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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 2000
REGISTRATION NO. 333-__________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
QUICKSILVER RESOURCES INC.
(Exact name of registrant as specified in its charter)
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Delaware 75-2756163
(State or other jurisdiction of incorporation or organization) (I.R.S.Employer Identification No.)
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777 West Rosedale Street, Suite 300
Fort Worth, Texas 76104
(817) 665-5000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Glenn Darden
777 West Rosedale Street, Suite 300
Fort Worth, Texas 76104
(817) 665-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Dean A Tetirick
Cantey & Hanger, L.L.P.
2100 Burnett Plaza
801 Cherry Street
Fort Worth, Texas 76102
(817) 877-2883
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
-
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Each Class Amount Maximum Maximum Amount of
of Securities to be to be Offering Price Aggregate Registration
Registered Registered Per Share (1) Offering Price Fee
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Common Stock, par 1,639,647 $7.94 $13,018,797 $3,620
value $.01 per share
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(1) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(c), the offering price is computed on the average of
the high and low prices of the Registrant's common stock, as reported on
the American Stock Exchange on October 27, 2000.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Subject To Completion, Dated November 1, 2000
PROSPECTUS
QUICKSILVER RESOURCES INC.
1,639,647 Shares
Common Stock
This prospectus relates to 1,639,647 shares of our common stock that may be
sold from time to time by the selling stockholders named in this prospectus.
We will not receive any of the proceeds from the sale by the selling
stockholders. Sales may be effected at market prices prevailing at the time of
the sale, at prices related to market prices or at negotiated prices.
Our common stock is traded on the American Stock Exchange under the symbol
"KWK." On October 31, 2000, the last reported sale price of our common stock on
the AMEX was $7.75 per share.
We are an independent energy company engaged in the acquisition,
development, exploration, production and sale of natural gas and crude oil and
the gathering, processing and transmission of natural gas. Our producing
properties are principally in the states of Michigan, Wyoming and Montana.
Investing in the common stock involves certain risks. You should carefully
consider the risk factors beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Our principal executive offices are located at 777 West Rosedale Street,
Suite 300 in Fort Worth, Texas 76104, and our telephone number is (817) 665-
5000.
The date of this prospectus is November __, 2000.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
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TABLE OF CONTENTS
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Risk Factors................................................. 1
Forward-Looking Statements................................... 9
Where You Can Find More Information.......................... 9
Quicksilver Resources Inc.................................... 10
Use of Proceeds.............................................. 11
Recent Developments.......................................... 11
Selling Stockholders......................................... 11
Sale of Shares............................................... 12
Validity of Common Stock..................................... 13
Experts...................................................... 13
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In this prospectus, the terms "Quicksilver," "we," "our," and "us" refer to
Quicksilver Resources Inc. and, where appropriate, to our predecessors: Mercury
Exploration Company; Quicksilver Energy, L.C.; Michigan Gas Partners Limited
Partnership; and MSR Exploration Ltd. The term "you" refers to a prospective
investor.
You should rely only on the information contained in this prospectus or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is legal
to sell these securities. The information in this prospectus may only be
accurate on the date of this prospectus.
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RISK FACTORS
You should carefully consider the following risk factors:
Because we have a limited operating history, our future operating results are
difficult to forecast, and our failure to sustain profitability in the future
could adversely affect the market price of our common stock.
Although our predecessors operated for years in the oil and gas industry
prior to our formation, we began operations in 1998, and have a limited
operating history in our current form upon which you may base your evaluation of
our performance. As a result of our recent formation and our brief operating
history, the operating results from the properties contributed by Mercury
Exploration Company and others to us when we were formed may not indicate what
our future results will be. We cannot assure you that we will maintain the
current level of revenues, natural gas and crude oil reserves or production we
now attribute to the properties contributed to us when we were formed and those
acquired since our formation. Any future growth of our natural gas and crude oil
reserves, production and operations could place significant demands on our
financial, operational and administrative resources. Our failure to sustain
profitability in the future could adversely affect the market price of our
common stock.
Natural gas and crude oil prices fluctuate widely, and low prices could have a
material adverse impact on our business.
Our revenues, profitability and future growth depend on prevailing natural
gas and crude oil prices. Prices also affect the amount of cash flow available
for capital expenditures and our ability to borrow and raise additional capital.
The amount we can borrow under our credit facility is subject to periodic
redetermination based in part on changing expectations of future prices. Lower
prices may also reduce the amount of natural gas and crude oil that we can
economically produce.
Prices for natural gas and crude oil fluctuate widely. For example, natural
gas and crude oil prices declined significantly in 1998 and, for an extended
period of time, remained substantially below prices obtained in previous years.
Among the factors that can cause this fluctuation are:
. the level of consumer product demand;
. weather conditions;
. domestic and foreign governmental regulations;
. the price and availability of alternative fuels;
. political conditions in oil and gas producing regions;
. the domestic and foreign supply of oil and gas;
. the price of foreign imports; and
. overall economic conditions.
