Quicksilver Resources Inc
) posted a loss per share of 13 cents in the second quarter of 2012
versus earnings per share of 6 cents in the year-ago quarter. The
loss in the reported quarter was wider than the Zacks Consensus
Estimate of a loss of 6 cents.
The weak quarterly earnings performance stemmed from lower natural
gas and natural gas liquids (NGL) prices as well as a decline in
core production volumes.
On a GAAP basis, the company reported a loss of $3.96 per share
compared with net income of 61 cents per share in the year-earlier
quarter. The difference between GAAP and operating earnings of
$3.83 per share during the quarter was due to a non-cash impairment
Total revenue at the end of the second quarter 2012 was $168.6
million, down 32.1% from $248.4 million in the year-ago quarter.
The year-over-year decline in revenue was mainly due to lower
production from the company's Horn River Basin operation and slower
completion activity at the Barnett Shale play. This was compounded
by fall in natural gas output from ongoing wells and temporary
shutdowns of inefficient facilities.
Reported quarter revenue also lagged the Zacks Consensus Estimate
of $187 million.
Quicksilver Resources achieved average daily production of 359
million cubic feet of natural gas equivalent (MMcfe) in the second
quarter 2012, down 14% from 417 MMcfe in the second quarter 2011.
The production mix comprising roughly 80% natural gas and 20% NGL,
crude oil and condensate remained unchanged over the sequentially
Total realized prices during the second quarter 2012 declined 15.7%
to $4.61 per thousand cubic feet equivalent (Mcfe) from $5.47 per
Mcfe, resulting from lower natural gas, NGL and oil prices. The
average realized oil, NGL and natural gas prices in the second
quarter were a respective $85.73 per barrel (down 11%), $39.36 per
barrel (down 0.05%) and $3.98 per thousand cubic feet (Mcf) (down
Total operating expenses incurred by the company during the
reported quarter shot up 573.6% year over year to $1,143.2 million
owing to an impairment cost of $992.0 million.
Excluding the impairment charge, operating expenses dropped 11% to
151.2 million year over year. The decrease in expenses was mainly
due to lower lease expenses and cost of natural gas purchased
partially offset by an increase in general and administrative
expenses. Lease operating expenses fell due to closure of
unproductive wells in the Barnett play resulting from decline in
water hauling and gas costs and lower well workover activity in the
US and Canada .
Interest expenses during the quarter were $40 million versus $48
million in the prior-year period. The year-over-year decrease in
expenses was on account of lower amortization of deferred financing
Cash and cash equivalents of the company as of June 30, 2012 were
$14.0 million versus $13.1 million as of December 31, 2011.
Long-term debt at Quicksilver, as of June 30, 2012, was $2.1
billion versus $1.9 billion as of December 31, 2011.
Capital expenditure for the second quarter 2012 amounted to $155
million. Out of the total cost, $131 million was allocated for
drilling and completion activities, $5 million for midstream
activities, $11 million associated with acreage purchases and $8
million on corporate and other.
The company anticipates production volumes in the third quarter
2012 in the range of 385-400 MMcfe per day. For 2012, the average
output is expected in the range of 365-380 MMcfe per day as
Quicksilver will further reduce its drilling activity in the
The company projects third quarter production taxes; gathering,
processing, and transportation expenses; and lease operating
expenses in the corresponding range of 21-23 cents per Mcfe,
$1.16-$1.20 per Mcfe and 60-64 cents per Mcfe. General &
administrative expenses and depreciation, deletion and amortization
expenses are expected in the band of 43-47 cents per Mcfe and
$1.30-$1.35 per Mcfe, respectively.
The company will continue its hedging of production capacities to
safeguard against fluctuating prices. The company has hedged 272
MMcfe/d of output which translates to more than 70% of its expected
total equivalent production for the remainder of 2012 and 160
MMcfe/d for 2013 at a weighted average price of $6.02 per Mcfe and
$5.30 per Mcfe, respectively.
The company has plans to incur capital expenses of $70 million for
the latter half of 2012 and roughly $360 million in oil and gas
related activities in 2012.
A Quicksilver peer,
Chesapeake Energy Corporation
), announced operating earnings for the second quarter 2012 of 6
cents per share, missing the Zacks Consensus Estimate of 8 cents,
while falling significantly short of the year-ago earnings of
76 cents per share.
Total revenue of the company increased 2.1% year over year to
$3,389 million and surpassed the Zacks Consensus Estimate of $1,891
Quicksilver reported lackluster earnings outcome in the second
quarter 2012 in the wake of sluggish production and weak prices. We
are still encouraged by the company's hardened focus on reducing
its operating costs and capital expenses which will aid in
generating profitable results. In addition, significant progress in
Quicksilver's negotiations regarding joint venture programs could
also add to the top-line growth.
However, compliance with environmental regulations and disruption
in transportation systems arising from weather conditions and
pipeline accidents could hurt the company's growth objectives in
the long run.
Quicksilver Resources currently retains a Zacks #3 Rank, implying a
short-term Hold rating.
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.
CHESAPEAKE ENGY (CHK): Free Stock Analysis
QUICKSILVER RES (KWK): Free Stock Analysis
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