Quicksilver Resources Inc. (KWK) reported first quarter 2011 adjusted earnings per share (EPS) of 2 cents, substantially lower than the year-ago figure of 20 cents. Earnings during the quarter also missed the Zacks Consensus Estimate of 4 cents.
On a GAAP basis, the company reported a loss of 42 cents per share compared with earnings of 5 cents per share in the year-ago quarter. The difference between GAAP and operating earnings during the quarter was due to a non-cash impairment charge of $49.1 million, related to Quicksilver’s Canadian full cost pool, a non-cash loss of $23.3 million associated with the company's equity interest in BreitBurn Energy Partner's (BBEP) and a $1.3 million gain on the sale of BBEP units.
Total Revenue
Total revenue at the end of the first quarter 2011 was $212.2 million, down 4.5% from $222.1 million in the year-ago quarter. The year-over-year decline in revenue was mainly due to lower performance from its Natural Gas, NGL and Oil segment.
Reported quarter revenue surpassed the Zacks Consensus Estimate of $195 million.
Operational Update
Quicksilver Resources achieved average daily production of 392.3 million cubic feet of natural gas equivalent (MMcfe) in the first quarter 2011, an increase of 23.2% from 318.4 MMcfe in the first quarter of 2010.
The production volumes comprised roughly 81% natural gas, 18% natural gas liquids (NGL) and 1% crude oil and condensate.
Total realized prices during the first quarter 2011 declined 23.3% to $5.39 per Mcfe, resulting from lower natural gas prices realized in the year, offset by a rise in oil and NGL prices. The average realized oil, NGL and natural gas prices during the year were $87.05 per barrel (up 21.9%), $37.84 per barrel (up 21.3%), and $5.07 per thousand cubic feet (Mcf) (down 31.8%), respectively.
Total expenses incurred by the company during the reported quarter rose 45.2% year over year. The increase in expenses was mainly due to a 175% increase in gathering, processing and transportation expenses of the company. Other categories of expenses during the quarter decreased from year-ago levels, reflecting the effect of cost control measures undertaken by the company.
Interest expenses during the quarter were $46.2 million versus $44.5 million in the prior-year quarter.
Financials
Cash and cash equivalents of the company as of March 31, 2011 were $0.002 million versus $0.6 million as of March 31, 2010.
Cash provided by operating activities during the quarter was $11.7 million versus $65.7 million a year ago.
The capital cost of the company for the first quarter of 2011 amounted to $197 million. Out of the total expenditure, $108.3 million was allocated for drilling to completion activities, $39.4 million for midstream activities, $47.3 million used for acreage purchases and $ 2 million on other assets.
Capital expenditure of the company for 2011 is expected to be $480 million.
Long-term debt at Quicksilver, as of March 31, 2011, was $1.88 billion versus $1.74 billion as of December 31, 2010.
Guidance
The company expects production volumes in the second quarter 2011 to increase by 8% sequentially to reach the neighborhood of 420– 430 MMcfe per day.
The company estimates production taxes; gathering, processing, and transportation expenses; and lease operating expenses in the corresponding range of 21–23 cents per Mcfe, $1.21–$1.25 per Mcfe and 57–62 cents per Mcfe. General & administrative expenses and depreciation, deletion and amortization expenses are expected to be 47–51 cents per Mcfe and $1.43–$1.48 per Mcfe, respectively.
The company has hedged about 60% of its expected total production for the second quarter of 2011. About 190 MMcf per day of Quicksilver's natural gas for the second quarter is hedged through collars at a floor price of $5.95 per Mcf. The company also has in place fixed-price swaps at a price of $38.84 per barrel for about 10,500 barrels per day of its NGL production for the second quarter and full year 2011.
Peer Comparison
At its peer, Chesapeake Energy Corporation (CHK) announced operating earnings for the first quarter 2011 of 75 cents per share, surpassing the Zacks Consensus Estimate of 70 cents, while falling short of the year-ago earnings of 82 cents per share.
Total revenue of the company plunged 42% year over year to $1,612 million, and was way below the Zacks Consensus Estimate of $2,653 million.
Quicksilver Resources currently retains a Zacks #3 Rank (short-term Hold rating) on the stock.
Based in Fort Worth, Texas, independent exploration and production company Quicksilver Resources is primarily engaged in the development of long-lived, unconventional onshore natural gas reserves in the North American continent.
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