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Reserve estimates depend on many assumptions that may turn out to be inaccurate
and any material inaccuracies in these reserve estimates or underlying
assumptions will materially affect the quantities and present value of our
reserves.
The process of estimating oil and gas reserves is complex. It requires
interpretations of available technical data and various assumptions, including
assumptions relating to economic factors. Any significant inaccuracies in these
interpretations or assumptions could materially affect the estimated quantities
and present value of reserves shown in the information incorporated by reference
into this prospectus from documents filed with the SEC.
In order to prepare these estimates we and independent reserve engineers
engaged by us must project production rates and timing of development
expenditures. We and the engineers must also analyze available geological,
geophysical, production and engineering data, and the extent, quality and
reliability of this data can vary. The process also requires economic
assumptions such as natural gas and crude oil prices, drilling and operating
expenses, capital expenditures, taxes and availability of funds. Therefore,
estimates of natural gas and crude oil reserves are inherently imprecise.
Actual future production, oil and gas prices, revenues, taxes, development
expenditures, operating expenses and quantities of recoverable natural gas and
crude oil reserves most likely will vary from our estimates. Any significant
variance could materially affect the estimated quantities and present value of
reserves shown in the information incorporated by reference into this prospectus
from documents filed with the SEC. In addition, we may adjust estimates of
proved reserves to reflect production history, results of exploration and
development, prevailing natural gas and crude oil prices and other factors, many
of which are beyond our control.
At June 30, 2000, approximately 28% of our estimated proved reserves were
undeveloped. Undeveloped reserves, by their nature, are less certain. Recovery
of undeveloped reserves requires significant capital expenditures and successful
drilling operations. Our reserve data assumes that we will make significant
capital expenditures to develop our reserves. Although we have prepared
estimates of our natural gas and crude oil reserves and the costs associated
with these reserves in accordance with industry standards, we cannot assure you
that the estimated costs are accurate, that development will occur as scheduled
or that the actual results will be as estimated.
You should not assume that the present value of future net revenues
referred to in the information incorporated by reference into this prospectus
from documents filed with the SEC is the current market value of our estimated
oil and gas reserves. In accordance with SEC requirements, the estimated
discounted future net cash flows from proved reserves are generally based on
prices and costs as of the date of the estimate. Actual future prices and costs
may be materially higher or lower than the prices and costs as of the date of
the estimate. Any changes in consumption by gas purchasers or in governmental
regulations or taxation will also affect actual future net cash flows. The
timing of both the production and the expenses from the development and
production of oil and gas properties will affect the timing of actual future net
cash flows from proved reserves and their present value. In addition, the 10%
discount factor, which is required by the Securities and Exchange Commission to
be used in calculating discounted future net cash flows for reporting purposes,
is not necessarily the most accurate discount factor. The effective interest
rate at various times and the risks associated with us or the oil and gas
industry in general will affect the accuracy of the 10% discount factor.
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We may have difficulty financing our planned growth.
We have experienced and expect to continue to experience substantial
capital expenditure and working capital needs, particularly as a result of our
property acquisition and development drilling activities. In the future, we will
require additional financing, in addition to cash generated from our operations,
to fund our planned growth. If revenues decrease as a result of lower natural
gas or crude oil prices or otherwise, we may have limited ability to expend the
capital necessary to replace our reserves or to maintain production at current
levels, resulting in a decrease in production over time. If our cash flow from
operations is not sufficient to satisfy our capital expenditure requirements, we
cannot be certain that additional financing will be available to us on
acceptable terms or at all. In the event additional capital resources are
unavailable, we may curtail our acquisition, development drilling and other
activities or be forced to sell some of our assets on an untimely or unfavorable
basis.
We are vulnerable to operational hazards, transportation dependencies,
regulatory risks and other uninsured risks associated with our activities.
The oil and gas business involves operating hazards such as well blowouts,
craterings, explosions, uncontrollable flows of crude oil, natural gas or well
fluids, fires, formations with abnormal pressures, pipeline ruptures or spills,
pollution, releases of toxic gas and other environmental hazards and risks, any
of which could cause us to experience substantial losses. Also, the availability
of a ready market for our natural gas and crude oil production depends on the
proximity of reserves to, and the capacity of, natural gas and crude oil
gathering systems, pipelines and trucking or terminal facilities.
Federal and state regulation of oil and gas production and transportation,
tax and energy policies, changes in supply and demand and general economic
conditions all could adversely affect our ability to produce and market our
natural gas and crude oil. In addition, we may be liable for environmental
damage caused by previous owners of property purchased or leased by us.
As a result of operating hazards, regulatory risks and other uninsured
risks, we could incur substantial liabilities to third parties or governmental
entities, the payment of which could reduce or eliminate funds available for
exploration, development or acquisitions. According to customary industry
practices, we maintain insurance against some, but not all, of such risks and
losses. The occurrence of an event that is not covered, or not fully covered, by
insurance could have a material adverse effect on our business, financial
condition and results of operations. In addition, pollution and environmental
risks generally are not fully insurable.
