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Kwk

GICS Sector Energy

Sub-Industry Oil &Gas Exploration &Production

Summary This natural gas and crude oil production company,based in Forth Worth,TX,develops and acquires long-lived natural gas and crude oil properties,mainly focusing on unconventional reservoirs,such as hydrocarbons found in fractured shales,coal seams and tight sands.Operations are mainly in Michigan,Canada and

Texas.

Price as of Sep 26,2008$21.66Dividend Rate/Share Nil $10K Invested 5Yrs Ago $53,814Total Shares Outstg.(M)158.652-Wk Range

$44.98–18.03

Trailing 12-Month P/E 7.0Beta 1.09Market Capitalization(B)$3.436Trailing 12-Month EPS $3.09Tangible Book Val/Share $6.76Yield (%)Nil Institutional Ownership (%)64

Options:ASE,CBOE,P ,Ph

S&P Financial Writer Frank Barone Fair Value Calculation

$25.10Volatility

Average

Technical Evaluation

NEUTRAL

Since September,2008,the technical indicators for KWK have been NEUTRAL.

Relative Strength Rank

WEAK

Income Statement Analysis &Financial Review Total revenues for the six months ended June 30,2008were $355.5million vs.$253.1million in the prior year,advancing 40%year over year.Total expenses rose 24%,and operating income was $177.8million,vs.$110.6million for last year.In-come before taxes was $148.5million vs.$78.8million,an increase of 88%.Income taxes were $52.5million,against $24.1million,and for the first two quarters of the fiscal year,net income was $94.6million ($0.56a share),vs.$54.6million ($0.33a share)in 2007.

In the second quarter,total revenues were $198million vs.$136.5million in the prior year,an in-crease of 45%year to year.Total expenses grew 22%,and operating income for the quarter was $107.2million,vs.$62.1million in the prior-year period.Income before taxes was $81.9million vs.$44.6million,increasing 84%.Income taxes were $28.6million,against $12.8million for last year,and net income was $52.4million ($0.31a share),vs.$31.7million ($0.19a share)in the second quarter of 2007.

Key Operating Information

In the second quarter ended June 30,2008,total daily average production increased 13%,to 236

million cubic feet equivalent (MMcfe),versus 208million MMcfe in the prior-year period.The 2008production volumes were comprised of approxi-mately 67%natural gas,approximately 29%nat-ural gas liquids and approximately 4%crude oil and condensate.

In the second quarter of 2008,results include a non-cash pre-tax loss of $10.3million or $0.04per share on the company's investment in BreitBurn Energy Partners L.P .

Recent Developments

At June 30,2008,the company's total debt out-standing was $1.3billion.Total debt as a percent of total capitalization was approximately 58%at June 30,2008.

In April,2008,Quicksilver acquired 19licenses covering approximately 127,000net contiguous acres in the Horn River Basin in northeast British Columbia.The company has identified more than 500feet of gross thickness from the Upper De-vonian Muskwa and Klua shale formations at depths ranging from 7,800to 9,000feet on the li-censes.

Revenue (Million $)

1Q 2Q

4Q Year 2008157.5198.0------2007116.6136.4159.2149.1561.3200699.6589.4799.21102.0390.4200555.2568.5483.77102.9310.5200439.7841.9845.5452.43179.7200337.5233.1033.5136.83141.0

Earnings Per Share ($)20080.250.31------20070.140.190.18 2.35 2.8620060.170.150.140.120.5820050.070.110.160.220.5420040.040.050.050.060.2120030.05Nil

0.040.040.14

Fiscal year ended Dec.31.Next earnings report expected:Early November

Amount ($)

Date Decl.

Ex-Div.Date

Stk.of Record

Payment

Date

2-for-101/0702/0101/1801/31/08

Source:Company reports.

All of the views expressed in this research report accurately reflect our quantitative research models regarding any and all of the subject securities or issuers.No part of our compensation was,is,or will be,directly or indirectly,related to the specific recommendations or views expressed in this research report.This report is for information purposes and should not be considered a solicitation to buy or sell any security.Neither S&P nor any other party guarantees its accuracy or makes warranties regarding results from its usage.S&P receives compensation from the issuer or an agent thereof for initiating coverage,and for distribution including licensed redistribution of this report,and/or for inclusion in other S&P publications,generally in amounts up to U.S.$14,175per year.Redistribution is prohibited without written permission.

