Quicksilver Resources to Redeem Senior Notes - Analyst Blog

Independent oil & gas company, Quicksilver Resources Inc. KWK, announced that it plans to redeem all its current outstanding Senior Notes due in 2015 and 2016. Redemption related payment is expected to be done by April 28, 2014.

Senior Notes due in 2015 include a principal amount of $10.5 million with a coupon rate of 8.25% while 2016 Senior Notes are worth $8.1 million with a coupon rate of 11.75%. The holders of the Senior Notes will receive the principal and a percentage of the principal as bonus and all the accrued and unpaid interest till the date of redemption. 2015 Notes will receive 101.938% of the principal while the 2016 Notes will get 105.875% of the principal.

Quicksilver reported a loss of 3 cents the in fourth quarter compared with the Zacks Consensus Estimate of a loss of 4 cents. However, revenues for the quarter lagged both the consensus estimate and the year-ago figure.

The company's cash balance improved substantially from $5.0 million as of Dec 31, 2012 to $89.1 million as of Dec 31, 2013, primary due to the proceeds from the Tokyo Gas transaction. In 2013, Quicksilver repaid $1.3 billion of debts and issued new debts worth $1.2 billion.

The Zacks Rank #3 (Hold) company has now reported negative earnings surprises in two of the last four quarters with an average negative surprise of 58.3%. The negative surprise can be attributed to a large sum of interest expense paid during the year which digested roughly 54.2% of the total operating income.

The redemption of debt will lower the leverage and interest burden of the company going forward. Also, Quicksilver expects to invest $136 million in 2014. We expect these initiatives will help the company to not only report in the green but also to reduce outstanding debt thereby strengthening its balance sheet.

Other Stock to Consider

Some better-ranked stocks in the same industry include Range Resources Corporation RRC, Clayton Williams Energy, Inc. CWEI and World Point Terminals, LP WPT. All these stocks sport a Zacks Rank #1 (Strong Buy).