We may be unable to make additional acquisitions of producing properties or
successfully integrate them into our operations.
Our growth in recent years has been due in significant part to acquisitions
of producing properties. We expect to continue to evaluate and, where
appropriate, pursue acquisition opportunities on terms our management considers
to be favorable to us. We cannot assure you that we will be able to identify
suitable acquisitions in the future, or that we will be able to finance these
acquisitions on favorable terms or at all. In addition, we compete against other
companies for acquisitions, and we cannot assure you that we will be successful
in the acquisition of any material property interests. Further, we cannot assure
you that any future acquisitions that we make will be integrated successfully
into our operations or will achieve desired profitability objectives.
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The successful acquisition of producing properties requires an assessment
of recoverable reserves, exploration potential, future oil and gas prices,
operating costs, potential environmental and other liabilities and other factors
beyond our control. These assessments are necessarily inexact and their accuracy
inherently uncertain, and such a review may not reveal all existing or potential
problems, nor will it necessarily permit us to become sufficiently familiar with
the properties to fully assess their merits and deficiencies. Inspections may
not always be performed on every well, and structural and environmental problems
are not necessarily observable even when an inspection is undertaken.
In addition, significant acquisitions can change the nature of our
operations and business depending upon the character of the acquired properties,
which may be substantially different in operating and geological characteristics
or geographic location than existing properties. While our current operations
are located primarily in Michigan, Montana, Wyoming and Canada, we cannot assure
you that we will not pursue acquisitions or properties located in other
locations.
The failure to replace our reserves could adversely affect our production and
cash flows.
Our future success depends upon our ability to find, develop or acquire
additional oil and gas reserves that are economically recoverable. Our proved
reserves will generally decline as reserves are depleted, except to the extent
that we conduct successful exploration or development activities or acquire
properties containing proved reserves, or both. In order to increase reserves
and production, we must continue our development drilling and recompletion
programs or undertake other replacement activities. Our current strategy is to
maintain our focus on low-cost operations while increasing our reserve base,
production and cash flow through acquisitions of producing properties where we
can utilize our experience as a low-cost operator and use available cash flows
to continue to exploit our existing properties. We cannot assure you, however,
that our planned development projects and acquisition activities will result in
significant additional reserves or that we will have continuing success drilling
productive wells at low finding and development costs. Furthermore, while our
revenues may increase if prevailing oil and gas prices increase significantly,
our finding costs for additional reserves could also increase.
We cannot control the activities on properties we do not operate.
Other companies operate some of the properties in which we have an
interest. As a result, we have a limited ability to exercise influence over
operations for these properties or their associated costs. Our dependence on the
operator and other working interest owners for these projects and our limited
ability to influence operations and associated costs could materially adversely
affect the realization of our targeted returns on capital in drilling or
acquisition activities. As a result, the success and timing of our drilling and
development activities on properties operated by others depend upon a number of
factors that are outside of our control, including:
. timing and amount of capital expenditures;
. the operator's expertise and financial resources;
. approval of other participants in drilling wells; and
. selection of technology.
4
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The loss of key personnel could adversely affect our ability to operate.
Our operations are dependent on a relatively small group of key management
and technical personnel. We cannot assure you that these individuals will remain
with us for the immediate or foreseeable future. The unexpected loss of the
services of one or more of these individuals could have a detrimental effect on
us.
Competition in our industry is intense, and we are smaller and have a more
limited operating history than most of our competitors.
We compete with major and independent oil and gas companies for property
acquisitions. We also compete for the equipment and labor required to operate
and develop these properties. Most of our competitors have substantially greater
financial and other resources than we do. In addition, larger competitors may be
able to absorb the burden of any changes in federal, state and local laws and
regulations more easily than we can, which would adversely affect our
competitive position. These competitors may be able to pay more for exploratory
prospects and productive natural gas and oil properties and may be able to
define, evaluate, bid for and purchase a greater number of properties and
prospects than we can. Our ability to explore for oil and gas prospects and to
acquire additional properties in the future will depend on our ability to
conduct operations, to evaluate and select suitable properties and to complete
transactions in this highly competitive environment. Furthermore, the oil and
gas industry competes with other industries in supplying the energy and fuel
needs of industrial, commercial, and other consumers.
Leverage materially affects our operations.
As of June 30, 2000, our long-term debt was $240,102,000, including
$187,000,000 outstanding under our bank credit facility, $53,000,000 outstanding
under our subordinated notes and $102,000 of subsidiary and other debt. We had
$8,000,000 of available borrowing capacity under our bank credit facility. The
borrowing base limitation on our credit facility is periodically redetermined.
Upon a redetermination, we could be forced to repay a portion of our bank debt.
We may not have sufficient funds to make such repayments.
