On Sep 30, we issued an updated research report on oil and gas producer Quicksilver Resources Inc. (KWK). Though the company is burdened with high levels of debt its strategic alliances with strong partners will boost results going forward.
The company reported a loss of 7 cents in the second quarter of 2014, in line with Zacks Consensus Estimate. Total production of 23.3 billion cubic feet equivalent (Bcfe) in the reported quarter declined from 26.1 Bcfe in the year-ago quarter. The decline was primarily due to the Tokyo Gas transaction in the middle of the second-quarter 2013 and the natural decline in Canadian volumes due to minimal capital activity.
Quicksilver Resources is currently pursuing several initiatives to expand its operations. During the first six months of 2014, the company invested around $88 million, up 57.6% year over year. For 2014, the company intends to make capital investments of $130–$135 million. The scheduled completion of these growth projects will allow the company to increase its reserves.
The company is also working to contain cost and lower operating expenses. It cut its operating expenses by 8.2% year over year to $104.5 million, primarily due to lower lease operating as well as gathering, processing and transportation expenses.
Quicksilver Resources does not hold transportation related assets for delivering its output and, as such, its marketability depends heavily upon the availability, proximity and capacity of pipeline systems owned by third parties. Disruptions in transportation operations resulting from weather conditions, accidents, loss of pipeline or gathering system access could severely impact the company’s ability to market, fractionate and deliver production.
Like Quicksilver Resources, other oil and gas companies are also monetizing their non-core holdings to explore better opportunities. TOTAL S.A. (TOT) continues to divest and acquire assets to strengthen its portfolio. This French oil and gas major plans to divest assets worth $10 billion in the 2015–2017 period. Cimarex Energy Company (XEC) announced that it has signed various agreements to sell $326 million of oil and gas assets.
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