Quicksilver Resources,Inc.(KWK)is an independent energy company engaged primarily in exploration,development and production of unconventional natural gas onshore in North America.It owns natural gas and oil properties in the United States,principally in Texas,Wyoming and Montana,and in Canada,princi-pally in Alberta.Properties held in Michigan,Indiana and Kentucky were divested on November 1,2007.KWK also owns about 73%of Quicksilver Gas Services LP (KGS),a publicly-traded midstream master limit-ed partnership,and approximately 32%of the limited partner units of BreitBurn Energy Partners L.P .,a publicly-traded natural gas and oil exploration and production master limited partnership.

The company's production and development operations are concentrated in the Fort Worth and Western Canadian Sedimentary basins.At December 31,2007,the company had estimated total proved reserves of approximately 1.5Tcfe,about 99%of which were natural gas and NGLs and about 62%of which were proved developed.Approximately 78%of its reserves at December 31,2007,were located in Texas and about 21%were in Canada.In 2007,it had average production of 213MMcfe per day and total production of 77.9Bcfe.

During 2007,KWK drilled 244gross (219net)wells in the Fort Worth Basin Barnett Shale,and as of Decem-ber 31,2007,it had drilled a total of 426gross (377net)wells in the basin and was producing from 187gross (163net)wells.Its interests are spread across an area 40miles by 30miles centered in Hood County.As of December 31,2007,the company held approximately 247,000net acres in the Fort Worth Basin Bar-nett Shale play with over 1,600drilling locations.About 20%of this acreage is currently developed.Much of the acreage in this play contains high-Btu natural gas which contains NGLs within the natural gas stream.

The KGS pipeline and gathering system is located in the southern portion of the Fort Worth Basin,which includes over 200miles of natural gas gathering pipelines ranging from 2inches to 20inches in diameter and a 25-mile NGL pipeline that runs from the processing plant to an interconnecting third party pipeline.The pipeline system gathers and delivers natural gas produced by its wells and those of third parties to the processing facilities,which have the capacity to process more than 200MMcfd of natural gas.KGS has begun construction of a third processing unit,with an additional 125MMcfd of capacity that is expected to become operational in the first quarter of 2009.

The company holds about 470,000net acres in the Delaware Basin of West Texas.At December 31,2007,it had drilled five resource assessment wells on that acreage.It expects to drill six additional wells in the area in 2008.

KWK's Rocky Mountain properties are located in Montana and Wyoming.Production from those proper-ties is primarily crude oil from well-established producing formations at depths ranging from 1,000feet to 17,000feet.As of December 31,2007,its Rocky Mountain proved reserves were 2.5MMBbls of crude oil and 1.8Bcfe of natural gas and NGLs for total equivalent reserves of 17Bcfe.Daily production from its properties in the Rocky Mountain region averaged 3.1MMcfe for 2007.

Quicksilver Resources conducts its Canadian operations through its wholly-owned subsidiary,Quicksilver Resources Canada Inc.At December 31,2007,Canadian reserves totaled 328Bcfe.Daily production aver-aged 56.9MMcfe,representing approximately 27%of the company's total 2007production.During 2007,KWK drilled 355gross (184net)productive wells.In 2008,it plans to drill about 300gross (170net)wells.As of December 31,2007,the company had approximately 311,000gross (226,000net)undeveloped acres in

Canada.

Investor Contact

R.C.Buterbaugh (817-665-4835)

Office

777West Rosedale,Fort Worth,TX 76104.Telephone 817-665-5000.Fax

817-665-5005.Email

quicksilver@https://www.wendangku.net/doc/ef14505799.html, Website

https://www.wendangku.net/doc/ef14505799.html,

Officers Chrmn T.F.Darden Pres &CEO G.Darden COO P .J.Cook SVP &CFO P .W.Cook

SVP,Secy &General Counsel J.C.Cirone

Board Members G.Darden T.F.Darden W.B.Dunn J.Hughes S.M.Morris W.Y.Rogers,III A.D.Self M.Warner Domicile Delaware Founded 1997Employees 505

Stockholders 770

Price as of Sep 26,2008$21.66Dividend Rate/Share Nil $10K Invested 5Yrs Ago $53,814Total Shares Outstg.(M)158.652-Wk Range

$44.98–18.03

Trailing 12-Month P/E 7.0Beta 1.09Market Capitalization(B)$3.436Trailing 12-Month EPS

