##### 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 June 30, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto
 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, Suite 300, Fort Worth, Texas
(Address of principal executive offices)
    
    76104 (Zip Code)
 (817) 665-5000
 None
 þ o
  þ o o
 o þ
  Title of Class
    
    
    
    Outstanding as of July 31, 2006Common Stock, $0.01 par value
    
    
    
    77,539,205




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##### 



QUICKSILVER RESOURCES INC.
INDEX TO FORM 10-Q
For the Period Ending June 30, 2006
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Report of Independent Registered Public Accounting Firm
    
    
    3Condensed Consolidated Balance Sheets at June 30, 2006 and December 31, 2005
    
    
    4Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Six
Months Ended June 30, 2006 and 2005
    
    
    5Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended
June 30, 2006 and 2005
    
    
    6Notes to Condensed Consolidated Interim Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    30PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 6. Exhibits
    
    
    32Signatures
    
    
    33Amended and Restated Certificate of IncorporationAwareness Letter of Deloitte & Touche LLPCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to 18 U.S.C. Section 1350
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements (Unaudited)
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Share-Based Payment.
  
 3




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QUICKSILVER RESOURCES INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands, except for share data  Unaudited
 June 30,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assetsCash and cash equivalents
    
    $
    21,718
    
    
    $
    14,318Accounts receivable, net of allowance for doubtful accounts
    
    
    48,752
    
    
    
    76,121Current deferred income taxes
    
    
    
    
    
    
    14,614Other current assets
    
    
    28,103
    
    
    
    8,531Total current assets
    
    
    98,573
    
    
    
    113,584Investments in and advances to equity affiliates
    
    
    8,521
    
    
    
    8,353Property,
plant and equipment  net (full cost)
    
    
    1,340,792
    
    
    
    1,112,002Other assets
    
    
    27,182
    
    
    
    9,155$
    1,475,068
    
    
    $
    1,243,094LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    376
    
    
    $
    70,493Accounts payable
    
    
    35,875
    
    
    
    48,409Accrued derivative obligations
    
    
    455
    
    
    
    40,632Accrued liabilities
    
    
    46,507
    
    
    
    52,656Total current liabilities
    
    
    83,213
    
    
    
    212,190Long-term debt
    
    
    721,694
    
    
    
    506,039Derivative obligations
    
    
    665
    
    
    
    4,631Asset retirement obligations
    
    
    23,056
    
    
    
    20,891Deferred income taxes
    
    
    142,806
    
    
    
    115,728Minority interest
    
    
    4,523
    
    
    
    Stockholders equityPreferred stock, $0.01 par value, 10,000,000 shares
authorized,
0 and 1 share issued and outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value, 200,000,000 and
100,000,000 shares authorized, respectively, and
79,926,559 and 78,650,110 shares issued, respectively
    
    
    799
    
    
    
    787Paid in capital in excess of par value
    
    
    233,016
    
    
    
    211,843Treasury stock of 2,579,414 and 2,571,611 shares,
respectively
    
    
    (10,832
    )
    
    
    (10,353
    )Accumulated other comprehensive income (loss)
    
    
    31,265
    
    
    
    (12,382
    )Retained earnings
    
    
    244,863
    
    
    
    193,720Total stockholders equity
    
    
    499,111
    
    
    
    383,615$
    1,475,068
    
    
    $
    1,243,094
  4




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##### Table of Contents



QUICKSILVER RESOURCES INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 In thousands, except for per share data  Unaudited
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005RevenuesOil, gas and related product sales
    
    $
    88,536
    
    
    $
    67,843
    
    
    $
    187,225
    
    
    $
    122,683Other revenue
    
    
    929
    
    
    
    697
    
    
    
    1,890
    
    
    
    1,106Total revenues
    
    
    89,465
    
    
    
    68,540
    
    
    
    189,115
    
    
    
    123,789ExpensesOil and gas production costs
    
    
    24,220
    
    
    
    17,041
    
    
    
    45,630
    
    
    
    34,016Production and ad valorem taxes
    
    
    1,986
    
    
    
    3,311
    
    
    
    6,159
    
    
    
    5,990Other operating costs
    
    
    546
    
    
    
    654
    
    
    
    949
    
    
    
    1,045Depletion, depreciation and accretion
    
    
    17,954
    
    
    
    13,017
    
    
    
    35,627
    
    
    
    25,389Provision for bad debts
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    88General and administrative
    
    
    5,437
    
    
    
    4,618
    
    
    
    11,691
    
    
    
    7,731Total expenses
    
    
    50,143
    
    
    
    38,729
    
    
    
    100,056
    
    
    
    74,259Income (loss) from equity affiliates
    
    
    (80
    )
    
    
    215
    
    
    
    108
    
    
    
    439Operating income
    
    
    39,242
    
    
    
    30,026
    
    
    
    89,167
    
    
    
    49,969Other income-net
    
    
    (498
    )
    
    
    (118
    )
    
    
    (848
    )
    
    
    (204
    )Interest expense
    
    
    10,566
    
    
    
    4,776
    
    
    
    19,768
    
    
    
    9,433Income before income taxes and minority interest
    
    
    29,174
    
    
    
    25,368
    
    
    
    70,247
    
    
    
    40,740Income tax expense
    
    
    5,555
    
    
    
    8,183
    
    
    
    19,093
    
    
    
    12,801Minority interest
    
    
    11
    
    
    
    
    
    
    
    11
    
    
    
    Net income
    
    $
    23,608
    
    
    $
    17,185
    
    
    $
    51,143
    
    
    $
    27,939Other comprehensive income, net of income taxesReclassification adjustments  hedge settlements
    
    
    (2,324
    )
    
    
    2,433
    
    
    
    (830
    )
    
    
    8,637Unrealized gain (loss) on derivative instruments
    
    
    16,094
    
    
    
    4,333
    
    
    
    39,566
    
    
    
    (5,930
    )Foreign currency translation adjustments
    
    
    4,907
    
    
    
    (528
    )
    
    
    4,911
    
    
    
    (1,208
    )Comprehensive income
    
    $
    42,285
    
    
    $
    23,423
    
    
    $
    94,790
    
    
    $
    29,438Basic net income per common share
    
    $
    0.31
    
    
    $
    0.23
    
    
    $
    0.67
    
    
    $
    0.37Diluted net income per common share
    
    $
    0.29
    
    
    $
    0.21
    
    
    $
    0.63
    
    
    $
    0.35Weighted average common shares outstandingBasic
    
    
    76,723
    
    
    
    75,751
    
    
    
    76,383
    
    
    
    75,619Diluted
    
    
    83,089
    
    
    
    82,474
    
    
    
    82,949
    
    
    
    82,268
  5




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##### Table of Contents



QUICKSILVER RESOURCES INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 In thousands  Unaudited
 For the Six Months EndedJune 30,2006
    
