##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 or
 o
    
    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.
  Delaware
    
    75-2756163(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)777 West Rosedale, Fort Worth, Texas
    
    76104(Address of principal executive offices)
    
    (Zip Code)
 (817) 665-5000
 None
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Title of Class
    
    Outstanding as of April 26, 2010Common Stock, $0.01 par value
    
    170,279,079




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##### Table of Contents



DEFINITIONS
  Bbl Bbls
 Bbld
 Bcf
 Bcfd
 Bcfe
 Canada
 DD&A
 LIBOR
 MBbl MBbls
 MBbld
 MMBbls
 MMBtu
 MMBtud
 Mcf
 Mcfe
 MMcf
 MMcfd
 MMcfe
 MMcfed
 NGL NGLs
 NYMEX
 Oil
 Tcfe
 COMMONLY USED TERMS
  ABR
 AOCI
 Alliance Leasehold
 Alliance Midstream Assets
 BBEP
 Eni
 Eni Production
 Eni Transaction
 FASB
 FASC FASB Accounting Standards Codification
 GAAP
 Gas Purchase Commitment
 KGS
 KGS Credit Facility
 KGS Secondary Offering
 Mercury
 Michigan Sales Contract
 OCI
 RSU
 SEC
 Senior Secured Credit Facility
 2




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##### 



QUICKSILVER RESOURCES INC.
INDEX TO FORM 10-Q
For the Period Ending March 31, 2010
  
 PART I. FINANCIAL INFORMATIONItem 1.   Condensed Consolidated Interim Financial Statements (Unaudited)Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)Condensed Consolidated Balance SheetsCondensed Consolidated Statements of EquityCondensed Consolidated Statements of Cash FlowsNotes to Condensed Consolidated Interim Financial StatementsItem 2.   Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.   Quantitative and Qualitative Disclosures About Market RiskItem 4.   Controls and ProceduresPART II. OTHER INFORMATIONItem 1.   Legal ProceedingsItem 1A.   Risk FactorsItem 2.   Unregistered Sales of Equity Securities and Use of ProceedsItem 3.   Defaults Upon Senior SecuritiesItem 4.   [Removed and Reserved]Item 5.   Other InformationItem 6.   ExhibitsSignatureEX-31.1EX-31.2EX-32.1
   3




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##### Table of Contents



Forward-Looking Information
  
    
    changes in general economic conditions;
    
    fluctuations in natural gas, NGL and crude oil prices;
    
    failure or delays in achieving expected production from exploration and development
projects;
    
    uncertainties inherent in estimates of natural gas, NGL and crude oil reserves and
predicting natural gas, NGL and crude oil reservoir performance;
    
    effects of hedging natural gas, NGL and crude oil prices;
    
    fluctuations in the value of certain of our assets and liabilities;
    
    competitive conditions in our 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;
    
    operating hazards, natural disasters, weather-related delays, casualty losses and
other matters beyond our control;
    
    the effects of existing and future laws and governmental regulations, including
environmental and climate change requirements;
    
    the effects of existing or future litigation; and
    
    certain factors discussed elsewhere in this quarterly report.
   4




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PART I.  FINANCIAL INFORMATION
 
 Item 1.  Condensed Consolidated Interim Financial Statements (Unaudited)
 
 QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
In thousands, except for per share data  Unaudited
 For the Three Months EndedMarch 31,2010
    
    
    2009RevenueNatural gas, NGL and crude oil
    
    $
    201,563
    
    
    $
    183,554Sales of purchased natural gas
    
    
    16,224
    
    
    
    -Other
    
    
    4,371
    
    
    
    2,378Total revenue
    
    
    222,158
    
    
    
    185,932Operating expenseOil and gas production expense
    
    
    35,989
    
    
    
    32,171Production and ad valorem taxes
    
    
    8,483
    
    
    
    4,366Costs of purchased natural gas
    
    
    33,307
    
    
    
    -Other operating costs
    
    
    1,254
    
    
    
    1,527Depletion, depreciation and accretion
    
    
    46,757
    
    
    
    59,696General and administrative
    
    
    20,523
    
    
    
    17,381Total expense
    
    
    146,313
    
    
    
    115,141Impairment related to oil and gas properties
    
    
    -
    
    
    
    (896,483
    )Operating income (loss)
    
    
    75,845
    
    
    
    (825,692
    )Loss from earnings of BBEP - net
    
    
    (15,989
    )
    
    
    -Other income - net
    
    
    343
    
    
    
    761Interest expense
    
    
    (44,517
    )
    
    
    (40,201
    )Income (loss) before income taxes
    
    
    15,682
    
    
    
    (865,132
    )Income tax (expense) benefit
    
    
    (5,082
    )
    
    
    297,823Net income (loss)
    
    
    10,600
    
    
    
    (567,309
    )Net income attributable to noncontrolling interests
    
    
    (2,412
    )
    
    
    (1,670
    )Net income (loss) attributable to Quicksilver
    
    $
    8,188
    
    
    $
    (568,979
    )Other comprehensive income (loss) - net of income taxReclassification adjustments related tosettlements of derivative contracts
    
    
    (26,269
    )
    
    
    (36,914
    )Net change in derivative fair value
    
    
    98,606
    
    
    
    108,603Foreign currency translation adjustment
    
    
    6,960
    
    
    
    (7,224
    )Comprehensive income (loss)
    
    $
    87,485
    
    
    $
    (504,514
    )Earnings (loss) per common share - basic
    
    $
    0.05
    
    
    $
    (3.37
    )Earnings (loss) per common share - diluted
    
    $
    0.05
    
    
    $
    (3.37
    )Basic weighted average shares outstanding
    
    
    170,175
    
    
    
    168,841Diluted weighted average shares outstanding
    
    
    171,040
    
    
    
    168,841
  5




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QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except for share data  Unaudited
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    601
    
    
    $
    1,785Accounts receivable - net of allowance for doubtful accounts
    
    
    60,348
    
    
    
    65,253Derivative assets at fair value
    
    
    172,850
    
    
    
    97,957Other current assets
    
    
    50,542
    
    
    
    54,943Total current assets
    
    
    284,341
    
    
    
    219,938Investment in BBEP
    
    
    96,774
    
    
    
    112,763Property, plant and equipmentOil and gas properties, full cost method (including unevaluated costs of
$392,272 and $458,037, respectively)
    
    
    2,428,099
    
    
    
    2,338,244Other property and equipment
    
    
    765,789
    
    
    
    747,696Property, plant and equipment - net
    
    
    3,193,888
    
    
    
    3,085,940Derivative assets at fair value
    
    
    54,304
    
    
    
    14,427Deferred income taxes
    
    
    118,203
    
    
    
    133,051Other assets
    
    
    44,489
    
    
    
    46,763$
    3,791,999
    
    
    $
    3,612,882LIABILITIES AND EQUITYCurrent liabilitiesAccounts payable
    
    $
    150,532
    
    
    $
    157,986Accrued liabilities
    
    
    132,247
    
    
    
    156,604Derivative liabilities at fair value
    
    
    812
    
    
    
    395Deferred income taxes
    
    
    71,756
    
    
    
    51,675Total current liabilities
    
    
    355,347
    
    
    
    366,660Long-term debt
    
    
    2,510,494
    
    
    
    2,427,523Asset retirement obligations
    
    
    61,822
    
    
    
    59,268Other liabilities
    
    
    20,692
    
    
    
    20,691Derivative liabilities at fair value
    
    
    654
    
    
    
    -Deferred income taxes
    
    
    49,095
    
    
    
    41,918Commitments and contingencies (Note 7)
    
    
    -
    
    
    
    -EquityPreferred stock, par value $0.01, 10,000,000 shares authorized, none outstanding
    
    
    -
    
    
    
    -Common stock, $0.01 par value, 400,000,000 shares authorized; 175,439,552
and 174,469,836 shares issued, respectively
    
    
    1,754
    
    
    
    1,745Paid in capital in excess of par value
    
    
    742,773
    
    
    
    730,265Treasury stock of 5,022,244 and 4,704,448 shares, respectively
    
    
    (41,129
    )
    
    
    (36,363
    )Accumulated other comprehensive income
    
    
    200,633
    
    
    
    121,336Retained deficit
    
    
    (172,797
    )
    
    
    (180,985
    )Quicksilver stockholders equity
    
    
    731,234
    
    
    
    635,998Noncontrolling interests
    
    
    62,661
    
    
    
    60,824Total equity
    
    
    793,895
    
    
    
    696,822$
    3,791,999
    
    
    $
    3,612,882
  6




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QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
In thousands  Unaudited
 Quicksilver Resources Inc. StockholdersAccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    RetainedCommon
    
    
    Paid-in
    
    
    Treasury
    
    
    Comprehensive
    
    
    Earnings
    
    
    NoncontrollingStock
    
    
    Capital
    
    
    Stock
    
    
    Income
    
    
    (Deficit)
    
    
    Interests
    
    
    TotalBalances at December 31, 2008
    
    $
    1,717
    
    
    $
    656,958
    
    
    $
    (35,441
    )
    
    $
    185,104
    
    
    $
    376,488
    
    
    $
    26,737
    
    
    $
    1,211,563Net income (loss)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (568,979
    )
    
    
    1,670
    
    
    
    (567,309
    )Hedge derivative contract settlements
reclassified into earnings from accumulated
other comprehensive income, net of
income tax of $16,950
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (36,914
    )
    
    
    -
    
    
    
    -
    
    
    
    (36,914
    )Net change in derivative fair value, net
of income tax of $52,805
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    108,603
    
    
    
    -
    
    
    
    -
    
    
    
    108,603Foreign currency translation adjustment
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (7,224
    )
    