$3.09

Tangible Book Val/Share

$6.76

Yield (%)

Nil Institutional Ownership (%)

Past Growth Rate (%)

1Year

3Years

5Years

9Years

Sales

43.7843.9837.8530.82Net Income

96.37

57.30

Ratio Analysis (Annual Avg.)Net Margin (%)

85.4145.8433.6123.80%LT Debt to Capitalization 35.5849.2948.5953.33Return on Equity (%)

58.3234.4124.93

20.79

2007200620052004Price/Sales 8.927.7911.1610.51Price/EBITDA

13.6312.0517.0318.85Price/Pretax Income 6.7923.0527.0741.55P/E Ratio

10.4432.4639.6960.39Avg.Diluted Shares Outstg (M)

168.0166.3164.9154.0

Figures based on calendar year-end

price

Per Share Data ($)2007200620052004200320022001200019991998Tangible Book Value 6.99 3.71 2.52 2.02 1.91 1.020.840.780.650.47Cash Flow 3.56 1.040.860.470.370.360.420.380.220.25Earnings 2.860.580.540.210.140.110.170.160.040.07Dividends Nil Nil Nil Nil Nil Nil Nil Nil Nil NA Payout Ratio Nil Nil Nil Nil Nil Nil Nil Nil Nil NA Prices:High 30.5826.3825.1012.63 5.61 4.39 3.42 1.65 1.30NA Prices:Low 16.4814.3411.14 5.35 3.26 2.80 1.510.600.55NA P/E Ratio:High 114646614239201033NA P/E Ratio:Low

Income Statement Analysis (Million $)Revenue

56139031018014112214312047.638.9Operating Income

36725220310079.270.781.774.421.122.9Depreciation,Depletion and Amortization 11978.855.240.732.130.228.624.614.012.4Interest Expense 71.644.121.715.720.219.823.822.18.70 6.70Pretax Income 73713212845.428.521.330.127.7 3.027.41Effective Tax Rate 34.8%28.9%31.8%31.2%35.1%35.1%35.9%36.5%NM 44.3%Net Income

47993.787.331.318.513.819.317.6 3.16 4.89

Balance Sheet &Other Financial Data (Million $)Cash 28.2 5.28

14.315.9 4.129.128.7312.8 2.56NA Current Assets 19017111466.249.744.835.347.418.9NA Total Assets 2,7761,8831,243888667530469440194191Current Liabilities 35919921283.580.568.552.146.511.7NA Long Term Debt 81491950639924924724824095.0NA Common Equity 1,06857638430424212994.486.869.666.7Total Capital 2,2871,658890787562433394374180NA Capital Expenditures 1,02159732923214889.067.419140.3NA Cash Flow 59917314272.050.644.048.042.217.2NA Current Ratio 0.50.90.50.80.60.70.7 1.0 1.6NA %Long Term Debt of Capitalization 35.655.456.950.744.457.163.164.152.8NA %Return on Assets 20.6 6.08.2 4.0 3.1 2.8 4.2 5.6 1.9NA %Return on Equity 58.3

19.525.411.510.012.421.322.5 6.2NA

Data as orig reptd.;bef.results of disc opers/spec.items.Per share data adj.for stk.divs.;EPS diluted.1998bal.sheet pro forma adjtd.as of Sept.30'99.E-Estimated.NA-Not Available.NM-Not Meaningful.NR-Not Ranked.UR-Under Review.

Primary Shares Outstanding (M)158.6Market Capitalization (B)$3.4Price as of 09/25/08

$23.06

Insitutional Ownership (%)

Holders

Shares (000)

Total Shares Held 247101,764New Positions

6310,566Increased Positions 776,406Decreased Positions 11221,010

Holder

Reported

Shares (M)

%Shares Outstg.

%Change from Prev.Period

Current Mkt.Value (M$)

FMR LLC

Jun'08

17.711.14-20.1w 408Capital World Investors

Jun'08 5.46 3.44-23.0w 126Barclays Global Investors UK Holdings Ltd Jun'08 4.79 3.02 3.48v 111NEUBERGER BERMAN,LLC

Jun'08 4.46 2.81 2.75v 103RAINIER INVESTMENT MANAGEMENT Jun'08 3.62 2.28100v 83.5GOLDMAN SACHS GROUP INC Jun'08 3.29 2.07-53.8w 75.8VANGUARD GROUP ,INC.(THE)Jun'08 3.21 2.0310.8v 74.1ADVISORY RESEARCH,INC.