    
    2005Operating activities:Net income
    
    $
    51,143
    
    
    $
    27,939Charges and credits to net income not affecting cashDepletion, depreciation and accretion
    
    
    35,627
    
    
    
    25,389Deferred income taxes
    
    
    19,063
    
    
    
    12,528Non-cash compensation
    
    
    2,819
    
    
    
    500Amortization of deferred loan costs
    
    
    1,255
    
    
    
    701Income from equity affiliates
    
    
    (108
    )
    
    
    (439
    )Minority interest
    
    
    11
    
    
    
    Non-cash (gain) loss from hedging activities
    
    
    77
    
    
    
    (287
    )Other non-cash items
    
    
    129
    
    
    
    58Changes in assets and liabilitiesAccounts receivable
    
    
    27,369
    
    
    
    (2,844
    )Current and other assets
    
    
    (13,674
    )
    
    
    (3,685
    )Accounts payable
    
    
    (1,423
    )
    
    
    2,542Accrued and other liabilities
    
    
    9,502
    
    
    
    (1,459
    )Net cash provided by operating activities
    
    
    131,790
    
    
    
    60,943Investing activities:Purchases of property, plant and equipment
    
    
    (279,713
    )
    
    
    (132,515
    )Return of investment in equity affiliates
    
    
    365
    
    
    
    315Proceeds from sales of properties
    
    
    4,854
    
    
    
    1,190Net cash used for investing activities
    
    
    (274,494
    )
    
    
    (131,010
    )Financing activities:Issuance of debt
    
    
    408,742
    
    
    
    59,823Repayments of debt
    
    
    (271,719
    )
    
    
    (161
    )Proceeds from exercise of stock options
    
    
    18,366
    
    
    
    1,508Minority interest contributions
    
    
    4,506
    
    
    
    Purchase of treasury stock
    
    
    (479
    )
    
    
    Payment for fractional shares
    
    
    
    
    
    
    (18
    )Debt issuance costs
    
    
    (9,192
    )
    
    
    (107
    )Net cash provided by financing activities
    
    
    150,224
    
    
    
    61,045Effect of exchange rates on cash
    
    
    (120
    )
    
    
    283Net increase (decrease) in cash and cash equivalents
    
    
    7,400
    
    
    
    (8,739
    )Cash and cash equivalents at beginning of period
    
    
    14,318
    
    
    
    15,947Cash and cash equivalents at end of period
    
    $
    21,718
    
    
    $
    7,208
  6




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##### Table of Contents



QUICKSILVER RESOURCES INC.
 
 NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 UNAUDITED
 1. ACCOUNTING POLICIES AND DISCLOSURES
     Net Income per Common Share
  Three Months Ended
    
    
    Six Months Ended JuneJune 30,
    
    
    30,2006
    
    
    2005
    
    
    2006
    
    
    2005(in thousands, expect per share amounts)Net income
    
    $
    23,608
    
    
    $
    17,185
    
    
    $
    51,143
    
    
    $
    27,939Impact of
assumed conversions  interest on 1.875%
contingently convertible debentures, net of income taxes
    
    
    475
    
    
    
    475
    
    
    
    950
    
    
    
    950Net income available to stockholders assuming
conversion of contingently convertible debentures
    
    $
    24,083
    
    
    $
    17,660
    
    
    $
    52,093
    
    
    $
    28,889Weighted average common shares-basic
    
    
    76,723
    
    
    
    75,751
    
    
    
    76,383
    
    
    
    75,619Effect of dilutive securities:Employee stock options
    
    
    1,110
    
    
    
    1,678
    
    
    
    1,327
    
    
    
    1,657Employee stock awards
    
    
    348
    
    
    
    137
    
    
    
    331
    
    
    
    84Contingently convertible debentures
    
    
    4,908
    
    
    
    4,908
    
    
    
    4,908
    
    
    
    4,908Weighted average common shares-diluted
    
    
    83,089
    
    
    
    82,474
    
    
    
    82,949
    
    
    
    82,268Basic net income per common share
    
    $
    0.31
    
    
    $
    0.23
    
    
    $
    0.67
    
    
    $
    0.37Diluted net income per common share
    
    $
    0.29
    
    
    $
    0.21
    
    
    $
    0.63
    
    
    $
    0.35
 7




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##### Table of Contents



Recently Issued Accounting Standards
 Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109
 2. STOCK-BASED COMPENSATION
 Share-Based Payment . Accounting for Stock Issued to Employees
    8




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##### Table of Contents



Accounting for
Stock-based Compensation
 Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2005
    
    
    June 30, 2005(in thousands, except per share amounts)Net income
    
    $
    17,185
    
    
    $
    27,939Impact of
assumed conversions  interest on 1.875%
contingently convertible debentures, net of income taxes
    
    
    475
    
    
    
    950Deduct:
Total stock  based compensation expense
determined under fair value based method for stock
option awards, net of related tax effect
    
    
    (1,907
    )
    
    
    (3,838
    )Pro forma net income available to stockholders assuming
conversion of contingently convertible debentures
    
    $
    15,753
    
    
    $
    25,051As reportedBasic net income per common share
    
    $
    0.23
    
    
    $
    0.37Diluted net income per common share
    
    
    0.21
    
    
    
    0.35Pro formaBasic net income per common share
    
    $
    0.20
    
    
    $
    0.32Diluted net income per common share
    
    
    0.19
    
    
    
    0.31
 Employee Stock Plans
 1999 and 2004 Plans
    2006 Equity Plan
  9




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##### Table of Contents



Stock Options
   Wtd AvgExerciseShares
    
    
    PriceOutstanding at beginning of year
    
    
    2,840,695
    
    
    $
    17.13Granted
    
    
    2,401
    
    
    
    44.39Exercised
    
    
    (1,019,271
    )
    
    
    18.02Forfeited
    
    
    (16,632
    )
    
    
    11.01Outstanding at period end
    
    
    1,807,193
    
    
    $
    16.71Exercisable at June 30, 2006
    
    
    1,340,962
    
    
    $
    18.13Weighted average fair value of options granted
    
    
    
    
    
    $
    24.99
   Six Months Ended June 30, 2006Grant date
    
    Jan 3, 2006Risk-free interest rate
    
    
    4.35
    %Expected life (in years)
    
    
    10.0Expected volatility
    
    
    37.3
    %Dividend yield
    
    
    
  Restricted Stock
    Wtd AvgGrant DateShares
    
    
    Fair ValueOutstanding at beginning of year
    
    
    133,858
    
    
    $
    33.73Granted
    
    
    267,754
    
    
    
    43.64Vested
    
    
    (46,462
    )
    
    
    33.79Forfeited
    
    
    (10,276
    )
    