    
    -
    
    
    
    -
    
    
    
    (7,224
    )Issuance and vesting of stock compensation
    
    
    22
    
    
    
    5,287
    
    
    
    (623
    )
    
    
    -
    
    
    
    -
    
    
    
    418
    
    
    
    5,104Stock option exercises
    
    
    -
    
    
    
    11
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    11Distributions paid on KGS common units
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (2,448
    )
    
    
    (2,448
    )Balances at March 31, 2009
    
    $
    1,739
    
    
    $
    662,256
    
    
    $
    (36,064
    )
    
    $
    249,569
    
    
    $
    (192,491
    )
    
    $
    26,377
    
    
    $
    711,386Balances at December 31, 2009
    
    $
    1,745
    
    
    $
    730,265
    
    
    $
    (36,363
    )
    
    $
    121,336
    
    
    $
    (180,985
    )
    
    $
    60,824
    
    
    $
    696,822Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    8,188
    
    
    
    2,412
    
    
    
    10,600Hedge derivative contract settlements
reclassified into earnings from accumulated
other comprehensive income, net of
income tax of $14,006
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (26,269
    )
    
    
    -
    
    
    
    -
    
    
    
    (26,269
    )Net change in derivative fair value, net
of income tax of $49,567
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    98,606
    
    
    
    -
    
    
    
    -
    
    
    
    98,606Foreign currency translation adjustment
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    6,960
    
    
    
    -
    
    
    
    -
    
    
    
    6,960Issuance and vesting of stock compensation
    
    
    8
    
    
    
    5,006
    
    
    
    (4,766
    )
    
    
    -
    
    
    
    -
    
    
    
    (478
    )
    
    
    (230
    )Stock option exercises
    
    
    1
    
    
    
    759
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    760Issuance of KGS common units
    
    
    -
    
    
    
    6,743
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    4,307
    
    
    
    11,050Distributions paid on KGS common units
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,404
    )
    
    
    (4,404
    )Balances at March 31, 2010
    
    $
    1,754
    
    
    $
    742,773
    
    
    $
    (41,129
    )
    
    $
    200,633
    
    
    $
    (172,797
    )
    
    $
    62,661
    
    
    $
    793,895
  7




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QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands  Unaudited
 For the Three Months EndedMarch 31,2010
    
    
    2009Operating activities:Net income (loss)
    
    $
    10,600
    
    
    $
    (567,309
    )Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Depletion, depreciation and accretion
    
    
    46,757
    
    
    
    59,696Impairment related to oil and gas properties
    
    
    -
    
    
    
    896,483Deferred income tax expense (benefit)
    
    
    5,082
    
    
    
    (304,639
    )Non-cash interest expense
    
    
    5,075
    
    
    
    4,139Stock-based compensation
    
    
    5,680
    
    
    
    5,790Non-cash loss from hedging and derivative activities
    
    
    1,421
    
    
    
    1,128Loss from BBEP in excess of cash distributions, net of impairment
    
    
    15,989
    
    
    
    11,101Other
    
    
    (323
    )
    
    
    91Changes in assets and liabilitiesAccounts receivable
    
    
    4,905
    
    
    
    33,536Derivative assets at fair value
    
    
    14,260
    
    
    
    54,896Other assets
    
    
    5,519
    
    
    
    1,566Accounts payable
    
    
    (15,553
    )
    
    
    (21,436
    )Accrued and other liabilities
    
    
    (33,640
    )
    
    
    (25,692
    )Net cash provided by operating activities
    
    
    65,772
    
    
    
    149,350Investing activities:Purchases of property, plant and equipment
    
    
    (129,331
    )
    
    
    (255,984
    )Proceeds from sales of property and equipment
    
    
    718
    
    
    
    416Net cash used for investing activities
    
    
    (128,613
    )
    
    
    (255,568
    )Financing activities:Issuance of debt
    
    
    295,446
    
    
    
    208,374Repayments of debt
    
    
    (227,639
    )
    
    
    (101,188
    )Debt issuance costs paid
    
    
    (109
    )
    
    
    (39
    )Gas Purchase Commitment repayments
    
    
    (7,317
    )
    
    
    -Issuance of KGS common units - net of offering costs
    
    
    11,050
    
    
    
    -Distributions paid on KGS common units
    
    
    (4,404
    )
    
    
    (2,448
    )Proceeds from exercise of stock options
    
    
    760
    
    
    
    11Taxes paid by KGS for equity-based compensation vesting
    
    
    (1,144
    )
    
    
    (63
    )Purchase of treasury stock for stock-based compensation vesting
    
    
    (4,766
    )
    
    
    (623
    )Net cash provided by (used for) financing activities
    
    
    61,877
    
    
    
    104,024Effect of exchange rate changes in cash
    
    
    (220
    )
    
    
    (224
    )Net decrease in cash
    
    
    (1,184
    )
    
    
    (2,418
    )Cash and cash equivalents at beginning of period
    
    
    1,785
    
    
    
    2,848Cash and cash equivalents at end of period
    
    $
    601
    
    
    $
    430
  8




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QUICKSILVER RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Unaudited
 1.
    ACCOUNTING POLICIES AND DISCLOSURES
    Recently Issued Accounting Standards
  2.
    DERIVATIVES AND FAIR VALUE MEASUREMENTS
 Commodity Price Derivatives
  Interest Rate Derivatives
  (In thousands)2010
    
    $
    1,8562011
    
    
    2,1952012
    
    
    2,3802013
    
    
    2,5802014
    
    
    2,7972015
    
    
    2,1812016
    
    
    271$
    14,260
  9




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Other Derivatives
  (In thousands)Liability fair value at December 31, 2009
    $
    
    50,744Decrease due to gas volumes purchased
    
    
    (7,317
    )Embedded derivative increase (decrease) due to:Price changes
    
    
    21,704Volume changes
    
    
    (5,066
    )Total increase (decrease) in embedded derivative
    
    
    16,638Liability fair value at March 31, 2010 (1)
    $
    
    60,065
 
 (1)
    
    The liability for the Gas Purchase Commitment was valued using
estimated Eni production volumes through December 2010 and published future
market prices and risk-adjusted interest rates as of March 31, 2010. 10




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Asset Derivatives
    
    
    Liability DerivativesMarch 31,
    
    December 31,
    
    
    March 31,
    
    December 31,2010
    
    2009
    
    
    2010
    
    2009(In thousands)
    
    
    
    (In thousands)Derivatives designated as hedges:Commodity contracts reported in:Current derivative assets
    
    $
    174,108
    
    
    $
    97,883
    
    
    
    $
    584
    
    
    $
    638Noncurrent derivative assets
    
    
    57,386
    
    
    
    11,031
    
    
    
    
    -
    
    
    
    -Current derivative liabilities
    
    
    -
    
    
    
    243
    
    
    
    
    584
    
    
    
    638Noncurrent derivative liabilities
    
    
    392
    
    
    
    -
    
    
    
    
    -
    
    
    
    -Interest rate contracts reported in:Current derivative assets
    
    
    -
    
    
    
    712
    
    
    
    
    674
    
    
    
    -Noncurrent derivative assets
    
    
    -
    
    
    
    3,396
    
    
    
    
    3,082
    
    
    
    -Current derivative liabilities
    
    
    
    
    
    
    -
    
    
    
    
    228
    
    
    
    -Noncurrent derivative liabilities
    
    
    -
    
    
    
    -
    
    
    
    
    1,046
    
    
    
    -Total derivatives designated as hedges
    
    $
    231,886
    
    
    $
    113,265
    
    
    
     $
    6,198
    
    
    $    1,276Derivatives not designated as hedges:Gas Purchase Commitment reported in
accrued liabilities
    
    $
    -
    
    
    $
    -
    
    
    
    $
    23,263
    
    
    $
    6,625Total derivatives not designated as hedges
    
    $
    -
    
    
    $
    -
    
    
    
    $
    23,263
    
    
    $
    6,625Total derivatives
    
    $
    231,886
    
    
    $
    113,265
    
    
    
    $
    29,461
    
    
    $
    7,901
  Significant Other ObservableInputs - Level 2March 31,
    
    
    December 31,2010

    
    2009(in thousands)Gas Purchase Commitment
    
    $
    (23,263
    )
    
$
    (6,625
    )Commodity contracts
    
    
    230,718
    
    
    
    107,881Interest rate contracts
    
    
    (5,030
    )
    
    
    4,108Total
    
    $    202,425
    
    
    $
    105,364
   11




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##### Table of Contents



For the Three Months Ended March 31, 2010Gas Purchase
    
    
    Interest Rate
    
    
    CommodityCommitment

    
    Swaps
    
    Hedges
    
    Total(In thousands)Derivative fair value at December 31, 2009
    
    $
    (6,625
    )
    
    $
    4,108
    
    
    $
    107,881
    
    
$
    105,364Net change in amounts receivable/payable
    
    
    -    
    
    
    (4,997
    )
    
    
    (2,223
    )
    
    
    (7,220
    )Net settlements reported in revenue
    
    
    -
    
    
    
    -
    
    
    
    (24,557
    )
    
    
    (24,557
    )Net settlements reported in interest expense
    
    
    -

    

    
    (2,296
    )
    
    
    -    
    
    
    (2,296
    )Cash settlements reported in long-term debt
    
    
    
    
    
    
    (13,934
    )
    
    
    
    
    
    
    (13,934
    )Change in
fair value of Gas Purchase Commitment
reported in costs of purchased gas
    
    
    (16,638
    )
    
    
    -    
    
    
    -    
    
    
    (16,638
    )Change in fair value of effective interest swaps
    
    
    -    
    
    
    12,089
    
    
    
