##### 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 September 30, 2009
 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(Do not check if a smaller reporting company)
Smaller reporting company o o þ
  Title of Class
    
    Outstanding as of October 26, 2009Common Stock, $0.01 par value
    
    169,133,374




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##### 



QUICKSILVER RESOURCES INC.
INDEX TO FORM 10-Q
For the Period Ending September 30, 2009
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
    
    
    5Condensed Consolidated Balance Sheets
    
    
    6Condensed Consolidated Statements of Stockholders Equity
    
    
    7Condensed Consolidated Statements of Cash Flows
    
    
    8Notes to Condensed Consolidated Interim Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    31Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    47Item 4. Controls and Procedures
    
    
    49PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    49Item 1A. Risk Factors
    
    
    50Item 2. Unregistered Sales of Equity Securities
    
    
    57Item 3. Defaults Upon Senior Securities
    
    
    57Item 4. Submission of Matters to a Vote of Security Holders
    
    
    57Item 5. Other Information
    
    
    57Item 6. Exhibits
    
    
    58Signature
    
    
    59EX-31.1EX-31.2EX-32.1




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##### Table of Contents



DEFINITIONS
  Bbl Bbls
 Bbld
 Bcf
 Bcfd
 Bcfe
 Btu
 Canada
 CBM
 DD&A
 LIBOR
 MBbl MBbls
 MBbld
 MMBbls
 MMBtu
 MMBtud
 Mcf
 Mcfe
 MMcf
 MMcfd
 MMcfe
 MMcfed
 NGL NGLs
 NYMEX
 Oil
 Tcf
 Tcfe
 COMMONLY USED TERMS
  ABR
 AOCI
 Alliance Acquisition
 Alliance Leasehold
 BBEP
 BreitBurn Transaction
 CMS Litigation
 Eni
 Eni Production
 Eni Transaction
 Gas Purchase Commitment
 FASB
 3




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##### Table of Contents



FASC FASB Accounting Standards Codification
 GAAP
 KGS
 KGS Credit Agreement
 Mercury
 Michigan Sales Contract
 Northeast Operations
 OCI
 PCAOB
 RSU
 SEC
 Senior Secured Credit Facility
 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;
    
    the effects of existing or future litigation; and
    
    certain factors discussed elsewhere in this quarterly report.
 10-K 10-Q 8-K
  4




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. 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 Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenueNatural gas, NGL and crude oil
    
    $
    198,287
    
    
    $
    218,214
    
    
    $
    581,156
    
    
    $
    574,717Sales of purchased natural gas
    
    
    5,964
    
    
    
    
    
    
    
    11,181
    
    
    
    Other
    
    
    2,406
    
    
    
    18,048
    
    
    
    6,293
    
    
    
    17,063Total revenue
    
    
    206,657
    
    
    
    236,262
    
    
    
    598,630
    
    
    
    591,780Operating expensesOil and gas production expense
    
    
    29,064
    
    
    
    33,068
    
    
    
    92,938
    
    
    
    98,443Production and ad valorem taxes
    
    
    6,630
    
    
    
    4,944
    
    
    
    18,437
    
    
    
    10,684Costs of purchased natural gas
    
    
    2,964
    
    
    
    
    
    
    
    11,546
    
    
    
    Other operating costs
    
    
    2,066
    
    
    
    878
    
    
    
    5,337
    
    
    
    2,679Depletion, depreciation and accretion
    
    
    44,548
    
    
    
    51,777
    
    
    
    155,210
    
    
    
    125,756General and administrative
    
    
    17,682
    
    
    
    25,605
    
    
    
    59,452
    
    
    
    56,402Total expenses
    
    
    102,954
    
    
    
    116,272
    
    
    
    342,920
    
    
    
    293,964Impairment related to oil and gas properties
    
    
    
    
    
    
    
    
    
    
    (967,126
    )
    
    
    Operating income (loss)
    
    
    103,703
    
    
    
    119,990
    
    
    
    (711,416
    )
    
    
    297,816Loss from earnings of BBEP  net
    
    
    (43,685
    )
    
    
    (89,814
    )
    
    
    (24,669
    )
    
    
    (93,864
    )Other expense  net
    
    
    (645
    )
    
    
    (2,113
    )
    
    
    (739
    )
    
    
    (1,055
    )Interest expense
    
    
    (41,619
    )
    
    
    (35,988
    )
    
    
    (149,901
    )
    
    
    (65,521
    )Income (loss) before income taxes
    
    
    17,754
    
    
    
    (7,925
    )
    
    
    (886,725
    )
    
    
    137,376Income tax (expense) benefit
    
    
    (15,595
    )
    
    
    5,295
    
    
    
    301,125
    
    
    
    (46,041
    )Net income (loss)
    
    
    2,159
    
    
    
    (2,630
    )
    
    
    (585,600
    )
    
    
    91,335Net income attributable to noncontrolling interests
    
    
    (1,429
    )
    
    
    (1,125
    )
    
    
    (4,411
    )
    
    
    (2,621
    )Net income (loss) attributable to Quicksilver
    
    $
    730
    
    
    $
    (3,755
    )
    
    $
    (590,011
    )
    
    $
    88,714Other comprehensive income (loss)  net of income taxReclassification adjustments related to
settlements of derivative contracts
    
    
    (63,196
    )
    
    
    17,500
    
    
    
    (160,183
    )
    
    
    40,396Net change in derivative fair value
    
    
    1,030
    
    
    
    308,096
    
    
    
    113,333
    
    
    
    46,847Foreign currency translation adjustment
    
    
    11,937
    
    
    
    (11,044
    )
    
    
    18,719
    
    
    
    (17,858
    )Comprehensive income (loss)
    
    $
    (49,499
    )
    
    $
    310,797
    
    
    $
    (618,142
    )
    
    $
    158,099Earnings (loss) per common share  basic
    
    $
    
    
    
    $
    (0.02
    )
    
    $
    (3.49
    )
    
    $
    0.55Earnings (loss) per common share  diluted
    
    $
    
    
    
    $
    (0.02
    )
    
    $
    (3.49
    )
    
    $
    0.55Basic weighted average shares outstanding
    
    
    169,021
    
    
    
    164,439
    
    
    
    168,917
    
    
    
    160,293Diluted weighted average shares outstanding
    
    
    170,657
    
    
    
    164,439
    
    
    
    168,917
    
    
    
    171,099
  5




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##### Table of Contents



QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except for share data  Unaudited
 September 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,568
    
    
    $
    2,848Accounts receivable  net of allowance for doubtful accounts
    
    
    75,225
    
    
    
    143,315Derivative assets at fair value
    
    
    147,815
    
    
    
    171,740Other current assets
    
    
    57,066
    
    
    
    75,433Total current assets
    
    
    281,674
    
    
    
    393,336Investment in BBEP
    
    
    114,733
    
    
    
    150,503Property, plant and equipmentOil and gas properties, full cost method (including unevaluated costs of
$497,301 and $543,533, respectively)
    
    
    2,261,930
    
    
    
    3,142,608Other property and equipment
    
    
    731,870
    
    
    
    655,107Property, plant and equipment  net
    
    
    2,993,800
    
    
    
    3,797,715Derivative assets at fair value
    
    
    34,170
    
    
    
    116,006Deferred income taxes
    
    
    143,450
    
    
    
    Other assets
    
    
    47,728
    
    
    
    40,648$
    3,615,555
    
    
    $
    4,498,208LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    
    
    
    $
    6,579Accounts payable
    
    
    143,989
    
    
    
    282,636Income taxes payable
    
    
    5,583
    
    
    
    40Accrued liabilities
    
    
    152,205
    
    
    
    66,923Derivative liabilities at fair value
    
    
    871
    
    
    
    9,928Deferred income taxes
    
    
    63,394
    
    
    
    52,393Total current liabilities
    
    
    366,042
    
    
    
    418,499Long-term debt
    
    
    2,531,632
    
    
    
    2,586,046Asset retirement obligations
    
    
    44,902
    
    
    
    34,753Other liabilities
    
    
    30,049
    
    
    
    12,962Deferred income taxes
    
    
    36,542
    
    
    
    234,385Commitments and contingencies (Note 10)
    
    
    
    
    
    
    Stockholders equityPreferred stock, par value $0.01, 10,000,000 shares authorized, none outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value, 400,000,000 shares authorized; 173,997,988
and 171,742,699 shares issued, respectively
    
    
    1,740
    
    
    
    1,717Paid in capital in excess of par value
    
    
    672,475
    
    
    
    656,958Treasury stock of 4,700,335 and 4,572,795 shares, respectively
    
    
    (36,309
    )
    
    
    (35,441
    )Accumulated other comprehensive income
    
    
    156,973
    
    
    
    185,104Retained earnings (deficit)
    
    
    (213,523
    )
    
    
    376,488Quicksilver stockholders equity
    
    
    581,356
    
    
    
    1,184,826Noncontrolling interests
    
    
    25,032
    
    
    
    26,737Total equity
    
    
    606,388
    
    
    
    1,211,563$
    3,615,555
    
    
    $
    4,498,208
  6




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##### Table of Contents



QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS 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, 2007
    
    $
    1,606
    
    
    $
    378,622
    
    
    $
    (12,304
    )
    
    $
    40,066
    
    
    $
    754,764
    
    
    $
    29,714
    
    
    $
    1,192,468Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,714
    
    
    
    2,621
    
    
    
    91,335Hedge derivative contract settlements
reclassified into earnings from
accumulated
other comprehensive income, net of
income tax of $20,770
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,396
    
    
    
    
    
    
    
    
    
    
    
    40,396Net change in derivative fair value, net
of income tax of $23,846
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,847
    
    
    
    
    
    
    
    
    
    
    
    46,847Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,858
    )
    
    
    
    
    
    
    
    
    
    
    (17,858
    )Stock issuance  Alliance Acquistion
    
    
    104
    
    
    
    261,988
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    262,092Issuance and vesting of stock compensation
    
    
    5
    
    
    
    11,050
    
    
    
    (3,235
    )
    
    
    
    
    
    
    
    
    
    
    755
    
    
    
    8,575Stock option exercises
    
    
    2
    
    
    
    1,238
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,240Distributions paid on KGS common units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,343
    )
    
    
    (6,343
    )Balances at September 30, 2008
    
    $
    1,717
    
    
    $
    652,898
    
    
    $
    (15,539
    )
    
    $
    109,451
    
    
    $
    843,478
    
    
    $
    26,747
    
    
    $
    1,618,752Balances at December 31, 2008
    
    $
    1,717
    
    
    $
    656,958
    
    
    $
    (35,441
    )
    
    $
    185,104
    
    
    $
    376,488
    
    
    $
    26,737
    
    
    $
    1,211,563Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (590,011
    )
    
    
    4,411
    
    
    
    (585,600
    )Hedge derivative contract settlements
reclassified into earnings from
accumulated
other comprehensive income, net of
income tax benefit of $74,629
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (160,183
    )
    
    
    
    
    
    
    
    
    
    
    (160,183
    )Net change in derivative fair value, net
of income tax of $52,317
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,333
    
    
    
    
    
    
    
    
    
    
    
    113,333Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,719
    
    
    
    
    
    
    
    
    
    
    
    18,719Issuance and vesting of stock compensation
    
    
    23
    
    
    
    14,695
    
    
    
    (868
    )
    
    
    
    
    
    
    
    
    
    
    1,228
    
    
    
    15,078Stock option exercises
    
    
    
    
    
    
    822
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    822Distributions paid on KGS common units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,344
    )
    
    
    (7,344
    )Balances at September 30, 2009
    
    $
    1,740
    
    
    $
    672,475
    
    
    $
    (36,309
    )
    
    $
    156,973
    
    
    $
    (213,523
    )
    
    $
    25,032
    
    
    $
    606,388
  7




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##### Table of Contents



QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands  Unaudited
 For the Nine Months EndedSeptember 30,2009
    
    
    2008Operating activities:Net income (loss)
    
    $
    (585,600
    )
    
    $
    91,335Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Impairment related to oil and gas properties
    
    
    967,126
    
    
    
    Depletion, depreciation and accretion
    
    
    155,210
    
    
    
    125,756Deferred income tax expense (benefit)
    
    
    (313,556
    )
    
    
    43,322Loss from BBEP in excess of cash distributions, net of
impairment
    
    
    35,770
    
    
    
    93,864Non-cash interest expense
    
    
    40,553
    
    
    
    8,085Stock-based compensation
    
    
    16,007
    
    
    
    11,810Non-cash (gain) loss from hedging and derivative activities
    
    
    2,845
    
    
    
    (2,065
    )Other
    
    
    684
    
    
    
    1,288Changes in assets and liabilitiesAccounts receivable
    
    
    67,555
    
    
    
    (16,532
    )Derivative assets at fair value
    
    
    54,896
    
    
    
    Other assets
    
    
    4,490
    
    
    
    (4,819
    )Accounts payable
    
    
    (34,543
    )
    
    
    (9,619
    )Income taxes payable
    
    
    5,542
    
    
    
    (46,414
    )Accrued and other liabilities
    
    
    33,614
    
    
    
    (21,891
    )Net cash provided by operating activities
    
    
    450,593
    
    
    
    274,120Investing activities:Purchases of property, plant and equipment
    
    
    (561,120
    )
    
    
    (985,124
    )Alliance Acquisition
    
    
    
    
    
    
    (990,649
    )Proceeds from sales of property, plant and equipment
    
    
    221,038
    
    
    
    818Return of investment from BBEP
    
    
    
    
    
    
    31,435Net cash used for investing activities
    
    
    (340,082
    )
    