Jun'08 3.20 2.02-19.6w 73.8SCOUT CAPITAL MANAGEMENT LLC Jun'08 2.89 1.82100v 66.7JENNISON ASSOCIATES LLC Jun'08

2.39 1.51-9.71w 55.1Total

51.032.15-6.97

1,176

Holder

Reported

Shares (M)

%Shares Outstg.

%Change from Prev.Period

Current Mkt.Value (M$)

FIDELITY INDEPENDENCE FUND

Jul'08 3.87 2.448.41v

89.2NEUBERGER &BERMAN GENESIS FUND Jun'08 2.98 1.88Nil 68.7FUNDAMENTAL INVESTORS INC

Jun'08 2.59 1.63Nil 59.8FIDELITY SELECT PORTFOLIOS -NATURAL GAS PORTFOLIO Jul'08 2.57 1.62-7.03w 59.2SMALLCAP WORLD FUND

Jun'08 2.50 1.58-16.9w 57.7KEELEY SMALL CAP VALUE FUND,INC.Jun'08 1.370.86Nil 31.5FIDELITY SELECT PORTFOLIOS -ENERGY Jul'08 1.320.83-2.39w 30.4Capital Research Global Investors Jun'08 1.250.79Nil 28.8FIDELITY BALANCED FUND

Jul'08 1.240.78-1.90w 28.6GOLDMAN SACHS MID-CAP VALUE FUND May'08

1.150.72-46.2w 26.5Total

20.813.13-6.50

480

Holder

Reported

DARDEN,THOMAS F.05/14/081,100v DUNN,W.BYRON 04/10/0816,058v

WAGNER,ROBERT N.

04/10/0810,712w DUNN,W.BYRON

04/10/088,942v ROGERS,W.YANDELL III 03/04/0824,252v DARDEN,GLENN 02/11/0833,048v CIRONE,JOHN C.02/11/082,448v SELF,ANNE DARDEN 02/08/0817,256v MORRIS,STEVEN M.

01/23/08

12,126v

Shares are "as reported"as of the transaction date.

v Buy

w Sell

Source:Standard &Poor's,Vickers.

Sub-Industry Outlook Stock Performance

Our fundamental outlook for the oil and gas exploration and production(E&P)sub-industry for the next12months is neutral.While crude oil and natural gas prices have risen so far this year,the shares of exploration and production companies have been mixed as oil and gas prices have quickly come down from highs seen earlier in the year. Sentiment appears to have shifted in the oil markets, and S&P expects oil prices to remain under pressure through2009on a stronger U.S.dollar, commodity market profit taking and equity withdrawal,and a more pessimistic outlook for

non-OECD economies.Offsets include continued Asian demand,OPEC actions,geopolitical factors and increased costs of production.

We expect world economic growth in2009to be the slowest since2003.U.S.growth is likely to slow before rising,the outlook for Europe has darkened, and growth in Asia is slowing,albeit from high levels.Still,oil demand weakness within the OECD regions is being offset by strength in Asia and the Middle East.As of September2008,Global Insight estimated that global oil demand growth would average0.53million b/d in2008and0.60million b/d in2009,compared with1.07million b/d in2007.On the supply side,Global Insight estimates global oil supply growth of2.09million b/d in2008and0.48 million b/d in2009,compared with a rise of0.11 million b/d in2007.

With oil prices falling and production rising,OPEC at its September9meeting agreed to trim "overproduction"relative to its output"targets."With major gains in new OPEC supply slated for2009and 2010,we believe the cartel will defend a price floor of around$100.OPEC meets again on December17, and we expect formal quotas to be cut by over1 million b/d from January2009.As of September8,using data from Global Insight,

S&P estimates that West Texas Intermediate(WTI)

spot oil prices will average about$114per barrel in

2008,$110in2009,and$108in2010.We expect WTI

prices to average about$122in the third quarter.

On the U.S.natural gas front,we see increased

production from shale plays being offset by

increased demand and reduced imports.As of

September8,using data from Global Insight,S&P

estimates Henry Hub bid week(a blend of spot and

contract)prices will average$9.52per million Btu in

2008,$9.55in2009,and$9.68in2010.