    -    
    
    
    12,089Ineffectiveness reported in other revenue
    
    
    -    
    
    
    -    
    
    
    1,395
    
    
    
    1,395Unrealized gains reported in OCI
    
    
    -    
    
    
    -    
    
    
    148,222
    
    
    
    148,222Derivative fair value at March 31, 2010
    
    $
    (23,263
    )
    
    $
    (5,030
    )
    
    $
    230,718
    
    
    $
    202,425
 For the Three Months Ended March 31, 2009Michigan
    
    CommodityContract
    
    Hedges
    
    Total(In thousands)Derivative fair value at December 31, 2008
    
    $
    (12,901
    )
    

$
    290,719
    
    
    $
    277,818Net change in amounts receivable/payable
    
    
    (3,518
    )
    
    
    -
    
    
    
    (3,518
    )Net settlements
    
    
    16,479
    
    
    
    -
    
    
    
    16,479Net settlements reported in revenue
    
    
    -
    
    
    
    (53,864
    )
    
    
    (53,864
    )Ineffectiveness reported in other revenue
    
    
    (60
    )
    
    
    (1,068
    )
    
    
    (1,128
    )Cash settlement reported in OCI
    
    
    -
    
    
    
    (54,896
    )
    
    
    (54,896
    )Unrealized gains reported in OCI
    
    
    -
    
    
    
    161,432
    
    
    
    161,432Derivative fair value at March 31, 2009
    
    $
    -
    
    
    $
    342,323
    
    
    $
    342,323
  12




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##### Table of Contents



3.
    INVESTMENT IN BREITBURN ENERGY PARTNERS L.P.
  For the Three Months EndedDecember 31,2009
    
    
    2008(In thousands)Revenues (1)
    
    $
    38,263
    
    
    $
    443,247Operating expenses (2)
    
    
    73,272
    
    
    
    165,796Operating income (loss)
    
    
    (35,009
    )
    
    
    277,451Interest and other (3)
    
    
    5,859
    
    
    
    25,599Income tax (benefit) expense
    
    
    (1,174
    )
    
    
    677Noncontrolling interests
    
    
    19
    
    
    
    13Net income (loss) available to BBEP
    
    $
    (39,713
    )
    
    $
    251,162
 
 (1)
    
    Includes unrealized losses of $54.7 million and unrealized gains $346.3 million
for the three months ended December 31, 2009 and 2008, respectively.(2)
    
    An impairment of BBEPs oil and gas properties of $86.4 million was included for the
three months ended December 31, 2008.(3)
    
    The three months ended December 31, 2009 and 2008 included $0.7 million and $15.1
million, respectively, for unrealized losses on interest rate swaps. As of December 31,2009
    
    
    2008(In thousands)Current assets
    
    $
    142,441
    
    
    $
    140,566Property, plant and equipment
    
    
    1,741,089
    
    
    
    1,840,341Other assets
    
    
    87,499
    
    
    
    235,927Current liabilities
    
    
    91,890
    
    
    
    79,990Long-term debt
    
    
    559,000
    
    
    
    736,000Other non-current liabilities
    
    
    91,338
    
    
    
    47,413Total equity
    
    
    1,228,801
    
    
    
    1,353,431
   (In thousands)Balance at December 31, 2009
    
    $
    112,763Equity loss in BBEP
    
    
    (15,989
    )Distributions from BBEP
    
    
    -Balance at March 31, 2010
    
    $
    96,774
 13




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##### Table of Contents



4.
    PROPERTY, PLANT AND EQUIPMENT
  March 31,
    
    December 31,2010
    
    2009(In thousands)Oil and gas propertiesSubject to depletion
    $
    4,153,280
    
    
    $    3,947,676Unevaluated costs
    
    
    392,272
    
    
    
    
    458,037Accumulated depletion
    
    
    (2,117,453
    )
    
    
    
    (2,067,469
    )Net oil and gas properties
    
    
    2,428,099
    
    
    
    
    2,338,244Other plant and equipmentPipelines and processing facilities
    
    
    792,699
    
    
    
    
    779,493General properties
    
    
    70,487
    
    
    
    
    68,698Construction in progress
    
    
    19,000
    
    
    
    
    5,630Accumulated depreciation
    
    
    (116,397
    )
    
    
    
    (106,125
    )Net other property and equipment
    
    
    765,789
    
    
    
    
    747,696Property, plant and equipment, net of
accumulated depletion and depreciation

    $    3,193,888
    
    
    $    3,085,940
 Ceiling Test Analysis
    14




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##### Table of Contents



5.  LONG-TERM DEBT
  March 31,
    
    December 31,2010
    
    2009(In thousands)Senior Secured Credit Facility
    
    
$
    442,647
    
    
$
    467,569Senior notes due 2015, net of unamortized discount
    

    
    470,190
    
    
    
    469,964Senior notes due 2016, net of unamortized discount
    

    
    581,903
    
    
    
    581,359Senior notes due 2019, net of unamortized discount
    

    
    293,137
    
    
    
    293,004Senior subordinated notes due 2016
    

    
    350,000
    
    
    
    350,000Convertible debentures, net of unamortized discount
    

    
    137,913
    
    
    
    136,119KGS credit agreement
    

    
    225,800
    
    
    
    125,400Total debt
    

    
    2,501,590
    
    
    
    2,423,415Unamortized deferred gain - terminated interest
rate swaps
    

    
    13,934
    
    
    
    -Fair value - interest rate swaps
    

    
    (5,030
    )
    
    
    4,108Long-term debt
    

$
    2,510,494
    
    
$
    2,427,523
 Senior Secured Credit Facility
  Convertible Debentures
   KGS Credit Facility
  15




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##### Table of Contents



Summary of All Outstanding Debt
  Priority on Collateral and Structural Seniority (1)
    
    Recourse only toHighest priority
    
    (ARROW)
    
    Lowest priority
    
    KGS assetsEqual prioritySenior Secured

    2015

    2016

    2019

    Senior

    Convertible
    
    KGS CreditCredit Facility

    Senior Notes

    Senior Notes

    Senior Notes

    Subordinated Notes

    Debentures
    
    AgreementScheduled maturity date

    February 9, 2012

    August 1, 2015

    January 1, 2016

    September 1, 2019

    April 1, 2016

    November 1, 2024
    
    August 10, 2012Interest rate at
March 31, 2010 (2)


    3.12%

    8.25%

    11.75%

    9.125%

    7.125%

    1.875%

    

    3.25%Base interest rate options (3)

    LIBOR, ABR or
specified (4)

    N/A

    N/A

    N/A

    N/A

    N/A

    
    LIBOR, ABR or
specified (5)Financial covenants (6)

    - Minimum
current
ratio of 1.0
- Minimum EBITDA to
interest expense ratio
of 2.5

    N/A

    N/A

    N/A

    N/A

    N/A

    
    - Maximum debt
to
EBITDA ratio of 4.5
- Minimum EBITDA
to interest expense
ratio of 2.5Significant restrictive
covenants (6)

    - Incurrence of debt
- Incurrence of liens
- Payment of dividends
- Equity purchases
- Asset sales
- Affiliate transactions
- Limitations on
derivatives

    - Incurrence of debt
- Incurrence of liens
- Payment of dividends
- Equity purchases
- Asset sales
- Affiliate transactions

    - Incurrence of debt
- Incurrence of liens
- Payment of dividends
- Equity purchases
- Asset sales
- Affiliate transactions

    - Incurrence of debt
- Incurrence of liens
- Payment of dividends
- Equity purchases
- Asset sales
- Affiliate transactions

    - Incurrence of debt
- Incurrence of liens
- Payment of dividends
- Equity purchases
- Asset sales
- Affiliate transactions

    N/A

    
    - Incurrence of debt
- Incurrence of liens
- Equity purchases
- Asset sales
- Limitations on
derivativesEstimated fair value (7)
    
    $442.6 million
    
    $486.9 million
    
    $690.0 million
    
    $318.0 million
    
    $332.5 million
    
    $166.5 million
    
    $225.8 million
 
 (1)
    
    The Senior Secured Credit Facility is secured by a first
perfected lien on substantially all our assets, excluding KGS assets.  The
other debt presented is based upon structural seniority and priority of
payment.(2)
    
    Represents the weighted average borrowing rate payable to lenders and
excludes effects of interest rate derivatives.(3)
    
    Interest rate options include a base rate plus a spread.(4)
    
    Interest rate spreads on our Senior Secured Credit Facility include a
floor to ABR of one-month LIBOR plus a 1% increase in the ABR margin to a range
of 1.375% to 2.375% and Eurodollar and specified rate margins to a range of
2.25% to 3.25%.(5)
    
    Interest rate spreads on the KGS Credit Facility include a floor
to ABR of one-month LIBOR plus a 1% increase in the ABR margin to a range of
2.00% to 3.00% and Eurodollar and specified rate margins to a range of 3.00% to
4.00%.(6)
    
    The covenant information presented in this table is qualified in all
respects by reference to the full text of the covenants and related definitions
contained in the documents governing the various components of our debt.(7)
    
    The estimated fair value is determined based on market quotations on
the balance sheet date for fixed rate obligations.  We believe that debt with
market-based interest rates has a fair value equal to its carrying value.  16




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##### Table of Contents



6. ASSET RETIREMENT OBLIGATIONS
  (In thousands)Beginning asset retirement obligations
    
    $
    59,377Incremental liability incurred
    
    
    589Accretion expense
    
    
    737Currency translation adjustment
    
    
    1,228Ending asset retirement obligations
    
    
    61,931Less current portion
    
    
    (109
    )Long-term asset retirement obligations
    
    $
    61,822
 7. COMMITMENTS AND CONTINGENCIES
      17




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##### Table of Contents



8 NONCONTROLLING INTERESTS AND KGS
  KGS OwnershipQuicksilver
    
    
    Public
    
    
    TotalGeneral partner interests
    
    
    1.6%
    
    
    