Our level of debt affects our operations in several important ways,
including the following:
. a large portion of our cash flow from operations is used to pay
interest on borrowings;
. the covenants contained in the agreements governing our debt limit our
ability to borrow additional funds or to dispose of assets;
. the covenants contained in the agreements governing our debt may
affect our flexibility in planning for, and reacting to, changes in
business conditions;
. a high level of debt may impair our ability to obtain additional
financing in the future for working capital, capital expenditures,
acquisitions, general corporate or other purposes;
. our leveraged financial position may make us more vulnerable to
economic downturns and may limit our ability to withstand competitive
pressures, despite our entry into long-term gas contracts and hedging
arrangements to reduce our exposure;
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. any debt that we incur under our credit facility will be at variable
rates, making us vulnerable to increases in interest rates; and
. a high level of debt will affect our flexibility in planning for or
reacting to changes in market conditions.
In addition, we may significantly alter our capitalization in order to make
future acquisitions or develop our properties. These changes in capitalization
may significantly increase our level of debt. A higher level of debt increases
the risk that we may default on our debt obligations. Our ability to meet debt
obligations and to reduce our level of debt depends on our future performance.
General economic conditions and financial, business and other factors affect our
operations and our future performance. Many of these factors are beyond our
control.
If we are unable to repay our debt at maturity out of cash on hand, we
could attempt to refinance the debt or repay the debt with the proceeds of an
equity offering. We cannot assure you that we will be able to generate
sufficient cash flow to pay the interest on our debt or that future borrowing or
equity financing will be available to pay or refinance the debt. The terms of
our debt may also prohibit us from taking these actions. Factors that will
affect our ability to raise cash through an offering or our capital stock or a
refinancing of our debt include financial market conditions and our market value
and operations performance at the time of the offering or other financing. We
cannot assure you that any offering or refinancing can be successfully
completed.
Several companies have entered into purchase contracts with us for a significant
part of our production and if they default on these contracts, we could be
materially and adversely affected.
Several long-term contracts for the sale of a significant portion of our
natural gas production are currently in place and account for a significant
portion of our total revenues. We cannot assure you that the other parties to
these contracts will continue to perform under the contracts. If the other
parties were to default after taking delivery of our natural gas, it could have
a material adverse effect on our cash flows for the period in which the default
occurred. A default by the other parties prior to taking delivery of our
natural gas could also have a material adverse effect on our cash flows for the
period in which the default occurred depending on the prevailing market prices
of natural gas at the time compared to the price required to be paid under the
long-term contracts.
Our activities are regulated by complex laws and regulations, including
environmental regulations, that can adversely affect the cost, manner or
feasibility of doing business.
Oil and gas operations are subject to various federal, state and local
government laws and regulations which may be changed from time to time in
response to economic or political conditions. Matters that are typically
regulated include:
. discharge permits for drilling operations;
. drilling bonds;
. reports concerning operations;
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. spacing of wells;
. unitization and pooling of properties;
. environmental protection; and
. taxation.
From time to time, regulatory agencies have imposed price controls and
limitations on production by restricting the rate of flow of oil and gas wells
below actual production capacity to conserve supplies of natural gas and crude
oil. We also are subject to changing and extensive tax laws, the effects of
which cannot be predicted.
The development, production, handling, storage, transportation and disposal
of natural gas and crude oil, by-products, and other substances and materials
produced or used in connection with oil and gas operations are subject to laws
and regulations primarily relating to protection of human health and the
environment. The discharge of natural gas, crude oil or pollutants into the air,
soil or water may give rise to significant liabilities on our part to the
government and third parties and may result in the assessment of civil or
criminal penalties or require us to incur substantial costs of remediation.
Legal requirements frequently are changed and subject to interpretation,
and we are unable to predict the ultimate cost of compliance with these
requirements or their effect on our operations. We cannot assure you that
existing laws or regulation, as currently interpreted or reinterpreted in the
future, or future laws or regulations, will not materially adversely affect our
business, results of operations and financial condition.
Hedging our production may result in losses.
To reduce our exposure to fluctuations in the prices of natural gas and
crude oil, we have entered into long-term gas contracts and hedging
arrangements. These hedging arrangements expose us to risk of financial loss in
some circumstances including the following:
. our production is materially less than expected; or
. the other parties to the hedging contracts fail to perform their
contract obligations.
In addition, these hedging arrangements may limit the benefit we would
receive from increases in the prices for natural gas and crude oil in the
following instances:
. there is a change in the expected difference between the underlying
price in the hedging agreement and actual prices received; or
. a sudden unexpected event materially impacts natural gas or crude oil
prices.
Furthermore, if we choose not to engage in hedging arrangements in the
future, we may be more adversely affected by changes in natural gas and crude
oil prices than our competitors who engage in hedging arrangements.
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A small number of existing stockholders control our company, which could limit
your ability to influence the outcome of stockholder votes.
Members of the Darden family, together with Mercury and Quicksilver Energy,
L.C., companies primarily owned by the members of the Darden family,
beneficially own on the date of this prospectus approximately 56% of our common
stock. As a result, these entities and individuals will be able to control the
outcome of stockholder votes, including votes concerning the election of
directors, the adoption or amendment of provisions in our charter or bylaws and
the approval of mergers and other significant corporate transactions.
