Texas-based oil and natural gas company, Quicksilver Resources Inc. (KWK) provided operational update on its completion of a well in the Delaware Basin in West Texas and of an eight-well pad in the Horn River Basin located in the British Columbia.
The company has a combined acreage of 105,000 acres in the Pecos County and in the southern Midland and Delaware basins in West Texas. In the Horn River Basin, Quicksilver holds a 130,000 net acre position.
Update on West Texas
Quicksilver achieved a 1,500-foot horizontal lateral in its Price Ranch #1 well which was completed in the Third Bone Springs play with six fracture stages. The initial rate of output was 300 barrels of oil equivalent per day ("Boed") and had an average 10-day flow rate of 200 Boed. The well in which the company has a 100% working interest includes an energy mix of 80% oil and 20% natural gas.
Update on Horn River Basin
In the Horn River Basin, production in the eight-well pad is ready to come online. The wells were completed with laterals ranging from 5,400 feet to 8,600 feet and have surpassed initial output expectations with individual flow rates between 23 million cubic feet of natural gas per day (“MMcfd”) and 34 MMcfd. A total of five Muskwa and three Klua wells were drilled. Presently, the company is clocking output capacity of 73 MMcfd from three of the operating wells while the rest are shut-in due to minimum midstream commitments.
We believe completion of the Bone Springs formation will provide a boost to the oil drilling program in West Texas. In addition, future wells that will be drilled in the Bone Springs play are expected to have longer laterals and large fracture treatments which will result in greater production volumes and propel top-line outcomes.
The combined positive effect of a gradual hike in natural gas prices in the US market and significant progress in the Horn River Basin will be a major revenue churner in the near term. At the same time, Quicksilver’s increasing effort to integrate the natural gas business in the downstream markets including liquid natural gas (LNG) exports also looks encouraging.
However, unexpected breakdown in operations, regulatory hurdles and reliance on third parties for marketability of output are generic risks that could limit growth opportunities for the company.
Quicksilver anticipates production volumes in the third quarter 2012 in the range of 385–400 million cubic feet of natural gas equivalent per day ("MMcfed"). For 2012, the average output is expected in the range of 365–380 MMcfe per day.
The Zacks Consensus Estimate for the third quarter and full year 2012 are currently pegged at 2 cents per share and 21 cents per share, respectively.
The company holds a Zacks #3 Rank implying a short-term Hold rating. The company’s closest peer is Chesapeake Energy Corporation (CHK).
Quicksilver Resources Inc. is an 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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