    
    (1,943,520
    )Financing activities:Issuance of debt
    
    
    1,377,525
    
    
    
    2,472,119Repayment of debt
    
    
    (1,507,137
    )
    
    
    (781,988
    )Debt issuance costs
    
    
    (30,995
    )
    
    
    (24,545
    )Gas Purchase Commitment  net
    
    
    54,488
    
    
    
    Noncontrolling interest distributions
    
    
    (7,344
    )
    
    
    (6,343
    )Other
    
    
    (107
    )
    
    
    (1,995
    )Net cash provided by (used for) financing activities
    
    
    (113,570
    )
    
    
    1,657,248Effect of exchange rate changes in cash
    
    
    1,779
    
    
    
    (2,609
    )Net decrease in cash
    
    
    (1,280
    )
    
    
    (14,761
    )Cash and cash equivalents at beginning of period
    
    
    2,848
    
    
    
    28,226Cash and cash equivalents at end of period
    
    $
    1,568
    
    
    $
    13,465
  8




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##### Table of Contents



QUICKSILVER RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Unaudited
 1. ACCOUNTING POLICIES AND DISCLOSURES
    Earnings per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands, except per
    
    
    (In thousands, except pershare data)
    
    
    share data)Net income (loss) attributable to Quicksilver
    
    $
    730
    
    
    $
    (3,755
    )
    
    $
    (590,011
    )
    
    $
    88,714Impact of assumed conversions  interest
on 1.875%
convertible debentures, net of income taxes
    
    
    
    
    
    
    1,578
    
    
    
    
    
    
    
    3,137Income (loss) available to stockholders assuming
conversion of convertible debentures
    
    $
    730
    
    
    $
    (2,177
    )
    
    $
    (590,011
    )
    
    $
    91,851Weighted average common shares  basic
    
    
    169,021
    
    
    
    164,439
    
    
    
    168,917
    
    
    
    160,293Effect of dilutive securities:Employee stock options
    
    
    1,452
    
    
    
    
    
    
    
    
    
    
    
    676Employee stock unit awards
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    314Contingently convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,816Weighted average common shares  diluted
    
    
    170,657
    
    
    
    164,439
    
    
    
    168,917
    
    
    
    171,099Earnings (loss) per common share  basic
    
    $
    
    
    
    $
    (0.02
    )
    
    $
    (3.49
    )
    
    $
    0.55Earnings (loss) per common share  diluted
    
    $
    
    
    
    $
    (0.02
    )
    
    $
    (3.49
    )
    
    $
    0.55
 9




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##### Table of Contents



Recently Issued Accounting Standards
  
    
    Pronouncements Impacting Quicksilver That Have Been Implemented
 FASB Accounting Standards
Codification
 Business Combinations
 Consolidation
 Fair Value Measurements and
Disclosures,
 Derivatives and Hedging,
 Debt
with Conversion and Other Options
 10




---



##### Table of Contents



Earnings per Share
 Financial
Instruments
 Subsequent Events
 Fair Value
Measurements and Disclosures
  For the Three Months Ended September 30, 2008
    
    
    For the Nine Months Ended September 30, 2008As Originally
    
    
    
    
    
    
    Effect of
    
    
    As Originally
    
    
    
    
    
    
    Effect ofReported
    
    
    As Adjusted
    
    
    Change
    
    
    Reported
    
    
    As Adjusted
    
    
    Change(In thousands, except for per share data)
    
    
    (In thousands, except for per share data)Operating income
    
    $
    119,990
    
    
    $
    119,990
    
    
    $
    
    
    
    $
    297,816
    
    
    $
    297,816
    
    
    $
    Loss from earnings of BBEP
    
    
    (89,814
    )
    
    
    (89,814
    )
    
    
    
    
    
    
    (93,864
    )
    
    
    (93,864
    )
    
    
    Interest expense and other
    
    
    (36,440
    )
    
    
    (38,101
    )
    
    
    (1,661
    )
    
    
    (61,680
    )
    
    
    (66,576
    )
    
    
    (4,896
    )Income before income tax
    
    
    (6,264
    )
    
    
    (7,925
    )
    
    
    (1,661
    )
    
    
    142,272
    
    
    
    137,376
    
    
    
    (4,896
    )Income tax (expense) benefit
    
    
    4,714
    
    
    
    5,295
    
    
    
    581
    
    
    
    (47,754
    )
    
    
    (46,041
    )
    
    
    1,713Minority interest expense
    
    
    (1,125
    )
    
    
    
    
    
    
    (1,125
    )
    
    
    (2,621
    )
    
    
    
    
    
    
    (2,621
    )Net income
attributable to noncontrolling interests
    
    
    
    
    
    
    (1,125
    )
    
    
    1,125
    
    
    
    
    
    
    
    (2,621
    )
    
    
    2,621Net income attributable to Quicksilver
    
    $
    (2,675
    )
    
    $
    (3,755
    )
    
    $
    (1,080
    )
    
    $
    91,897
    
    
    $
    88,714
    
    
    $
    (3,183
    )Earnings per share  basic
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    
    
    
    $
    0.57
    
    
    $
    0.55
    
    
    $
    (0.02
    )Earnings per share  diluted
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    
    
    
    $
    0.54
    
    
    $
    0.55
    
    
    $
    0.01Basic weighted average shares outstanding
    
    
    164,087
    
    
    
    164,439
    
    
    
    352
    
    
    
    159,914
    
    
    
    160,293
    
    
    
    379Diluted weighted average shares outstanding
    
    
    164,087
    
    
    
    164,439
    
    
    
    352
    
    
    
    171,759
    
    
    
    171,099
    
    
    
    (660
    )
 
    
    Pronouncements Not Yet Implemented
  11




---



##### Table of Contents



2. ENI TRANSACTION
    Total AggregateYear
    
    Linear Feet2009
    
    
    28,2152010
    
    
    58,4482011
    
    
    44,0802012
    
    
    26,9742013
    
    
    34,102
  3. ALLIANCE ACQUISITION
  (In thousands)Purchase Price:Cash paid
    
    $
    1,000,000Cash received from post-closing settlement
    
    
    (9,086
    )Cash paid for acquisition-related expenses
    
    
    1,368Total cash
    
    
    992,282Issuance of 10,400,468 common shares
    
    
    262,092$
    1,254,374
 12




---



##### Table of Contents



(In thousands)Allocation of Purchase Price:Oil and gas properties  proved
    
    $
    788,457Oil and gas properties  unproved
    
    
    440,372Midstream assets
    
    
    27,652Liabilities assumed
    
    
    (1,035
    )Asset retirement obligations
    
    
    (1,072
    )$
    1,254,374
  Pro Forma Information
  For the Three
    
    
    For the NineMonths Ended
    
    
    Months EndedSeptember 30, 2008
    
    
    September 30, 2008(In thousands, except for per share data)Revenues
    
    $
    249,956
    
    
    $
    667,762Net income attributable to Quicksilver
    
    $
    (112
    )
    
    $
    85,544Earnings per share  basic
    
    $
    
    
    
    $
    0.51Earnings per share  diluted
    
    $
    
    
    
    $
    0.50
 4. DERIVATIVES AND FAIR VALUE MEASUREMENTS
   Commodity Price Derivatives
  13




---



##### Table of Contents



Interest Rate Derivatives
  Other Derivatives
  (In thousands)Initial valuation of liability (1)
    
    $
    58,294Decrease due to gas volumes purchased
    
    
    (3,806
    )Embedded derivative increase (decrease) due to:Price changes
    
    
    1,667Volume changes
    
    
    (479
    )Total embedded derivative
    
    
    1,188Balance at September 30, 2009
    
    $
    55,676
 
 (1)
    
    Initial valuation of the Gas Purchase Commitment was estimated using estimated Eni
production volumes from June 19, 2009 through December 2010 and published future market prices
and risk-adjusted interest rates as of June 19, 2009. 14




---



##### Table of Contents



Asset Derivatives
    
    
    
    Liability DerivativesSeptember 30,
    
    
    December 31,
    
    
    
    September 30,
    
    
    December 31,2009
    
    
    2008
    
    
    
    2009
    
    
    2008(In thousands)
    
    
    
    (In thousands)Derivatives designated as hedges:Commodity contracts reported in:Current derivative assets
    
    $
    145,180
    
    
    $
    179,079
    
    
    
    $
    
    
    
    $
    2,500Noncurrent derivative assets
    
    
    20,763
    
    
    
    116,006
    
    
    
    
    
    
    
    
    Current derivative liabilities
    
    
    
    
    
    
    
    
    
    
    
    871
    
    
    
    1,865Interest rate contracts reported in:Current derivative assets
    
    
    2,635
    
    
    
    
    
    
    
    
    
    
    
    
    Noncurrent derivative assets
    
    
    13,407
    
    
    
    
    
    
    
    
    
    
    
    
    Current derivative liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Noncurrent derivative liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total derivatives designated as hedges
    
    $
    181,985
    
    
    $
    295,085
    
    
    
    $
    871
    
    
    $
    4,365Derivatives not designated as hedges:Gas Purchase Commitment reported in:Accrued liabilities
    
    $
    
    
    
    $
    
    
    
    
    $
    1,146
    
    
    $
    Other liabilities
    
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    Michigan Sales Contract natural gas
purchase derivatives (1) reported
in current derivative assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,839Michigan Sales Contract (1) reported
in current derivative liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,063Total derivatives not designated as hedges
    
    $
    
    
    
    $
    
    
    
    
    $
    1,188
    
    
    $
    12,902Total derivatives
    
    $
    181,985
    
    
    $
    295,085
    
    
    
    $
    2,059
    
    
    $
    17,267
 
 (1)
    
    During 2009, our net cash payments were $16.5 million, including derivative
settlements, to complete our obligations under the Michigan Sales Contract  Fair Value Measurements as of September 30, 2009(1)Balance SheetLevel 2
    
    

Other (2)
    
    
    Total(In thousands)Derivative assets
    
    $
    181,985
    
    
    $
    
    
    
    $
    181,985Derivative liabilities
    
    $
    2,059
    
    
    $
    
    
    
    $
    2,059
 15




---



##### Table of Contents



Fair Value Measurements as of December 31, 2008(1)Balance SheetLevel 2
    
    

Other(2)
    
    
    Total(In thousands)Derivative assets
    
    $
    295,085
    
    
    $
    (7,339
    )
    
    $
    287,746Derivative liabilities
    
    $
    17,267
    
    
    $
    (7,339
    )
    
    $
    9,928
 
 (1)
    
    No Level 1 or Level 3 measurements(2)
    
    Represents amounts netted under master netting arrangements with counterparties   For the Three Months Ended September 30, 2009Michigan
    
    
    Gas Purchase
    
    
    Fair Value
    
    
    Cash FlowContract
    
    
    Commitment
    
    
    Derivatives
    
    
    Derivatives
    
    
    Total(In thousands)Derivative fair value at June 30, 2009
    
    $
    
    
    
    $
    (3,818
    )
    
    $
    (266
    )
    
    $
    257,548
    
    
    $
    253,464Net settlements reported in revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92,687
    )
    
    
    (92,687
    )Net settlements reported in interest expense
    
    
    
    
    
    
    
    
    
    
    (6,537
    )
    
    
    
    
    
    
    (6,537
    )Change in fair value of Gas Purchase Commitment
reported in costs of purchased gas
    
    
    
    
    
    
    2,630
    
    
    
    
    
    
    
    
    
    
    
    2,630Change in fair value of effective interest swaps
    
    
    
    
    
    
    
    
    
    
    22,845
    
    
    
    
    
    
    
    22,845Ineffectiveness reported in other revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    77Unrealized gains reported in OCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    134Derivative fair value at September 30, 2009
    
    $
    
    
    
    $
    (1,188
    )
    
    $
    16,042
    
    
    $
    165,072
    
    
    $
    179,926
 For the Three Months Ended September 30, 2008Michigan
    
    
    Gas Purchase
    
    
    Fair Value
    
    
    Cash FlowContract
    
    
    Commitment
    
    
    Derivatives
    
    
    Derivatives
    
    
    Total(In thousands)Derivative fair value at June 30, 2008
    
    $
    (46,138
    )
    
    $
    
    
    
    $
    
    
    
    $
    (372,842
    )
    
    $
    (418,980
    )Change in amounts due from Quicksilver
    
    
    4,443
    
    
    
    
    
    
    
    
    
    
    
    (612
    )
    
    
    3,831Net settlements
    
    
    16,072
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,072Net settlements reported in revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,614
    
    
    
    26,614Ineffectiveness reported in other revenue
    
    
    (357
    )
    
    
    
    
    
    
    
    
    
    
    13,912
    
    
    
    13,555Unrealized gains reported in OCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    462,130
    
    
    
    462,130Derivative fair value at September 30, 2008
    
    $
    (25,980
    )
    
    $
    
    
    
    $
    
    
    
    $
    129,202
    
    
    $
    103,222
 16




---



##### Table of Contents



For the Nine Months Ended September 30, 2009Michigan
    
    
    Gas Purchase
    
    
    Fair Value
    
    
    Cash FlowContract
    
    
    Commitment
    
    
    Derivatives
    
    
    Derivatives
    
    
    Total(In thousands)Derivative fair value at December 31, 2008
    
    $
    (12,901
    )
    
    $
    
    
    
    $
    
    
    
    $
    290,719
    
    
    $
    277,818Change in amounts due from Quicksilver
    
    
    (3,518
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,518
    )Net settlements
    
    
    16,479
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,479Net settlements reported in revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (234,812
    )
    
    
    (234,812
    )Net settlements reported in interest expense
    
    
    
    
    
    
    
    
    
    
    (7,200
    )
    
    
    
    
    
    
    (7,200
    )Change in fair value of Gas Purchase Commitment
reported in costs of purchased gas
    
    
    
    
    
    
    (1,188
    )
    
    
    
    
    
    
    
    
    
    
    (1,188
    )Change in fair value of effective interest swaps
    
    
    
    
    
    
    
    
    
    
    23,242
    
    
    
    
    
    
    
    23,242Ineffectiveness reported in other revenue
    
    
    (60
    )
    
    
    
    
    
    
    
    
    
    
    (1,589
    )
    
    
    (1,649
    )Cash settlement reported in OCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,896
    )
    
    
    (54,896
    )Unrealized gains reported in OCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165,650
    
    
    
    165,650Derivative fair value at September 30, 2009
    
    $
    
    
    
    $
    (1,188
    )
    
    $
    16,042
    
    
    $
    165,072
    
    
    $
    179,926
 For the Nine Months Ended September 30, 2008Michigan
    
    
    Gas Purchase
    
    
    Fair Value
    
    
    Cash FlowContract
    
    
    Commitment
    
    
    Derivatives
    
    
    Derivatives
    
    
    Total(In thousands)Derivative fair value at December 31, 2007
    
    $
    (63,777
    )
    
    $
    
    
    
    $
    
    
    
    $
    (5,503
    )
    
    $
    (69,280
    )Change in amounts due from Quicksilver
    
    
    4,436
    
    
    
    
    
    
    
    
    
    
    
    (1,663
    )
    
    
    2,773Net settlements
    
    
    34,198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,198Net settlements reported in revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,167
    
    
    
    61,167Ineffectiveness reported in other revenue
    
    
    (837
    )
    
    
    
    
    
    
    
    
    
    
    4,508
    
    
    
    3,671Unrealized gains reported in OCI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,693
    
    
    
    70,693Derivative fair value at September 30, 2008
    
    $
    (25,980
    )
    
    $
    
    
    
    $
    
    
    
    $
    129,202
    
    
    $
    103,222
  5.
    
