Quicksilver Resources Set to Gain from Major Shale Plays - Analyst Blog

On Jun 24, we issued an updated research report on Quicksilver Resources Inc. KWK. The oil and gas operator is poised to benefit from large-scale investments directed primarily at its key shale plays — the Barnett and the Horseshoe Canyon.

 

Quicksilver Resources expects production from an additional 100 wells to come online in the Horseshoe Canyon by late 2014. In addition, increased drilling activities at the Barnett Shale will result in higher volumes in the coming quarters. We believe Quicksilver's concentrated efforts on developing these assets will bode well for its future growth.

 

However, strict environment legislations could limit Quicksilver's profitability. Moreover, disruption in transportation operations resulting from weather conditions, accidents, loss of pipeline or gathering system access could act as headwinds. 

 

Quicksilver Resources, a Zacks Rank #3 (Hold) stock, recorded wider-than-expected loss in the first quarter of 2014, due to a production decline stemming from lower drilling and completion activities. 

 

Quicksilver's successful cost-abatement initiatives and higher production from its key assets could improve its margin. In the last two years, Quicksilver witnessed growth in organic reserves from 1% in 2011 to 22% in 2013.

 

On a positive note, Quicksilver Resources used its strong financial position to shrink its net debt by more than $0.5 billion in the last 12 months and expects to further lessen debt with the completion of the Horn River transaction. 

 

Nonetheless, the company's inability to develop or acquire any economically viable reserves to supplement its current and future production might significantly affect its future business prospects.

 

Key Picks from the Sector

 

Other better-ranked oil and gas players include Encana Corp. ECA, WPX Energy Inc. WPX and RSP Permian, Inc. RSPP. All these stocks currently sport a Zacks Rank #1 (Strong Buy).