##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 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, Fort Worth, Texas
    
    76104(Address of principal executive offices)
    
    (Zip Code)
 (817) 665-5000
 None
 þ o
  þ o o
 o þ
  Title of Class
    
    Outstanding as of April 30, 2007Common Stock, $0.01 par value
    
    78,164,128




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##### 



QUICKSILVER RESOURCES INC.
INDEX TO FORM 10-Q
For the Period Ending March 31, 2007
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Report of Independent Registered Public Accounting Firm
    
    
    3Condensed Consolidated Balance Sheets at March 31, 2007 and December 31, 2006
    
    
    4Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the Three Months Ended March 31, 2007 and 2006
    
    
    5Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006
    
    
    6Notes to Condensed Consolidated Interim Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 6. Exhibits
    
    
    25Signatures
    
    
    26Description of 2007 Cash BonusAwareness 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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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements (Unaudited)
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 3




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QUICKSILVER RESOURCES INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 In thousands, except
for share data  Unaudited
 March 31,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    5,718
    
    
    $
    5,281Accounts receivable, net of allowance for doubtful accounts
    
    
    76,180
    
    
    
    76,521Current derivative assets
    
    
    8,037
    
    
    
    64,086Other current assets
    
    
    27,611
    
    
    
    25,076Total current assets
    
    
    117,546
    
    
    
    170,964Investments in and advances to equity affiliates
    
    
    7,396
    
    
    
    7,434Property, plant and equipment  net (full cost)
    
    
    1,843,645
    
    
    
    1,679,280Non-current derivative assets
    
    
    
    
    
    
    3,753Other assets
    
    
    23,846
    
    
    
    21,481$
    1,992,433
    
    
    $
    1,882,912LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    312
    
    
    $
    400Accounts payable
    
    
    108,141
    
    
    
    109,914Accrued liabilities
    
    
    55,710
    
    
    
    67,697Derivative obligations
    
    
    2,509
    
    
    
    Current deferred income taxes
    
    
    2,062
    
    
    
    21,378Total current liabilities
    
    
    168,734
    
    
    
    199,389Long-term debt
    
    
    1,058,604
    
    
    
    919,117Derivative obligations
    
    
    5,252
    
    
    
    Asset retirement obligations
    
    
    26,987
    
    
    
    25,058Deferred income taxes
    
    
    165,174
    
    
    
    156,251Minority interest
    
    
    7,694
    
    
    
    7,431Stockholders equityPreferred stock, $0.01 par value, 10,000,000 shares authorized,
no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value, 200,000,000 shares authorized
and 80,746,547 and 80,181,593 shares issued, respectively
    
    
    807
    
    
    
    802Paid in capital in excess of par value
    
    
    243,933
    
    
    
    238,063Treasury stock of 2,592,769 and 2,579,671 shares, respectively
    
    
    (11,231
    )
    
    
    (10,737
    )Accumulated other comprehensive income
    
    
    16,534
    
    
    
    60,099Retained earnings
    
    
    309,945
    
    
    
    287,439Total stockholders equity
    
    
    559,988
    
    
    
    575,666$
    1,992,433
    
    
    $
    1,882,912
  4




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QUICKSILVER RESOURCES INC.
 
 CONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
 In thousands, except
for per share data  Unaudited
 For the Three Months EndingMarch 31,2007
    
    
    2006RevenuesOil, gas and related product sales
    
    $
    113,292
    
    
    $
    98,689Other revenue
    
    
    3,288
    
    
    
    961Total revenues
    
    
    116,580
    
    
    
    99,650ExpensesOil and gas production costs
    
    
    28,569
    
    
    
    21,410Production and ad valorem taxes
    
    
    4,490
    
    
    
    4,173Other operating costs
    
    
    784
    
    
    
    403Depletion, depreciation and accretion
    
    
    24,594
    
    
    
    17,673Provision for doubtful accounts
    
    
    (264
    )
    
    
    General and administrative
    
    
    9,962
    
    
    
    6,254Total expenses
    
    
    68,135
    
    
    
    49,913Income from equity affiliates
    
    
    115
    
    
    
    188Operating income
    
    
    48,560
    
    
    
    49,925Other income-net
    
    
    (601
    )
    
    
    (350
    )Interest expense
    
    
    14,952
    
    
    
    9,202Income before income taxes and minority interest
    
    
    34,209
    
    
    
    41,073Income tax expense
    
    
    11,295
    
    
    
    13,538Minority interest
    
    
    63
    
    
    
    Net income
    
    $
    22,851
    
    
    $
    27,535Other comprehensive income (loss), net of income taxesReclassification adjustments  hedge settlements
    
    
    (9,510
    )
    