Year to date through September19,the S&P Oil&

Gas Exploration&Production Index rose3.9%,

versus a13.4%drop for the S&P1500Composite

Index.In2007,the sub-industry index climbed42.2%,

versus a3.6%gain for the1500.

--Michael Kay

GICS Sector:Energy

Sub-Industry:Oil&Gas Exploration&

Production

Based on S&P1500Indexes

Month-end Price Performance as of08/29/08

20042005200620072008

600

500

400

300

200

100

Sub-Industry Sector S&P1500

NOTE:All Sector&Sub-Industry information is based on the

Global Industry Classification Standard(GICS)

Sub-Industry:Oil&Gas Exploration&Production Peer Group*:Exploration&Production-Small

Peer Group

Stock

Symbol

Stk.Mkt.

Cap.

(Mil.$)

Recent

Stock

Price($)

Week

High/Low($)Beta

Yield

(%)

P/E

Ratio

Fair

Value

Calc.($)

Quality

Ranking

S&P

%ile

Return on

Revenue

(%)

LTD to

Cap

(%)

Quicksilver Resources KWK3,43621.6644.98/18.03 1.09Nil725.10B2885.435.6 Baytex Energy Trust BTE2,49826.3135.20/15.860.0211.416NA B-2825.719.7 Berry Petroleum'A'BRY1,75241.0162.15/30.99 1.190.71240.50A-3127.042.3 Cabot Oil&Gas COG4,01838.8872.92/32.100.760.32134.80B+9022.923.6 Cimarex Energy XEC4,14149.8474.50/36.880.890.5755.80NR7622.513.0 Comstock Resources CRK2,49054.1290.61/28.520.29Nil1545.50B-3210.035.0 Denbury Resources DNR5,31421.5240.32/18.760.85Nil1522.00B9026.232.6 Encore Acquisition EAC2,40845.1579.62/26.100.82Nil9045.00NR29 2.354.2 Forest Oil FST4,68452.1783.10/40.850.88Nil NM48.00B-7915.638.4 Goodrich Petroleum GDP1,69645.1986.18/16.63-0.33Nil NM NA C88NM43.2 McMoRan Exploration MMR1,53725.3035.52/10.70 1.49Nil31NA C23NM64.9 Penn Virginia PVA2,43558.2081.00/37.01 1.130.4NM46.60B+29 6.038.8 Plains Explor&Prod'n PXP4,03937.5479.86/32.25 1.05Nil850.80NR8412.538.4 St.Mary Land Exploration SM2,31237.1965.58/31.700.780.31138.20A-7919.333.8 Stone Energy SGY1,75944.2873.96/38.59 1.04Nil545.20B3324.131.1 NA-Not Available NM-Not Meaningful NR-Not Rated.*For Peer Groups with more than15companies or stocks,selection of issues is based on market capitalization.

Source:S&P.

S&P Analyst Research Notes and other Company News

August20,2008

11:21am ET...S&P INITIATES COVERAGE ON LP UNITS OF QUICKSILVER GAS SVCS WITH HOLD OPINION(KGS20.184***):This master LP gathers and processes natural gas and natural gas liquids.We believe that it will benefit from its strategic location on the Barnett Shale formation,and from its relationship with its general partner Quicksilver Resources(KWK24.71,NR)through KWK's strong drilling program.We see'08and'09earnings per unit at$0.92and$1.63. Our12-month target price of$23is based on an expected yield of6.4%on a

12-month forward annualized distribution estimate of$1.44and on our12-month target enterprise value to estimated EBITDA multiple of13X./T.Shafi

August7,2008

Quicksilver Resources Inc.reported unaudited earnings results for the second quarter and six months ended June30,2008.For the quarter,the company reported net income of$52.4million or$0.31per diluted share,up65%from the 2007second-quarter net income of$31.7million or$0.19per diluted share.The revenue for the quarter was$198,015,000compared to$136,501,000for the same period a year ago.Second-quarter2008net income includes a non-cash pre-tax loss of$10.3million or$0.04per diluted share on the company's investment in BreitBurn Energy Partners L.P.Per share data reflects the two-for-one stock split effected in the form of a stock dividend on January31,2008.For the six months, the company reported net income of$94,572,000or$0.56per diluted share on total revenue of$355,518,000compared to net income of$54,582,000or$0.33per diluted share on total revenue of$253,081,000for the same period a year ago. June27,2008