    -
    
    
    
    1.6%Limited partner interests:Common interests
    
    
    19.7%
    
    
    
    39.0%
    
    
    
    58.7%Subordinated interests
    
    
    39.7%
    
    
    
    -
    
    
    
    39.7%Total interests
    
    
    61.0%
    
    
    
    39.0%
    
    
    
    100.0%
  9. STOCK-BASED COMPENSATION
  Quicksilver Stock Options
   StockOptionsIssuedWeighted average grant date fair value
    
    
    $15.88Weighted average grant date
    
    Jan 4, 2010Weighted average risk-free interest rate
    
    
    3.00
    %Expected life (in years)
    
    
    6.0Weighted average volatility
    
    
    66.76
    %Expected dividends
    
    
    
  Wtd Avg
    
    
    Wtd AvgExercise
    
    
    Remaining
    
    AggregateShares
    
    
    Price
    
    
    Contractual Life
    
    Intrinsic Value(In years)
    
    
    (In thousands)Outstanding at December 31, 2009
    
    
    3,014,441
    
    
    $
    8.97Granted
    
    
    901,887
    
    
    
    15.88Exercised
    
    
    (134,587
    )
    
    
    5.65Cancelled
    
    
    (45,984
    )
    
    
    7.69Outstanding at March 31, 2010
    
    
    3,735,757
    
    
    $
    10.78
    
    
    
    8.8
    
    
    
    $   19,527Exercisable at March 31, 2010
    
    
    1,158,760
    
    
    $
    11.15
    
    
    
    8.2
    
    
    
    $     7,141Vested at March 31, 2010 or expected to vest in the future
    
    
    3,647,793
    
    
    $
    10.81
  18




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##### Table of Contents



Quicksilver Restricted Stock and Restricted Stock Units
  Payable in stock
    
    Payable in cashWtd Avg
    
    
    
    
    
    
    Wtd AvgGrant Date
    
    
    
    
    
    Grant DateShares
    
    Fair Value
    
    Stock Units
    
    Fair ValueOutstanding at December 31, 2009
    
    
    2,722,875
    
    
    $
    10.33
    
    
    
    328,695
    
    
    $
    6.22Granted
    
    
    887,869
    
    
    
    15.59
    
    
    
    166,118
    
    
    
    15.87Vested
    
    
    (1,071,366
    )
    
    
    12.14
    
    
    
    (109,602
    )
    
    
    6.22Cancelled
    
    
    (52,740
    )
    
    
    10.36
    
    
    
    (4,439
    )
    
    
    9.71Outstanding at March 31, 2010
    
    
    2,486,638
    
    
    $
    11.43
    
    
    
    380,772
    
    
    $
    10.39
  KGS Phantom Units
  Payable in units
    
    Payable in cashWtd Avg
    
    
    
    
    
    Wtd AvgGrant Date
    
    
    
    
    
    Grant DateUnits
    
    Fair Value
    
    Units

    
    Fair ValueOutstanding at December 31, 2009
    
    
    485,672
    
    
    $
    12.73
    
    
    
    33,240
    
    
    $
    20.90Granted
    
    
    211,600
    
    
    
    21.15
    
    
    
    -
    
    
    
    -Vested
    
    
    (179,886
    )
    
    
    13.74
    
    
    
    -
    
    
    
    -Cancelled
    
    
    (431
    )
    
    
    14.72
    
    
    
    -
    
    
    
    -Outstanding at March 31, 2010
    
    
    516,955
    
    
    $
    15.84
    
    
    
    33,240
    
    
    $
    20.90
  19




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##### Table of Contents



10. EARNINGS PER SHARE
  Three Months EndedMarch 31,2010
    
    2009(In thousands, except per sharedata)Net income (loss) attributable to Quicksilver
    
    $
    8,188
    
    
    $
    (568,979
    )Impact of assumed conversions  interest on 1.875%
convertible debentures, net of income taxes (1)
    
    
    -
    
    
    
    -Income (loss) available to stockholders assuming
conversion of convertible debentures
    
    $
    8,188
    
    
    $
    (568,979
    )Weighted average common shares  basic
    
    
    170,175
    
    
    
    168,841Effect of dilutive securities(1):Employee stock options
    
    
    843
    
    
    
    -Employee stock unit awards
    
    
    22
    
    
    
    -Contingently convertible debentures
    
    
    -
    
    
    
    -Weighted average common shares  diluted
    
    
    171,040
    
    
    
    168,841Earnings (loss) per common share  basic
    
    $
    0.05
    
    
    $
    (3.37
    )Earnings (loss) per common share  diluted
    
    $
    0.05
    
    
    $
    (3.37
    )
 (1)
    For the three months ended March 31, 2010 and 2009, the effects of 9.8 million shares for our convertible debt were antidilutive and excluded
from the diluted share calculations.  Stock options and unvested restricted
stock units representing 0.9 million shares at March 31, 2009 were also
antidilutive and excluded from the diluted share calculations. 11. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
   March 31, 2010Restricted
    
    Restricted
    
    Quicksilver
    
    Unrestricted
    
    
    
    
    
    QuicksilverQuicksilver
    
    Guarantor
    
    Non-Guarantor
    
    Subsidiary
    
    and Restricted
    
    Non-Guarantor
    
    Consolidating
    
    Resources Inc.Resources Inc.
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    Consolidated(In thousands)ASSETSCurrent assets
    
    $
    268,914
    
    
    $
    84,403
    
    
    $
    57,649
    
    
    $
    (111,506
    )
    
    $
    299,460
    
    
    $
    13,266
    
    
    $
    (28,385
    )
    
    $
    284,341Property and equipment
    
    
    2,033,730
    
    
    
    130,235
    
    
    
    529,053
    
    
    
    -
    
    
    
    2,693,018
    
    
    
    500,870
    
    
    
    -
    
    
    
    3,193,888Investment in subsidiaries
(equity method)
    
    
    569,073
    
    
    
    153,305
    
    
    
    -
    
    
    
    (472,299
    )
    
    
    250,079
    
    
    
    -
    
    
    
    (153,305
    )
    
    
    96,774Other assets
    
    
    250,326
    
    
    
    -
    
    
    
    11,389
    
    
    
    -
    
    
    
    261,715
    
    
    
    8,845
    
    
    
    (53,564
    )
    
    
    216,996Total assets
    
    $
    3,122,043
    
    
    $
    367,943
    
    
    $
    598,091
    
    
    $
    (583,805
    )
    
    $
    3,504,272
    
    
    $
    522,981
    
    
    $
    (235,254
    )
    
    $
    3,791,999LIABILITIES AND EQUITYCurrent liabilities
    
    $
    322,644
    
    
    $
    118,607
    
    
    $
    36,327
    
    
    $
    (111,506
    )
    
    $
    366,072
    
    
    $
    17,660
    
    
    $
    (28,385
    )
    
    $
    355,347Long-term liabilities
    
    
    2,068,165
    
    
    
    11,878
    
    
    
    326,923
    
    
    
    -
    
    
    
    2,406,966
    
    
    
    289,355
    
    
    
    (53,564
    )
    
    
    2,642,757Quicksilver stockholders equity
    
    
    731,234
    
    
    
    237,458
    
    
    
    234,841
    
    
    
    (472,299
    )
    
    
    731,234
    
    
    
    153,305
    
    
    
    (153,305
    )
    
    
    731,234Noncontrolling interests
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    62,661
    
    
    
    -
    
    
    
    62,661Total liabilities and equity
    
    $
    3,122,043
    
    
    $
    367,943
    
    
    $
    598,091
    
    
    $
    (583,805
    )
    
    $
    3,504,272
    
    
    $
    522,981
    
    
    $
    (235,254
    )
    
    $
    3,791,999
 20




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##### Table of Contents



December 31, 2009Restricted
    
    
    Restricted
    
    
    Restricted
    
    
    Quicksilver
    
    
    Unrestricted
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Subsidiary
    
    
    and Restricted
    
    
    Non-Guarantor
    
    
    Consolidating
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETS
    
    (In thousands)Current assets
    
    $
    313,485
    
    
    $
    394
    
    
    $
    42,622
    
    
    $
    (121,580
    )
    
    $
    234,921
    
    
    $
    2,268
    
    
    $
    (17,251
    )
    
    $
    219,938Property and equipment
    
    
    1,980,053
    
    
    
    131,862
    
    
    
    491,528
    
    
    
    -
    
    
    
    2,603,443
    
    
    
    482,497
    
    
    
    -
    
    
    
    3,085,940Investment in subsidiaries
(equity method)
    
    
    549,200
    
    
    
    230,221
    
    
    
    -
    
    
    
    (436,437
    )
    
    
    342,984
    
    
    
    -
    
    
    
    (230,221
    )
    
    
    112,763Other assets
    
    
    235,304
    
    
    
    -
    
    
    
    3,112
    
    
    
    -
    
    
    
    238,416
    
    
    
    9,067
    
    
    
    (53,242
    )
    
    
    194,241Total assets
    
    $
    3,078,042
    
    
    $
    362,477
    
    
    $
    537,262
    
    
    $
    (558,017
    )
    
    $
    3,419,764
    
    
    $
    493,832
    
    
    $
    (300,714
    )
    
    $
    3,612,882LIABILITIES AND EQUITYCurrent liabilities
    
    $
    349,415
    
    
    $
    116,298
    
    
    $
    25,321
    
    
    $
    (121,580
    )
    
