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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