    INVESTMENT IN BREITBURN ENERGY PARTNERS L.P.
   17




---



##### Table of Contents



For the
    
    
    For theFor the Three Months
Ended
    
    
    Nine Months
    
    
    Eight MonthsJune 30,
    
    
    Ended
    
    
    Ended2009
    
    
    2008
    
    
    June 30, 2009
    
    
    June 30, 2008(In thousands)Revenues (1)
    
    $
    (36,994
    )
    
    $
    (212,677
    )
    
    $
    534,192
    
    
    $
    (118,175
    )Operating expenses (2)
    
    
    67,352
    
    
    
    69,590
    
    
    
    307,391
    
    
    
    181,747Operating income (loss)
    
    
    (104,346
    )
    
    
    (282,267
    )
    
    
    226,801
    
    
    
    (299,922
    )Interest and other (3)
    
    
    4,988
    
    
    
    4,994
    
    
    
    37,458
    
    
    
    16,274Income tax (benefit) expense
    
    
    (809
    )
    
    
    (1,091
    )
    
    
    336
    
    
    
    (2,006
    )Noncontrolling interests
    
    
    (5
    )
    
    
    70
    
    
    
    15
    
    
    
    155Net income (loss) available to
BBEP
    
    $
    (108,520
    )
    
    $
    (286,240
    )
    
    $
    188,992
    
    
    $
    (314,345
    )Net income (loss) available to
common unitholders
    
    $
    (108,520
    )
    
    $
    (284,494
    )
    
    $
    188,992
    
    
    $
    (312,794
    )
 
 (1)
    
    Unrealized losses on commodity derivatives of $148.7 million and $319.9 million were
included for the three months ended June 30, 2009 and 2008, respectively.   Unrealized gains of
$193.5 million and unrealized losses of $392.2 million on commodity derivatives were included
for the nine months ended June 30, 2009 and the eight months ended June 30, 2008,
respectively.   Realized gains on commodity derivatives of $25.0 million and $70.6 million for
the early settlement of derivative positions were included for the three and nine months ended
June 30, 2009, respectively.(2)
    
    An impairment of BBEPs oil and gas properties of $86.4 million was included for the
nine months ended June 30, 2009(3)
    
    The three months ended June 30, 2009 included $0.3 million for unrealized gains on
interest rate swaps and the nine months ended June 30, 2009 included $17.9 million for
unrealized losses on interest rate swaps As of
    
    As ofJune 30, 2009
    
    December 31, 2008(In thousands)Current assets
    
    $
    126,473
    
    
    $
    140,566Property, plant and equipment
    
    
    1,799,124
    
    
    
    1,840,341Other assets
    
    
    123,248
    
    
    
    235,927Current liabilities
    
    
    64,887
    
    
    
    79,990Long-term debt
    
    
    640,000
    
    
    
    736,000Other non-current liabilities
    
    
    73,986
    
    
    
    47,413Partners equity
    
    
    1,269,972
    
    
    
    1,353,431
  18




---



##### Table of Contents



(In thousands)Balance at December 31, 2008
    
    $
    150,503Equity income in BBEP
    
    
    77,415Distributions from BBEP
    
    
    (11,101
    )Non-cash impairment of BBEP
    
    
    (102,084
    )Balance at September 30, 2009
    
    $
    114,733
 6.
    
    PROPERTY, PLANT AND EQUIPMENT
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Oil and gas propertiesSubject to depletion
    
    $
    3,780,855
    
    
    $
    3,621,831Unevaluated costs
    
    
    497,301
    
    
    
    543,533Accumulated depletion
    
    
    (2,016,226
    )
    
    
    (1,022,756
    )Net oil and gas properties
    
    
    2,261,930
    
    
    
    3,142,608Other plant and equipmentPipelines and processing facilities
    
    
    753,213
    
    
    
    529,555General properties
    
    
    68,118
    
    
    
    57,941Construction in progress
    
    
    6,269
    
    
    
    134,557Accumulated depreciation
    
    
    (95,730
    )
    
    
    (66,946
    )Net other property and equipment
    
    
    731,870
    
    
    
    655,107Property, plant and equipment, net of
accumulated depletion and depreciation
    
    $
    2,993,800
    
    
    $
    3,797,715
 Ceiling Test Analysis
     19




---



##### Table of Contents



Net
    
    
    
    
    
    
    Pre-taxCapitalized
    
    
    Ceiling
    
    
    Charge forCosts(1)
    
    
    Limitation(2)
    
    
    Impairment(In thousands)First QuarterUnited States
    
    $
    2,727,130
    
    
    $
    1,940,263
    
    
    $
    786,867Canada
    
    
    458,135
    
    
    
    348,519
    
    
    
    109,616Total
    
    $
    3,185,265
    
    
    $
    2,288,782
    
    
    $
    896,483Second QuarterCanada
    
    $
    400,696
    
    
    $
    330,053
    
    
    $
    70,643Year to DateUnited States
    
    $
    2,727,130
    
    
    $
    1,940,263
    
    
    $
    786,867Canada
    
    
    858,831
    
    
    
    678,572
    
    
    
    180,259Total
    
    $
    3,585,961
    
    
    $
    2,618,835
    
    
    $
    967,126
 
 (1)
    
    Net capitalized costs before impairment includes all costs associated with
development, exploration and acquisition of oil and gas properties net of accumulated
depletion and impairment, reduced by the related deferred income tax liability(2)
    
    The ceiling limitation is the sum of (i) estimated future net cash flows, discounted
at 10% per annum, from proved reserves, based on unescalated period-end prices and costs,
adjusted for financial derivatives that qualify as cash flow hedges of our oil and gas
revenue, (ii) the costs of properties not being amortized, (iii) the lower of cost or market
value of unproved properties not included in the costs being amortized, less (iv) income tax
effects related to differences between book and tax bases of the oil and gas properties 7. LONG-TERM DEBT
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Senior secured credit facility
    
    $
    480,873
    
    
    $
    827,868Senior secured second lien facility, net of unamortized discount
    
    
    
    
    
    
    641,555Senior notes due 2015, net of unamortized discount
    
    
    479,218
    
    
    
    469,062Senior notes due 2016, net of unamortized discount
    
    
    580,830
    
    
    
    Senior notes due 2019, net of unamortized discount
    
    
    292,892
    
    
    
    Senior subordinated notes due 2016
    
    
    356,563
    
    
    
    350,000Convertible debentures, net of unamortized discount
    
    
    134,356
    
    
    
    129,240KGS credit agreement
    
    
    206,900
    
    
    
    174,900Total debt
    
    
    2,531,632
    
    
    
    2,592,625Less current maturities
    
    
    
    
    
    
    (6,579
    )Long-term debt
    
    $
    2,531,632
    
    
    $
    2,586,046
 20




---



##### Table of Contents



Senior Secured Credit Facility
  Senior Secured Second Lien Facility and Senior Notes Due 2016
  Senior Notes Due 2019
  Convertible Debentures
   KGS Credit Agreement
  21




---



##### Table of Contents



Summary of All Outstanding Debt
 Long-Term Debt
 Priority on Collateral and Structural Seniority (7)
    
    Recourse only toHighest priority
    
    
    
    Lowest priority
    
    KGS assetsEqual prioritySenior Secured
    
    2015
    
    2016
    
    2019
    
    Senior
    
    Convertible
    
    KGS CreditCredit Facility
    
    Senior Notes
    
    Senior Notes
    
    Senior Notes
    
    Subordinated Notes
    
    Debentures
    
    AgreementMaturity date
    
    February 9, 2012
    
    June 27, 2015
    
    January 1, 2016
    
    September 1, 2019
    
    March 16, 2016
    
    November 1, 2024
    
    August 10, 2012Interest
rate atSeptember 30, 2009 (1)
    
    
    3.067
    %
    
    
    8.25
    %
    
    
    11.75
    %
    
    
    9.125
    %
    
    
    7.125
    %
    
    
    1.875
    %
    
    
    1.50
    %Base interest rate options(2)
    
    LIBOR, ABR or specified(3)
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    LIBOR, ABR or specified(4)Financial covenants(5)
    
    - Minimum current ratio of 1.0
    
    
    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 2.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    - Minimum EBITDA to interest expense ratio of 2.5Significant non-financial
    
    - Incurrence of debt
    
    - Incurrence of debt
    
    - Incurrence of debt
    
    - Incurrence of debt
    
    - Incurrence of debt
    
    
    N/A
    
    
    - Incurrence of debtcovenants (5)
    
    - Incurrence of liens
    
    - Incurrence of liens
    
    - Incurrence of liens
    
    - Incurrence of liens
    
    - Incurrence of liens
    
    
    
    
    
    - Incurrence of liens- Payment of
    
    - Payment of
    
    - Payment of
    
    - Payment of
    
    - Payment ofdividends
    
    dividends
    
    dividends
    
    dividends
    
    dividends
    
    
    
    
    
    - Equity purchases- Equity purchases
    
    - Equity purchases
    
    - Equity purchases
    
    - Equity purchases
    
    - Equity purchases
    
    
    
    
    
    - Asset sales- Asset sales
    
    - Asset sales
    
    - Asset sales
    
    - Asset sales
    
    - Asset sales
    
    
    
    
    
    - Limitations on- Affiliate transactions
    
    - Affiliate
    
    - Affiliate
    
    - Affiliate
    
    - Affiliate
    
    
    
    
    
    derivativestransactions
    
    transactions
    
    transactions
    
    transactions- Limitations on derivativesEstimated fair value (6)
    
    $480.9 million
    
    $463.1 million
    
    $658.5 million
    
    $298.5 million
    
    $301.6 million
    
    $173.9 million
    
    $206.9 million
 
 (1)
    
    Represents the weighted average borrowing rate payable to lenders and
excludes effects of interest rate derivatives(2)
    
    Interest rate options include a base rate plus a spread(3)
    
    The Senior Secured Credit Facility was amended in August 2009 to add 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 an
increase in the Eurodollar and specified rate margins to a range of 2.25% to 3.25%(4)
    
    The KGS Credit Agreement was amended in October 2009 to add 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 an
increase in the Eurodollar and specified rate margins to a range of 3.00% to 4.00%(5)
    
    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(6)
    
    The estimated fair value is determined based on market quotations on the balance
sheet date for fixed rate obligations.   We consider debt with market-based interest rates to
have a fair value equal to its carrying value.(7)
    
    The Senior Secured Credit Facility is secured by a first perfected lien on
substantially all the assets.   The other debt presented is based upon structural seniority. 22




---



##### Table of Contents



8. ASSET RETIREMENT OBLIGATIONS
  (In thousands)Beginning asset retirement obligations
    
    $
    35,193Incremental liability incurred
    
    
    6,000Accretion expense
    
    
    1,722Change in estimates
    
    
    157Sale of properties
    
    
    (380
    )Asset retirement costs incurred
    
    
    (153
    )Gain on settlement of liability
    
    
    208Currency translation adjustment
    
    
    2,595Ending asset retirement obligations
    
    
    45,342Less current portion
    
    
    (440
    )Long-term asset retirement obligations
    
    $
    44,902
 9. INCOME TAXES
     10. COMMITMENTS AND CONTINGENCIES
 Commitments
and Contingencies
   23




---



##### Table of Contents



Commitments
   11. STOCK-BASED COMPENSATION
 Stockholders Equity
 Quicksilver Stock Options
   StockOptionsIssuedWtd avg grant date fair value
    
    $
    6.21Wtd avg grant date
    
    Jan 2, 2009Wtd avg risk-free interest rate
    
    
    1.90
    %Expected life (in years)
    