    $
    369,454
    
    
    $
    14,457
    
    
    $
    (17,251
    )
    
    $
    366,660Long-term liabilities
    
    
    2,092,629
    
    
    
    11,843
    
    
    
    309,840
    
    
    
    -
    
    
    
    2,414,312
    
    
    
    188,330
    
    
    
    (53,242
    )
    
    
    2,549,400Quicksilver stockholders equity
    
    
    635,998
    
    
    
    234,336
    
    
    
    202,101
    
    
    
    (436,437
    )
    
    
    635,998
    
    
    
    230,221
    
    
    
    (230,221
    )
    
    
    635,998Noncontrolling interests
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    60,824
    
    
    
    -
    
    
    
    60,824Total liabilities and equity
    
    $
    3,078,042
    
    
    $
    362,477
    
    
    $
    537,262
    
    
    $
    (558,017
    )
    
    $
    3,419,764
    
    
    $
    493,832
    
    
    $
    (300,714
    )
    
    $
    3,612,882
 For the Three Months Ended March 31, 2010Restricted
    
    
    Restricted
    
    
    Restricted
    
    
    Quicksilver
    
    
    Unrestricted
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Subsidiary
    
    
    and Restricted
    
    
    Non-Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)Revenue
    
    $
    182,500
    
    
    $
    1,645
    
    
    $
    35,849
    
    
    $
    (696
    )
    
    $
    219,298
    
    
    $
    24,739
    
    
    $
    (21,879
    )
    
    $
    222,158Operating expense
    
    
    127,841
    
    
    
    1,883
    
    
    
    23,345
    
    
    
    (696
    )
    
    
    152,373
    
    
    
    15,819
    
    
    
    (21,879
    )
    
    
    146,313Equity in net earnings of subsidiaries
    
    
    10,602
    
    
    
    3,777
    
    
    
    -
    
    
    
    (10,602
    )
    
    
    3,777
    
    
    
    -
    
    
    
    (3,777
    )
    
    
    -Operating income
    
    
    65,261
    
    
    
    3,539
    
    
    
    12,504
    
    
    
    (10,602
    )
    
    
    70,702
    
    
    
    8,920
    
    
    
    (3,777
    )
    
    
    75,845Loss from earnings of BBEP
    
    
    (15,989
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (15,989
    )
    
    
    -
    
    
    
    -
    
    
    
    (15,989
    )Interest expense and other
    
    
    (40,059
    )
    
    
    -
    
    
    
    (1,437
    )
    
    
    -
    
    
    
    (41,496
    )
    
    
    (2,678
    )
    
    
    -
    
    
    
    (44,174
    )Income tax (expense)   benefit
    
    
    (1,025
    )
    
    
    (1,239
    )
    
    
    (2,765
    )
    
    
    -
    
    
    
    (5,029
    )
    
    
    (53
    )
    
    
    -
    
    
    
    (5,082
    )Net income
    
    $
    8,188
    
    
    $
    2,300
    
    
    $
    8,302
    
    
    $
    (10,602
    )
    
    $
    8,188
    
    
    $
    6,189
    
    
    $
    (3,777
    )
    
    $
    10,600Net income
attributable to noncontrolling interests
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (2,412
    )
    
    
    -
    
    
    
    (2,412
    )Net income attributable Quicksilver
    
    $
    8,188
    
    
    $
    2,300
    
    
    $
    8,302
    
    
    $
    (10,602
    )
    
    $
    8,188
    
    
    $
    3,777
    
    
    $
    (3,777
    )
    
    $
    8,188
 For the Three Months Ended March 31, 2009Restricted
    
    
    Restricted
    
    
    Restricted
    
    
    Quicksilver
    
    
    Unrestricted
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Subsidiary
    
    
    and Restricted
    
    
    Non-Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)Revenue
    
    $
    137,607
    
    
    $
    32
    
    
    $
    45,814
    
    
    $
    76
    
    
    $
    183,529
    
    
    $
    23,964
    
    
    $
    (21,561
    )
    
    $
    185,932Operating expense
    
    
    892,198
    
    
    
    284
    
    
    
    128,893
    
    
    
    76
    
    
    
    1,021,451
    
    
    
    11,736
    
    
    
    (21,563
    )
    
    
    1,011,624Equity in net earnings of subsidiaries
    
    
    (57,641
    )
    
    
    7,725
    
    
    
    -
    
    
    
    57,641
    
    
    
    7,725
    
    
    
    -
    
    
    
    (7,725
    )
    
    
    -Operating income (loss)
    
    
    (812,232
    )
    
    
    7,473
    
    
    
    (83,079
    )
    
    
    57,641
    
    
    
    (830,197
    )
    
    
    12,228
    
    
    
    (7,723
    )
    
    
    (825,692
    )Income from earnings of BBEP
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Interest expense and other
    
    
    (36,551
    )
    
    
    1,383
    
    
    
    (1,400
    )
    
    
    -
    
    
    
    (36,568
    )
    
    
    (2,235
    )
    
    
    (637
    )
    
    
    (39,440
    )Income tax (expense)   benefit
    
    
    279,804
    
    
    
    (3,100
    )
    
    
    21,082
    
    
    
    -
    
    
    
    297,786
    
    
    
    37
    
    
    
    -
    
    
    
    297,823Discontinued operations
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (635
    )
    
    
    635
    
    
    
    -Net income (loss)
    
    $
    (568,979
    )
    
    $
    5,756
    
    
    $
    (63,397
    )
    
    $
    57,641
    
    
    $
    (568,979
    )
    
    $
    9,395
    
    
    $
    (7,725
    )
    
    $
    (567,309
    )Net income
attributable to noncontrolling interests
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,670
    )
    
    
    -
    
    
    
    (1,670
    )Net income
(loss)   attributable to Quicksilver
    
    $
    (568,979
    )
    
    $
    5,756
    
    
    $
    (63,397
    )
    
    $
    57,641
    
    
    $
    (568,979
    )
    
    $
    7,725
    
    
    $
    (7,725
    )
    
    $
    (568,979
    )
 21




---



##### Table of Contents



For the Three Months Ended March 31, 2010Restricted
    
    
    Restricted
    
    
    Restricted
    
    
    Quicksilver
    
    
    Unrestricted
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Subsidiary
    
    
    and Restricted
    
    
    Non-Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)Net cash flow provided by operating activities
    
    $
    50,013
    
    
    $
    130
    
    
    $
    20,759
    
    
    $
    -
    
    
    $
    70,902
    
    
    $
    (1,457
    )
    
    $
    (3,673
    )
    
    $
    65,772Purchases of property, plant and equipment
    
    
    (85,571
    )
    
    
    (130
    )
    
    
    (22,980
    )
    
    
    -
    
    
    
    (108,681
    )
    
    
    (17,163
    )
    
    
    (3,487
    )
    
    
    (129,331
    )Distribution to parent
    
    
    80,276
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    80,276
    
    
    
    (80,276
    )
    
    
    
    
    
    
    -Proceeds from sales of property and equipment
    
    
    718
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    718
    
    
    
    -
    
    
    
    -
    
    
    
    718Net cash flow used for investing activities
    
    
    (4,577
    )
    
    
    (130
    )
    
    
    (22,980
    )
    
    
    -
    
    
    
    (27,687
    )
    
    
    (97,439
    )
    
    
    (3,487
    )
    
    
    (128,613
    )Issuance of debt
    
    
    159,000
    
    
    
    -
    
    
    
    24,446
    
    
    
    -
    
    
    
    183,446
    
    
    
    112,000
    
    
    
    -
    
    
    
    295,446Repayments of debt
    
    
    (193,000
    )
    
    
    -
    
    
    
    (23,039
    )
    
    
    -
    
    
    
    (216,039
    )
    
    
    (11,600
    )
    
    
    -
    
    
    
    (227,639
    )Debt issuance costs
    
    
    (109
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (109
    )
    
    
    -
    
    
    
    -
    
    
    
    (109
    )Gas Purchase Commitment - net
    
    
    (7,317
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (7,317
    )
    
    
    -
    
    
    
    -
    
    
    
    (7,317
    )Issuance of KGS common units
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    11,050
    
    
    
    
    
    
    
    11,050Distributions to parent
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (7,160
    )
    
    
    7,160
    
    
    
    -Distributions to noncontrolling interests
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,404
    )
    
    
    -
    
    
    
    (4,404
    )Proceeds from exercise of stock options
    
    
    760
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    760
    
    
    
    -
    
    
    
    -
    
    
    
    760Treasury transactions - equity
    
    
    (4,766
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,766
    )
    
    
    (1,144
    )
    
    
    -
    
    
    
    (5,910
    )Net cash
flow provided by (used for)financing activities
    
    
    (45,432
    )
    
    
    -
    
    
    
    1,407
    
    
    
    -
    
    
    
    (44,025
    )
    
    
    98,742
    
    
    
    7,160
    
    
    
    61,877Effect of exchange rates on cash
    
    
    -
    
    
    
    -
    
    
    
    (220
    )
    
    
    -
    
    
    
    (220
    )
    
    
    -
    
    
    
    -
    
    
    
    (220
    )Net decrease in cash and equivalents
    
    
    4
    
    
    
    -
    
    
    
    (1,034
    )
    
    
    -
    
    
    
    (1,030
    )
    
    
    (154
    )
    
    
    -
    
    
    
    (1,184
    )Cash and equivalents at beginning of period
    
    
    5
    
    
    
    -
    
    
    
    1,034
    
    
    
    -
    
    
    
    1,039
    
    
    
    746
    
    
    
    -
    
    
    