    
    1,453Unrealized gain (loss) on derivative instruments
    
    
    (35,679
    )
    
    
    23,513Foreign currency translation adjustments
    
    
    1,624
    
    
    
    4Comprehensive income (loss)
    
    $
    (20,714
    )
    
    $
    52,505Basic net income per common share
    
    $
    0.30
    
    
    $
    0.36Diluted net income per common share
    
    $
    0.28
    
    
    $
    0.34Weighted average common shares outstandingBasic
    
    
    77,194
    
    
    
    76,039Diluted
    
    
    83,830
    
    
    
    82,808
  5




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QUICKSILVER RESOURCES INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 In thousands  Unaudited
 For the Three Months EndedMarch 31,2007
    
    
    2006Operating activities:Net income
    
    $
    22,851
    
    
    $
    27,535Charges and credits to net income not affecting cashDepletion, depreciation and accretion
    
    
    24,594
    
    
    
    17,673Deferred income taxes
    
    
    11,265
    
    
    
    13,400Non-cash compensation
    
    
    2,899
    
    
    
    1,246Amortization of deferred loan costs
    
    
    456
    
    
    
    735Income from equity affiliates
    
    
    (115
    )
    
    
    (188
    )Minority interest
    
    
    63
    
    
    
    Other non-cash items
    
    
    328
    
    
    
    80Changes in assets and liabilitiesAccounts receivable
    
    
    605
    
    
    
    8,468Current and other assets
    
    
    (3,528
    )
    
    
    (11,278
    )Accounts payable
    
    
    6,507
    
    
    
    3,262Accrued and other liabilities
    
    
    7,330
    
    
    
    2,406Net cash provided by operating activities
    
    
    73,255
    
    
    
    63,339Investing activities:Purchases of property, plant and equipment
    
    
    (210,175
    )
    
    
    (139,955
    )Return of investment in equity affiliates
    
    
    202
    
    
    
    250Proceeds from sales of properties
    
    
    
    
    
    
    341Net cash used for investing activities
    
    
    (209,973
    )
    
    
    (139,364
    )Financing activities:Issuance of debt
    
    
    143,446
    
    
    
    392,182Repayments of debt
    
    
    (6,868
    )
    
    
    (198,082
    )Debt issuance costs
    
    
    (2,303
    )
    
    
    (8,283
    )Proceeds from exercise of stock options
    
    
    2,976
    
    
    
    1,430Minority interest contributions
    
    
    167
    
    
    
    Purchase of treasury stock
    
    
    (494
    )
    
    
    (29
    )Net cash provided by financing activities
    
    
    136,924
    
    
    
    187,218Effect of exchange rates on cash
    
    
    231
    
    
    
    246Net increase in cash and cash equivalents
    
    
    437
    
    
    
    111,439Cash and cash equivalents at beginning of period
    
    
    5,281
    
    
    
    14,318Cash and cash equivalents at end of period
    
    $
    5,718
    
    
    $
    125,757
  6




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QUICKSILVER RESOURCES INC.
 
 NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 UNAUDITED
 1. ACCOUNTING POLICIES AND DISCLOSURES
    Net Income per Common Share
  Three Months Ended March 31,2007
    
    
    2006(in thousands, except per share data)Income from continuing operations
    
    $
    22,851
    
    
    $
    27,535Impact of assumed conversions  interest on 1.875%
contingently convertible debentures, net of income taxes
    
    
    475
    
    
    
    475Income from continuing operations available to stockholders
assuming conversion of contingently convertible debentures
    
    $
    23,326
    
    
    $
    28,010Weighted average common shares-basic
    
    
    77,194
    
    
    
    76,039Effect of dilutive securities:Employee stock options
    
    
    884
    
    
    
    1,554Employee stock awards
    
    
    844
    
    
    
    307Contingently convertible debentures
    
    
    4,908
    
    
    
    4,908Weighted average common shares-diluted
    
    
    83,830
    
    
    
    82,808Basic net income per common share
    
    $
    0.30
    
    
    $
    0.36Diluted net income per common share
    
    $
    0.28
    
    
    $
    0.34
 7




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Recently Issued Accounting Standards
 Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No.
109 Accounting for Income Taxes.
     2. HEDGING
  March 31,
    
    
    December 31,2007
    
    
    2006(in thousands)Derivative assets:Floating price natural
gas financial swaps
    
    $
    12
    
    
    $
    Fixed price sale commitments
    
    
    
    
    
    
    53Natural gas basis swaps
    
    
    70
    
    
    
    159Crude oil financial collars
    
    
    451
    
    
    
    689Natural gas financial swaps
    
    
    
    
    