A large number of our outstanding shares may be sold into the market in the near
future which could cause the market price of our common stock to drop
significantly, even if our business is doing well.
Our shares that are eligible for future sale may have an adverse affect on
the price of our stock. There were 18,283,334 shares of our common stock
outstanding on the date of this prospectus. After the offering, approximately
7,900,000 shares will be freely tradeable without substantial restriction or the
requirement of future registration under the Securities Act of 1933. In
addition, we have the following warrants and options outstanding to purchase
shares of our common stock:
. Warrants to purchase 550,000 shares at $12.50 per share;
. Warrants to purchase 550,000 shares at $20.00 per share;
. Warrants to purchase 28,000 shares at $33.75 per share;
. Warrants to purchase 5,750 shares at 10 cents per share;
. Options to purchase 24,857 shares of $8.75 per share;
. Options to purchase 432,203 shares at $3.6875 per share; and
. Options to purchase 200,000 shares at $7.125 per share.
Sales of substantial amounts of common stock, or a perception that such sales
could occur, and the existence of options or warrants to purchase shares of
common stock at prices that may be below the then current market price of the
common stock could adversely affect the market price of our common stock and
could impair our ability to raise capital through the sale of our equity
securities.
Our certificate of incorporation contains provisions that could discourage an
acquisition or change of control.
Our certificate of incorporation authorizes our board of directors to issue
preferred stock without stockholder approval. If our board of directors elects
to issue preferred stock, it could be more difficult for a third party to
acquire control of us, even if that change of control might be beneficial to
stockholders.
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FORWARD-LOOKING STATEMENTS
Some statements made by us in this prospectus and incorporated by reference
from documents filed with the SEC are "forward-looking statements." Statements
or assumptions related to or underlying such forward-looking statements include,
without limitation, statements regarding:
. the quality of our properties with regard to, among other things, the
existence of reserves in economic quantities;
. our ability to increase our reserves through exploration and
development;
. the number of locations to be drilled and the time frame within which
they will be drilled;
. future prices of natural gas and crude oil,
. anticipated domestic demand for natural gas; and
. the adequacy of our capital resources and liquidity.
Risks, uncertainties and other factors may cause our actual results to
differ materially from anticipated results expressed or implied by these
prospective statements and we undertake no obligation to update them. The most
significant of these risks, uncertainties and other factors are discussed under
"Risk Factors" in this prospectus and in sections of documents we incorporate by
reference, including "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business and Properties." You are
urged to carefully consider these factors.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You can read and copy
any document filed by us at the public reference facilities maintained by the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. You may request copies
of these documents, upon payment of a duplicating fee, by writing the SEC at the
address in the previous sentence. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of its public reference room. Our SEC
filings are also available on the SEC's Website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" information from other
documents that we file with it, which means that we can disclose important
information by referring you to those documents. The information incorporated by
reference is an important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the following documents:
. Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999;
. Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000;
. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000;
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. Our Current Reports on Form 8-K filed on March 19, 1999 (dated March
4, 1999), on May 28, 1999 (dated May 17, 1999) and on April 14, 2000
(dated March 31, 2000) and on Form 8-K/A filed on July 28, 1999
(Amendment No. 1 to Form 8-K filed on May 28, 1999) on June 6, 2000
(Amendment No. 1 to Form 8-K filed on April 14, 2000) and on June 15,
2000 (Amendment No. 2 to Form 8-K filed on April 14, 2000);
. Our Proxy Statement filed April 28, 2000;
. The description of our common stock and preferred stock contained in
our Form 8-A filed February 16, 1999; and
. All other documents filed by us pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus and prior to termination of this offering of common stock.
You may request a copy of any of these documents, except exhibits to the
documents (unless the exhibits are specifically incorporated by reference), at
no cost, by writing or telephoning us at the following address:
Quicksilver Resources Inc.
777 West Rosedale Street, Suite 300
Fort Worth, Texas 76104
(817) 665-5000
QUICKSILVER RESOURCES INC.
Quicksilver is an independent energy company engaged in the acquisition,
development, exploration, production and sale of natural gas and crude oil and
the gathering, processing and transmission of natural gas. Our producing
properties are located principally in the states of Michigan, where we are the
largest independent natural gas producer, Wyoming and Montana. We acquired our
first properties in Canada in August 1999. Over the past five years, we have
significantly increased our proved reserves and production. We have
accomplished this growth primarily through the acquisition of reserves in well-
established producing areas followed by aggressive exploitation and development
drilling and the purchase of additional interests in those or nearby similar
properties. Our properties are located in well-established producing areas that
have long productive histories and typically exhibit low annual decline rates.