    1,785Cash and equivalents at end of period
    
    $
    9
    
    
    $
    -
    
    
    $
    -
    
    
    $
    -
    
    
    $
    9
    
    
    $
    592
    
    
    $
    -
    
    
    $
    601
 For the Three Months Ended March 31, 2009Restricted
    
    
    Restricted
    
    
    Restricted
    
    
    Quicksilver
    
    
    Unrestricted
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Subsidiary
    
    
    and Restricted
    
    
    Non-Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)Net cash flow provided by operations
    
    $
    117,347
    
    
    $
    67
    
    
    $
    28,425
    
    
    $
    -
    
    
    $
    145,839
    
    
    $
    10,229
    
    
    $
    (6,718
    )
    
    $
    149,350Purchases of property, plant and equipment
    
    
    (204,006
    )
    
    
    (67
    )
    
    
    (28,959
    )
    
    
    -
    
    
    
    (233,032
    )
    
    
    (22,952
    )
    
    
    -
    
    
    
    (255,984
    )Proceeds from sales of property and equipment
    
    
    416
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    416
    
    
    
    -
    
    
    
    -
    
    
    
    416Net cash flow used for investing activities
    
    
    (203,590
    )
    
    
    (67
    )
    
    
    (28,959
    )
    
    
    -
    
    
    
    (232,616
    )
    
    
    (22,952
    )
    
    
    -
    
    
    
    (255,568
    )Issuance of debt
    
    
    169,000
    
    
    
    -
    
    
    
    17,374
    
    
    
    -
    
    
    
    186,374
    
    
    
    22,000
    
    
    
    -
    
    
    
    208,374Repayments of debt
    
    
    (83,645
    )
    
    
    -
    
    
    
    (17,543
    )
    
    
    -
    
    
    
    (101,188
    )
    
    
    -
    
    
    
    -
    
    
    
    (101,188
    )Debt issuance costs
    
    
    (39
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (39
    )
    
    
    -
    
    
    
    -
    
    
    
    (39
    )Distributions to parent
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (6,718
    )
    
    
    6,718
    
    
    
    -Distributions to noncontrolling interests
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (2,448
    )
    
    
    -
    
    
    
    (2,448
    )Proceeds from exercise of stock options
    
    
    11
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    11
    
    
    
    -
    
    
    
    -
    
    
    
    11Treasury transactions - equity
    
    
    (623
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (623
    )
    
    
    (63
    )
    
    
    -
    
    
    
    (686
    )Net cash
flow provided by (used for)financing activities
    
    
    84,704
    
    
    
    -
    
    
    
    (169
    )
    
    
    -
    
    
    
    84,535
    
    
    
    12,771
    
    
    
    6,718
    
    
    
    104,024Effect of exchange rates on cash
    
    
    (61
    )
    
    
    -
    
    
    
    (163
    )
    
    
    -
    
    
    
    (224
    )
    
    
    -
    
    
    
    -
    
    
    
    (224
    )Net decrease in cash and equivalents
    
    
    (1,600
    )
    
    
    -
    
    
    
    (866
    )
    
    
    -
    
    
    
    (2,466
    )
    
    
    48
    
    
    
    -
    
    
    
    (2,418
    )Cash and equivalents at beginning of period
    
    
    1,679
    
    
    
    -
    
    
    
    866
    
    
    
    -
    
    
    
    2,545
    
    
    
    303
    
    
    
    -
    
    
    
    2,848Cash and equivalents at end of period
    
    $
    79
    
    
    $
    -
    
    
    $
    -
    
    
    $
    -
    
    
    $
    79
    
    
    $
    351
    
    
    $
    -
    
    
    $
    430
 12. SEGMENT INFORMATION
  Exploration & Production
    
    Processing &
    
    Corporate
    
    
    
    
    
    QuicksilverUnited States
    
    Canada
    
    Gathering
    
    and Other
    
    Elimination
    
    Consolidated(in thousands)For the Three Months Ended March 31, 2010Revenue
    
    $
    182,500
    
    
    $
    35,849
    
    
    $
    25,803
    
    
    $
    -
    
    
    $
    (21,994
    )
    
    $
    222,158Depletion, depreciation and accretion
    
    
    27,949
    
    
    
    11,285
    
    
    
    7,057
    
    
    
    466
    
    
    
    -
    
    
    
    46,757Operating income
    
    
    72,279
    
    
    
    13,433
    
    
    
    11,123
    
    
    
    (20,990
    )
    
    
    -
    
    
    
    75,845Property and equipment costs incurred
    
    
    77,367
    
    
    
    30,585
    
    
    
    27,634
    
    
    
    620
    
    
    
    -
    
    
    
    136,206
 22




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##### Table of Contents



Exploration & Production
    
    Processing &
    
    Corporate
    
    
    
    
    
    QuicksilverUnited States
    
    Canada
    
    Gathering
    
    and Other
    
    Elimination
    
    Consolidated(in thousands)For the Three Months Ended March 31, 2009Revenue
    
    $
    137,729
    
    
    $
    45,929
    
    
    $
    25,075
    
    
    $
    -
    
    
    $
    (22,801
    )
    
    $
    185,932Depletion, depreciation and accretion
    
    
    44,250
    
    
    
    10,293
    
    
    
    4,827
    
    
    
    326
    
    
    
    -
    
    
    
    59,696Operating income
    
    
    (739,359
    )
    
    
    (82,076
    )
    
    
    13,450
    
    
    
    (17,707
    )
    
    
    -
    
    
    
    (825,692
    )Property and equipment costs incurred
    
    
    137,632
    
    
    
    42,778
    
    
    
    17,897
    
    
    
    526
    
    
    
    -
    
    
    
    198,833Property, Plant and Equipment-netMarch 31, 2010
    
    $
    2,021,821
    
    
    $
    529,053
    
    
    $
    631,105
    
    
    $
    11,909
    
    
    $
    -
    
    
    $
    3,193,888December 31, 2009
    
    
    1,968,430
    
    
    
    491,528
    
    
    
    614,359
    
    
    
    11,623
    
    
    
    -
    
    
    
    3,085,940
 13. SUPPLEMENTAL CASH FLOW INFORMATION
  Three Months EndedMarch 31,2010
    
    
    2009(In thousands)Interest
    
    $
    50,025
    
    
    $
    46,325Income taxes
    
    
    (7,006
    )
    
    
    -
  Three Months EndedMarch 31,2010
    
    
    2009(In thousands)Working
capital related to acquisition
of property, plant and equipment
    
    $
    126,393
    
    
    $
    163,378
 14. RELATED-PARTY TRANSACTIONS
       23




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##### Table of Contents



ITEM 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations
 Form 10-K
 EXECUTIVE OVERVIEW
  2010 HIGHLIGHTS
 BBEP Update
  2010 CAPITAL OUTLOOK
   24




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##### Table of Contents



RESULTS OF OPERATIONS  Three Months Ended March 31, 2010 and 2009
  Natural Gas, NGL and Crude Oil Revenue
  Natural Gas
    
NGL
    
Oil and Condensate
    
Total2010
        
    2009
        
    2010

    
    2009
        
    2010
        
    2009
        
    2010
        
    2009(In millions)Texas
    
    $
    81.5
    
    
    $
    72.7
    
    
    $
    41.1
    
    
    $
    25.4
    
    
    $
    3.2
    
    
    $
    3.3
    
    
    $
    125.8
    
    
    $
    101.4Other U.S.
    
    
    1.2
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    -
    
    
    
    2.3
    
    
    
    1.3
    
    
    
    3.6
    
    
    
    1.4Hedging
    
    
    48.3
    
    
    
    34.8
    
    
    
    (9.6
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    38.7
    
    
    
    34.8Total U.S.
    
    
    131.0
    
    
    
    107.6
    
    
    
    31.6
    
    
    
    25.4
    
    
    
    5.5
    
    
    
    4.6
    
    
    
    168.1
    
    
    
    137.6Canada
    
    
    31.8
    
    
    
    26.9
    
    
    
    0.1
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    31.9
    
    
    
    26.9Hedging
    
    
    1.6
    
    
    
    19.0
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1.6
    
    
    
    19.0Total Canada
    
    
    33.4
    
    
    
    45.9
    
    
    
    0.1
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    33.5
    
    
    
    45.9Total Company
    
    $
    164.4
    
    
    $
    153.5
    
    
    $
    31.7
    
    
    $
    25.4
    
    
    $
    5.5
    
    
    $
    4.6
    
    
    $
    201.6
    
    
    $
    183.5
  Natural Gas
    
NGL
    
Oil and Condensate
    
Equivalent Total2010
    
    2009
    
    2010
    
    2009
    
    2010
    
    2009
    
    2010
    
    2009(MMcfd)
    
    
    (Bbld)
    
    
    (Bbld)
    
    
    (MMcfed)Texas
    
    
    173.3
    
    
    
    177.3
    
    
    
    11,263
    
    
    
    13,348
    
    
    
    474
    
    
    
    1,019
    
    
    
    243.7
    
    
    
    263.5Other U.S.
    
    
    2.3
    
    
    
    0.3
    
    
    
    17
    
    
    
    -
    
    
    
    381
    
    
    
    475
    
    
    
    4.8
    
    
    
    3.1Total U.S.
    
