Quicksilver Resources Inc. (KWK)
Q3 2010 Earnings Call Transcript
November 8, 2010 11:00 am ET
Rick Buterbaugh – VP, IR and Corporate Planning
Glenn Darden – President and CEO
Phil Cook – SVP and CFO
Toby Darden – Chairman
Dave Kistler – Simmons & Company
Noel Parks – Ladenburg Thalmann
Renee Iceman [ph] – JPMorgan
Jeff Robertson – Barclays Capital
Kim Pacanovsky – MLV
Previous Statements by KWK
» Quicksilver Resources Inc. Q2 2010 Earnings Call Transcript
» Quicksilver Resources Q1 2010 Earnings Call Transcript
» Quicksilver Resources Inc. Q4 2009 Earnings Call Transcript
Thank you. Mr. Buterbaugh, you may begin your call.
Thank you and good morning. Joining me today are Toby Darden, Chairman; Glenn Darden, President and Chief Executive Officer; Phil Cook, Senior Vice President and Chief Financial Officer; and Chris Cirone to Senior Vice President and General Counsel.
This morning the company issued a press release detailing Quicksilver’s results for the third quarter of 2010. If you just do not have a copy of this release, you can retrieve a copy of it on the company’s Web site at www.qrinc.com under the News and Updates tab.
During today’s call, the company will be making forward-looking statements which are subject to risks and uncertainties. Actual results might differ materially from those projected in these forward-looking statements. Additional information concerning risk factors that could cause such differences is detailed in the company’s filings with the SEC.
Today’s presentation will include information regarding adjusted net income which is a non-GAAP financial measure. As required by the SEC rules, reconciliations of adjusted net income to the most directly comparable GAAP measure are available on our Web site under the Investor Relations tab.
Let me just say at the outset that we cannot comment on the letter that our Board of our Directors received from Darden family beyond what has already been publicly disclosed, so we will not be taking questions on that subject.
At this time, I’ll turn the call over to Glenn Darden to review our financial and operating activities in more detail.
Thank you, Rick and good morning. Quicksilver Resources reported adjusted net income of $28.7 million, $0.17 per diluted share for the third quarter of 2010. This compares to $0.25 per diluted share in the third quarter of 2009 and $0.18 per diluted share in the prior quarter of 2010.
Quicksilver’s daily production for the quarter was at a record high for company averaging more than 362 Mcfe per day, up 16% year-over-year.
Operationally, the company drilled 19 net wells in the Fort Worth Basin, Barnett play and connected 24 net wells to sales in the quarter. Quicksilver currently has three rigs running in the basin, a level that will be sustained through the year.
The company also has four frac crews working and expects to reduce its inventory of drill but on completed wells in the Barnett to approximately 90 wells by year end.
We continue to drill at a reduced level in the Horseshoe Canyon in coal project in Alberta, but the company made an acquisition in October of approximately 23 Bcf of proved developed reserves for $22 million just few weeks ago.
This was in an area that Quicksilver operates, so the purchase was a very efficient buy. Excluding this recent acquisition, we project Canadian volumes to be 66 million to 70 million cubic feet of gas per day, roughly flat with last year.
In the Horn River Basin in northeast British Columbia, the company completed its third Devonian shale well and is beginning completion work on the fourth. The C-29-D, this third well produced at initial rates in excess of 14 million cubic feet a day and has averaged over 12 million cubic feet a day for the first 22 days of production up to today’s call. We currently are selling gas from this project through a permanent sales line connecting to the Spectra pipeline that goes to Fort Nelson.
The company recently spudded a shallower horizontal well to test for oil in the Exshaw formation at approximately 4,400 feet. We’ve had good oil shows drilling through this zone in each deeper gas well we have drilled, so we are excited about this testing of the formation.
Also on the new venture front, we continue to add acreage in the Greater Green River Basin of Southern Wyoming and Northern Colorado. Quicksilver now has approximately 140,000 net acres in the basin which we believe to be prospective for both oil and natural gas from the Niobrara formation.
We’ve scheduled two exploratory wells on this acreage blocked later in 2011. We continue to monitor drilling and completion work offsetting our acreage in northern Montana and what is termed the Alberta Bakken play. The company has a large held-by production acreage position and is looking to do some of its own testing later in 2011.
On October 1, Quicksilver closed on the sale of all of its interest in Quicksilver Gas Services to Crestwood Holdings LLC for $701 million in cash and $238 million in assumed debt.
We have an additional $72 million in earn-out payments projected to come in over the next two years as well. This was an excellent transaction for the company, and that resulted in a balance sheet improvement of roughly $1 billion for Quicksilver.