Quicksilver Draws 2011 Capex Plans - Analyst Blog

Quicksilver Resources Inc. (KWK) outlined its capital spending plans and provided its production volumes guidance for 2011.

Quicksilver Resources expects capital expenditure in 2011 to approximate $455 million. Of the capital budget for 2011, the company has slated roughly $280 million for drilling and completion activities, $85 million for gathering and processing facilities, $50 million for leasehold and $40 million for other property and equipment.

Regionally, Quicksilver Resources plans to spend about $320 million in Texas, $110 million in Canada and $25 million combined in other areas in the United States.

Quicksilver Resources expects its 2011 capital program to grow average daily production volumes by more than 20% from the estimated 2010 levels and fund the ongoing evaluation of the company's high-potential exploratory acreage positions in the Horn River and Greater Green River basins.

Production volumes for 2011 are anticipated in the range of 425-435 million cubic feet of natural gas equivalents per day (MMcfe/d), comprising  roughly 80% natural gas and 20% natural gas liquids and crude oil.

Quicksilver Resources' capital expenditures include about $40 million for exploratory drilling and completion, and $80 million for infrastructure and leasehold for its extensive leasehold in the Horn River Basin of British Columbia and the Greater Green River Basin in northern Colorado.

In the Fort Worth Basin, the company expects to operate two rigs throughout the year resulting in the drilling and completion of roughly 40 gross (33 net) wells. The company also estimates to drill uncompleted wells of about 45 gross (43 net) in the Fort Worth Basin.

Additionally, Quicksilver Resources has about 50% of its projected 2011 production hedged at weighted-average floor prices of $6.06 per thousand cubic feet of natural gas and $38.33 per barrel of natural gas liquids, underpinning a substantial portion of its capital program.

In the third quarter of 2010, Quicksilver Resources reported earnings of 17 cents per share, down 32% from last year's earnings of 25 cents. Net revenues of $237.7 million, however, grew 15% from the year-ago revenues on account of a 10% rise in the company's sales volumes. Average daily production in the quarter was 362 MMcfe, reflecting an increase of 16.4% year over year.

For the fourth quarter of 2010, the company expects production volumes of roughly $385–$395 MMcfe/d. The Zacks Consensus earnings estimate for the fourth quarter, fiscal 2010 and fiscal 2011 are 16 cents, 66 cents and 35 cents, respectively.

Quicksilver Resources currently has a Zacks #3 Rank (short term Hold rating), in line with the company's closest peers Chesapeake Energy Corporation (CHK) and Denbury Resources Inc. (DNR).