    
    1,009Natural gas financial collars
    
    
    19,385
    
    
    
    65,982$
    19,918
    
    
    $
    67,892Derivative liabilities:Fixed price sale commitments
    
    $
    10
    
    
    $
    Floating price natural gas
financial swaps
    
    
    
    
    
    
    53Crude oil financial collars
    
    
    251
    
    
    
    NGL financial swaps
    
    
    223
    
    
    
    Natural gas financial swaps
    
    
    7,825
    
    
    
    Natural gas financial collars
    
    
    11,333
    
    
    
    $
    19,642
    
    
    $
    53
 8




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3. LONG-TERM DEBT
  March 31,
    
    
    December 31,2007
    
    
    2006(in thousands)Senior secured credit facility
    
    $
    560,582
    
    
    $
    421,123Senior subordinated notes
    
    
    350,000
    
    
    
    350,000Contingently convertible debentures, net
of unamortized discount
    
    
    148,022
    
    
    
    147,994Other loans
    
    
    312
    
    
    
    4001,058,916
    
    
    
    919,517Less current maturities
    
    
    (312
    )
    
    
    (400
    )$
    1,058,604
    
    
    $
    919,117
    9




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4. ASSET RETIREMENT OBLIGATIONS
   Three Months EndedMarch 31,2007
    
    
    2006(in thousands)Beginning asset retirement obligation
    
    $
    25,206
    
    
    $
    20,965Additional liability incurred
    
    
    1,454
    
    
    
    946Accretion expense
    
    
    361
    
    
    
    314Change in estimates
    
    
    
    
    
    
    29Loss on settlement of liability
    
    
    
    
    
    
    57Asset retirement costs incurred
    
    
    
    
    
    
    (69
    )Currency translation adjustment
    
    
    115
    
    
    
    (15
    )Ending asset retirement obligation
    
    $
    27,136
    
    
    $
    22,227
 5. COMMITMENTS AND CONTINGENCIES
  2007
    
    $
    30,9092008
    
    
    29,6012009
    
    
    29,0912010
    
    
    2,753$
    92,354
  2007
    
    $
    7322008
    
    
    4,3922009
    
    
    9,5062010
    
    
    10,4942011
    
    
    10,494Thereafter
    
    
    69,422$
    105,040
 10




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6. STOCK-BASED COMPENSATION
 Share-Based Payment .
   Employee Stock Plans
 2006 Equity Plan
  11




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Stock Options
  Wtd AvgExerciseShares
    
    
    PriceOutstanding at beginning of year
    
    
    1,689,190
    
    
    $
    16.84Granted
    
    
    
    
    
    
    Exercised
    
    
    (175,957
    )
    
    
    16.91Forfeited
    
    
    (4,800
    )
    
    
    11.01Outstanding at period end
    
    
    1,508,433
    
    
    $
    16.85Exercisable at March 31, 2007
    
    
    1,227,476
    
    
    $
    17.95Vested or expected to vest
at March 31, 2007
    
    
    1,487,275
    
    
    $
    16.93
   Restricted Stock
   Wtd AvgGrantDate FairShares
    
    
    ValueOutstanding at beginning of year
    
    
    511,873
    
    
    $
    38.35Granted
    
    
    408,557
    
    
    
    36.63Vested
    
    
    (69,201
    )
    
    
    41.21Forfeited
    
    
    (19,922
    )
    
    
    36.67Outstanding at period end
    
    
    831,307
    
    
    $
    37.31
  7. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
  12




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Condensed Consolidating Balance Sheets
 March 31, 2007Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)ASSETSCurrent assets
    
    $
    134,809
    
    
    $
    258,112
    
    
    $
    63,300
    
    
    $
    (338,675
    )
    
    $
    117,546Investments in subsidiaries (equity method)
    
    
    537,680
    
    
    
    157,201
    
    
    
    2
    
    
    
    (687,487
    )
    
    
    7,396Property and equipment, net
    
    
    1,163,917
    
    
    
    88,084
    
    
    
    591,644
    
    
    
    
    
    
    
    1,843,645Other assets
    
    
    21,598
    
    
    
    1
    
    
    
    2,247
    
    
    
    
    
    
    
    23,846Total assets
    
    $
    1,858,004
    
    
    $
    503,398
    
    
    $
    657,193
    
    
    $
    (1,026,162
    )
    
    $
    1,992,443LIABILITIESCurrent liabilities
    
    $
    368,360
    
    
    $
    94,593
    
    
    $
    44,456
    
    
    $
    (338,675
    )
    
    $
    168,734Non-current liabilities
    
    
    929,656
    
    
    
    24,495
    
    
    
    301,866
    
    
    
    
    
    
    