    
    175.6
    
    
    
    177.6
    
    
    
    11,280
    
    
    
    13,348
    
    
    
    855
    
    
    
    1,494
    
    
    
    248.5
    
    
    
    266.6Canada
    
    
    69.9
    
    
    
    64.9
    
    
    
    11
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    69.9
    
    
    
    64.9Total Company
    
    
    245.5
    
    
    
    242.5
    
    
    
    11,291
    
    
    
    13,348
    
    
    
    855
    
    
    
    1,494
    
    
    
    318.4
    
    
    
    331.5
  Natural Gas
    
    NGL
    
    Oil and Condensate
    
    Equivalent Total2010
    
    2009
    
    2010
    
    2009
    
    2010
    
    2009
    
    2010
    
    2009(per Mcf)
    
    
    (per Bbl)
    
    
    (per Bbl)
    
    
    (per Mcfe)Texas
    
    $
    5.23
    
    
    $
    4.56
    
    
    $
    40.51
    
    
    $
    21.13
    
    
    $
    73.63
    
    
    $
    36.24
    
    
    $
    5.73
    
    
    $
    4.28Other U.S.
    
    
    4.99
    
    
    
    3.91
    
    
    
    85.70
    
    
    
    -
    
    
    
    68.49
    
    
    
    30.54
    
    
    
    8.29
    
    
    
    4.67Hedging - U.S.
    
    
    3.06
    
    
    
    2.18
    
    
    
    (9.43
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1.73
    
    
    
    1.45Total U.S.
    
    
    8.28
    
    
    
    6.73
    
    
    
    31.19
    
    
    
    21.13
    
    
    
    71.36
    
    
    
    34.42
    
    
    
    7.52
    
    
    
    5.74Canada
    
    
    5.08
    
    
    
    4.60
    
    
    
    73.92
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    5.08
    
    
    
    4.60Hedging - Canada
    
    
    0.24
    
    
    
    3.26
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    0.24
    
    
    
    3.26Total Canada
    
    
    5.32
    
    
    
    7.86
    
    
    
    73.92
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    5.32
    
    
    
    7.86Total Company
    
    $
    7.44
    
    
    $
    7.04
    
    
    $
    31.19
    
    
    $
    21.13
    
    
    $
    71.36
    
    
    $
    34.42
    
    
    $
    7.03
    
    
    $
    6.15
 25




---



##### Table of Contents



NaturalGas
    
    NGL
    
    Oil
    
    Total(In thousands)Revenue for the quarter ended March 31, 2009
    
    $
    153,524
    
    
    $
    25,396
    
    
        $
    4,634
    
    
    $
    183,554Volume variance
    
    
    1,271
    
    
    
    (3,922
    )
    
    
    (1,984
    )
    
    
    (4,635
    )Hedge settlement variance
    
    
    (4,016
    )
    
    
    (9,573
    )
    
    
    -
    
    
    
    (13,589
    )Price variance
    
    
    13,600
    
    
    
    19,790
    
    
    
    2,843
    
    
    
    36,233Revenue for the quarter ended March 31, 2010
    
    $
    164,379
    
    
    $
    31,691
    
    
    $
    5,493
    
    
    $
    201,563
      26




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##### Table of Contents



Sales of Purchased Natural Gas and Costs of Purchased Natural Gas
 Three Months EndedMarch 31,2010
    
    2009(In thousands)Sales of purchased natural gas:Purchases from Eni
    
    $
    12,578
    
    
    $
    -Purchases from others
    
    
    3,646
    
    
    
    -Total
    
    
    16,224
    
    
    
    -Costs of purchased natural gas sold:Purchases from Eni
    
    
    12,518
    
    
    
    -Purchases from others
    
    
    4,151
    
    
    
    -Unrealized valuation loss on Gas Purchase
Commitment
    
    
    16,638
    
    
    
    -Total
    
    
    33,307
    
    
    
    -Net sales and purchases of natural gas
    
    $
    (17,083
    )
    
    $
    -
  Other Revenue
  Oil and Gas Production Expense
 Three Months Ended March 31,2010
    
    2009(In thousands, except per unit amounts)Per
    
    
    
    
    
    
    
    PerTexas
    
    
    
    
    
    
    Mcfe
    
    
    
    
    
    
    
    McfeCash expense
    
    $
    23,389
    
    
    
    $ 1.06
    
    
    $
    22,315
    
    
    
    $ 0.94Equity compensation
    
    
    211
    
    
    
    0.01
    
    
    
    303
    
    
    
    0.01$
    23,600
    
    
    
    $ 1.07
    
    
    $
    22,618
    
    
    
    $ 0.95Other U.S.Cash expense
    
    $
    1,964
    
    
    
    $ 4.58
    
    
    $
    1,832
    
    
    
    $ 6.16Equity compensation
    
    
    41
    
    
    
    0.10
    
    
    
    50
    
    
    
    0.17$
    2,005
    
    
    
    $ 4.68
    
    
    $
    1,882
    
    
    
    $ 6.33Total U.S.Cash expense
    
    $
    25,353
    
    
    
    $ 1.13
    
    
    $
    24,147
    
    
    
    $ 1.01Equity compensation
    
    
    252
    
    
    
    0.01
    
    
    
    353
    
    
    
    0.01$
    25,605
    
    
    
    $ 1.14
    
    
    $
    24,500
    
    
    
    $ 1.02CanadaCash expense
    
    $
    10,057
    
    
    
    $ 1.60
    
    
    $
    7,075
    
    
    
    $ 1.21Equity compensation
    
    
    327
    
    
    
    0.05
    
    
    
    596
    
    
    
    0.10$
    10,384
    
    
    
    $ 1.65
    
    
    $
    7,671
    
    
    
    $ 1.31Total CompanyCash expense
    
    $
    35,410
    
    
    
    $ 1.24
    
    
    $
    31,222
    
    
    
    $ 1.05Equity compensation
    
    
    579
    
    
    
    0.02
    
    
    
    949
    
    
    
    0.03$
    35,989
    
    
    
    $ 1.26
    
    
    $
    32,171
    
    
    
    $ 1.08
  27




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##### Table of Contents



Production and Ad Valorem Taxes
 Three Months Ended March 31,2010
    
    2009(In thousands, except per unit amounts)Per
    
    
    
    
    
    PerProduction and ad valorem taxes
    
    
    
    
    

Mcfe
   
    
    
    
    

McfeU.S.
    
    $
    7,737
    
    
    $
    0.35
    
    
    $
    3,942
    
    
    $
    0.16Canada
    
    
    746
    
    
    
    0.12
    
    
    
    424
    
    
    
    0.07Total production and ad valorem taxes
    
    $
    8,483
    
    
    $
    0.30
    
    
    $
    4,366
    
    
    $
    0.15
  Depletion, Depreciation and Accretion
 Three Months Ended March 31,2010
    
    2009(In thousands, except per unit amounts)Per
    
    
    
    
    
    PerDepletion
    
    
    
    
    
Mcfe
    
    
    
    
    
McfeU.S.
    
    $
    26,434
    
    
    $
    1.17
    
    
    $
    41,872
    
    
    $
    1.74Canada
    
    
    9,774
    
    
    
    1.55
    
    
    
    9,102
    
    
    
    1.56Total depletion
    
    
    36,208
    
    
    
    1.26
    
    
    
    50,974
    
    
    
    1.71Depreciation of other fixed assetsU.S.
    
    $
    8,729
    
    
    $
    0.39
    
    
    $
    7,310
    
    
    $
    0.30Canada
    
    
    1,083
    
    
    
    0.17
    
    
    
    823
    
    
    
    0.14Total depreciation
    
    
    9,812
    
    
    
    0.34
    
    
    
    8,133
    
    
    
    0.27Accretion
    
    
    737
    
    
    
    0.03
    
    
    
    589
    
    
    
    0.02Total DD&A
    
    $
    46,757
    
    
    $
    1.63
    
    
    $
    59,696
    
    
    $
    2.00
   General and Administrative Expense
 Three Months Ended March 31,2010
    
    2009(In thousands, except per unit amounts)Per
    
    
    
    
    
    PerGeneral and administrative expense
    
    
    
    
    
Mcfe
    
    
    
    
    
McfeCash expense
    
    $
    15,658
    
    
    
    $ 0.55
    
    
    $
    12,665
    
    
    
    $ 0.42Equity compensation
    
    
    4,865
    
    
    
    0.17
    
    
    
    4,716
    
    
    
    0.16Total general and administrative expense
    
    $
    20,523
    
    
    
    $ 0.72
    
    
    $
    17,381
    
    
    
    $ 0.58
 28




---



##### Table of Contents



BBEP-Related Income
   Interest Expense
 Three Months EndedMarch 31,2010
    
    2009(in thousands)Interest costs
    
    $
    40,875
    
    
    $
    37,373Add: Non-cash interest
(1)
    
    
    5,075
    
    
    
    4,139Less: Interest capitalized
    
    
    (1,433
    )
    
    
    (1,311
    )Interest expense
    
    $
    44,517
    
    
    $
    40,201
 (1)
    
    Amortization of deferred financing costs and original issue discounts
  Income Tax Expense
 Three Months EndedMarch 31,2010
    
    2009Income tax (benefit) expense (in thousands)
    
    $
    5,082
    
    
    $
    (297,823)Effective tax rate
    
    
    32.4%
    
    
    34.4%
  Quicksilver Resources Inc. and its Restricted Subsidiaries
  Results of Operations
 29




---



##### Table of Contents



Liquidity, Capital
Resources and Financial Condition
 LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
 Cash Flow Activity
    Three Months EndedMarch 31,2010
    
    2009(In thousands)Net cash provided by operating activities
    
$
    65,772
    
    
$
    149,350Net cash used for investing activities
    
    
    (128,613
    )
    
    
    (255,568
    )Net cash provided by financing activities
    
    
    61,877
    
    
    
    104,024Effect of exchange rate changes in cash
    
    
    (220
    )
    
    
    (224
    )
 Operating Cash Flows
   30




---



##### Table of Contents



Investing Cash Flows
  Three Months Ended March 31,2010
    
    2009(In thousands)Exploration and development:Texas
    
$
    71,012
    
    
$
    122,800Other U.S.
    
