Quicksilver Posts Mixed Bag - Analyst Blog

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Quicksilver Resources Inc. ( KWK ), on an adjusted basis, reported a loss of 1 cent per share in the fourth quarter 2012 versus breakeven earnings posted in the year-ago quarter. Pro forma loss lagged the Zacks Consensus Estimate of 1 cent.

The bottom line in the reported quarter was affected by lower production and falling prices.

On a GAAP basis, the company reported a loss of $6.47 per share compared with earnings of 14 cents in the year-ago quarter.

Quicksilver Resources' 2012 operating loss was 27 cents compared with earnings of 12 cents reported in 2011. 2012 loss was slightly wider than the Zacks Consensus Estimate of a loss of 25 cents.

GAAP loss for 2012 was $14.61 per share versus earnings of 52 cents per share n 2011.

Revenue

Total revenue at the end of fourth quarter 2012 was $179.1 million, down 19.7% from $223.1 million reported in the year-ago quarter.

Reported quarter revenue surpassed the Zacks Consensus Estimate by 4.1%.

Quicksilver generated total revenue of $670.8 million in 2012 compared with $943.6 million in 2011.

For 2012, total revenue beat the Zacks Consensus Estimate of $663.0 million.

The decline in top-line were due to the lower sales revenue from natural gas as well as oil.

Operational Update

Quicksilver Resources achieved average daily production of 342.4 million cubic feet of natural gas equivalent (MMcfe) in the fourth quarter 2012, a decrease of 17% from 412.5 MMcfe in the fourth quarter of 2011.

For full-year 2012, production averaged 360.0 MMcfe per day, reflecting a fall of 12.7% from the 2011 level.

Output from the Barnett Shale and Horseshoe Canyon dwindled partially offset by a ramp-up in production activities at the Horn River play.  

Reserves comprised roughly 76% natural gas, 23% natural gas liquids (NGL) and 1% crude oil and condensate.

Total realized prices excluding hedging during the quarter declined 17.0% year over year to $3.65 per thousand cubic feet equivalent (Mcfe), on account of weak natural gas, natural liquids and oil prices realized. The average realized oil, NGL and natural gas prices during the year were $77.96 per barrel (down 9.3%), $29.85 per barrel (down 41.2%), and $3.20 per thousand cubic feet (Mcf) (down 5.8%), respectively.

Lease operating expenses incurred by the company during the reported quarter and the year declined 22.3% and 7.3%, respectively. A reduction in lease operating costs at the Barnett and Horn river plays resulted in lower costs.

Financials

Capital expenditure for fourth quarter 2012 amounted to $31.0 million. Out of the total expenditure, $10.0 million was allocated for drilling and completion activities, $7.0 million used for new acreage purchases and $14.0 million on capitalized interest and overhead costs.

Long-term debt at Quicksilver, as of Dec 31, 2012, was $2.06 billion versus $1.9 billion as of Dec 31, 2011.

Operating cash flow at year-end 2012 was $222.2 million versus $253.0 million at the end of 2011.

Guidance

The company expects average daily production volumes in the first quarter 2013 in the range of 360-365 (MMcfe) per day. For full year 2013, Quicksilver Resources set its output volumes at 335-345 MMcfe per day.

In the first quarter, the company estimates production taxes; gathering, processing, and transportation expenses; and lease operating expenses in the corresponding range of 14-16 cents per Mcfe, $1.20-$1.22 per Mcfe and 80-82 cents per Mcfe. General & administrative expenses and Depreciation, depletion and amortization expenses are expected to be 55-57 cents per Mcfe and 52-54 cents per Mcfe, respectively.

Additionally, the company has hedged about 200 million cubic feet per day (MMcfd) of natural gas for 2013 at a floor price of $5.10 per Mcf. For 2014 and 2015, the company has in place fixed-price swaps at a price of $5.08 and $5.23 per Mcf for about 170 MMcfd and 150 MMcfd natural gas production, respectively. In addition, Quicksilver for the period 2016 to 2021 has hedged around 40 MMcfd of gas production at an average price of $4.48 per Mcf.

Other Exploration and Production Company Releases

Plains Exploration & Production Company ( PXP ) posted fourth-quarter 2012 pro forma earnings per share of 41 cents, missing the Zacks Consensus Estimate of 53 cents.

Noble Energy Inc. ( NBL ) reported adjusted earnings per share of $1.65 for the fourth quarter 2012, which comfortably surpassed the Zacks Consensus Estimate of $1.07.

Anadarko Petroleum Corporation ( APC ) posted net earnings from continuing operations of 91 cents per share in fourth quarter 2012, beating the Zacks Consensus Estimate of 70 cents.

Our View

We believe the company's Barnett Shale asset would be the major return provider in the upcoming quarters. Given its increasing focus on the natural gas business, we expect Quicksilver to capitalize on recovering gas prices, going forward. Moreover, the company's strong hedging program will further help in keeping margins stable.

However, deferred construction at the Horn River Basin for the proposed natural gas facility and continued limited activity at the Horseshoe Canyon play could act as potential negatives.

Quicksilver Resources currently retains a Zacks Rank #3 (Hold). Based in Fort Worth, Texas, Quicksilver Resources is primarily engaged in the development of long-lived, unconventional onshore natural gas reserves in the North American continent.



ANADARKO PETROL (APC): Free Stock Analysis Report

QUICKSILVER RES (KWK): Free Stock Analysis Report

NOBLE ENERGY (NBL): Free Stock Analysis Report

PLAINS EXPL&PRD (PXP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: APC , KWK , NBL , NGL , PXP

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