    
    37.25Outstanding at period end
    
    
    344,874
    
    
    $
    41.31
  10




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##### Table of Contents



3. HEDGING
  June 30,
    
    
    December 31,2006
    
    
    2005(in thousands)Derivative assets:Fixed price sale commitments
    
    $
    207
    
    
    $
    638Floating price natural gas basis swaps
    
    
    5
    
    
    
    Natural gas financial collars
    
    
    20,044
    
    
    
    $
    20,256
    
    
    $
    638Derivative liabilities:Natural gas financial collars
    
    $
    3,034
    
    
    $
    44,480Crude oil financial collars
    
    
    1,344
    
    
    
    320Floating price natural gas financial swaps
    
    
    211
    
    
    
    463Floating price natural gas basis swaps
    
    
    57
    
    
    
    Fixed price sale commitments
    
    
    
    
    
    
    35$
    4,646
    
    
    $
    45,298
   4. LONG-TERM DEBT
  June 30,
    
    
    December 31,2006
    
    
    2005(in thousands)Senior secured credit facility
    
    $
    223,557
    
    
    $
    357,788Senior subordinated notes
    
    
    350,000
    
    
    
    Contingently convertible debentures, net of
unamortized discount
    
    
    147,937
    
    
    
    147,881Second lien mortgage notes payable
    
    
    
    
    
    
    70,000Other loans
    
    
    576
    
    
    
    746Deferred
gain  fair value interest hedge
    
    
    
    
    
    
    117722,070
    
    
    
    576,532Less current maturities
    
    
    (376
    )
    
    
    (70,493
    )$
    721,694
    
    
    $
    506,039
  11




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##### Table of Contents



5. ASSET RETIREMENT OBLIGATIONS
   Six
Months Ended June 30,2006
    
    
    2005(in thousands)Beginning asset retirement obligation
    
    $
    20,965
    
    
    $
    18,471Additional liability incurred
    
    
    1,186
    
    
    
    474Accretion expense
    
    
    649
    
    
    
    552Change in estimates
    
    
    29
    
    
    
    Asset retirement costs incurred
    
    
    (122
    )
    
    
    (77
    )Loss on settlement of liability
    
    
    96
    
    
    
    14Currency translation adjustment
    
    
    326
    
    
    
    (80
    )Ending asset retirement obligation
    
    $
    23,129
    
    
    $
    19,354
 6. INCOME TAXES
 Accounting for Income Taxes
  12




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##### Table of Contents



7. MINORITY INTEREST
  8. COMMITMENTS AND CONTINGENCIES
    9. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
  13




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##### Table of Contents



Condensed Consolidating Balance Sheets
 June 30, 2006Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)ASSETSCurrent assets
    
    $
    115,415
    
    
    $
    230,106
    
    
    $
    45,330
    
    
    $
    (292,278
    )
    
    $
    98,573Investments in subsidiaries (equity method)
    
    
    446,758
    
    
    
    99,985
    
    
    
    
    
    
    
    (537,222
    )
    
    
    8,521Property and equipment, net
    
    
    778,947
    
    
    
    86,489
    
    
    
    475,356
    
    
    
    
    
    
    
    1,340,792Other assets
    
    
    26,186
    
    
    
    
    
    
    
    996
    
    
    
    
    
    
    
    27,182Total assets
    
    $
    1,367,306
    
    
    $
    415,580
    
    
    $
    521,682
    
    
    $
    (829,500
    )
    
    $
    1,475,068LIABILITIESCurrent liabilities
    
    $
    263,399
    
    
    $
    77,000
    
    
    $
    35,092
    
    
    $
    (292,278
    )
    
    $
    83,213Long-term liabilities
    
    
    604,796
    
    
    
    24,554
    
    
    
    263,394
    
    
    
    
    
    
    
    892,744Stockholders equity
    
    
    499,111
    
    
    
    314,026
    
    
    
    223,196
    
    
    
    (537,222
    )
    
    
    499,111Total liabilities and stockholders equity
    
    $
    1,367,306
    
    
    $
    415,580
    
    
    $
    521,682
    
    
    $
    (829,500
    )
    
    $
    1,475,068
 December 31, 2005Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)ASSETSCurrent assets
    
    $
    101,587
    
    
    $
    201,458
    
    
    $
    62,105
    
    
    $
    (251,566
    )
    
    $
    113,584Investments in subsidiaries (equity method)
    
    
    290,951
    
    
    
    8,932
    
    
    
    
    
    
    
    (291,530
    )
    
    
    8,353Property and equipment, net
    
    
    638,355
    
    
    
    141,193
    
    
    
    332,454
    
    
    
    
    
    
    
    1,112,002Other assets
    
    
    8,000
    
    
    
    
    
    
    
    1,155
    
    
    
    
    
    
    
    9,155Total assets
    
    $
    1,038,893
    
    
    $
    351,583
    
    
    $
    395,714
    
    
    $
    (543,096
    )
    
    $
    1,243,094LIABILITIESCurrent liabilities
    
    $
    247,065
    
    
    $
    124,780
    
    
    $
    91,911
    
    
    $
    (251,566
    )
    
    $
    212,190Long-term liabilities
    
    
    408,213
    
    
    
    24,542
    
    
    
    214,534
    
    
    
    
    
    
    
    647,289Stockholders equity
    
    
    383,615
    
    
    
    202,261
    
    
    
    89,269
    
    
    
    (291,530
    )
    
    
    383,615Total liabilities and stockholders equity
    
    $
    1,038,893
    
    
    $
    351,583
    
    
    $
    395,714
    
    
    $
    (543,096
    )
    
    $
    1,243,094
 Condensed Consolidating Statement of Income
 For the Three Months Ended June 30, 2006Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Revenues
    
    $
    53,875
    
    
    $
    10,727
    
    
    $
    28,582
    
    
    $
    (3,719
    )
    
    $
    89,465Operating expenses
    
    
    34,341
    
    
    
    3,850
    
    
    
    15,671
    
    
    
    (3,719
    )
    
    
    50,143Income (loss) from equity affiliates
    
    
    2
    
    
    
    (82
    )
    
    
    
    
    
    
    
    
    
    
    (80
    )Income from operations
    
    
    19,536
    
    
    
    6,795
    
    
    
    12,911
    
    
    
    
    
    
    
    39,242Equity in net earnings of subsidiaries
    
    
    15,978
    
    
    
    148
    
    
    
    
    
    
    
    (16,126
    )
    
    
    Interest expense and other
    
    
    6,787
    
    
    
    11
    
    
    
    3,281
    
    
    
    
    
    
    
    10,079Income tax provision
    
    
    5,119
    
    
    
    2,374
    
    
    
    (1,938
    )
    
    
    
    
    