    1,256,017Minority interest
    
    
    
    
    
    
    
    
    
    
    7,694
    
    
    
    
    
    
    
    7,694Stockholders equity
    
    
    559,988
    
    
    
    384,310
    
    
    
    303,177
    
    
    
    (687,487
    )
    
    
    559,988Total liabilities and stockholders equity
    
    $
    1,858,004
    
    
    $
    503,398
    
    
    $
    657,193
    
    
    $
    (1,026,162
    )
    
    $
    1,992,433
 December 31, 2006Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)ASSETSCurrent assets
    
    $
    165,061
    
    
    $
    250,928
    
    
    $
    78,531
    
    
    $
    (323,556
    )
    
    $
    170,964Investments in subsidiaries (equity method)
    
    
    510,548
    
    
    
    131,750
    
    
    
    
    
    
    
    (634,864
    )
    
    
    7,434Property and equipment, net
    
    
    1,043,037
    
    
    
    87,025
    
    
    
    549,218
    
    
    
    
    
    
    
    1,679,280Other assets
    
    
    22,397
    
    
    
    
    
    
    
    2,837
    
    
    
    
    
    
    
    25,234Total assets
    
    $
    1,741,043
    
    
    $
    469,703
    
    
    $
    630,586
    
    
    $
    (958,420
    )
    
    $
    1,882,912LIABILITIESCurrent liabilities
    
    $
    368,073
    
    
    $
    91,414
    
    
    $
    63,458
    
    
    $
    (323,556
    )
    
    $
    199,389Non-current liabilities
    
    
    797,304
    
    
    
    24,577
    
    
    
    278,545
    
    
    
    
    
    
    
    1,100,426Minority interest
    
    
    
    
    
    
    
    
    
    
    7,431
    
    
    
    
    
    
    
    7,431Stockholders equity
    
    
    575,666
    
    
    
    353,712
    
    
    
    281,152
    
    
    
    (634,864
    )
    
    
    575,666Total liabilities and stockholders equity
    
    $
    1,741,043
    
    
    $
    469,703
    
    
    $
    630,586
    
    
    $
    (958,420
    )
    
    $
    1,882,912
 Condensed Consolidating Statements of Income
 For the Three Months Ended March 31, 2007Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Revenues
    
    $
    70,868
    
    
    $
    8,756
    
    
    $
    41,434
    
    
    $
    (4,478
    )
    
    $
    116,580Operating expenses
    
    
    46,461
    
    
    
    4,443
    
    
    
    21,709
    
    
    
    (4,478
    )
    
    
    68,135Income from equity affiliates
    
    
    6
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    115Income from operations
    
    
    24,413
    
    
    
    4,422
    
    
    
    19,725
    
    
    
    
    
    
    
    48,560Equity in net earnings of subsidiaries
    
    
    14,736
    
    
    
    1,281
    
    
    
    
    
    
    
    (16,017
    )
    
    
    Interest expense and other
    
    
    11,121
    
    
    
    (10
    )
    
    
    3,303
    
    
    
    
    
    
    
    14,414Income tax provision
    
    
    5,177
    
    
    
    1,551
    
    
    
    4,567
    
    
    
    
    
    
    
    11,295Net income
    
    $
    22,851
    
    
    $
    4,162
    
    
    $
    11,855
    
    
    $
    (16,017
    )
    
    $
    22,851
 For the Three Months Ended March 31, 2006Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Revenues
    
    $
    54,968
    
    
    $
    13,378
    
    
    $
    32,367
    
    
    $
    (1,063
    )
    
    $
    99,650Operating expenses
    
    
    33,615
    
    
    
    4,374
    
    
    
    12,987
    
    
    
    (1,063
    )
    
    
    49,913Income from equity affiliates
    
    
    
    
    
    
    188
    
    
    
    
    
    
    
    
    
    
    
    188Income from operations
    
    
    21,353
    
    
    
    9,192
    
    
    
    19,380
    
    
    
    
    
    
    
    49,925Equity in net earnings of subsidiaries
    
    
    17,678
    
    
    
    
    
    
    
    
    
    
    
    (17,678
    )
    
    
    Interest expense and other
    
    
    6,153
    
    
    
    (2
    )
    
    
    2,701
    
    
    
    
    
    
    
    8,852Income tax provision
    
    
    5,343
    
    
    
    3,218
    
    
    
    4,977
    
    
    
    
    
    
    
    13,538Net income
    
    $
    27,535
    
    
    $
    5,976
    
    
    $
    11,702
    
    
    $
    (17,678
    )
    
    $
    27,535
 13




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##### Table of Contents



Condensed Consolidating Statements of Cash Flows
 For the Three Months Ended March 31, 2007Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Cash flow provided by operations
    
