Taking a Look at Quicksilver Resources

Exploration and production company Quicksilver Resources Inc. KWK was seen once again continuing its downward trend on Thursday. The stock closed 3.84% below its previous close at $6.26 which is just nine cents above its 52 week low. The last few trading days have been among the worst days for KWK - it has lost 16% of its value in last 1 month.

Quicksilver is an oil and gas industry engaged in upstream exploration and production of natural gas from the Barnett Shale, the Delaware Basin in west Texas, and South Alberta and Horn River Basin in Canada. Its midstream operation is handled by Quicksilver Gas Services which is a subsidiary of Quicksilver. Last December, Quicksilver made a joint venture with Kohlberg Kravis Roberts & Co. KKR to collaborate on the development of natural gas midstream services.

With this joint venture, Quicksilver will leverage the midstream assets of the partnership, with the company dedicating its entire production from Horn River acreage to the partnership. This will facilitate Quicksilver to achieve low cost solution for gathering, treating and distributing natural gas - thus leading to a healthy midstream operation in Canada.

Quicksilver’s revenue for quarter ended December 31, 2011, is expected to be lower than the revenue earned in third quarter. The likely reason is the downward pressure on oil prices during the third quarter. On December 1, 2011, there was insider selling seen by officers of Quicksilver which developed a negative sentiment about the company.

Anticipating this scenario, investors have taken huge short positions in Quicksilver which can be inferred from the short interest which is currently 6.7. This figure indicated that there will be a pressure sooner or later on investors to cover their short positions leading to a recovery in the stock price. Also, the P/B ratio of Quicksilver is 1.01, stating it to be fair priced at this stage. If there is any further short selling in Quicksilver, it may lead to a decrease in P/B ratio, making the stock to be an attractive investment.

With a beta of 1.8, Quicksilver is a moderately volatile stock. The stock is recently seen traded actively with high volume which has further aggravated the price movement of Quicksilver. With the recent joint venture, Quicksilver is trying to strengthen its position in the oil and gas industry, which is a good side of any company. The company was unable to meet the market expectation in terms of quarterly revenues which has spoiled the party for now, but one good quarter or perhaps one good year may be all that is needed to turn the tables.

Quicksilver is trading at $5.88 at the time of posting, down 6.07% from Thursday's market close.