to 220,000 barrels, or 2,387 b/d in the third quarter of 2002. Oil prices realized for the third quarter of 2003 averaged $23.33 per barrel versus $24.15 for the prior year third quarter.

Among the company’s third quarter highlights are that Canadian net gas sales in November have increased to 15 MMcf/d with significant production additions in the third quarter from the Beiseker and Gayford coal bed methane developments in the Palliser area of Southern Alberta. This production is primarily from the Horseshoe Canyon coals and other gas-bearing zones within the Edmonton group and the Belly River formations. To date, 138 wells have been drilled this year and drilling operations are ongoing to drill 186 total wells by year-end. This target is higher than the company’s earlier estimate of 176 wells due to the success of its coal bed testing program.

The company also put into operation its 12-mile Cardinal Pipeline at the end of September. The pipeline connects Quicksilver’s Indiana production into the interstate pipeline market, where it is now selling more than five MMcf/d out of this New Albany shale production area. The company reported that 82 of 85 wells planned for the year have been drilled with tie-ins continuing through year-end. In addition to the remaining three budgeted wells to be drilled this year, Quicksilver said it plans to drill approximately 20 additional wells this year in the project. The company said it expects to reach its planned production rate for the project of 10 MMcf/d by year-end.

Regarding Quicksilver’s Michigan Antrim shale production area, the company has drilled or participated in the drilling of 62 gross (48 net) wells. The budgeted 56 net Michigan Antrim shale wells should be completed by year-end.

“With current production of 15 million cubic feet a day in Canada, we are ahead of our previously announced projections for our Canadian coal bed methane development. We will continue to add production in Canada before we close out the year,” said Glenn Darden, Quicksilver’s CEO. “In spite of third-party plant outages in Michigan, we were able to meet Wall Street’s earnings expectations. With Michigan now back on full production and gas volumes increasing in our two very active developments in Canada and Indiana/Kentucky, Quicksilver is poised for significant production and reserve growth in 2004.”

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