    
    5,555Net income
    
    $
    23,608
    
    
    $
    4,558
    
    
    $
    11,568
    
    
    $
    (16,126
    )
    
    $
    23,608
 For the Three Months Ended June 30, 2005Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Revenues
    
    $
    38,370
    
    
    $
    10,821
    
    
    $
    20,052
    
    
    $
    (703
    )
    
    $
    68,540Operating expenses
    
    
    26,531
    
    
    
    4,641
    
    
    
    8,260
    
    
    
    (703
    )
    
    
    38,729Income from equity affiliates
    
    
    24
    
    
    
    191
    
    
    
    
    
    
    
    
    
    
    
    215Income from operations
    
    
    11,863
    
    
    
    6,371
    
    
    
    11,792
    
    
    
    
    
    
    
    30,026Equity in net earnings of subsidiaries
    
    
    11,677
    
    
    
    
    
    
    
    
    
    
    
    (11,677
    )
    
    
    Interest expense and other
    
    
    3,354
    
    
    
    (40
    )
    
    
    1,344
    
    
    
    
    
    
    
    4,658Income tax provision
    
    
    3,001
    
    
    
    2,244
    
    
    
    2,938
    
    
    
    
    
    
    
    8,183Net income
    
    $
    17,185
    
    
    $
    4,167
    
    
    $
    7,510
    
    
    $
    (11,677
    )
    
    $
    17,185
 14




---



##### Table of Contents



For the Six Months Ended June 30, 2006Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Revenues
    
    $
    108,843
    
    
    $
    24,105
    
    
    $
    60,949
    
    
    $
    (4,782
    )
    
    $
    189,115Operating expenses
    
    
    67,956
    
    
    
    8,224
    
    
    
    28,658
    
    
    
    (4,782
    )
    
    
    100,056Income from equity affiliates
    
    
    2
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    108Income from operations
    
    
    40,889
    
    
    
    15,987
    
    
    
    32,291
    
    
    
    
    
    
    
    89,167Equity in net earnings of subsidiaries
    
    
    33,656
    
    
    
    148
    
    
    
    
    
    
    
    (33,804
    )
    
    
    Interest expense and other
    
    
    12,940
    
    
    
    9
    
    
    
    5,982
    
    
    
    
    
    
    
    18,931Income tax provision
    
    
    10,462
    
    
    
    5,592
    
    
    
    3,039
    
    
    
    
    
    
    
    19,093Net income
    
    $
    51,143
    
    
    $
    10,534
    
    
    $
    23,270
    
    
    $
    (33,804
    )
    
    $
    51,143
 For the Six Months Ended June 30, 2005Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Revenues
    
    $
    64,782
    
    
    $
    20,310
    
    
    $
    39,969
    
    
    $
    (1,272
    )
    
    $
    123,789Operating expenses
    
    
    51,608
    
    
    
    8,075
    
    
    
    15,848
    
    
    
    (1,272
    )
    
    
    74,259Income from equity affiliates
    
    
    24
    
    
    
    415
    
    
    
    
    
    
    
    
    
    
    
    439Income from operations
    
    
    13,198
    
    
    
    12,650
    
    
    
    24,121
    
    
    
    
    
    
    
    49,969Equity in net earnings of subsidiaries
    
    
    23,559
    
    
    
    
    
    
    
    
    
    
    
    (23,559
    )
    
    
    Interest expense and other
    
    
    6,389
    
    
    
    (44
    )
    
    
    2,884
    
    
    
    
    
    
    
    9,229Income tax provision
    
    
    2,429
    
    
    
    4,443
    
    
    
    5,929
    
    
    
    
    
    
    
    12,801Net income
    
    $
    27,939
    
    
    $
    8,251
    
    
    $
    15,308
    
    
    $
    (23,559
    )
    
    $
    27,939
 Condensed Consolidating Statements of Cash Flows
 For the Six Months Ended June 30, 2006Non-
    

    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Cash flow provided by operations
    
    $
    32,019
    
    
    $
    39,917
    
    
    $
    59,854
    
    
    $
    
    
    
    $
    131,790Cash flow used for investing activities
    
    
    (148,436
    )
    
    
    (37,392
    )
    
    
    (88,666
    )
    
    
    
    
    
    
    (274,494
    )Cash flow provided by financing activities
    
    
    123,526
    
    
    
    
    
    
    
    26,698
    
    
    
    
    
    
    
    150,224Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    (120
    )Net increase (decrease) in cash &
equivalents
    
    
    7,109
    
    
    
    2,525
    
    
    
    (2,234
    )
    
    
    
    
    
    
    7,400Cash & equivalents at beginning of period
    
    
    8,990
    
    
    
    (4,410
    )
    
    
    9,738
    
    
    
    
    
    
    
    14,318Cash & equivalents at end of period
    
    $
    16,099
    
    
    $
    (1,885
    )
    
    $
    7,504
    
    
    $
    
    
    
    $
    21,718
 For the Six Months Ended June 30, 2005Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Cash flow provided by operations
    
    $
    29,767
    
    
    $
    7,088
    
    
    $
    24,088
    
    
    $
    
    
    
    $
    60,943Cash flow used for investing activities
    
    
    (65,360
    )
    
    
    (10,050
    )
    
    
    (55,600
    )
    
    
    
    
    
    
    (131,010
    )Cash flow provided by financing activities
    
    
    34,222
    
    
    
    
    
    
    
    26,823
    
    
    
    
    
    
    
    61,045Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    283
    
    
    
    
    
    
    
    283Net decrease in cash & equivalents
    
    
    (1,371
    )
    
    
    (2,962
    )
    
    
    (4,406
    )
    
    
    
    
    
    
    (8,739
    )Cash & equivalents at beginning of period
    
    
    10,428
    
    
    
    1,080
    
    
    
    4,439
    
    
    
    
    
    
    
    15,947Cash & equivalents at end of period
    
    $
    9,057
    
    
    $
    (1,882
    )
    
    $
    33
    
    
    $
    
    
    
    $
    7,208
 10. SUPPLEMENTAL CASH FLOW INFORMATION
  Six Months Ended June 30,2006
    
    2005(in thousands)Interest
    
    $
    12,982
    
    
    $
    9,174Income taxes
    
    $
    3
    
    
    $
    857
 15




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##### Table of Contents



Six Months Ended June 30,2006
    
    2005(in thousands)Noncash
investing activities  changes
in working capital
associated with property and equipment
    
    $
    (26,950
    )
    
    $
    (1,615
    )
 11. RELATED PARTY TRANSACTIONS
   12. GEOGRAPHIC INFORMATION
  UnitedFor the Three Months Ended
    
    States
    
    Canada
    
    Corporate
    
    Consolidated(in thousands)June 30, 2006Revenues
    
    $
    63,393
    
    
    $
    26,072
    
    
    $
    
    
    