12:24pm ET...QUICKSILVER RESOURCES INC.(KWK39.27)UP2.73,CALYON UPGRADES QUICKSILVER(KWK)TO BUY FROM ADD...Analyst Jeb Armstrong tells salesforce he's raising the percentage of net asset value used in valuation by5%to65%-75%.Notes consensus oil&gas price forecasts have moved closer to his forecasts since his last update.Says long term price strips for oil&gas have moved up favorably,providing him greater confidence in forecasts.Says changes only affect rating on KWK,noting stock off some15%from recent high. Says identity of KWK's second stealth play remains mystery.Notes excitement over co.'s position in northeast British Columbia appears to have ebbed as attention turns to cos with exposure to Haynesville shale in northern Louisiana. Ups$47target to$51./B.Brodie

May8,2008

Quicksilver Resources Inc.announced earnings results for the first quarter ended March31,2008.For the period,the company reported total revenues of$157.5 million and net income of$42.1million or$0.25per share against total revenues of $116.5million and net income of$22.8million or$0.14per share for the same period a year ago.

February27,2008

Quicksilver Resources Inc.announced earnings results for the fourth quarter and full year ended December31,2007.The company reported record net income for the fourth quarter of2007of$396.1million or$2.35per diluted share,including $366.8million or$2.17per diluted share associated with the divestiture of the company's Northeast Operations.The company's comparative fourth-quarter 2006net income was$19.7million or$0.12per diluted share.Adjusted net income, a non-GAAP measure that excludes items associated with the divestment of the company's Northeast Operations,was$29.3million or$0.18per diluted share for the fourth quarter of2007,up approximately49%as compared to$19.7million or $0.12per diluted share in the prior-year quarter.Total revenues for the fourth quarter of2007were$149.1million compared to$102.0million in the prior-year quarter.Full year2007net income was a record$479.4million or$2.86per diluted share,as compared to full-year2006net income of$93.7million or$0.58per diluted share.Per share data reflects the two-for-one stock split effected in the form of a stock dividend on January31,2008.Total revenue for the period was $561,258,000against$390,362,000for the same period a year ago.Adjusted net income for the period was$116,107,000or$0.70per diluted share against

$93,719,000or$0.58per diluted share for the same period a year ago.First-quarter 2008production volumes are expected to average in the range of210MMcfe to 220MMcfe per day.

February4,2008

Up2.31to30.93...Announces that2007reserve additions,a company-record of nearly608bln cubic feet of natural gas equivalent(Bcfe),replaced780%of total year production,another company-record of about78Bcfe.Says reserves at 12/31/07totaled about1.55trillion cubic feet of natural gas equivalents(Tcfe), essentially unchanged from prior-year level despite the divestment of apx.546 Bcfe of reserves associated with co.'s mature properties in Michigan,Indiana and Kentucky in11/07.

December18,2007

Up7.75to57.17...Says its board unanimously approved a capital budget for'08 which includes approximately$650M for drilling,$160M for gathering and processing facilities(incl.$80M associated with Quicksilver Gas Service LP), $70M for leasehold and$5M for other property and equipment.Citigroup,RBC Capital raise price targets.

Source:S&P.

Of the total 25companies following KWK,24analysts currently publish recommendations.

No.of Ratings

%of Total

1Mo.Prior 3Mos.Prior

Buy

72975Buy/Hold 9371010Hold

62567Weak Hold 1411Sell

0000No Opinion 14

11Total

100

2524

BUY/HOLD

Banc of America Securities Llc.Calyon Securities (usa)Inc.Canaccord

Capital

Coker &Palmer

Inc.

Credit

Suisse

First Boston Deutsche Bank

Goldman Sachs &Co.Harris Nesbitt

JP Morgan Securities Jefferies &Company

Keybanc Capital

Mkts /

McDonald

Ladenburg Thalmann

&Co.Merrill

Lynch Research

Pickering Energy Partners,Inc.Pritchard Capital Partners,LLC RBC Capital Markets (US)Raymond James &Assoc,Inc.Simmons &Company Int'l Smith Barney

Southcoast Capital Corp.Thomas Weisel Partners Tristone Capital Inc.UBS Warburg

Wachovia Securities Weeden &Co.

Fiscal Years Avg Est.

High Est.

Low Est.

#of Est.

Est.P/E

2009 1.94 2.62 1.192511.22008

1.43 1.75 1.272315.12009vs.