    
    6.0Wtd avg volatility
    
    
    56.76
    %Expected dividends
    
    
    
  Wtd Avg
    
    
    Wtd AvgExercise
    
    
    Remaining
    
    
    AggregateShares
    
    
    Price
    
    
    Contractual Life
    
    
    Intrinsic Value(In years)
    
    
    (In thousands)Outstanding at December 31, 2008
    
    
    1,103,336
    
    
    $
    14.20Granted
    
    
    2,605,699
    
    
    
    6.21Exercised
    
    
    (147,510
    )
    
    
    5.58Cancelled
    
    
    (79,504
    )
    
    
    9.01Outstanding at September 30, 2009
    
    
    3,482,021
    
    
    $
    8.70
    
    
    
    7.6
    
    
    $
    24,668Exercisable at September 30, 2009
    
    
    803,128
    
    
    $
    10.25
    
    
    
    2.4
    
    
    $
    5,046Vested at September 30, 2009 or
expected to vest in the future
    
    
    3,303,418
    
    
    $
    7.18
  24




---



##### 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, 2008
    
    
    1,336,111
    
    
    $
    24.01
    
    
    
    
    
    
    $
    Granted
    
    
    2,264,679
    
    
    
    6.23
    
    
    
    339,835
    
    
    
    6.22Vested
    
    
    (715,431
    )
    
    
    22.32
    
    
    
    
    
    
    
    Cancelled
    
    
    (156,900
    )
    
    
    14.12
    
    
    
    (5,795
    )
    
    
    6.21Outstanding at September 30, 2009
    
    
    2,728,459
    
    
    $
    9.91
    
    
    
    334,040
    
    
    $
    6.22
  KGS Phantom Units
   Payable in units
    
    Payable in cashWtd Avg
    
    
    
    
    
    Wtd AvgGrant Date
    
    
    
    
    
    Grant DateUnits
    
    Fair Value
    
    Units
    
    Fair ValueOutstanding at December 31, 2008
    
    
    139,918
    
    
    $
    25.15
    
    
    
    60,319
    
    
    $
    21.63Granted
    
    
    405,428
    
    
    
    10.06
    
    
    
    920
    
    
    
    13.40Vested
    
    
    (49,789
    )
    
    
    25.25
    
    
    
    (25,609
    )
    
    
    13.53Cancelled
    
    
    (9,885
    )
    
    
    15.90
    
    
    
    (5,973
    )
    
    
    21.36Outstanding at September 30, 2009
    
    
    485,672
    
    
    $
    12.73
    
    
    
    29,657
    
    
    $
    28.42
  25




---



##### Table of Contents



12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
   September 30, 2009Restricted
    
    
    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
    
    $
    362,105
    
    
    $
    198
    
    
    $
    48,680
    
    
    $
    (119,055
    )
    
    $
    291,928
    
    
    $
    6,490
    
    
    $
    (16,744
    )
    
    $
    281,674Property and equipment
    
    
    1,924,744
    
    
    
    142,984
    
    
    
    470,411
    
    
    
    
    
    
    
    2,538,139
    
    
    
    455,661
    
    
    
    
    
    
    
    2,993,800Investment in subsidiaries (equity method)
    
    
    473,186
    
    
    
    91,957
    
    
    
    
    
    
    
    (358,453
    )
    
    
    206,690
    
    
    
    
    
    
    
    (91,957
    )
    
    
    114,733Other assets
    
    
    275,033
    
    
    
    67,238
    
    
    
    1,643
    
    
    
    
    
    
    
    343,914
    
    
    
    1,635
    
    
    
    (120,201
    )
    
    
    225,348Total assets
    
    $
    3,035,068
    
    
    $
    302,377
    
    
    $
    520,734
    
    
    $
    (477,508
    )
    
    $
    3,380,671
    
    
    $
    463,786
    
    
    $
    (228,902
    )
    
    $
    3,615,555LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities
    
    $
    338,369
    
    
    $
    131,449
    
    
    $
    21,782
    
    
    $
    (119,055
    )
    
    $
    372,545
    
    
    $
    10,241
    
    
    $
    (16,744
    )
    
    $
    366,042Long-term liabilities
    
    
    2,115,343
    
    
    
    11,458
    
    
    
    299,969
    
    
    
    
    
    
    
    2,426,770
    
    
    
    336,556
    
    
    
    (120,201
    )
    
    
    2,643,125Stockholders equity
    
    
    581,356
    
    
    
    159,470
    
    
    
    198,983
    
    
    
    (358,453
    )
    
    
    581,356
    
    
    
    91,957
    
    
    
    (91,957
    )
    
    
    581,356Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,032
    
    
    
    
    
    
    
    25,032Total liabilities and stockholders equity
    
    $
    3,035,068
    
    
    $
    302,377
    
    
    $
    520,734
    
    
    $
    (477,508
    )
    
    $
    3,380,671
    
    
    $
    463,786
    
    
    $
    (228,902
    )
    
    $
    3,615,555
 December 31, 2008Restricted
    
    
    Restricted
    
    
    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
    
    $
    424,862
    
    
    $
    163
    
    
    $
    102,384
    
    
    $
    (123,071
    )
    
    $
    404,338
    
    
    $
    2,613
    
    
    $
    (13,615
    )
    
    $
    393,336Property and equipment
    
    
    2,756,915
    
    
    
    1,774
    
    
    
    550,906
    
    
    
    
    
    
    
    3,309,595
    
    
    
    488,120
    
    
    
    
    
    
    
    3,797,715Investment in subsidiaries (equity method)
    
    
    513,706
    
    
    
    79,316
    
    
    
    
    
    
    
    (363,203
    )
    
    
    229,819
    
    
    
    
    
    
    
    (79,316
    )
    
    
    150,503Other assets
    
    
    206,099
    
    
    
    123,298
    
    
    
    910
    
    
    
    
    
    
    
    330,307
    
    
    
    1,916
    
    
    
    (175,569
    )
    
    
    156,654Total assets
    
    $
    3,901,582
    
    
    $
    204,551
    
    
    $
    654,200
    
    
    $
    (486,274
    )
    
    $
    4,274,059
    
    
    $
    492,649
    
    
    $
    (268,500
    )
    
    $
    4,498,208LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities
    
    $
    357,077
    
    
    $
    122,677
    
    
    $
    44,907
    
    
    $
    (123,071
    )
    
    $
    401,590
    
    
    $
    30,524
    
    
    $
    (13,615
    )
    
    $
    418,499Long-term liabilities
    
    
    2,359,679
    
    
    
    
    
    
    
    327,964
    
    
    
    
    
    
    
    2,687,643
    
    
    
    356,072
    
    
    
    (175,569
    )
    
    
    2,868,146Stockholders equity
    
    
    1,184,826
    
    
    
    81,874
    
    
    
    281,329
    
    
    
    (363,203
    )
    
    
    1,184,826
    
    
    
    79,316
    
    
    
    (79,316
    )
    
    
    1,184,826Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,737
    
    
    
    
    
    
    
    26,737Total liabilities and stockholders equity
    
    $
    3,901,582
    
    
    $
    204,551
    
    
    $
    654,200
    
    
    $
    (486,274
    )
    
    $
    4,274,059
    
    
    $
    492,649
    
    
    $
    (268,500
    )
    
    $
    4,498,208
 For the Three Months Ended September 30, 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)Revenues
    
    $
    157,407
    
    
    $
    (11
    )
    
    $
    47,648
    
    
    $
    91
    
    
    $
    205,135
    
    
    $
    24,298
    
    
    $
    (22,776
    )
    
    $
    206,657Operating expenses
    
    
    90,053
    
    
    
    2,190
    
    
    
    20,224
    
    
    
    91
    
    
    
    112,558
    
    
    
    13,172
    
    
    
    (22,776
    )
    
    
    102,954Equity in net earnings of subsidiaries
    
    
    23,685
    
    
    
    7,224
    
    
    
    
    
    
    
    (23,685
    )
    
    
    7,224
    
    
    
    
    
    
    
    (7,224
    )
    
    
    Operating income (loss)
    
    
    91,039
    
    
    
    5,023
    
    
    
    27,424
    
    
    
    (23,685
    )
    
    
    99,801
    
    
    
    11,126
    
    
    
    (7,224
    )
    
    
    103,703Income from earnings of BBEP
    
    
    (43,685
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,685
    )
    
    
    
    
    
    
    
    
    
    
    (43,685
    )Interest expense and other
    
    
    (38,525
    )
    
    
    814
    
    
    
    (2,315
    )
    
    
    
    
    
    
    (40,026
    )
    
    
    (2,238
    )
    
    
    
    
    
    
    (42,264
    )Income tax (expense) benefit
    
    
    (8,099
    )
    
    
    (2,043
    )
    
    
    (5,218
    )
    
    
    
    
    
    
    (15,360
    )
    
    
    (235
    )
    
    
    
    
    
    
    (15,595
    )Net income (loss)
    
    $
    730
    
    
    $
    3,794
    
    
    $
    19,891
    
    
    $
    (23,685
    )
    
    $
    730
    
    
    $
    8,653
    
    
    $
    (7,224
    )
    
    $
    2,159Net income attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,429
    )
    
    
    
    
    
    
    (1,429
    )Net income attributable Quicksilver
    
    $
    730
    
    
    $
    3,794
    
    
    $
    19,891
    
    
    $
    (23,685
    )
    
    $
    730
    
    
    $
    7,224
    
    
    $
    (7,224
    )
    
    $
    730
 26




---



##### Table of Contents



For the Three Months Ended September 30, 2008Restricted
    
    
    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)Revenues
    
    $
    171,639
    
    
    $
    
    
    
    $
    61,266
    
    
    $
    
    
    
    $
    232,905
    
    
    $
    19,304
    
    
    $
    (15,947
    )
    
    $
    236,262Operating expenses
    
    
    100,488
    
    
    
    376
    
    
    
    21,244
    
    
    
    
    
    
    
    122,108
    
    
    
    10,111
    
    
    
    (15,947
    )
    
    
    116,272Equity in net earnings of subsidiaries
    
    
    29,851
    
    
    
    5,263
    
    
    
    
    
    
    
    (29,851
    )
    
    
    5,263
    
    
    
    
    
    
    
    (5,263
    )
    
    
    Operating income
    
    
    101,002
    
    
    
    4,887
    
    
    
    40,022
    
    
    
    (29,851
    )
    
    
    116,060
    
    
    
    9,193
    
    
    
    (5,263
    )
    
    
    119,990Loss from earnings of BBEP
    
    
    (89,814
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89,814
    )
    
    
    
    
    
    
    
    
    
    
    (89,814
    )Interest expense and other
    
    
    (31,948
    )
    
    
    1,736
    
    
    
    (5,190
    )
    
    
    
    
    
    
    (35,402
    )
    
    
    (2,699
    )
    
    
    
    
    
    
    (38,101
    )Income tax (expense) benefit
    
    
    17,005
    
    
    
    (2,317
    )
    
    
    (9,287
    )
    
    
    
    
    
    
    5,401
    
    
    
    (106
    )
    
    
    
    
    
    
    5,295Net income
    
    $
    (3,755
    )
    
    $
    4,306
    
    
    $
    25,545
    
    
    $
    (29,851
    )
    
    $
    (3,755
    )
    
    $
    6,388
    
    
    $
    (5,263
    )
    
    $
    (2,630
    )Net income attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,125
    )
    
    
    
    
    
    
    (1,125
    )Net income (loss) attributable
to Quicksilver
    
    $
    (3,755
    )
    
    $
    4,306
    
    
    $
    25,545
    
    
    $
    (29,851
    )
    
    $
    (3,755
    )
    
    $
    5,263
    
    
    $
    (5,263
    )
    
    $
    (3,755
    )
 For the Nine Months Ended September 30, 2009Restricted
    
    
    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)Revenues
    
    $
    452,403
    
    
    $
    689
    
    
    $
    140,786
    
    
    $
    (394
    )
    
    $
    593,484
    
    
    $
    72,993
    
    
    $
    (67,847
    )
    
    $
    598,630Operating expenses
    
    
    1,094,552
    
    
    
    4,547
    
    
    
    240,063
    
    
    
    (394
    )
    
    
    1,338,768
    
    
    
    39,125
    
    
    
    (67,847
    )
    
    
    1,310,046Equity in net earnings of subsidiaries
    
    
    (65,113
    )
    
    
    21,088
    
    
    
    
    
    
    
    65,113
    
    
    
    21,088
    
    
    
    
    
    
    
    (21,088
    )
    
    
    Operating income (loss)
    
    
    (707,262
    )
    
    
    17,230
    
    
    
    (99,277
    )
    
    
    65,113
    
    
    
    (724,196
    )
    
    
    33,868
    
    
    
    (21,088
    )
    
    
    (711,416
    )Income from earnings of BBEP
    
    
    (24,669
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,669
    )
    
    
    
    
    
    
    
    
    
    
    (24,669
    )Interest expense and other
    
    
    (139,682
    )
    
    
    3,389
    
    
    
    (6,424
    )
    
    
    
    
    
    
    (142,717
    )
    
    
    (7,923
    )
    
    
    
    
    
    
    (150,640
    )Income tax (expense) benefit
    
    
    281,602
    
    
    
    (7,217
    )
    
    
    27,186
    
    
    
    
    
    
    
    301,571
    
    
    
    (446
    )
    
    
    
    
    
    
    301,125Net income (loss)
    
    $
    (590,011
    )
    
    $
    13,402
    
    
    $
    (78,515
    )
    
    $
    65,113
    
    
    $
    (590,011
    )
    
    $
    25,499
    
    
    $
    (21,088
    )
    