    $
    89,465Depletion, depreciation and accretion
    
    
    11,273
    
    
    
    6,484
    
    
    
    197
    
    
    
    17,954Operating income
    
    
    31,570
    
    
    
    13,306
    
    
    
    (5,634
    )
    
    
    39,242Property and equipment costs incurred
    
    
    104,926
    
    
    
    13,587
    
    
    
    644
    
    
    
    119,157June 30, 2005Revenues
    
    $
    48,351
    
    
    $
    20,189
    
    
    $
    
    
    
    $
    68,540Depletion, depreciation and accretion
    
    
    8,604
    
    
    
    4,267
    
    
    
    146
    
    
    
    13,017Operating income
    
    
    22,874
    
    
    
    11,916
    
    
    
    (4,764
    )
    
    
    30,026Property and equipment costs incurred
    
    
    53,447
    
    
    
    23,286
    
    
    
    289
    
    
    
    77,022
 UnitedFor the Six Months Ended
    
    States
    
    Canada
    
    Corporate
    
    ConsolidatedJune 30, 2006Revenues
    
    $
    130,606
    
    
    $
    58,509
    
    
    $
    
    
    
    $
    189,115Depletion, depreciation and accretion
    
    
    21,625
    
    
    
    13,683
    
    
    
    319
    
    
    
    35,627Operating income
    
    
    68,144
    
    
    
    33,033
    
    
    
    (12,010
    )
    
    
    89,167Property and equipment costs incurred
    
    
    200,487
    
    
    
    51,068
    
    
    
    1,207
    
    
    
    252,762
 16




---



##### Table of Contents



UnitedFor the Six Months Ended
    
    States
    
    Canada
    
    Corporate
    
    ConsolidatedJune 30, 2005Revenues
    
    $
    83,625
    
    
    $
    40,164
    
    
    $
    
    
    
    $
    123,789Depletion, depreciation and accretion
    
    
    16,522
    
    
    
    8,572
    
    
    
    295
    
    
    
    25,389Operating income
    
    
    33,707
    
    
    
    24,288
    
    
    
    (8,026
    )
    
    
    49,969Property and equipment costs incurred
    
    
    84,068
    
    
    
    49,766
    
    
    
    296
    
    
    
    134,130Fixed
Assets  netJune 30, 2006
    
    $
    956,988
    
    
    $
    380,798
    
    
    $
    3,006
    
    
    $
    1,340,792December 31, 2005
    
    $
    777,330
    
    
    $
    332,580
    
    
    $
    2,092
    
    
    $
    1,112,002
 17




---



##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Information
  
    
    changes in general economic conditions;
    
    fluctuations in natural gas and crude oil prices;
    
    failure or delays in achieving expected production from natural gas and crude oil
exploration and development projects;
    
    effects of hedging natural gas and crude oil prices;
    
    uncertainties inherent in estimates of natural gas and crude oil reserves and
predicting natural gas and crude oil reservoir performance;
    
    competitive conditions in our industry;
    
    actions taken by third-party operators, processors and transporters;
    
    changes in the availability and cost of capital;
    
    delays in obtaining oil field 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
    
    factors discussed in our Form 10-K for the year ended December 31, 2005.
  18




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##### Table of Contents



RESULTS OF OPERATIONS
 Summary Financial Data
Three Months Ended June 30, 2006 Compared with the Three Months Ended June 30, 2005
 Three Months Ended June 30,2006
    
    2005(in thousands)Total operating revenues
    
    $
    89,465
    
    
    $
    68,540Total operating expenses
    
    
    50,143
    
    
    
    38,729Operating income
    
    
    39,242
    
    
    
    30,026Net income
    
    
    23,608
    
    
    
    17,185
  Operating Revenues
  Gas, Oil and Related Product Sales
  Three Months Ended June 30,2006
    
    
    2005Natural gas, oil and NGL sales (in thousands)United States
    
    $
    62,608
    
    
    $
    47,777Canada
    
    
    25,928
    
    
    
    20,066Total
    
    $
    88,536
    
    
    $
    67,843Product sale revenues (in thousands)Natural gas sales
    
    $
    72,735
    
    
    $
    59,913Oil and condensate sales
    
    
    9,533
    
    
    
    6,425NGL sales
    
    
    6,268
    
    
    
    1,505Total
    
    $
    88,536
    
    
    $
    67,843Average daily sales volumeNatural gas  McfdUnited States
    
    
    94,585
    
    
    
    87,596Canada
    
    
    49,624
    
    
    
    37,985Total
    
    
    144,209
    
    
    
    125,581Oil and condensate  BbldUnited States
    
    
    1,688
    
    
    
    1,569Canada
    
    
    1
    
    
    
    Total
    
    
    1,689
    
    
    
    1,569NGL  BbldUnited States
    
    
    1,623
    
    
    
    486Canada
    
    
    25
    
    
    
    11Total
    
    
    1,648
    
    
    
    497
 19




---



##### Table of Contents



Three Months Ended June 30,2006
    
    
    2005Total sales
 McfedUnited States
    
    
    114,451
    
    
    
    99,914Canada
    
    
    49,780
    
    
    
    38,061Total
    
    
    164,231
    
    
    
    137,975Unit prices  including impact of hedgesNatural gas  per McfUnited States
    
    $
    5.45
    
    
    $
    5.00Canada
    
    
    5.71
    
    
    
    5.80Consolidated
    
    
    5.54
    
    
    
    5.24Oil and condensate  per BblUnited States
    
    $
    62.03
    
    
    $
    45.01Canada
    
    
    51.43
    
    
    
    Consolidated
    
    
    62.03
    
    
    
    45.01NGL  per BblUnited States
    
    $
    41.55
    
    
    $
    33.14Canada
    
    
    57.36
    
    
    
    39.03Consolidated
    
    
    41.80
    
    
    
    33.27
    20




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##### Table of Contents



Operating Expenses
  Oil and Gas Operations Expense
 Three Months EndedJune 30,2006
    
    
    2005(in thousands, except per unitamounts)Oil and gas operations expenseUnited States
    
    $
    18,429
    
    
    $
    13,550Canada
    
    
    5,791
    
    
    
    3,491Total
    
    $
    24,220
    
    
    $
    17,041Oil and gas operations expense  per McfeUnited States
    
    $
    1.78
    
    
    $
    1.46Canada
    
    
    1.28
    
    
    
    1.01Consolidated
    
    
    1.62
    
    
    
    1.36
   Production and Ad Valorem Taxes
  Depletion, Depreciation and Accretion
 Three Months Ended June 30,2006
    
    
    2005(in thousands, except per unit amounts)Depletion
    
    $
    14,874
    
    
    $
    10,860Depreciation of other fixed assets
    
    
    2,745
    
    
    