We have established a high quality reserve base that is primarily located
in Michigan and the Rocky Mountain states of Montana and Wyoming. As of June
30, 2000, we had proved reserves of 655 Bcfe, of which approximately 84% were
natural gas and 16% were crude oil and condensate, with an estimated PV-10 value
of $752,200,000, taking into account all applicable hedging arrangements and
basis and quality differentials. Approximately 73% of our proved reserve
volumes are classified as proved developed and we are the operator of the proved
reserves that constitute approximately 78% of our PV-10 value. Based on our
proved reserves as of June 30, 2000, we had a reserve life of 15.9 years. As of
June 30, 2000, we had interests in 4,742 gross (1,536 net) producing wells and
were the operator of approximately 1,852 of the gross wells. No individual well
accounts for a significant amount of our production. Since 1995, we have
experienced significant growth in reserves and production and achieved high
drilling success rates. We have increased our reserves by 334% from 152 Bcfe on
December 31,
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1995 to 655 Bcfe as of June 30, 2000, and the average acquisition, development
and finding cost of our proved reserves is $.47 per Mcfe.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the common stock
offered by the selling stockholders.
RECENT DEVELOPMENTS
CMS Acquisition
On March 31, 2000, we completed our acquisition from CMS Energy Corporation
of all of CMS' natural gas and crude oil exploration and production properties
in Michigan, including the stock of Terra Energy Ltd., as well as other smaller
interests in Ohio, Kentucky and Indiana. The sale included approximately
180,000 net leasehold acres producing approximately 49,000 Mcf equivalent (Mcfe)
net per day from the Antrim Shale, as well as from the Niagaran and Prairie du
Chien formations. We are now the largest independent gas producer in the State
of Michigan. Additionally, the acquisition increased our development drilling
inventory. The proved producing component of our reserves has increased to
almost 70% and doubled our reserve base, which, based on estimates by Holditch-
Reservoir Technologies Consulting Services, our independent reserve engineers,
is 655 Bcfe.
PanCanadian Joint Venture
On November 1, 2000, we announced the formation of a joint venture between
our Canadian subsidiary, MGV Energy, Inc., and PanCanadian Petroleum Limited to
explore for and develop coal bed methane (CBM) reserves on 1 million acres of
PanCanadian lands. The project, focusing in PanCanadian's Palliser block in
Southern Alberta, is one of the largest potential CBM plays in North America.
According to the Canadian Gas Potential Committee, there are significant gas
reserves in place in Canadian coal beds. On the PanCanadian joint venture lands
there are estimates of substantial reserves of CBM.
PanCanadian and MGV already have a working relationship in Alberta to
acquire and develop shallow gas reserves. PanCanadian and MGV are now expanding
that working relationship to focus on determining the commercial potential of
CBM on PanCanadian lands.
An initial exploration phase will begin before year-end 2000 with the
drilling of a series of test wells. For each successful exploration well, a
pilot program of four additional wells will follow. MGV, with its unconventional
gas expertise, will operate the exploration and pilot phases of the joint
venture. The companies will share exploratory and evaluation costs.
SELLING STOCKHOLDERS
The selling stockholders who are offering the common stock covered by this
prospectus are Joint Energy Development Investments Limited Partnership,
referred to below as JEDI, an affiliate of Enron Corp., and Union Oil Company of
California, d/b/a Unocal, referred to below as Unocal. JEDI is offering
1,340,405 shares and Unocal is offering 299,242 shares. There is no
relationship, affiliation or arrangement between JEDI and Unocal regarding their
shares of our common stock or the disposition of those shares.
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JEDI acquired its 1,340,405 shares of our common stock in exchange for
partnership interests in Michigan Gas Partners Limited Partnership shortly after
our formation. We agreed to file this registration statement for the resale of
JEDI's shares upon JEDI's request and to keep it effective until completion of
the distribution of the shares in an underwritten offering or for a period of
one year in the case of other offerings, unless all the shares are sold before
the end of one year. We also agreed to bear all out-of-pocket expenses for
JEDI's offering of its shares, other than underwriting discounts and selling
commissions. JEDI was represented on our Board of Directors from the time of
our formation until September 2000. It currently has the right to appoint a
representative to our Board of Directors but has chosen not to do so, relying
instead on Board observation rights also available to the stockholder.
Unocal acquired its 299,242 shares of our common stock in connection with
our acquisition of substantially all of Unocal's natural gas and crude oil
properties in Michigan, completed in May 1999. The purchase price in the Unocal
acquisition was $30 million, consisting of $27 million in cash, adjusted to
$25.8 million in cash at closing, and 404,381 unregistered shares of our common
stock. The stock portion of the purchase price was placed in escrow for
distribution over a three-year period, subject to downward adjustment in
correlation to costs, expenses and liabilities which might be incurred during
the period. On August 28, 2000, we entered into an agreement with Unocal
terminating the escrow arrangement, settling all claims and potential claims
against the escrowed shares and releasing to Unocal all but 105,139 of the
escrowed shares. The 105,139 shares were returned to us and are now held as
treasury shares. We offered to include Unocal's shares in the registration
statement of which this prospectus is a part and to keep it effective as long as
we were required to keep it effective in respect of JEDI's offering. Unocal
accepted our offer and has agreed to bear a proportionate part of all out-of-
pocket expenses of this offering, together with underwriting discounts and
selling commissions relative to the sale of its shares.