    $
    (585,600
    )Net income attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,411
    )
    
    
    
    
    
    
    (4,411
    )Net income (loss) attributable
to Quicksilver
    
    $
    (590,011
    )
    
    $
    13,402
    
    
    $
    (78,515
    )
    
    $
    65,113
    
    
    $
    (590,011
    )
    
    $
    21,088
    
    
    $
    (21,088
    )
    
    $
    (590,011
    )
 For the Nine Months Ended September 30, 2008Restricted
    
    
    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)Revenues
    
    $
    437,512
    
    
    $
    
    
    
    $
    145,238
    
    
    $
    
    
    
    $
    582,750
    
    
    $
    52,694
    
    
    $
    (43,664
    )
    
    $
    591,780Operating expenses
    
    
    240,274
    
    
    
    1,389
    
    
    
    65,790
    
    
    
    
    
    
    
    307,453
    
    
    
    30,175
    
    
    
    (43,664
    )
    
    
    293,964Equity in net earnings of subsidiaries
    
    
    59,469
    
    
    
    12,257
    
    
    
    
    
    
    
    (59,469
    )
    
    
    12,257
    
    
    
    
    
    
    
    (12,257
    )
    
    
    Operating income
    
    
    256,707
    
    
    
    10,868
    
    
    
    79,448
    
    
    
    (59,469
    )
    
    
    287,554
    
    
    
    22,519
    
    
    
    (12,257
    )
    
    
    297,816Loss from earnings of BBEP
    
    
    (93,864
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (93,864
    )
    
    
    
    
    
    
    
    
    
    
    (93,864
    )Interest expense and other
    
    
    (50,601
    )
    
    
    4,664
    
    
    
    (13,107
    )
    
    
    
    
    
    
    (59,044
    )
    
    
    (7,532
    )
    
    
    
    
    
    
    (66,576
    )Income tax (expense) benefit
    
    
    (23,528
    )
    
    
    (5,436
    )
    
    
    (16,968
    )
    
    
    
    
    
    
    (45,932
    )
    
    
    (109
    )
    
    
    
    
    
    
    (46,041
    )Net income
    
    $
    88,714
    
    
    $
    10,096
    
    
    $
    49,373
    
    
    $
    (59,469
    )
    
    $
    88,714
    
    
    $
    14,878
    
    
    $
    (12,257
    )
    
    $
    91,335Net income attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,621
    )
    
    
    
    
    
    
    (2,621
    )Net income attributable to Quicksilver
    
    $
    88,714
    
    
    $
    10,096
    
    
    $
    49,373
    
    
    $
    (59,469
    )
    
    $
    88,714
    
    
    $
    12,257
    
    
    $
    (12,257
    )
    
    $
    88,714
 27




---



##### Table of Contents



For the Nine Months Ended September 30, 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 operating activities
    
    $
    260,402
    
    
    $
    47,666
    
    
    $
    121,102
    
    
    $
    
    
    
    $
    429,170
    
    
    $
    51,268
    
    
    $
    (29,845
    )
    
    $
    450,593Purchases of property, plant and equipment
    
    
    (387,938
    )
    
    
    (47,666
    )
    
    
    (79,745
    )
    
    
    
    
    
    
    (515,349
    )
    
    
    (50,067
    )
    
    
    4,296
    
    
    
    (561,120
    )Assets purchased under Repurchase Obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,645
    )
    
    
    5,645
    
    
    
    Proceeds
from sales of property, plant and equipment
    
    
    220,270
    
    
    
    
    
    
    
    768
    
    
    
    
    
    
    
    221,038
    
    
    
    
    
    
    
    
    
    
    
    221,038Net cash flow used for investing activities
    
    
    (167,668
    )
    
    
    (47,666
    )
    
    
    (78,977
    )
    
    
    
    
    
    
    (294,311
    )
    
    
    (55,712
    )
    
    
    9,941
    
    
    
    (340,082
    )Issuance of debt
    
    
    1,278,138
    
    
    
    
    
    
    
    52,887
    
    
    
    
    
    
    
    1,331,025
    
    
    
    46,500
    
    
    
    
    
    
    
    1,377,525Repayments of debt
    
    
    (1,396,105
    )
    
    
    
    
    
    
    (96,532
    )
    
    
    
    
    
    
    (1,492,637
    )
    
    
    (14,500
    )
    
    
    
    
    
    
    (1,507,137
    )Debt issuance costs
    
    
    (29,870
    )
    
    
    
    
    
    
    (1,125
    )
    
    
    
    
    
    
    (30,995
    )
    
    
    
    
    
    
    
    
    
    
    (30,995
    )Gas Purchase Commitment  net
    
    
    54,488
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,488
    
    
    
    
    
    
    
    
    
    
    
    54,488Distributions to parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,904
    )
    
    
    19,904
    
    
    
    Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,344
    )
    
    
    
    
    
    
    (7,344
    )Other
    
    
    (44
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    (63
    )
    
    
    
    
    
    
    (107
    )Net cash flow provided by (used for)
financing activities
    
    
    (93,393
    )
    
    
    
    
    
    
    (44,770
    )
    
    
    
    
    
    
    (138,163
    )
    
    
    4,689
    
    
    
    19,904
    
    
    
    (113,570
    )Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    1,779
    
    
    
    
    
    
    
    1,779
    
    
    
    
    
    
    
    
    
    
    
    1,779Net decrease in cash and equivalents
    
    
    (659
    )
    
    
    
    
    
    
    (866
    )
    
    
    
    
    
    
    (1,525
    )
    
    
    245
    
    
    
    
    
    
    
    (1,280
    )Cash and equivalents at beginning of period
    
    
    1,679
    
    
    
    
    
    
    
    866
    
    
    
    
    
    
    
    2,545
    
    
    
    303
    
    
    
    
    
    
    
    2,848Cash and equivalents at end of period
    
    $
    1,020
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,020
    
    
    $
    548
    
    
    $
    
    
    
    $
    1,568
 For the Nine Months Ended September 30, 2008Restricted
    
    
    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
    
    $
    138,736
    
    
    $
    2,483
    
    
    $
    113,616
    
    
    $
    
    
    
    $
    254,835
    
    
    $
    36,365
    
    
    $
    (17,080
    )
    
    $
    274,120Purchases of property, plant and equipment
    
    
    (1,744,219
    )
    
    
    (2,483
    )
    
    
    (116,871
    )
    
    
    
    
    
    
    (1,863,573
    )
    
    
    (112,200
    )
    
    
    
    
    
    
    (1,975,773
    )Return of investment from BBEP
    
    
    31,435
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,435
    
    
    
    
    
    
    
    
    
    
    
    31,435Proceeds from sales of property, plant and
equipment
    
    
    1,025
    
    
    
    
    
    
    
    618
    
    
    
    
    
    
    
    1,643
    
    
    
    
    
    
    
    (825
    )
    
    
    818Net cash flow used for investing activities
    
    
    (1,711,759
    )
    
    
    (2,483
    )
    
    
    (116,253
    )
    
    
    
    
    
    
    (1,830,495
    )
    
    
    (112,200
    )
    
    
    (825
    )
    
    
    (1,943,520
    )Issuance of debt
    
    
    2,169,611
    
    
    
    
    
    
    
    203,208
    
    
    
    
    
    
    
    2,372,819
    
    
    
    99,300
    
    
    
    
    
    
    
    2,472,119Repayments of debt
    
    
    (583,782
    )
    
    
    
    
    
    
    (198,206
    )
    
    
    
    
    
    
    (781,988
    )
    
    
    
    
    
    
    
    
    
    
    (781,988
    )Debt issuance costs
    
    
    (24,545
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,545
    )
    
    
    
    
    
    
    
    
    
    
    (24,545
    )Payments to parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (825
    )
    
    
    825
    
    
    
    Distributions to parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,080
    )
    
    
    17,080
    
    
    
    Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,343
    )
    
    
    
    
    
    
    (6,343
    )Other
    
    
    (1,995
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,995
    )
    
    
    
    
    
    
    
    
    
    
    (1,995
    )Net cash flow provided by (used for)
financing activities
    
    
    1,559,289
    
    
    
    
    
    
    
    5,002
    
    
    
    
    
    
    
    1,564,291
    
    
    
    75,052
    
    
    
    17,905
    
    
    
    1,657,248Effect of exchange rates on cash
    
    
    (155
    )
    
    
    
    
    
    
    (2,454
    )
    
    
    
    
    
    
    (2,609
    )
    
    
    
    
    
    
    
    
    
    
    (2,609
    )Net decrease in cash and equivalents
    
    
    (13,889
    )
    
    
    
    
    
    
    (89
    )
    
    
    
    
    
    
    (13,978
    )
    
    
    (783
    )
    
    
    
    
    
    
    (14,761
    )Cash and equivalents at beginning of period
    
    
    27,012
    
    
    
    
    
    
    
    89
    
    
    
    
    
    
    
    27,101
    
    
    
    1,125
    
    
    
    
    
    
    
    28,226Cash and equivalents at end of period
    
    $
    13,123
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    13,123
    
    
    $
    342
    
    
    $
    
    
    
    $
    13,465
 13. SUPPLEMENTAL CASH FLOW INFORMATION
  Nine Months EndedSeptember 30,2009
    
    
    2008(In thousands)Interest
    
    $
    111,549
    
    
    $
    58,762Income taxes
    
    
    (41,267
    )
    
    
    49,775
 28




---



##### Table of Contents



Nine Months EndedSeptember 30,2009
    
    
    2008(In thousands)Working capital related to acquisition
of property, plant and equipment
    
    $
    126,520
    
    
    $
    191,959Issuance of common stock as
consideration for the Alliance Acquisition
    
    
    
    
    
    
    262,092
 14. RELATED-PARTY TRANSACTIONS
      15. SEGMENT INFORMATION
  Exploration & Production
    
    
    Processing &
    
    
    Corporate
    
    
    
    
    
    
    QuicksilverUnited States
    
    
    Canada
    
    
    Gathering
    
    
    and Other
    
    
    Elimination
    
    
    Consolidated(in thousands)For the Three Months Ended September 30, :2009Revenues
    
    $
    157,407
    
    
    $
    47,648
    
    
    $
    24,287
    
    
    $
    
    
    
    $
    (22,685
    )
    
    $
    206,657Depletion, depreciation and accretion
    
    
    27,957
    
    
    
    9,321
    
    
    
    6,836
    
    
    
    434
    
    
    
    
    
    
    
    44,548Operating income
    
    
    82,747
    
    
    
    28,354
    
    
    
    10,718
    
    
    
    (18,116
    )
    
    
    
    
    
    
    103,703Property and equipment costs incurred
    
    
    80,852
    
    
    
    13,925
    
    
    
    43,946
    
    
    
    362
    
    
    
    
    
    
    
    139,0852008Revenues
    
    $
    171,421
    
    
    $
    61,484
    
    
    $
    19,304
    
    
    $
    
    
    
    $
    (15,947
    )
    
    $
    236,262Depletion, depreciation and accretion
    
    
    36,178
    
    
    
    11,337
    
    
    
    3,990
    
    
    
    272
    
    
    
    
    
    
    
    51,777Operating income
    
    
    94,650
    
    
    
    40,927
    
    
    
    8,817
    
    
    
    (24,404
    )
    
    
    
    
    
    
    119,990Property and equipment costs incurred
    
    
    1,484,080
    
    
    
    21,208
    
    
    
    97,525
    
    
    
    215
    
    
    
    
    
    
    
    1,603,028
 29




---



##### Table of Contents



Exploration & Production
    
    
    Processing &
    
    
    Corporate
    
    
    
    
    
    
    QuicksilverUnited States
    
    
    Canada
    
    
    Gathering
    
    
    and Other
    
    
    Elimination
    
    
    Consolidated(in thousands)For the Nine Months Ended September 30, :2009Revenues
    
    $
    452,403
    
    
    $
    140,786
    
    
    $
    73,682
    
    
    $
    
    
    
    $
    (68,241
    )
    
    $
    598,630Depletion, depreciation and accretion
    
    
    106,338
    
    
    
    29,284
    
    
    
    18,346
    
    
    
    1,242
    
    
    
    
    
    
    
    155,210Operating income
    
    
    (589,707
    )
    
    
    (96,487
    )
    
    
    35,472
    
    
    
    (60,694
    )
    
    
    
    
    
    
    (711,416
    )Property and equipment costs incurred
    
    
    308,905
    
    
    
    70,440
    
    
    
    92,226
    
    
    
    2,018
    
    
    
    
    
    
    
    473,5892008Revenues
    
    $
    436,925
    
    
    $
    145,825
    
    
    $
    52,694
    
    
    $
    
    
    
    $
    (43,664
    )
    
    $
    591,780Depletion, depreciation and accretion
    
    
    79,731
    
    
    
    34,353
    
    
    
    10,874
    
    
    
    798
    
    
    
    
    
    
    
    125,756Operating income
    
    
    247,311
    
    
    
    81,862
    
    
    
    21,130
    
    
    
    (52,487
    )
    
    
    
    
    
    
    297,816Property and equipment costs incurred
    
    
    1,938,667
    
    
    
    108,482
    
    
    
    204,330
    
    
    
    769
    
    
    
    
    
    
    
    2,252,248Property, Plant and Equipment-netSeptember 30, 2009
    
    $
    1,912,941
    
    
    $
    470,411
    
    
    $
    598,645
    
    
    $
    11,803
    
    
    $
    
    
    
    $
    2,993,800December 31, 2008
    
    
    2,723,103
    
    
    
    550,413
    
    
    
    519,447
    
    
    
    4,752
    
    
    
    
    
    
    
    3,797,715
 30




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##### Table of Contents



ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  EXECUTIVE OVERVIEW
  2009 HIGHLIGHTS
 Eni Transaction
  Long-Term Debt
    Increase in Production
 Results of
Operations
 Horn River Basin Discovery
  31




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##### Table of Contents



BBEP Update
  Litigation Update
   2009  2010 OUTLOOK
   32




---



##### Table of Contents



RESULTS OF OPERATIONS  Three Months Ended September 30, 2009 and 2008
  Natural Gas, NGL and Crude Oil Revenue
  Natural Gas
    
    
    NGL
    
    
    Oil and Condensate
    
    
    Total2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Texas
    
    $
    45.7
    
    
    $
    117.4
    
    
    $
    36.1
    
    
    $
    61.6
    
    
    $
    3.3
    
    
    $
    9.1
    
    
    $
    85.1
    
    
    $
    188.1Other U.S.
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    2.2
    
    
    
    4.7
    
    
    
    2.5
    
    
    
    5.3Hedging
    
    
    63.2
    
    
    
    (15.1
    )
    
    
    
    
    
    
    (4.9
    )
    
    
    
    
    
    
    (3.4
    )
    
    
    63.2
    
    
    
    (23.4
    )Total U.S.
    