    1,875Accretion
    
    
    335
    
    
    
    282Total depletion, depreciation and accretion
    
    $
    17,954
    
    
    $
    13,017Average depletion cost per Mcfe
    
    $
    1.00
    
    
    $
    0.86
 21




---



##### Table of Contents



General and Administrative Expense
  Interest Expense
  Income Tax Expense
  Summary Financial Data
Six Months Ended June 30, 2006 Compared with the Six Months Ended June 30, 2005
 Six Months Ended June 30,2006
    
    
    2005(in thousands)Total operating revenues
    
    $
    189,115
    
    
    $
    123,789Total operating expenses
    
    
    100,056
    
    
    
    74,259Operating income
    
    
    89,167
    
    
    
    49,969Net income
    
    
    51,143
    
    
    
    27,939
  Operating Revenues
  22




---



##### Table of Contents



Gas, Oil and Related Product Sales
  Six Months Ended June 30,2006
    
    
    2005Natural gas, oil and NGL sales (in thousands)United States
    
    $
    129,293
    
    
    $
    82,935Canada
    
    
    57,932
    
    
    
    39,748Total
    
    $
    187,225
    
    
    $
    122,683Product sale revenues (in thousands)Natural gas sales
    
    $
    159,657
    
    
    $
    107,781Oil and condensate sales
    
    
    17,926
    
    
    
    12,341NGL sales
    
    
    9,642
    
    
    
    2,561Total
    
    $
    187,225
    
    
    $
    122,683Average daily sales volumeNatural gas  McfdUnited States
    
    
    92,817
    
    
    
    85,778Canada
    
    
    48,814
    
    
    
    38,673Total
    
    
    141,631
    
    
    
    124,451Oil and condensate  BbldUnited States
    
    
    1,639
    
    
    
    1,498Canada
    
    
    1
    
    
    
    Total
    
    
    1,640
    
    
    
    1,498NGL  BbldUnited States
    
    
    1,279
    
    
    
    420Canada
    
    
    17
    
    
    
    7Total
    
    
    1,296
    
    
    
    427Total sales  McfedUnited States
    
    
    110,323
    
    
    
    97,282Canada
    
    
    48,921
    
    
    
    38,722Total
    
    
    159,244
    
    
    
    136,004Unit prices  including impact of hedgesNatural gas  per McfUnited States
    
    $
    6.06
    
    
    $
    4.38Canada
    
    
    6.54
    
    
    
    5.67Consolidated
    
    
    6.23
    
    
    
    4.78Oil and condensate  per BblUnited States
    
    $
    60.40
    
    
    $
    45.51Canada
    
    
    53.21
    
    
    
    Consolidated
    
    
    60.39
    
    
    
    45.51NGL  per BblUnited States
    
    $
    41.02
    
    
    $
    33.05Canada
    
    
    47.98
    
    
    
    38.29Consolidated
    
    
    41.12
    
    
    
    33.13
  23




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##### Table of Contents



Operating Expenses
  Oil and Gas Operations Expense
 Six Months Ended June 30,2006
    
    
    2005(in thousands, except per unit amounts)Oil and gas operations expenseUnited States
    
    $
    34,628
    
    
    $
    27,051Canada
    
    
    11,002
    
    
    
    6,965Total
    
    $
    45,630
    
    
    $
    34,016Oil and gas operations expense  per McfeUnited States
    
    $
    1.74
    
    
    $
    1.52Canada
    
    
    1.24
    
    
    
    0.99Consolidated
    
    
    1.59
    
    
    
    1.38
   Production and Ad Valorem Taxes
  24




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##### Table of Contents



Depletion, Depreciation and Accretion
 Six Months Ended June30,2006
    
    
    2005(in thousands, except per unitamounts)Depletion
    
    $
    29,671
    
    
    $
    21,598Depreciation of other fixed assets
    
    
    5,307
    
    
    
    3,238Accretion
    
    
    649
    
    
    
    553Total depletion, depreciation and accretion
    
    $
    35,627
    
    
    $
    25,389Average depletion cost per Mcfe
    
    $
    1.03
    
    
    $
    0.88
  General and Administrative Expense
  Interest Expense
  Income Tax Expense
  LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
   25




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##### Table of Contents



Six MonthsEndedJune 30, 2006(in thousands)Exploration and developmentUnited States
    
    $
    158,496Canada
    
    
    42,952Total exploration and development
    
    
    201,448Gas processing and transportationUnited States
    
    
    41,268Canada
    
    
    7,870Total gas processing and transportation
    
    
    49,138Corporate and office
    
    
    2,176Total plant and equipment costs incurred
    
    $
    252,762
    26




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##### Table of Contents



June 30,
    
    
    December 31,2006
    
    
    2005(in thousands)Senior secured credit facility
    
    $
    223,557
    
    
    $
    357,788Senior subordinated notes
    
    
    350,000
    
    
    
    Convertible subordinated debentures
    
    
    147,937
    
    
    
    147,881Second lien mortgage notes payable
    
    
    
    
    
    
    70,000Other loans
    
    
    576
    
    
    
    746Deferred gain  fair interest hedge
    
    
    
    
    
    
    117Total debt
    
    
    722,070
    
    
    
    576,532Stockholders equity
    
    
    499,111
    
    
    
    383,615$
    1,221,181
    
    
    $
    960,147
 Financial Position
  
    
    A $10.1 million and $6.1 million increase in our current and deferred derivative
assets, respectively, reflecting the relative decrease in natural gas prices as
compared to the price collars that hedge a portion of our future natural gas and
crude oil production at June 30, 2006. The increase in our current derivative assets
and decrease in our current derivative liabilities resulted in a $14.6 million
decrease in our current deferred tax asset at June 30, 2006.
    
    A $228.8 million increase in our net property, plant and equipment assets includes
approximately $252.8 million in capital costs incurred for development, exploitation
and exploration of our oil and gas properties as well as additional pipeline and gas
processing assets in Texas.
    
    Our current portion of long-term debt has decreased $70.0 million. Our second
lien mortgage notes were retired with a portion of the proceeds from the issuance of
the senior subordinated notes in March 2006.
    
    A $40.2 million and $4.0 million decrease in our current and deferred derivative
obligations, respectively, reflecting the relative decrease in natural gas prices as
compared to the price floors and caps of our natural gas and crude oil collars at
June 30, 2006.
    