    $
    43,215
    
    
    $
    1,709
    
    
    $
    28,331
    
    
    $
    
    
    
    $
    73,255Cash flow used for investing activities
    
    
    (166,618
    )
    
    
    (26,222
    )
    
    
    (65,487
    )
    
    
    48,354
    
    
    
    (209,973
    )Cash flow provided by financing activities
    
    
    123,755
    
    
    
    24,513
    
    
    
    37,010
    
    
    
    (48,354
    )
    
    
    136,924Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    231
    
    
    
    
    
    
    
    231Net increase (decrease) in cash & equivalents
    
    
    352
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    437Cash & equivalents at beginning of period
    
    
    83
    
    
    
    
    
    
    
    5,198
    
    
    
    
    
    
    
    5,281Cash & equivalents at end of period
    
    $
    435
    
    
    $
    
    
    
    $
    5,283
    
    
    $
    
    
    
    $
    5,718
 For the Three Months Ended March 31, 2006Non-
    
    
    
    
    
    
    QuicksilverQuicksilver
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    Resources Inc.Resources Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Cash flow provided by operations
    
    $
    13,486
    
    
    $
    24,581
    
    
    $
    25,272
    
    
    $
    
    
    
    $
    63,339Cash flow used for investing activities
    
    
    (68,125
    )
    
    
    (21,301
    )
    
    
    (49,938
    )
    
    
    
    
    
    
    (139,364
    )Cash flow provided by financing activities
    
    
    172,536
    
    
    
    
    
    
    
    14,682
    
    
    
    
    
    
    
    187,218Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    246
    
    
    
    
    
    
    
    246Net decrease in cash & equivalents
    
    
    117,897
    
    
    
    3,280
    
    
    
    (9,738
    )
    
    
    
    
    
    
    111,439Cash & equivalents at beginning of period
    
    
    8,990
    
    
    
    (4,410
    )
    
    
    9,738
    
    
    
    
    
    
    
    14,318Cash & equivalents at end of period
    
    $
    126,887
    
    
    $
    (1,130
    )
    
    $
    
    
    
    $
    
    
    
    $
    125,757
 8. SUPPLEMENTAL CASH FLOW INFORMATION
  Three Months EndedMarch 31,2007
    
    2006(in thousands)Interest
    
    $
    6,443
    
    
    $
    7,612Income taxes
    
    $
    734
    
    
    $
    
  Three Months EndedMarch 31,2007
    
    2006(in thousands)Noncash investing activities  changes in
working capital
associated with property and equipment
    
    $
    (27,597
    )
    
    $
    (6,350
    )
 9. RELATED PARTY TRANSACTIONS
    14




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##### Table of Contents



10. GEOGRAPHIC INFORMATION
  UnitedStates
    
    Canada
    
    Corporate
    
    Consolidated(in thousands)For the Three Months EndedMarch 31, 2007Revenues
    
    $
    80,429
    
    
    $
    36,151
    
    
    $
    
    
    
    $
    116,580Depletion, depreciation and accretion
    
    
    15,616
    
    
    
    8,752
    
    
    
    226
    
    
    
    24,594Operating income
    
    
    39,770
    
    
    
    18,978
    
    
    
    (10,188
    )
    
    
    48,560Property and equipment costs incurred
    
    
    162,414
    
    
    
    19,559
    
    
    
    605
    
    
    
    182,578March 31, 2006Revenues
    
    $
    67,213
    
    
    $
    32,437
    
    
    $
    
    
    
    $
    99,650Depletion, depreciation and accretion
    
    
    10,352
    
    
    
    7,199
    
    
    
    122
    
    
    
    17,673Operating income
    
    
    36,574
    
    
    
    19,727
    
    
    
    (6,376
    )
    
    
    49,925Property and equipment costs incurred
    
    
    95,561
    
    
    
    37,481
    
    
    
    563
    
    
    
    133,605Fixed Assets  netMarch 31, 2007
    
    $
    1,331,037
    
    
    $
    508,969
    
    
    $
    3,639
    
    
    $
    1,843,645December 31, 2006
    
    $
    1,258,807
    
    
    $
    417,199
    
    
    $
    3,274
    
    
    $
    1,679,280
 11. QUICKSILVER GAS SERVICES LP
   15




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##### 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, 2006.
  16




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##### Table of Contents



RESULTS OF OPERATIONS
 Summary Financial Data
Three Months Ended March 31, 2007 Compared with the Three Months Ended March 31, 2006
 Three Months EndedMarch 31,2007
    
    2006(in thousands)Total operating revenues
    
    $
    116,580
    
    
    $
    99,650Total operating expenses
    
    
    68,135
    
    
    