    
    109.0
    
    
    
    102.5
    
    
    
    36.3
    
    
    
    57.1
    
    
    
    5.5
    
    
    
    10.4
    
    
    
    150.8
    
    
    
    170.0Canada
    
    
    18.0
    
    
    
    51.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18.0
    
    
    
    51.6Hedging
    
    
    29.5
    
    
    
    (3.4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.5
    
    
    
    (3.4
    )Total Canada
    
    
    47.5
    
    
    
    48.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47.5
    
    
    
    48.2Total Company
    
    $
    156.5
    
    
    $
    150.7
    
    
    $
    36.3
    
    
    $
    57.1
    
    
    $
    5.5
    
    
    $
    10.4
    
    
    $
    198.3
    
    
    $
    218.2
  Natural Gas
    
    
    NGL
    
    
    Oil and Condensate
    
    
    Equivalent Total2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(MMcfd)
    
    
    (Bbld)
    
    
    (Bbld)
    
    
    (MMcfed)Texas
    
    
    153.0
    
    
    
    137.1
    
    
    
    13,973
    
    
    
    11,485
    
    
    
    565
    
    
    
    865
    
    
    
    240.2
    
    
    
    211.2Other U.S.
    
    
    0.4
    
    
    
    0.2
    
    
    
    48
    
    
    
    49
    
    
    
    416
    
    
    
    469
    
    
    
    3.2
    
    
    
    3.3Total U.S.
    
    
    153.4
    
    
    
    137.3
    
    
    
    14,021
    
    
    
    11,534
    
    
    
    981
    
    
    
    1,334
    
    
    
    243.4
    
    
    
    214.5Canada
    
    
    67.8
    
    
    
    62.5
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67.8
    
    
    
    62.5Total Company
    
    
    221.2
    
    
    
    199.8
    
    
    
    14,024
    
    
    
    11,534
    
    
    
    981
    
    
    
    1,334
    
    
    
    311.2
    
    
    
    277.0
  Natural Gas
    
    
    NGL
    
    
    Oil and Condensate
    
    
    Equivalent Total2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(per Mcf)
    
    
    (per Bbl)
    
    
    (per Bbl)
    
    
    (per Mcfe)Texas
    
    $
    3.25
    
    
    $
    9.31
    
    
    $
    28.11
    
    
    $
    58.30
    
    
    $
    62.46
    
    
    $
    114.11
    
    
    $
    3.85
    
    
    $
    9.68Other U.S.
    
    
    3.22
    
    
    
    3.77
    
    
    
    34.43
    
    
    
    88.26
    
    
    
    57.96
    
    
    
    107.59
    
    
    
    8.52
    
    
    
    16.69Hedging  U.S.
    
    
    4.48
    
    
    
    (1.19
    )
    
    
    
    
    
    
    (4.61
    )
    
    
    
    
    
    
    (27.01
    )
    
    
    2.82
    
    
    
    (1.18
    )Total U.S.
    
    
    7.73
    
    
    
    8.11
    
    
    
    28.15
    
    
    
    53.82
    
    
    
    60.55
    
    
    
    84.80
    
    
    
    6.73
    
    
    
    8.61Canada
    
    
    2.89
    
    
    
    8.97
    
    
    
    116.68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.89
    
    
    
    8.97Hedging  Canada
    
    
    4.73
    
    
    
    (0.58
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.73
    
    
    
    (0.58
    )Total Canada
    
    
    7.61
    
    
    
    8.39
    
    
    
    116.68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.61
    
    
    
    8.39Total Company
    
    $
    7.69
    
    
    $
    8.20
    
    
    $
    28.15
    
    
    $
    53.82
    
    
    $
    60.55
    
    
    $
    84.80
    
    
    $
    6.93
    
    
    $
    8.56
 33




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##### Table of Contents



NaturalGas
    
    
    NGL
    
    
    Oil
    
    
    Total(In thousands)Revenue for the quarter
ended September 30, 2008
    
    $
    150,697
    
    
    $
    57,108
    
    
    $
    10,409
    
    
    $
    218,214Volume variance
    
    
    16,100
    
    
    
    12,326
    
    
    
    (2,757
    )
    
    
    25,669Hedge settlement variance
    
    
    111,179
    
    
    
    4,944
    
    
    
    3,395
    
    
    
    119,518Price variance
    
    
    (121,476
    )
    
    
    (38,055
    )
    
    
    (5,583
    )
    
    
    (165,114
    )Revenue for the quarter
ended September 30, 2009
    
    $
    156,500
    
    
    $
    36,323
    
    
    $
    5,464
    
    
    $
    198,287
      Sales of Purchased Natural Gas and Costs of Purchased Natural Gas
 Three Months EndedSeptember 30,2009
    
    
    2008(In thousands)Sales of purchased natural gas
    
    $
    5,964
    
    
    $
    Costs of purchased natural gas sold
    
    
    (5,594
    )
    
    
    Gain on valuation of Gas Purchase Commitment
    
    
    2,630
    
    
    
    Costs of purchased natural gas
    
    
    (2,964
    )Net sales and purchases of natural gas
    
    $
    3,000
    
    
    $
    
  34




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##### Table of Contents



Other Revenue
  Oil and Gas Production Expense
 Three Months Ended September 30,2009
    
    
    2008(In thousands, except per unit amounts)Per
    
    
    
    
    
    
    PerMcfe
    
    
    
    
    
    
    McfeTexasCash expense
    
    $
    18,051
    
    
    $
    0.82
    
    
    $
    21,644
    
    
    $
    1.11Equity compensation
    
    
    270
    
    
    
    0.01
    
    
    
    301
    
    
    
    0.02$
    18,321
    
    
    $
    0.83
    
    
    $
    21,945
    
    
    $
    1.13Other U.S.Cash expense
    
    $
    1,633
    
    
    $
    5.53
    
    
    $
    1,639
    
    
    $
    5.31Equity compensation
    
    
    49
    
    
    
    0.17
    
    
    
    42
    
    
    
    0.14$
    1,682
    
    
    $
    5.70
    
    
    $
    1,681
    
    
    $
    5.45Total U.S.Cash expense
    
    $
    19,684
    
    
    $
    0.88
    
    
    $
    23,283
    
    
    $
    1.18Equity compensation
    
    
    319
    
    
    
    0.01
    
    
    
    343
    
    
    
    0.02$
    20,003
    
    
    $
    0.89
    
    
    $
    23,626
    
    
    $
    1.20CanadaCash expense
    
    $
    8,594
    
    
    $
    1.38
    
    
    $
    8,837
    
    
    $
    1.54Equity compensation
    
    
    467
    
    
    
    0.07
    
    
    
    605
    
    
    
    0.10$
    9,061
    
    
    $
    1.45
    
    
    $
    9,442
    
    
    $
    1.64Total CompanyCash expense
    
    $
    28,278
    
    
    $
    0.99
    
    
    $
    32,120
    
    
    $
    1.26Equity compensation
    
    
    786
    
    
    
    0.03
    
    
    
    948
    
    
    
    0.04$
    29,064
    
    
    $
    1.02
    
    
    $
    33,068
    
    
    $
    1.30
   35




---



##### Table of Contents



Production and Ad Valorem Taxes
 Three Months Ended September 30,2009
    
    
    2008(In thousands, except per unit amounts)Per
    
    
    
    
    
    
    PerMcfe
    
    
    
    
    
    
    McfeProduction and ad valorem taxesU.S.
    
    $
    5,718
    
    
    $
    0.26
    
    
    $
    5,166
    
    
    $
    0.26Canada
    
    
    912
    
    
    
    0.15
    
    
    
    (222
    )
    
    
    (0.04
    )Total production and ad valorem taxes
    
    $
    6,630
    
    
    $
    0.23
    
    
    $
    4,944
    
    
    $
    0.19
  Other Operating Costs
  Depletion, Depreciation and Accretion
 Three Months Ended September 30,2009
    
    
    2008(In thousands, except per unit amounts)Per
    
    
    
    
    
    
    PerMcfe
    
    
    
    
    
    
    McfeDepletionU.S.
    
    $
    26,365
    
    
    $
    1.18
    
    
    $
    34,348
    
    
    $
    1.74Canada
    
    
    7,985
    
    
    
    1.28
    
    
    
    10,120
    
    
    
    1.76Total depletion
    
    
    34,350
    
    
    
    1.20
    
    
    
    44,468
    
    
    
    1.74Depreciation of other fixed assetsU.S.
    
    $
    8,576
    
    
    $
    0.38
    
    
    $
    5,928
    
    
    $
    0.30Canada
    
    
    1,039
    
    
    
    0.17
    
    
    
    1,006
    
    
    
    0.17Total depreciation
    
    
    9,615
    
    
    
    0.34
    
    
    
    6,934
    
    
    
    0.27Accretion
    
    
    583
    
    
    
    0.02
    
    
    
    375
    
    
    
    0.02Total depletion, depreciation and
accretion
    
    $
    44,548
    
    
    $
    1.56
    
    
    $
    51,777
    
    
    $
    2.03
  36




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##### Table of Contents



General and Administrative Expense
 Three Months Ended September 30,2009
    
    
    2008(In thousands, except per unit amounts)Per
    
    
    
    
    
    
    PerMcfe
    
    
    
    
    
    
    McfeGeneral and administrative expenseCash expense
    
    $
    12,968
    
    
    $
    0.46
    
    
    $
    12,674
    
    
    $
    0.49Litigation settlement
    
    
    1,000
    
    
    
    0.03
    
    
    
    9,633
    
    
    
    0.38Equity compensation
    
    
    3,714
    
    
    
    0.13
    
    
    
    3,298
    
    
    
    0.13Total general and administrative expense
    
    $
    17,682
    
    
    $
    0.62
    
    
    $
    25,605
    
    
    $
    1.00
  BBEP-Related Income
  Interest Expense
 Three Months Ended September 30,2009
    
    
    2008(in thousands)Interest costs
    
    $
    38,676
    
    
    $
    35,209Add: Non-cash interest (1)
    
    
    4,705
    
    
    
    3,553Less: Interest capitalized
    
    
    (1,762
    )
    
    
    (2,774
    )Interest expense
    
    $
    41,619
    
    
    $
    35,988
 
 (1)
    
    Amortization of deferred financing costs and original issue discount
  Income Tax Expense
 Three Months EndedSeptember 30,2009
    
    
    2008Income tax (benefit) expense (in thousands)
    
    $
    15,595
    
    
    $
    (5,295
    )Effective tax rate
    
    
    87.8
    %
    
    
    66.8
    %
  37




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##### Table of Contents



RESULTS OF OPERATIONS  Nine Months Ended September 30, 2009 and 2008
  Natural Gas, NGL and Crude Oil Revenue
  Natural Gas
    
    
    NGL
    
    
    Oil and Condensate
    
    
    Total2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Texas
    
    $
    170.5
    
    
    $
    272.8
    
    
    $
    94.2
    
    
    $
    171.5
    
    
    $
    10.5
    
    
    $
    25.8
    
    
    $
    275.2
    
    
    $
    470.1Other U.S.
    
    
    0.3
    
    
    
    0.4
    
    
    
    0.1
    
    
    
    1.0
    
    
    
    5.5
    
    
    
    13.2
    
    
    
    5.9
    
    
    
    14.6Hedging
    
    
    159.3
    
    
    
    (28.5
    )
    
    
    
    
    
    
    (13.4
    )
    
    
    
    
    
    
    (8.6
    )
    
    
    159.3
    
    
    
    (50.5
    )Total U.S.
    
    
    330.1
    
    
    
    244.7
    
    
    
    94.3
    
    
    
    159.1
    
    
    
    16.0
    
    
    
    30.4
    
    
    
    440.4
    
    
    
    434.2Canada
    
    
    65.0
    
    
    
    151.1
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65.1
    
    
    
    151.1Hedging
    
    
    75.6
    
    
    
    (10.6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75.6
    
    
    
    (10.6
    )Total Canada
    
    
    140.6
    
    
    
    140.5
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140.7
    
    
    
    140.5Total Company
    
    $
    470.7
    
    
    $
    385.2
    
    
    $
    94.4
    
    
    $
    159.1
    
    
    $
    16.0
    
    
    $
    30.4
    
    
    $
    581.1
    
    
    $
    574.7
  Natural Gas
    
    NGL
    
    Oil and Condensate
    
    Equivalent Total2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008(MMcfd)
    
    (Bbld)
    
    (Bbld)
    
    (MMcfed)Texas
    
    
    166.3
    
    
    
    104.6
    
    
    
    14,038
    
    
    
    10,976
    
    
    
    794
    
    
    
    864
    
    
    
    255.3
    
    
    
    175.6Other U.S.
    