    Our long-term debt has increased $215.7 million as a result of the issuance of our
$350.0 million senior subordinated notes and the $30.9 million increase in the
Canadian portion of our senior credit facility to finance Canadian capital
expenditures. Partially offsetting these additional borrowings was the repayment of
$165.0 million of debt outstanding on the U.S. portion of our senior credit facility
at December 31, 2005, as well as an additional $27.5 million repayment of 2006
borrowings, with a portion of the proceeds from the issuance of our senior
subordinated notes.
 Contractual Obligations and Commercial Commitments
    27




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##### Table of Contents



Number of DrillingRigs
    
    Rate
    
    Term1
    
    $15,500 per day
    
    
    One year beginning October 20051
    
    $18,500 per day
    
    
    Two years beginning May 20061
    
    $21,500 per day
    
    
    Three years beginning August 20061
    
    $18,500 per day
    
    
    Two years beginning September 20061
    
    $21,500 per day
    
    
    Three years beginning September 20061
    
    $18,500 per day
    
    
    Two years beginning October 20061
    
    $21,500 per day
    
    
    Three years beginning October 20061
    
    $21,500 per day
    
    
    Three years beginning November 2006
  Recently Issued Accounting Standards
 Share-Based Payment . Accounting for Stock
Issued to Employees
   Accounting for Uncertainty in Income
Taxes, an interpretation of SFAS No. 109
 
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
   Commodity Price Risk
  28




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##### Table of Contents



Weighted AvgRemaining Contract
    
    
    
    
    
    Price perProduct
    
    Type
    
    Period
    
    Volume
    
    Mcf or Bbl
    
    Fair Value(in thousands)Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    5,000 Mcfd
    
    $
    5.50 8.10
    
    
    $
    (2
    )Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    5,000 Mcfd
    
    
    5.50 8.25
    
    
    
    9Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    5,000 Mcfd
    
    
    6.50 8.25
    
    
    
    320Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    10,000 Mcfd
    
    
    6.50 8.25
    
    
    
    639Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    5,000 Mcfd
    
    
    7.00 8.35
    
    
    
    556Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    5,000 Mcfd
    
    
    7.00 8.35
    
    
    
    556Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    5,000 Mcfd
    
    
    7.00 8.35
    
    
    
    556Gas
    
    Collar
    
    Jul 2006-Apr 2007
    
    10,000 Mcfd
    
    
    7.50-11.00
    
    
    
    259Gas
    
    Collar
    
    Jul 2006-Apr 2007
    
    10,000 Mcfd
    
    
    7.50-11.15
    
    
    
    314Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    5,000 Mcfd
    
    
    8.00-10.10
    
    
    
    1,074Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    5,000 Mcfd
    
    
    8.00-10.10
    
    
    
    1,074Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    5,000 Mcfd
    
    
    8.00-10.20
    
    
    
    1,134Gas
    
    Collar
    
    Jul 2006-Oct 2006
    
    5,000 Mcfd
    
    
    8.00-10.20
    
    
    
    1,134Gas
    
    Collar
    
    Nov 2006-Mar 2007
    
    10,000 Mcfd
    
    
    7.50 9.65
    
    
    
    (1,712
    )Gas
    
    Collar
    
    Nov 2006-Mar 2007
    
    10,000 Mcfd
    
    
    8.00-14.72
    
    
    
    114Gas
    
    Collar
    
    Nov 2006-Mar 2007
    
    10,000 Mcfd
    
    
    8.00-15.00
    
    
    
    310Gas
    
    Collar
    
    Nov 2006-Mar 2007
    
    10,000 Mcfd
    
    
    8.50-11.35
    
    
    
    (353
    )Gas
    
    Collar
    
    Nov 2006-Mar 2007
    
    10,000 Mcfd
    
    
    8.50-11.50
    
    
    
    (300
    )Gas
    
    Collar
    
    Jan 2007-Dec 2007
    
    10,000 Mcfd
    
    
    9.0012.10
    
    
    
    2,213Gas
    
    Collar
    
    Jan 2007-Dec 2007
    
    20,000 Mcfd
    
    
    9.0012.10
    
    
    
    4,427Gas
    
    Collar
    
    Apr 2007-Oct 2007
    
    10,000 Mcfd
    
    
    7.50-11.50
    
    
    
    478Gas
    
    Collar
    
    Apr 2007-Oct 2007
    
    10,000 Mcfd
    
    
    7.50-11.75
    
    
    
    549Gas
    
    Collar
    
    Apr 2007-Oct 2007
    
    5,000 Mcfd
    
    
    7.50-11.78
    
    
    
    279Gas
    
    Collar
    
    Apr 2007-Oct 2007
    
    5,000 Mcfd
    
    
    7.50-11.80
    
    
    
    281Gas
    
    Collar
    
    Apr 2007-Mar 2008
    
    10,000 Mcfd
    
    
    9.00-12.00
    
    
    
    1,868Gas
    
    Collar
    
    Apr 2007-Mar 2008
    
    10,000 Mcfd
    
    
    9.00-12.05
    
    
    
    1,898Gas
    
    Collar
    
    Nov 2007-Mar 2008
    
    10,000 Mcfd
    
    
    8.00-15.00
    
    
    
    (389
    )Gas
    
    Collar
    
    Nov 2007-Mar 2008
    
    10,000 Mcfd
    
    
    8.00-15.65
    
    
    
    (276
    )Oil
    
    Collar
    
    Jul 2006-Jun 2007
    
    1,000 Bbld
    
    
    50.00-85.85
    
    
    
    (672
    )Oil
    
    Collar
    
    Jul 2006-Jun 2007
    
    1,000 Bbld
    
    
    50.00-85.85
    
    
    
    (672
    )Total
    
    $
    15,666
 29




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##### Table of Contents



Weighted AvgProduct
    
    Type
    
    Contract Period
    
    Volume
    
    Price per Mcf
    
    Fair Value(inthousands)Fixed price sale contractsGas
    
    Sale
    
    Jul 2006
    
    194 Mcfd
    
    
    $
    7.44
    
    
    $
    10Gas
    
    Sale
    
    Jul 2006
    
    600 Mcfd
    
    
    $
    7.06
    
    
    
    24Gas
    
    Sale
    
    Jul 2006-Aug 2006
    
    164 Mcfd
    
    
    $
    9.10
    
    
    
    33Gas
    
    Sale
    
    Jul 2006-Dec 2006
    
    426 Mcfd
    
    
    $
    8.47
    
    
    
    140$
    207Financial derivativesGas
    
    Floating Basis
    
    Jul 2006-May 2007
    
    3,284 Mcfd
    
    
    
    
    
    
    $
    (57
    )Gas
    
    Floating Basis
    
    Dec 2006-Jan 2007
    
    968 Mcfd
    
    
    
    
    
    
    
    5Gas
    
    Floating Price
    
    Jul 2006
    
    645 Mcfd
    
    
    
    
    
    
    
    (23
    )Gas
    
    Floating Price
    
    Jul 2006
    
    323 Mcfd
    
    
    
    
    
    
    
    (5
    )Gas
    
    Floating Price
    
    Jul 2006-Oct 2006
    
    325 Mcfd
    
    
    
    
    
    
    