We have agreed to indemnify the selling stockholders against certain
liabilities under the Securities Act of 1933. The selling stockholders may sell
none, some or all of the common stock offered by this prospectus. Assuming the
sale of all the shares offered in this prospectus, the selling stockholders will
not own any shares of common stock after the offering.
SALE OF SHARES
The selling stockholders have advised us that the distribution of the
shares of common stock offered in this prospectus by the selling stockholders
may be effected from time to time in one or more transactions (which may involve
block transactions) on the American Stock Exchange or in transactions otherwise
than on that exchange or in any combination of transactions. Sales may be
effected at market prices prevailing at the time of sale, at prices related to
market prices or at negotiated prices. The selling stockholders may sell shares
to or through broker-dealers in transactions involving one or more of the
following: (1) a block trade in which the broker-dealer attempts to sell the
shares as agent but, to facilitate the transaction, may position and resell a
portion of the block as principal, (2) an underwritten public offering, (3)
purchases by a broker-dealer as principal and resale by the broker-dealer for
its own account or (4) ordinary brokerage transactions in which the broker-
dealer solicits purchases. Broker-dealers participating in the distribution of
shares may be deemed to be underwriters under the Securities Act of 1933, and
any discounts or commissions received by the broker-dealers and any profit on
the resale of the shares may be deemed to be underwriting discounts or
commissions under the Securities Act of 1933.
Any of the shares covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act of 1933 may be sold under that
Rule rather than pursuant to this prospectus.
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Upon notification by either selling stockholder of any material arrangement
to sell shares through a secondary distribution, or a purchase by a broker-
dealer, we will file a supplement to this prospectus, if required, to disclose
among other things the names of the broker-dealers, the number of shares
involved, the price at which the shares will be sold and the commissions paid or
the discounts or concessions allowed to the broker-dealers.
We cannot assure you that the selling stockholders will sell any or all of
the common stock offered hereunder.
VALIDITY OF COMMON STOCK
Our counsel, Cantey & Hanger, L.L.P., Fort Worth, Texas, will give a legal
opinion as to the validity of our shares of common stock.
EXPERTS
The information incorporated by reference in this prospectus from our
Annual Report on Form 10-K for the year ended December 31, 1999 regarding the
estimated quantities of proved reserves of our oil and gas properties, the
future net cash flows from those reserves and the present values of those cash
flows is derived from reserve reports prepared or reviewed by Holditch-Reservoir
Technologies Consulting Services. The information is incorporated by reference
in this prospectus in reliance upon the authority of said firm as experts in
matters contained in the reports.
Our consolidated financial statements incorporated in this prospectus by
reference from our Annual Report on Form 10-K for the year ended December 31,
1999, including our consolidated balance sheets as of December 31, 1999 and
1998, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the two years in the period ended December 31, 1999,
and the consolidated statements of income and cash flows of MSR Exploration Ltd.
and subsidiaries for the period from inception March 7, 1997 to December 31,
1997, and the financial statements incorporated by reference from our Form 8-
K/As filed June 15, 2000 and July 28, 1999, including the statements of revenues
and direct operating expenses of CMS Oil & Gas Company's Michigan properties for
the three years ended December 31, 1999, 1998 and 1997, the consolidated balance
sheets of Terra Energy, Ltd. as of December 31, 1999 and 1998, and the related
consolidated statements of income, stockholder's equity and cash flows for each
of the three years in the period ended December 31, 1999, and the statement of
revenues and direct operating expenses of the Unocal Corporation's Spirt Energy
76 unit interests for the year ended December 31, 1998, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended March 31, 2000 and 1999 and June 30, 2000 and 1999 which is incorporated
herein by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their reports included in the Company's Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2000 and June 30, 2000 and
incorporated by reference herein, they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. Deloitte & Touche LLP are
not subject to the liability provisions of Section 11 of the Securities Act of
1933 for their reports on the unaudited interim financial information because
those reports are not "reports" or a "part" of the registration statement
prepared or certified by an accountant within the meaning of Sections 7 and 11
of the Act.
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The audited consolidated statements of income and cash flows of Mercury
Exploration Company for the year ended September 30, 1997, the audited
consolidated statements of income and cash flows of Mercury Exploration Company
for the three months ended December 31, 1997 and the statements of income and
cash flows of Michigan Gas Partners Limited Partnership for the year ended
December 31, 1997 incorporated by reference in this prospectus have been audited
by Weaver and Tidwell, L.L.P., independent auditors, as stated in their reports
which are incorporated herein by reference and have been so incorporated in
reliance upon the reports of such firm given their authority as experts in
accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of the fees and
expenses expected to be incurred by us in connection with the offering described
in this registration statement.