    
    0.3
    
    
    
    0.3
    
    
    
    31
    
    
    
    42
    
    
    
    440
    
    
    
    462
    
    
    
    3.2
    
    
    
    3.4Total U.S.
    
    
    166.6
    
    
    
    104.9
    
    
    
    14,069
    
    
    
    11,018
    
    
    
    1,234
    
    
    
    1,326
    
    
    
    258.5
    
    
    
    179.0Canada
    
    
    66.1
    
    
    
    62.5
    
    
    
    5
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    66.1
    
    
    
    62.5Total Company
    
    
    232.7
    
    
    
    167.4
    
    
    
    14,074
    
    
    
    11,018
    
    
    
    1,236
    
    
    
    1,326
    
    
    
    324.6
    
    
    
    241.5
  Natural Gas
    
    NGL
    
    Oil and Condensate
    
    Equivalent Total2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008(per Mcf)
    
    (per Bbl)
    
    (per Bbl)
    
    (per Mcfe)Texas
    
    $
    3.76
    
    
    $
    9.52
    
    
    $
    24.57
    
    
    $
    57.03
    
    
    $
    48.33
    
    
    $
    109.30
    
    
    $
    3.95
    
    
    $
    9.77Other U.S.
    
    
    0.56
    
    
    
    4.45
    
    
    
    26.08
    
    
    
    86.32
    
    
    
    45.82
    
    
    
    103.65
    
    
    
    6.98
    
    
    
    16.11Hedging  U.S.
    
    
    3.50
    
    
    
    (0.99
    )
    
    
    
    
    
    
    (4.46
    )
    
    
    
    
    
    
    (23.62
    )
    
    
    2.26
    
    
    
    (1.03
    )Total U.S.
    
    
    7.26
    
    
    
    8.51
    
    
    
    24.56
    
    
    
    52.69
    
    
    
    47.44
    
    
    
    83.70
    
    
    
    6.24
    
    
    
    8.85Canada
    
    
    3.61
    
    
    
    8.83
    
    
    
    70.67
    
    
    
    
    
    
    
    47.25
    
    
    
    
    
    
    
    3.61
    
    
    
    8.83Hedging  Canada
    
    
    4.19
    
    
    
    (0.62
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.19
    
    
    
    (0.62
    )Total Canada
    
    
    7.80
    
    
    
    8.21
    
    
    
    70.67
    
    
    
    
    
    
    
    47.25
    
    
    
    
    
    
    
    7.80
    
    
    
    8.21Total Company
    
    $
    7.41
    
    
    $
    8.40
    
    
    $
    24.57
    
    
    $
    52.69
    
    
    $
    47.44
    
    
    $
    83.70
    
    
    $
    6.56
    
    
    $
    8.69
 38




---



##### Table of Contents



NaturalGas
    
    
    NGL
    
    
    Oil
    
    
    Total(In thousands)Revenue for the
nine months ended
September 30, 2008
    
    $
    385,244
    
    
    $
    159,061
    
    
    $
    30,412
    
    
    $
    574,717Volume variance
    
    
    148,407
    
    
    
    43,375
    
    
    
    (2,159
    )
    
    
    189,623Hedge settlement variance
    
    
    273,967
    
    
    
    13,448
    
    
    
    8,583
    
    
    
    295,998Price variance
    
    
    (336,894
    )
    
    
    (121,463
    )
    
    
    (20,825
    )
    
    
    (479,182
    )Revenue for the nine
months ended September
30, 2009
    
    $
    470,724
    
    
    $
    94,421
    
    
    $
    16,011
    
    
    $
    581,156
     Sales of Purchased Natural Gas and Costs of Purchased Natural Gas
 Nine Months EndedSeptember 30,2009
    
    
    2008(In thousands)Sales of purchased natural gas
    
    $
    11,181
    
    
    $
    Costs of purchased natural gas sold
    
    
    (10,358
    )
    
    
    Loss on valuation of Gas Purchase
Commitment
    
    
    (1,188
    )
    
    
    Costs of purchased natural gas
    
    
    (11,546
    )Net sales and purchases of natural gas
    
    $
    (365
    )
    
    $
    
  Other Revenue




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##### Table of Contents



Oil and Gas Production Expense
 Nine Months Ended September 30,2009
    
    
    2008(In thousands, except per unit amounts)Per
    
    
    
    
    
    
    PerMcfe
    
    
    
    
    
    
    McfeTexasCash expense
    
    $
    61,112
    
    
    $
    0.88
    
    
    $
    65,129
    
    
    $
    1.35Equity compensation
    
    
    785
    
    
    
    0.01
    
    
    
    925
    
    
    
    0.02$
    61,897
    
    
    $
    0.89
    
    
    $
    66,054
    
    
    $
    1.37Other U.S.Cash expense
    
    $
    4,913
    
    
    $
    5.70
    
    
    $
    4,273
    
    
    $
    4.64Equity compensation
    
    
    147
    
    
    
    0.17
    
    
    
    133
    
    
    
    0.15$
    5,060
    
    
    $
    5.87
    
    
    $
    4,406
    
    
    $
    4.79Total U.S.Cash expense
    
    $
    66,025
    
    
    $
    0.94
    
    
    $
    69,402
    
    
    $
    1.42Equity compensation
    
    
    932
    
    
    
    0.01
    
    
    
    1,058
    
    
    
    0.02$
    66,957
    
    
    $
    0.95
    
    
    $
    70,460
    
    
    $
    1.44CanadaCash expense
    
    $
    24,399
    
    
    $
    1.35
    
    
    $
    26,440
    
    
    $
    1.54Equity compensation
    
    
    1,582
    
    
    
    0.09
    
    
    
    1,543
    
    
    
    0.09$
    25,981
    
    
    $
    1.44
    
    
    $
    27,983
    
    
    $
    1.63Total CompanyCash expense
    
    $
    90,424
    
    
    $
    1.02
    
    
    $
    95,842
    
    
    $
    1.45Equity compensation
    
    
    2,514
    
    
    
    0.03
    
    
    
    2,601
    
    
    
    0.04$
    92,938
    
    
    $
    1.05
    
    
    $
    98,443
    
    
    $
    1.49
   Production and Ad Valorem Taxes
 Nine Months Ended September 30,2009
    
    
    2008(In thousands, except per unit amounts)Per
    
    
    
    
    
    
    PerMcfe
    
    
    
    
    
    
    McfeProduction and ad valorem taxesU.S.
    
    $
    16,688
    
    
    $
    0.24
    
    
    $
    9,057
    
    
    $
    0.18Canada
    
    
    1,749
    
    
    
    0.10
    
    
    
    1,627
    
    
    
    0.10Total production and ad valorem taxes
    
    $
    18,437
    
    
    $
    0.21
    
    
    $
    10,684
    
    
    $
    0.16




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##### Table of Contents



Other Operating Costs
  Depletion, Depreciation and Accretion
 Nine Months Ended September 30,2009
    
    
    2008(In thousands, except per unit amounts)Per
    
    
    
    
    
    
    PerMcfe
    
    
    
    
    
    
    McfeDepletionU.S.
    
    $
    101,045
    
    
    $
    1.43
    
    
    $
    75,649
    
    
    $
    1.54Canada
    
    
    25,494
    
    
    
    1.41
    
    
    
    30,967
    
    
    
    1.81Total depletion
    
    
    126,539
    
    
    
    1.43
    
    
    
    106,616
    
    
    
    1.61Depreciation of other fixed assets:U.S.
    
    $
    24,092
    
    
    $
    0.34
    
    
    $
    15,293
    
    
    $
    0.31Canada
    
    
    2,856
    
    
    
    0.16
    
    
    
    2,751
    
    
    
    0.16Total depreciation
    
    
    26,948
    
    
    
    0.30
    
    
    
    18,044
    
    
    
    0.27Accretion
    
    
    1,723
    
    
    
    0.02
    
    
    
    1,096
    
    
    
    0.02Total depletion, depreciation and accretion
    
    $
    155,210
    
    
    $
    1.75
    
    
    $
    125,756
    
    
    $
    1.90
  Impairment of Oil and Gas Properties




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##### Table of Contents



General and Administrative Expense
 Nine Months Ended September 30,2009
    
    
    2008(In thousands, except per unit amounts)Per
    
    
    
    
    
    
    PerMcfe
    
    
    
    
    
    
    McfeGeneral and administrative expenseCash expense
    
    $
    40,483
    
    
    $
    0.45
    
    
    $
    37,175
    
    
    $
    0.55Litigation settlement
    
    
    6,000
    
    
    
    0.07
    
    
    
    9,633
    
    
    
    0.15Equity compensation
    
    
    12,969
    
    
    
    0.15
    
    
    
    9,594
    
    
    
    0.15Total general and administrative expense
    
    $
    59,452
    
    
    $
    0.67
    
    
    $
    56,402
    
    
    $
    0.85
  BBEP-Related Income and Expense




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##### Table of Contents



Interest Expense
 Nine Months EndedSeptember 30,2009
    
    
    2008(in thousands)Interest costs
    
    $
    113,972
    
    
    $
    63,837Add:Non-cash interest (1)
    
    
    13,431
    
    
    
    8,085Loss on early debt extinguishment
    
    
    27,122
    
    
    
    Less: Interest capitalized
    
    
    (4,624
    )
    
    
    (6,401
    )Interest expense
    
    $
    149,901
    
    
    $
    65,521
 
 (1)
    
    Amortization of deferred financing costs and original issue discount
  Income Tax Expense
 Nine Months EndedSeptember 30,2009
    
    2008Income tax (benefit) expense (in thousands)
    
    $
    (301,125
    )
    
    $
    46,041Effective tax rate
    
    
    34.0
    %
    
    
    33.5
    %
  Quicksilver Resources Inc. and its Restricted Subsidiaries
  Results of Operations Liquidity, Capital
Resources and Financial Condition
 43




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##### Table of Contents



LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
 Cash Flow Activity
    Nine Months EndedSeptember 30,2009
    
    2008(In thousands)Net cash provided by operating activities
    
    $
    450,593
    
    
    $
    274,120Net cash used for investing activities
    
    
    (340,082
    )
    
    
    (1,943,520
    )Net cash provided by financing activities
    
    
    (113,570
    )
    
    
    1,657,248Effect of exchange rate changes in cash
    
    
    1,779
    
    
    
    (2,609
    )
 Operating Cash Flows
   44




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##### Table of Contents



Weighted Avg PriceProduct
    
    Type
    
    Contract Period
    
    Volume
    
    Per Mcf of BblGas
    
    Collar
    
    Jan 2010-Dec 2011
    
    40 MMcfd
    
    $
    6.00-7.00Gas
    
    Collar
    
    Jan 2010-Dec 2012
    
    20 MMcfd
    
    
    6.50-7.15Gas
    
    Collar
    
    Jan 2010-Dec 2012
    
    20 MMcfd
    
    
    6.50-7.18Gas
    
    Collar
    
    Jan 2011-Dec 2011
    
    40 MMcfd
    
    
    6.25-7.50Gas
    
    Collar
    
    Jan 2012-Dec 2012
    
    20 MMcfd
    
    
    6.50-8.01NGL
    
    Swap
    
    Jan 2010-Dec 2010
    
    2,000 Bbld
    
    $
    32.65NGL
    
    Swap
    
    Jan 2010-Dec 2010
    
    3,000 Bbld
    
    
    32.98NGL
    
    Swap
    
    Jan 2010-Dec 2010
    
    1,000 Bbld
    
    
    33.63NGL
    
    Swap
    
    Jan 2010-Dec 2010
    
    1,000 Bbld
    
    
    34.15NGL
    
    Swap
    
    Jan 2010-Dec 2010
    
    3,000 Bbld
    
    
    34.22NGL
    
    Swap
    
    Jan 2011-Dec 2011
    
    3,000 Bbld
    
    
    36.06Gas
    
    Basis
    
    Jan 2010-Dec 2010
    
    20 MMcfd
    
    

(1)Gas
    
    Basis
    
    Jan 2010-Dec 2010
    
    20 MMcfd
    
    

(1)
 
 (1)
    

    Basis swaps for 40 MMcfd hedge the AECO basis adjustment at a deduction
of $0.45 per Mcf from NYMEX for 2010.


Investing Cash Flows




Nine Months EndedSeptember 30, 2009(In thousands)Exploration and development:Texas
    
    $
    281,674Other U.S.
    
    
    23,582Total U.S.
    
    
    305,256Canada
    
    
    70,116Total exploration and development
    
    
    375,372Midstream  Texas
    
    
    92,226Corporate and field office
    
    
    5,991Total plant and equipment costs incurred
    
    $
    473,589  Financing Cash Flows
  45




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##### Table of Contents



Financial Position
  
    
    Our current and non-current derivative assets and liabilities decreased $96.7 million on
a net basis.   Our net open derivative position decreased $234.8 million because of monthly
settlements during the 2009 period and $54.9 million received for early settlement of a
derivative hedging a portion of our 2010 production.   The valuation of our remaining open
derivative positions partially offset these decreases as a result of natural gas price
decreases during the 2009 period.   The Michigan Sales Contract was completed in March 2009,
which increased our derivative assets by $4.8 million and decreased our derivative
liabilities by $8.1 million.   Our current deferred income tax liability increased $11.0
million because of changes in the allocation between the U.S. and Canada of open derivative
positions and the difference in statutory tax rates between them.
    