    49,913Operating income
    
    
    48,560
    
    
    
    49,925Net income
    
    
    22,851
    
    
    
    27,535
  Operating Revenues
  Gas, Oil and Related Product Sales
  Three Months EndedMarch 31,2007
    
    
    2006Natural gas, oil and NGL sales
(in thousands)United States
    
    $
    79,263
    
    
    $
    66,685Canada
    
    
    34,029
    
    
    
    32,004Total
    
    $
    113,292
    
    
    $
    98,689Product sale revenues (in thousands)Natural gas sales
    
    $
    95,562
    
    
    $
    86,922Oil and condensate sales
    
    
    7,639
    
    
    
    8,393NGL sales
    
    
    10,091
    
    
    
    3,374Total
    
    $
    113,292
    
    
    $
    98,689Average daily sales volumeNatural gas  McfdUnited States
    
    
    101,258
    
    
    
    91,029Canada
    
    
    56,131
    
    
    
    47,996Total
    
    
    157,389
    
    
    
    139,025Oil and condensate  BbldUnited States
    
    
    1,665
    
    
    
    1,590Canada
    
    
    
    
    
    
    Total
    
    
    1,665
    
    
    
    1,590NGL  BbldUnited States
    
    
    3,316
    
    
    
    930Canada
    
    
    
    
    
    
    9Total
    
    
    3,316
    
    
    
    939
 17




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##### Table of Contents



Three Months EndedMarch 31,2007
    
    
    2006Total sales  McfedUnited States
    
    
    131,143
    
    
    
    106,150Canada
    
    
    56,131
    
    
    
    48,052Total
    
    
    187,274
    
    
    
    154,202Unit prices  including impact of hedgesNatural gas  per McfUnited States
    
    $
    6.75
    
    
    $
    6.71Canada
    
    
    6.73
    
    
    
    7.40Consolidated
    
    
    6.75
    
    
    
    6.95Oil and condensate  per BblUnited States
    
    $
    50.99
    
    
    $
    58.64Canada
    
    
    
    
    
    
    Consolidated
    
    
    50.99
    
    
    
    58.64NGL  per BblUnited States
    
    $
    33.81
    
    
    $
    40.09Canada
    
    
    
    
    
    
    21.29Consolidated
    
    
    33.81
    
    
    
    39.91
    Other Revenues
  18




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##### Table of Contents



Operating Expenses
  Oil and Gas Operations Expense
 Three Months EndedMarch 31,2007
    
    
    2006(in thousands, except perunit amounts)Oil and gas operations expenseUnited States
    
    $
    21,036
    
    
    $
    16,199Canada
    
    
    7,533
    
    
    
    5,211Total
    
    $
    28,569
    
    
    $
    21,410Oil and gas operations expense  per McfeUnited States
    
    $
    1.78
    
    
    $
    1.70Canada
    
    
    1.49
    
    
    
    1.20Consolidated
    
    
    1.69
    
    
    
    1.54
    Production and Ad Valorem Taxes
  19




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##### Table of Contents



Depletion, Depreciation and Accretion
 Three Months EndedMarch 31,2007
    
    
    2006(in thousands, except perunit amounts)Depletion
    
    $
    20,361
    
    
    $
    14,797Depreciation of other fixed assets
    
    
    3,872
    
    
    
    2,562Accretion
    
    
    361
    
    
    
    314Total depletion, depreciation and accretion
    
    $
    24,594
    
    
    $
    17,673Average depletion cost per Mcfe
    
    $
    1.21
    
    
    $
    1.07
  General and Administrative Expense
  Interest Expense
  Income Tax Expense
  LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
   20




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##### Table of Contents



Three MonthsEndedMarch 31, 2007(in thousands)Exploration and developmentUnited States
    
    $
    129,165Canada
    
    
    14,939Total exploration and development
    
    
    144,104Gas processing and transportationUnited States
    
    
    31,816Canada
    
    
    4,593Total gas processing and transportation
    
    
    36,409Corporate and office
    
    
    2,065Total plant and equipment costs incurred
    
    $
    182,578
   March 31,
    
    
    December 31,2007
    
    
    2006(in thousands)Senior secured credit facility
    
    $
    560,582
    
    
    $
    421,123Senior subordinated notes
    
    
    350,000
    
    
    
    350,000Convertible subordinated debentures
    
    
    148,022
    
    
    
    147,994Other loans
    
    
    312
    
    
    
    400Total debt
    
    
    1,058,916
    
    
    
    919,517Stockholders equity
    
    
    559,988
    
    
    
    575,666$
    1,618,904
    
    
    $
    1,495,183
 Financial Position
  
    
    A $164.4 million increase in our net property, plant and equipment assets includes
approximately $182.6 million in capital costs incurred for development, exploitation
and exploration of our oil and gas properties as well as additional natural gas
processing and gathering system assets in Texas.
    