    (63
    )Gas
    
    Floating Price
    
    Jul 2006-Oct 2006
    
    325 Mcfd
    
    
    
    
    
    
    
    (108
    )Gas
    
    Floating Price
    
    Nov 2006-Dec 2006
    
    328 Mcfd
    
    
    
    
    
    
    
    (12
    )(263
    )Total-net
    $
    (56
    )
  Interest Rate Risk
    
 ITEM 4. Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  30




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  Election of Directors
  Total VoteTotal Vote for
    
    
    Withheld forName
    
    Each Director
    
    
    Each DirectorGlenn Darden
    
    
    71,571,549
    
    
    
    522,540James A. Hughes
    
    
    71,709,833
    
    
    
    384,256W. Yandell Rogers, III
    
    
    71,699,146
    
    
    
    394,943
  Ratification of Appointment of Independent Registered Public Accounting Firm
  For
    
    
    71,739,185Against
    
    
    269,573Abstentions
    
    
    85,331
 Approval of Quicksilvers Amended and Restated Certificate of Incorporation
  For
    
    
    71,012,774Against
    
    
    988,807Abstentions
    
    
    92,508
 Approval of Quicksilvers 2006 Equity Plan
  For
    
    
    51,330,378Against
    
    
    14,678,613Abstentions
    
    
    105,849
 31




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##### Table of Contents



ITEM 6. Exhibits:
 Exhibit No.
    
    Description*3.1
    
    
    Amended and Restated Certificate of Incorporation of Quicksilver
Resources Inc. filed with the Secretary of State of the State of
Delaware on May 23, 2006.3.2
    
    
    Amended and Restated Certificate of Designation of Series A Junior
Participating Preferred Stock of Quicksilver Resources Inc. (filed as
Exhibit 4.3 to the Companys Form 8-A/A (Amendment No. 1) filed
December 21, 2005 and included herein by reference).10.1
    
    
    Quicksilver Resources Inc. 2006 Executive Bonus Program (filed as
Exhibit 10.1 to the Companys Form 8-K filed April 5, 2006 and included
herein by reference).10.2
    
    
    Quicksilver Resources Inc. 2006 Equity Plan (filed as Appendix C to
Quicksilver Resources Inc. Proxy Statement filed April 7, 2006 and
included herein by reference).10.3
    
    
    Form of Restricted Share Agreement pursuant to the 2006 Equity Plan
(filed as Exhibit 10.2 to the Companys Form 8-K filed May 25, 2006 and
included herein by reference).10.4
    
    
    Form of Restricted Stock Unit Agreement pursuant to the 2006 Equity
Plan (filed as Exhibit 10.3 to the Companys Form 8-K filed May 25,
2006 and included herein by reference).10.5
    
    
    Form of Quicksilver Resources Canada Inc. Restricted Stock Unit
Agreement pursuant to the 2006 Equity Plan (filed as Exhibit 10.4 to
the Companys Form 8-K filed May 25, 2006 and included herein by
reference).10.6
    
    
    Form of Incentive Stock Option Agreement pursuant to the 2006 Equity
Plan (filed as Exhibit 10.5 to the Companys Form 8-K filed May 25,
2006 and included herein by reference).10.7
    
    
    Form of Non-Qualified Stock Option Agreement pursuant to the 2006
Equity Plan (filed as Exhibit 10.6 to the Companys Form 8-K filed May
25, 2006 and included herein by reference).10.8
    
    
    Form of Non-Employee Director Restricted Share Agreement pursuant to
the 2006 Equity Plan (filed as Exhibit 10.7 to the Companys Form 8-K
filed May 25, 2006 and included herein by reference).10.9
    
    
    Form of Non-Employee Director Non-Qualified Stock Option Agreement
pursuant to the 2006 Equity Plan (filed as Exhibit 10.8 to the
Companys Form 8-K filed May 25, 2006 and included herein by
reference).*15.1
    
    
    Awareness Letter of Deloitte & Touche LLP.*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 32




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##### Table of Contents



SIGNATURES
   Quicksilver Resources Inc.By:
    
    /s/ Glenn Darden

Glenn DardenPresident and Chief Executive OfficerBy:
    
    /s/ Philip W. Cook

Philip W. CookSenior Vice President  Chief Financial Officer
 33




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description*3.1
    
    
    Amended and Restated Certificate of Incorporation of Quicksilver
Resources Inc. filed with the Secretary of State of the State of
Delaware on May 23, 2006.3.2
    
    
    Amended and Restated Certificate of Designation of Series A Junior
Participating Preferred Stock of Quicksilver Resources Inc. (filed as
Exhibit 4.3 to the Companys Form 8-A/A (Amendment No. 1) filed
December 21, 2005 and included herein by reference).10.1
    
    
    Quicksilver Resources Inc. 2006 Executive Bonus Program (filed as
Exhibit 10.1 to the Companys Form 8-K filed April 5, 2006 and included
herein by reference).10.2
    
    
    Quicksilver Resources Inc. 2006 Equity Plan (filed as Appendix C to
Quicksilver Resources Inc. Proxy Statement filed April 7, 2006 and
included herein by reference).10.3
    
    
    Form of Restricted Share Agreement pursuant to the 2006 Equity Plan
(filed as Exhibit 10.2 to the Companys Form 8-K filed May 25, 2006 and
included herein by reference).10.4
    
    
    Form of Restricted Stock Unit Agreement pursuant to the 2006 Equity
Plan (filed as Exhibit 10.3 to the Companys Form 8-K filed May 25,
2006 and included herein by reference).10.5
    
    
    Form of Quicksilver Resources Canada Inc. Restricted Stock Unit
Agreement pursuant to the 2006 Equity Plan (filed as Exhibit 10.4 to
the Companys Form 8-K filed May 25, 2006 and included herein by
reference).10.6
    
    
    Form of Incentive Stock Option Agreement pursuant to the 2006 Equity
Plan (filed as Exhibit 10.5 to the Companys Form 8-K filed May 25,
2006 and included herein by reference).10.7
    
    
    Form of Non-Qualified Stock Option Agreement pursuant to the 2006
Equity Plan (filed as Exhibit 10.6 to the Companys Form 8-K filed May
25, 2006 and included herein by reference).10.8
    
    
    Form of Non-Employee Director Restricted Share Agreement pursuant to
the 2006 Equity Plan (filed as Exhibit 10.7 to the Companys Form 8-K
filed May 25, 2006 and included herein by reference).10.9
    
    
    Form of Non-Employee Director Non-Qualified Stock Option Agreement
pursuant to the 2006 Equity Plan (filed as Exhibit 10.8 to the
Companys Form 8-K filed May 25, 2006 and included herein by
reference).*15.1
    
    
    Awareness Letter of Deloitte & Touche LLP.*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.
 
  34