    
    4,780
    
    
    
    14,563Total U.S.
    
    
    75,792
    
    
    
    137,363Canada
    
    
    30,584
    
    
    
    43,765Total exploration and development
    
    
    106,376
    
    
    
    181,128Midstream - Texas
    
    
    27,634
    
    
    
    16,906Corporate and field office
    
    
    2,196
    
    
    
    799Total plant and equipment costs incurred
    
$
    136,206
    
    
$
    198,833
  Financing Cash Flows
   Financial Position
  
    
    Our current and non-current derivative assets and liabilities increased $113.7 million on
a net basis.  The valuation of our remaining open derivative positions increased as a result
of natural gas price decreases relative to our commodity derivative pricing during the 2010
quarter.  Our net open derivative position partially offset these increases $40.3 million
because of monthly settlements during the 2010 quarter.  Our current deferred income tax
liability increased $20.1 million because of higher valuations for our open derivative
positions.
 
    
    Our net property, plant and equipment balance increased $107.9 million over the
three-month period ended March 31, 2010.  During the 2010 quarter, we have incurred $136.2
million for property, plant and equipment that has been partially offset by DD&A of $46.0
million.  The remaining increase was due to the effects of changes in U.S.-Canadian exchange
rates from December 31, 2009 to March 31, 2010.
 Contractual Obligations and Commercial Commitments
  31




---



##### Table of Contents



Critical Accounting Estimates
  *
    
    oil and gas reserves
    
*
    
    stock-based compensation*
    
    full cost ceiling calculations
    
    *
    
    income taxes*
    
    derivative instruments
  Off-Balance Sheet Arrangements
  Recently Issued Accounting Standards
  
 ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
   Commodity Price Risk
   32




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##### Table of Contents



Weighted AvgRemaining Contract
    
    
    
    Price Per Mcf orProduct
    
    Type
    
    Period
    
    Volume
    
    Bbl
    
    Fair Value(In thousands)Gas
    
    Collar
    
    Apr 2010-Dec 2010
    
    20 MMcfd
    
    $
    8.00-11.00
    
    
    $
    20,599Gas
    
    Collar
    
    Apr 2010-Dec 2010
    
    20 MMcfd
    
    
    8.00-11.00
    
    
    
    20,599Gas
    
    Collar
    
    Apr 2010-Dec 2010
    
    20 MMcfd
    
    
    8.00-12.20
    
    
    
    20,606Gas
    
    Collar
    
    Apr 2010-Dec 2010
    
    20 MMcfd
    
    
    8.00-12.20
    
    
    
    20,606Gas
    
    Collar
    
    Apr 2010-Dec 2010
    
    10 MMcfd
    
    
    8.50-12.05
    
    
    
    11,663Gas
    
    Collar
    
    Apr 2010-Dec 2010
    
    20 MMcfd
    
    
    8.50-12.05
    
    
    
    23,326Gas
    
    Collar
    
    Apr 2010-Dec 2010
    
    10 MMcfd
    
    
    8.50-12.08
    
    
    
    11,670Gas
    
    Collar
    
    Apr 2010-Dec 2011
    
    10 MMcfd
    
    
    6.00- 7.00
    
    
    
    8,134Gas
    
    Collar
    
    Apr 2010-Dec 2011
    
    10 MMcfd
    
    
    6.00- 7.00
    
    
    
    8,134Gas
    
    Collar
    
    Apr 2010-Dec 2011
    
    20 MMcfd
    
    
    6.00- 7.00
    
    
    
    16,269Gas
    
    Collar
    
    Apr 2010-Dec 2012
    
    20 MMcfd
    
    
    6.50- 7.15
    
    
    
    28,004Gas
    
    Collar
    
    Apr 2010-Dec 2012
    
    20 MMcfd
    
    
    6.50- 7.18
    
    
    
    28,018Gas
    
    Collar
    
    Jan 2011-Dec 2011
    
    10 MMcfd
    
    
    6.25- 7.50
    
    
    
    4,107Gas
    
    Collar
    
    Jan 2011-Dec 2011
    
    10 MMcfd
    
    
    6.25- 7.50
    
    
    
    4,107Gas
    
    Collar
    
    Jan 2011-Dec 2011
    
    20 MMcfd
    
    
    6.25- 7.50
    
    
    
    8,215Gas
    
    Collar
    
    Jan 2012-Dec 2012
    
    20 MMcfd
    
    
    6.50- 8.01
    
    
    
    7,285Gas
    
    Basis
    
    Apr 2010-Dec 2010
    
    20 MMcfd
    
    
    (1
    )
    
    
    (765
    )Gas
    
    Basis
    
    Apr 2010-Dec 2010
    
    20 MMcfd
    
    
    (1
    )
    
    
    (765
    )Gas
    
    Basis
    
    Apr 2010-Dec 2010
    
    10 MMcfd
    
    
    (2
    )
    
    
    (19
    )Gas
    
    Basis
    
    Apr 2010-Dec 2010
    
    10 MMcfd
    
    
    (2
    )
    
    
    (31
    )Gas
    
    Basis
    
    Apr 2010-Dec 2010
    
    20 MMcfd
    
    
    (2
    )
    
    
    (309
    )Gas
    
    Basis
    
    Jan 2011-Dec 2011
    
    10 MMcfd
    
    
    (1
    )
    
    
    286Gas
    
    Basis
    
    Jan 2011-Dec 2011
    
    10 MMcfd
    
    
    (1
    )
    
    
    286Gas
    
    Basis
    
    Jan 2011-Dec 2011
    
    20 MMcfd
    
    
    (1
    )
    
    
    572NGL
    
    Swap
    
    Apr 2010-Dec 2010
    
    2 MBbld
    
    $
    32.65
    
    
    
    (3,273
    )NGL
    
    Swap
    
    Apr 2010-Dec 2010
    
    3 MBbld
    
    
    32.98
    
    
    
    (4,576
    )NGL
    
    Swap
    
    Apr 2010-Dec 2010
    
    1 MBbld
    
    
    33.63
    
    
    
    (1,367
    )NGL
    
    Swap
    
    Apr 2010-Dec 2010
    
    1 MBbld
    
    
    34.15
    
    
    
    (1,225
    )NGL
    
    Swap
    
    Apr 2010-Dec 2010
    
    3 MBbld
    
    
    34.22
    
    
    
    (3,554
    )NGL
    
    Swap
    
    Jan 2011-Dec 2011
    
    3 MBbld
    
    
    36.06
    
    
    
    (909
    )NGL
    
    Swap
    
    Jan 2011-Dec 2011
    
    2 MBbld
    
    
    36.31
    
    
    
    (438
    )NGL
    
    Swap
    
    Jan 2011-Dec 2011
    
    3 MBbld
    
    
    41.95
    
    
    
    5,463Total
    
    $
    230,718
 
 (1)
    
    AECO Basis swaps hedge the AECO basis adjustment for 40 MMcfd at
a deduction of $0.45 per Mcf from NYMEX for the remainder of 2010 and 40 MMcfd
at a deduction of $0.39 Mcf from NYMEX for 2011.(2)
    
    Basis swaps for 40 MMcfd hedge the Houston Ship Channel basis
adjustment at a weighted average deduction of $0.067 Mcf from NYMEX for the
remainder of 2010.
  33




---



##### Table of Contents



(In thousands)Liability fair value at December 31, 2009
    
    $
    50,744Decrease due to gas volumes purchased
    
    
    (7,317
    )Embedded derivative increase (decrease) due to:Price changes
    
    
    21,704Volume changes
    
    
    (5,066
    )Total increase (decrease) in embedded derivative
    
    
    16,638Liability fair value at March 31, 2010 (1)
    
    $
    60,065
 
 (1)
    
    The liability for the Gas Purchase Commitment was valued using
estimated Eni production volumes through December 2010 and published future
market prices and risk-adjusted interest rates as of March 31, 2010.


Interest Rate Risk











ITEM 4. Controls and Procedures


Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures




Changes in Internal Control Over Financial Reporting




34



---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
   
 ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchases of Equity Securities
  Total Number of
    
    
    Maximum Number ofTotal Number
    
    
    
    
    
    
    Shares Purchased as
    
    
    Shares that May Yetof Shares
    
    
    Average Price
    
    Part of Publicly
    
    
    Be Purchased UnderPeriod
    

Purchased (1)
    
    Paid per Share
    

Announced
Plan (2)
    

the Plan (2)January 2010
    
    
    269,007
    
    
$
    15.01
    
    
    
    -
    
    
    
    -February 2010
    
    
    46,939
    
    
$
    14.96
    
    
    
    -
    
    
    
    -March 2010
    
    
    1,850
    
    
$
    14.11
    
    
    
    -
    
    
    
    -Total
    
    
    317,796
    
    
$
    15.00
    
    
    
    -
    
    
    
    -
 (1)
    
    Represents shares of common stock surrendered by employees to
satisfy our income tax withholding obligations arising upon the vesting of
restricted stock issued under our Amended and Restated 1999 Stock Option and
Retention Stock Plan or Amended and Restated 2006 Equity Plan.(2)
    
    We do not currently have in place any publicly announced, specific plans
or programs to purchase equity securities.
 
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. [Removed and Reserved]
 
 ITEM 5. Other Information
  
 ITEM 6. Exhibits:
 Exhibit No.
    
    Description* 31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith 35




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##### Table of Contents



SIGNATURES
   Quicksilver Resources Inc.By:
    /s/ Philip CookPhilip CookSenior Vice President - Chief Financial Officer 36




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##### Table of Contents



EXHIBIT INDEX
  Exhibit No.
    
    Description* 31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith 37