Registration Fee............................... $ 3,620
--------------
Legal Fees and Expenses........................ 20,000
--------------
Accounting Fees and Expenses................... 8,000
--------------
Printing and Duplicating Expenses.............. 500
--------------
Miscellaneous.................................. 2,880
--------------
Total................................... $ 35,000
==============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We are incorporated in Delaware. Under Section 145 of the Delaware General
Corporation Law (the "DGCL"), a Delaware corporation has the power, under
specified circumstances, to indemnify its directors, officers, employees and
agents in connection with actions, suits or proceedings brought against them by
a third party or in the right of the corporation, by reason of the fact that
they were or are such directors, officers, employees or agents, against expenses
and liabilities incurred in any such action, suit or proceedings so long as they
acted in good faith and in a manner that they reasonably believed to be in, or
not opposed to, the best interests of such corporation, and with respect to any
criminal action, that they had no reasonable cause to believe their conduct was
unlawful. With respect to suits by or in the right of such corporation,
however, indemnification is generally limited to attorneys' fees and other
expenses and is not available if such person is adjudged to be liable to such
corporation unless the court determines that indemnification is appropriate. A
Delaware corporation also has the power to purchase and maintain insurance for
such persons. Our Restated Certificate of Incorporation and bylaws permit
indemnification of directors and officers to the fullest extent permitted by
Section 145 of the DGCL. Reference is made to our Restated Certificate of
Incorporation and bylaws.
Additionally, we have acquired directors and officers insurance in the
amount of $3,000,000, which includes coverage for liability under the federal
securities laws.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provisions may not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 (relating to liability for unauthorized
acquisitions or redemptions of, or dividends on, capital stock) of the DGCL or
(iv) for any transaction from which the
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director derived an improper personal benefit. Our Restated Certificate of
Incorporation contains such a provision.
The above discussion of our Restated Certificate of Incorporation, bylaws
and Sections 102(b)(7) and 145 of the DGCL is not intended to be exhaustive and
is qualified in its entirety by such Restated Certificate of Incorporation,
bylaws and statutes.
ITEM 16. EXHIBITS.
Exhibit
Number Description
------ -----------
5.1 Opinion of Cantey & Hanger, L.L.P. regarding legality.
15.1 Awareness Letter of Deloitte & Touche LLP.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Weaver and Tidwell, L.L.P.
23.3 Consent of Holditch-Reservoir Technologies Consulting Services.
23.4 Consent of Cantey & Hanger, L.L.P. (set forth in their opinion filed
as Exhibit 5.1).
24.1 Powers of attorney (set forth on the signature page).
ITEM 17. UNDERTAKINGS.
We hereby undertake:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement.
(b) That for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering; and
(d) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of our annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a
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claim for indemnification against such liabilities (other than the payment by us
of expenses incurred or paid by one of our directors, officers or controlling
persons in the successful defense of any action, suit or proceeding) is asserted
by a director, officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by us is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we certify that
we have reasonable grounds to believe that we meet all the requirements for
filing on Form S-3 and have duly caused this registration statement to be signed
on our behalf by the undersigned, thereunto duly authorized, in the City of Fort
Worth, State of Texas, on November 1, 2000.
QUICKSILVER RESOURCES INC.
By: /s/ Glenn Darden
-----------------------------
Glenn Darden
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Glenn Darden and Bill Lamkin, or either of them,
his true and lawful attorney-in-fact and agent, with full power of substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and any additional registration statements pursuant to Rule 462(b),
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof. Pursuant to the requirements of the
Securities Act of 1933, as amended, this registration statement has been signed
below by the following persons in the capacities indicated and on the 1st day
of November, 2000.
/s/ Glenn Darden 11-1-00
---------------------------------- -------------
Glenn Darden Date
Director, President and Chief Executive Officer
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/s/ Frank Darden 11-1-00
---------------------------------- -------------
Frank Darden Date
Director
/s/ D. Randall Kent 11-1-00
---------------------------------- -------------
D. Randall Kent Date
Director
/s/ W. Yandell Rogers, III 11-1-00
---------------------------------- -------------
W. Yandell Rogers, III Date
Director
/s/ Anne Darden Self 11-1-00
---------------------------------- -------------
Anne Darden Self Date
Director
/s/ Bill Lamkin 11-1-00
---------------------------------- -------------
Bill Lamkin Date
Executive Vice President, Chief Financial Officer
and Secretary
/s/ Fred van Naerssen 11-1-00
---------------------------------- -------------
Fred van Naerssen Date
Vice President and Chief Accounting Officer
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
5.1 Opinion of Cantey & Hanger, L.L.P. regarding legality.
15.1 Awareness Letter of Deloitte & Touche LLP.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Weaver and Tidwell, L.L.P.
23.3 Consent of Holditch-Reservoir Technologies Consulting Services.
23.4 Consent of Cantey & Hanger, L.L.P. (set forth in their opinion filed
as Exhibit 5.1).
24.1 Powers of attorney (set forth on the signature page).
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