    We incurred additional long-term debt of $136.6 million primarily as a result of
our capital expenditures of $210.2 million exceeding our cash flow from operations by
$136.9 million. These borrowings have been drawn from our senior secured credit
facility.
    
    Our current and deferred derivative assets have decreased $56.0 million and $3.8
million, respectively, and we have current and non-current derivative liabilities of
$2.5 million and $5.3 million, respectively. These fluctuations reflect the
relatively less favorable pricing of our financial derivatives as compared to current
market
 21




---



##### Table of Contents



prices.
   Additionally, our current deferred tax liability decreased $19.3
million as a result of the change in the estimated fair value of our financial
derivatives.
 Recently Issued Accounting Standards
 Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No.
109 Accounting for Income Taxes.
     
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
   Commodity Price Risk
   22




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##### Table of Contents



Remaining
    
    
    
    
    
    
    Price PerProduct
    
    Type
    
    
    Contract Period
    
    
    Volume
    
    
    Mcf or Bbl
    
    
    Fair Value(in thousands)Gas
    
    Swap
    
    Jan 2008-Dec 2008
    
    25,000 Mcfd
    
    $
    8.13
    
    
    $
    (4,912
    )Gas
    
    Swap
    
    Jan 2008-Dec 2008
    
    7,500 Mcfd
    
    
    8.13
    
    
    
    (1,474
    )Gas
    
    Swap
    
    Jan 2008-Dec 2008
    
    5,000 Mcfd
    
    
    8.14
    
    
    
    (965
    )Gas
    
    Swap
    
    Jan 2008-Dec 2008
    
    2,500 Mcfd
    
    
    8.15
    
    
    
    (474
    )NGL
    
    Swap
    
    Jul 2007-Dec 2007
    
    1,000 Bbld
    
    
    40.41
    
    
    
    (223
    )Gas
    
    Collar
    
    Apr 2007
    
    10,000 Mcfd
    
    
    7.50-11.00
    
    
    
    Gas
    
    Collar
    
    Apr 2007
    
    10,000 Mcfd
    
    
    7.50-11.15
    
    
    
    Gas
    
    Collar
    
    Apr 2007-Dec 2007
    
    10,000 Mcfd
    
    
    9.00-12.10
    
    
    
    3,118Gas
    
    Collar
    
    Apr 2007-Dec 2007
    
    20,000 Mcfd
    
    
    9.00-12.10
    
    
    
    6,236Gas
    
    Collar
    
    Apr 2007-Oct 2007
    
    10,000 Mcfd
    
    
    7.50-11.50
    
    
    
    575Gas
    
    Collar
    
    Apr 2007-Oct 2007
    
    10,000 Mcfd
    
    
    7.50-11.75
    
    
    
    602Gas
    
    Collar
    
    Apr 2007-Oct 2007
    
    5,000 Mcfd
    
    
    7.50-11.78
    
    
    
    305Gas
    
    Collar
    
    Apr 2007-Oct 2007
    
    5,000 Mcfd
    
    
    7.50-11.80
    
    
    
    308Gas
    
    Collar
    
    May 2007-Dec 2007
    
    20,000 Mcfd
    
    
    7.00-  9.15
    
    
    
    (1,629
    )Gas
    
    Collar
    
    May 2007-Dec 2007
    
    10,000 Mcfd
    
    
    8.00-11.20
    
    
    
    990Gas
    
    Collar
    
    Apr 2007-Mar 2008
    
    15,000 Mcfd
    
    
    7.50-  8.70
    
    
    
    (3,138
    )Gas
    
    Collar
    
    Apr 2007-Mar 2008
    
    5,000 Mcfd
    
    
    7.50-  8.90
    
    
    
    (926
    )Gas
    
    Collar
    
    Apr 2007-Mar 2008
    
    10,000 Mcfd
    
    
    9.00-12.00
    
    
    
    3,228Gas
    
    Collar
    
    Apr 2007-Mar 2008
    
    10,000 Mcfd
    
    
    9.00-12.05
    
    
    
    3,247Gas
    
    Collar
    
    Nov 2007-Mar 2008
    
    10,000 Mcfd
    
    
    8.00-15.00
    
    
    
    375Gas
    
    Collar
    
    Nov 2007-Mar 2008
    
    10,000 Mcfd
    
    
    8.00-15.65
    
    
    
    397Gas
    
    Collar
    
    Jan 2008-Dec 2008
    
    20,000 Mcfd
    
    
    7.50-  9.15
    
    
    