200836%

50%

-6%

9%-26%Q3'090.520.700.391241.7Q3'08

0.380.490.302557.0Q3'09vs.Q3'08

37%

43%

30%

-52%

-27%

A company's earnings outlook plays a major part in any investment decision.Standard &Poor's organizes the earnings estimates of over 2,300Wall Street analysts,and provides their consensus of earnings over the next two years.This graph shows the trend in analyst estimates over the past 15months.

For fiscal year 2008,analysts estimate that KWK will earn $1.43.For the 2nd quarter of fiscal year 2008,KWK announced earnings per share of $0.31,representing 22%of the total annual

estimate.For fiscal year 2009,analysts estimate that KWK's earnings per share will grow by 36%to $1.94.

Source:S&P ,I/B/E/S International,Inc.

Quantitative Evaluations

In contrast to our qualitative STARS recommendations, which are assigned by S&P analysts,the quantitative evaluations described below are derived from proprietary arithmetic models.These computer-driven evaluations may at times contradict an analyst's qualitative assessment of a stock.One primary reason for this is that different measures are used to determine each.For instance,when designating STARS,S&P analysts assess many factors that cannot be reflected in a model,such as risks and opportunities,management changes,recent competitive shifts,patent expiration, litigation risk,etc.

S&P Quality Ranking

Growth and stability of earnings and dividends are deemed key elements in establishing S&P's Quality Rankings for common stocks,which are designed to capsulize the nature of this record in a single symbol.It should be noted,however,that the process also takes into consideration certain adjustments and modifications deemed desirable in establishing such rankings.The final score for each stock is measured against a scoring matrix determined by analysis of the scores of a large and representative sample of stocks.The range of scores in the array of this sample has been aligned with the following ladder of rankings:

A+ A A-B+ NR Highest

High

Above Average

Average

Not Ranked

B-

Below Average

Lower

Lowest

In Reorganization

S&P Fair Value Rank

Using S&P's exclusive proprietary quantitative model, stocks are ranked in one of five groups,ranging from Group5,listing the most undervalued stocks,to Group1, the most overvalued issues.Group5stocks are expected to generally outperform all others.A positive(+)or negative(-)Timing Index is placed next to the Fair Value ranking to further aid the selection process.A stock with a(+)added to the Fair Value Rank simply means that this stock has a somewhat better chance to outperform other stocks with the same Fair Value Rank.A stock with a(-) has a somewhat lesser chance to outperform other stocks with the same Fair Value Rank.The Fair Value rankings imply the following:

5-Stock is significantly undervalued

4-Stock is moderately undervalued

3-Stock is fairly valued

2-Stock is modestly overvalued

1-Stock is significantly overvalued

S&P Fair Value Calculation

The price at which a stock should trade at,according to S&P's proprietary quantitative model that incorporates both actual and estimated variables(as opposed to only actual variables in the case of S&P Quality Ranking). Relying heavily on a company's actual return on equity, the S&P Fair Value model places a value on a security based on placing a formula-derived price-to-book multiple on a company's consensus earnings per share estimate.

Insider Activity

Gives an insight as to insider sentiment by showing whether directors,officers and key employees who have proprietary information not available to the general public,are buying or selling the company's stock during the most recent six months.Funds From Operations(FFO)

FFO is Funds from Operations and equal to a REIT's net income,excluding gains or losses from sales of property, plus real estate depreciation.

Volatility

Rates the volatility of the stock's price over the past year. Technical Evaluation

In researching the past market history of prices and trading volume for each company,S&P's computer models apply special technical methods and formulas to identify and project price trends for the stock.

Relative Strength Rank

Shows,on a scale of1to99,how the stock has performed versus all other companies in S&P's universe on a rolling13-week basis.

Global Industry Classification Standard(GICS)

An industry classification standard,developed by Standard&Poor's in collaboration with Morgan Stanley Capital International(MSCI).GICS is currently comprised of10Sectors,24Industry Groups,67Industries,and147 Sub-Industries.

Exchange Type

ASE-American Stock Exchange;NNM-Nasdaq National Market;NSC-Nasdaq SmallCap;NYSE-New York Stock Exchange;BB-OTC Bulletin Board;OT-Over-the-Counter;TO-Toronto Stock Exchange. Dividends on American Depository Receipts(ADRs)and American Depository Shares(ADSs)are net of taxes (paid in the country of origin).