    Our net property, plant and equipment balance decreased $803.9 million over the
nine-month period ended September 30, 2009.   During 2009, we recorded charges for impairment
of our oil gas properties of $967.1 million and 2009 DD&A expense of $155.2 million.   Our
property, plant and equipment balances were also decreased by proceeds of $219.8 million for
the Eni Transaction.   These decreases were partially offset by $473.6 million of costs
incurred for property, plant and equipment.
    
    Our deferred income tax liability has decreased $197.8 million and a deferred tax asset
of $143.5 million was reclassified in connection with the impairments of both our investment
in BBEP and our U.S. oil and gas properties.
 Contractual Obligations and Commercial Commitments
  Critical Accounting Estimates
  *
    
    full cost ceiling calculation
    
    *
    
    oil and gas reserves*
    
    derivative instruments
    
    *
    
    asset retirement obligations*
    
    stock-based compensation
    
    *
    
    income taxes
 46




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##### Table of Contents



Off-Balance Sheet Arrangements
  Recently Issued Accounting Standards
  
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
   Commodity Price Risk
   47




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##### Table of Contents



Weighted Avg PriceProduct
    
    Type
    
    Remaining Contract Period
    
    Volume
    
    Per Mcf
    
    
    Fair Value(In thousands)Gas
    
    Swap
    
    Oct 2009-Dec 2009
    
    10 MMcfd
    
    $
    8.45
    
    
    $
    3,410Gas
    
    Swap
    
    Oct 2009-Dec 2009
    
    10 MMcfd
    
    
    8.45
    
    
    
    3,410Gas
    
    Swap
    
    Oct 2009-Dec 2009
    
    20 MMcfd
    
    
    8.46
    
    
    
    6,830Gas
    
    Collar
    
    Oct 2009-Dec 2009
    
    20 MMcfd
    
    
    7.50-  9.34
    
    
    
    5,024Gas
    
    Collar
    
    Oct 2009-Dec 2009
    
    20 MMcfd
    
    
    7.75-10.20
    
    
    
    5,553Gas
    
    Collar
    
    Oct 2009-Dec 2009
    
    10 MMcfd
    
    
    7.75-10.26
    
    
    
    2,784Gas
    
    Collar
    
    Oct 2009-Dec 2009
    
    20 MMcfd
    
    
    8.25-9.60
    
    
    
    6,378Gas
    
    Collar
    
    Oct 2009-Dec 2009
    
    10 MMcfd
    
    
    8.25-10.45
    
    
    
    3,232Gas
    
    Collar
    
    Oct 2009-Dec 2009
    
    10 MMcfd
    
    
    8.25-10.45
    
    
    
    3,232Gas
    
    Collar
    
    Oct 2009-Dec 2009
    
    10 MMcfd
    
    
    8.25-10.45
    
    
    
    3,232Gas
    
    Collar
    
    Oct 2009-Dec 2009
    
    10 MMcfd
    
    
    8.50-13.15
    
    
    
    3,420Gas
    
    Collar
    
    Oct 2009-Dec 2009
    
    30 MMcfd
    
    
    11.00-13.50
    
    
    
    17,197Gas
    
    Collar
    
    Oct 2009-Dec 2009
    
    10 MMcfd
    
    
    11.50-14.48
    
    
    
    6,165Gas
    
    Collar
    
    Jan 2010-Dec 2010
    
    20 MMcfd
    
    
    8.00-11.00
    
    
    
    15,044Gas
    
    Collar
    
    Jan 2010-Dec 2010
    
    20 MMcfd
    
    
    8.00-11.00
    
    
    
    15,044Gas
    
    Collar
    
    Jan 2010-Dec 2010
    
    20 MMcfd
    
    
    8.00-12.20
    
    
    
    15,336Gas
    
    Collar
    
    Jan 2010-Dec 2010
    
    20 MMcfd
    
    
    8.00-12.20
    
    
    
    15,336Gas
    
    Collar
    
    Jan 2010-Dec 2010
    
    10 MMcfd
    
    
    8.50-12.05
    
    
    
    9,173Gas
    
    Collar
    
    Jan 2010-Dec 2010
    
    20 MMcfd
    
    
    8.50-12.05
    
    
    
    18,347Gas
    
    Collar
    
    Jan 2010-Dec 2010
    
    10 MMcfd
    
    
    8.50-12.08
    
    
    
    9,227Gas
    
    Basis
    
    Oct 2009-Dec 2009
    
    20 MMcfd
    
    

(1
    )
    
    
    (871
    )Gas
    
    Basis
    
    Oct 2009-Dec 2009
    
    10 MMcfd
    
    
    (1
    )
    
    
    (435
    )Gas
    
    Basis
    
    Oct 2009-Dec 2009
    
    15 MMcfd
    
    
    (1
    )
    
    
    (495
    )Gas
    
    Basis
    
    Oct 2009-Dec 2009
    
    15 MMcfd
    
    
    (1
    )
    
    
    (501
    )Total
    
    
    $
    165,072
 
 (1)
    
    Basis swaps for 60 MMcfd hedge the AECO basis adjustment at a weighted average
deduction of $0.84 per Mcf from NYMEX for the remainder of 2009.
    48




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##### Table of Contents



(In thousands)Initial valuation of liability (1)
    
    $
    58,294Decrease due to gas volumes purchased
    
    
    (3,806
    )Embedded derivative increase (decrease) due
to:Price changes
    
    
    1,667Volume changes
    
    
    (479
    )Total embedded derivative
    
    
    1,188Balance at September 30, 2009
    
    $
    55,676
  Interest Rate Risk
  
 ITEM 4. Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  49




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##### Table of Contents



ITEM 1A. Risk Factors
  Natural gas, NGL and crude oil prices fluctuate widely, and low prices could have a material
adverse impact on our business, financial condition, results of operations and cash flows.
   
    
    domestic and foreign demand for natural gas and crude oil;
    
    the level of domestic and foreign natural gas and crude oil supplies;
    
    the price and availability of alternative fuels;
    
    weather conditions;
    
    domestic and foreign governmental regulations;
    
    impact of trade organizations, such as OPEC;
    
    political conditions in oil and natural gas producing regions; and
    
    worldwide economic conditions.
  If natural gas, NGL or crude oil prices decrease, our exploration and development efforts are
unsuccessful or our costs increase substantially, we may be required to recognize impairment of our
oil and gas properties, which could have a material adverse effect on our financial condition, our
results of operations and our ability to borrow under and comply with our debt agreements.
  Reserve estimates depend on many assumptions that may turn out to be inaccurate and any material
inaccuracies in these reserve estimates or underlying assumptions may materially affect the
quantities and present value of our reserves.
 50




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##### Table of Contents



Our production is concentrated in a small number of geographic areas.
  Our Canadian operations present unique risks and uncertainties, different from or in addition to
those we face in our domestic operations.
  We may have difficulty financing our planned growth.
  51




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##### Table of Contents



We are vulnerable to operational hazards, transportation dependencies, regulatory risks and other
uninsured risks associated with our activities.
    The failure to replace our reserves could adversely affect our production and cash flows.
  We have risk through our investment in BBEP.
   We have risk through our ownership of KGS.
  52




---



##### Table of Contents




    
    changes in general economic conditions;
    
    fluctuations in natural gas prices;
    
    failure or delays in us and third parties achieving expected production from natural gas
projects;
    
    competitive conditions in the midstream industry;
    
    actions taken on non-performance by third parties, including suppliers, contractors,
operators, processors, transporters and customers;
    
    changes in the availability and cost of capital;
    
    operating hazards, natural disasters, weather-related delays, casualty losses and other
matters beyond our control;
    
    construction costs or capital expenditures exceeding estimated or budgeted amounts;
    
    the effects of existing and future laws and governmental regulations;
    
    the effects of future litigation; and
    
    other factors discussed in KGS Annual Report on Form 10-K and as are or may be detailed
from time to time in KGS public announcements and other filings with the SEC.
 We cannot control the operations of gas processing and transportation facilities we do not own or
operate.
  The loss of key personnel could adversely affect our ability to operate.
  Competition in our industry is intense, and we are smaller and have a more limited operating
history than many of our competitors.
  Hedging our production may result in losses or limit our ability to benefit from price increases.
  
    
    our production could be materially less than expected; or
    
    the other parties to the hedging contracts could fail to perform their contractual
obligations.
  Delays in obtaining oil field equipment and increases in drilling and other service costs could
adversely affect our ability to pursue our drilling program and our results of operations.
 53




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##### Table of Contents



Our activities are regulated by complex laws and regulations, including those relating to
environmental matters, that can adversely affect the cost, manner or feasibility of doing business.
  
    
    discharge permits for drilling operations;
    
    water obtained for drilling purposes;
    
    drilling permits and bonds;
    
    reports concerning operations;
    
    spacing of wells;
    
    disposal wells;
    
    unitization and pooling of properties;
    
    environmental protection; and
    
    taxation.
     The risks associated with our debt could adversely affect our business, financial condition and
results of operations and the value of our securities.
  54




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##### Table of Contents




    
    make it more difficult for us to satisfy our obligations with respect to our debt;
    
    require us to dedicate a substantial portion of our cash flow from operations to payments
on our debt, thereby reducing the amount of our cash flow available for working capital,
capital expenditures, acquisitions and other general corporate purposes;
    
    require us to make principal payments if the quantity and value of our proved reserves
are insufficient to support our level of borrowings;
    
    limit our flexibility in planning for, or reacting to, changes in the oil and natural gas
industry;
    
    place us at a competitive disadvantage compared to our competitors who may have lower
debt service obligations and greater financing flexibility than we do;
    
    limit our financial flexibility, including our ability to borrow additional funds;
    
    increase our interest expense on our variable rate borrowings if interest rates increase;
    
    limit our ability to make capital expenditures to develop our properties;
    
    increase our vulnerability to exchange risk associated with Canadian dollar denominated
indebtedness;
    
    increase our vulnerability to general adverse economic and industry conditions; and
    
    result in a default or event of default under our debt agreements, which, if not cured or
waived, could adversely affect our financial condition, results of operations and cash
flows.
  
    
    reducing or delaying capital expenditures;
    
    seeking additional debt financing or equity capital;
    
    selling assets;
    
    restructuring or refinancing debt; or
    
    reorganizing our capital structure.
  Our debt agreements restrict our ability to engage in certain activities.
  
    
    incur additional debt;
    
    pay dividends on, or redeem or repurchase capital stock;
    
    make certain investments;
    
    incur or permit certain liens to exist;
    
    enter into certain types of transactions with affiliates;
    
    merge, consolidate or amalgamate with another company;
    
    transfer or otherwise dispose of assets, including capital stock of subsidiaries; and
    
    redeem subordinated debt.
   55




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##### Table of Contents



Parties with whom we do business may become unable or unwilling to timely perform their obligations
to us.
  A small number of existing stockholders exercise significant control over our company, which could
limit your ability to influence the outcome of stockholder votes.
  A large number of our outstanding shares and shares to be issued upon conversion of our outstanding
convertible debentures or exercise of our outstanding options may be sold into the market in the
future, which could cause the market price of our common stock to drop significantly, even if our
business is performing well.
   Our amended and restated certificate of incorporation, restated bylaws and stockholder rights plan
contain provisions that could discourage an acquisition or change of control without our board of
directors approval.
  
    
    our board of directors is authorized to issue preferred stock without stockholder
approval;
    
    our board of directors is classified; and
    
    advance notice is required for director nominations by stockholders and actions to be
taken at annual meetings at the request of stockholders.
  We have identified material weaknesses in our internal controls that, if not properly
corrected, could result in material misstatements in our financial statements.
  56




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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)July 2009
    
    
    25,063
    
    
    $
    9.18
    
    
    
    
    
    
    
    August 2009
    
    
    198
    
    
    $
    12.02
    
    
    
    
    
    
    
    September 2009
    
    
    882
    
    
    $
    10.57
    
    
    
    
    
    
    
    Total
    
    
    26,143
    
    
    $
    9.25
    
    
    
    
    
    
    
    
 
 (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. Submission of Matters to a Vote of Security Holders
  
 ITEM 5. Other Information
  57




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##### Table of Contents



ITEM 6. Exhibits:
 Exhibit No.
    
    Description4.1
    
    First Supplemental Indenture, dated July 31, 2009, between Quicksilver
Resources Inc. and The Bank of New York Mellon Trust Company, N.A., as
trustee (filed as Exhibit 4.2 to the Companys Form 10-Q filed August 10,
2009 and included herein by reference).4.2
    
    Eighth Supplemental Indenture, dated as of August 14, 2009, among Quicksilver
Resources Inc., the subsidiary guarantors named therein and The Bank of New
York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.1 to the
Companys Form 8-K filed August 17, 2009 and included herein by reference).* 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 58




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##### Table of Contents



SIGNATURES
   Quicksilver Resources Inc.By:
    /s/ Philip CookPhilip CookSenior Vice President - Chief Financial Officer 59




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description4.1
    
    First Supplemental Indenture, dated July 31, 2009, between Quicksilver
Resources Inc. and The Bank of New York Mellon Trust Company, N.A., as
trustee (filed as Exhibit 4.2 to the Companys Form 10-Q filed August 10,
2009 and included herein by reference).4.2
    
    Eighth Supplemental Indenture, dated as of August 14, 2009, among Quicksilver
Resources Inc., the subsidiary guarantors named therein and The Bank of New
York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.1 to the
Companys Form 8-K filed August 17, 2009 and included herein by reference).* 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 60