    (3,330
    )Gas
    
    Collar
    
    Apr 2008-Mar 2009
    
    20,000 Mcfd
    
    
    7.50-  9.35
    
    
    
    (2,306
    )Oil
    
    Collar
    
    Apr 2007-Jun 2007
    
    1,000 Bbld
    
    
    50.00-85.85
    
    
    
    (8
    )Oil
    
    Collar
    
    Apr 2007-Jun 2007
    
    1,000 Bbld
    
    
    50.00-85.85
    
    
    
    (8
    )Oil
    
    Collar
    
    Jul 2007-Dec 2007
    
    500 Bbld
    
    
    70.00-91.10
    
    
    
    451Oil
    
    Collar
    
    Jul 2007-Dec 2007
    
    500 Bbld
    
    
    60.00-72.80
    
    
    
    (177
    )Oil
    
    Collar
    
    Jan 2008-Dec 2008
    
    500 Bbld
    
    
    65.00-73.90
    
    
    
    (58
    )Gas
    
    Basis
    
    Apr 2007-May 2007
    
    1,967 Mcfd
    
    
    
    
    
    
    70Total
    
    $
    274
  Weighted AvgProduct
    
    Type
    
    
    Contract Period
    
    
    Volume
    
    
    Price per Mcf
    
    
    Fair Value(in thousands)Fixed price sale contractsGas
    
    Sale
    
    Apr 2007
    
    590 Mcfd
    
    $
    6.96
    
    
    $
    (10
    )Financial derivativesGas
    
    Floating Price
    
    Apr 2007
    
    667 Mcfd
    
    
    
    
    
    $
    12Total-net
    
    $
    2
 23




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##### Table of Contents



ITEM 4. Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  24




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##### Table of Contents



PART
II  OTHER INFORMATION
 
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchases of Equity Securities
  TotalNumber of
    
    
    MaximumShares
    
    
    Number ofPurchased as
    
    
    Shares thatTotal
    
    
    
    
    
    
    Part of
    
    
    May Yet BeNumber of
    
    
    
    
    
    
    Publicly
    
    
    PurchasedShares
    
    
    
    
    
    
    Announced
    
    
    Under thePurchased
    
    
    Average Price
    
    
    Plans or
    
    
    Plans orPeriod
    
    (1)
    
    
    Paid per Share
    
    
    Programs (2)
    
    
    Programs (2)January 1 to January 31, 2007
    
    
    11,590
    
    
    $
    37.48
    
    
    
    
    
    
    
    February 1 to February 28,
2007
    
    
    1,508
    
    
    $
    39.29
    
    
    
    
    
    
    
    March 1 to March 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    13,098
    
    
    $
    37.69
    
    
    
    
    
    
    
    
 
 (1)
    
    Represents shares of common stock surrendered by employees to satisfy the Companys income tax
withholding obligations arising upon the vesting of restricted stock issued under our Amended and Restated
1999 Stock Option and Retention Plan.(2)
    
    The Company does not currently have in place any publicly announced, specific plans or programs to
purchase equity securities. 
 ITEM 6. Exhibits:
 Exhibit No.
    
    Description10.1
    
    Amended and Restated Credit Agreement, dated as of February 9, 2007,
among Quicksilver Resources and the lenders identified therein (filed
as Exhibit 10.1 to the Companys Form 8-K filed February 12, 2007 and
included herein by reference).10.2
    
    Amended and Restated Credit Agreement, dated as of February 9, 2007,
among Quicksilver Resources Canada Inc. and the lenders and/or agents
identified therein (filed as Exhibit 10.2 to the Companys Form 8-K
filed February 12, 2007 and included herein by reference).*10.3
    
    Description of 2007 Cash Bonus.*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 25




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##### Table of Contents



SIGNATURES
   Quicksilver Resources Inc.By:
    
    /s/ Glenn DardenGlenn DardenPresident and Chief Executive OfficerBy:
    
    /s/ Philip CookPhilip CookSenior Vice President  Chief Financial Officer
 26




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description10.1
    
    Amended and Restated Credit Agreement, dated as of February 9, 2007,
among Quicksilver Resources and the lenders identified therein (filed
as Exhibit 10.1 to the Companys Form 8-K filed February 12, 2007 and
included herein by reference).10.2
    
    Amended and Restated Credit Agreement, dated as of February 9, 2007,
among Quicksilver Resources Canada Inc. and the lenders and/or agents
identified therein (filed as Exhibit 10.2 to the Companys Form 8-K
filed February 12, 2007 and included herein by reference).*10.3
    
    Description of 2007 Cash Bonus.*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 27