It's a Gas for Quicksilver Resources in Barnett Shale Play

Last Updated Aug 8, 2008 6:53 PM EDT

  • Quicksilver Resources LogoThe Company: Quicksilver Resources, a Fort Worth, Texas, natural gas producer
  • The Filing: Form 10-Q filed with the SEC on August 6, 2008
  • The Finding: Quicksilver Resources is demonstrating the success to be found via the drill bit on the Barnett Shale Formation near Fort Worth, Texas. Production volumes of natural gas and natural gas liquids in Barnett Basin grew by 120 percent for the second quarter.
The Upshot: Aggregate production volumes grew 75 percent year-over-year to 236 million cubic feet a day, after adjusting for the November 2007 divestment of Quicksilver's operations in Michigan, Indiana and Kentucky.

Quicksilver is closing today on a previously announced $1.3 billion purchase to acquire additional producing and non-producing leasehold royalty assets in the Fort Worth Basin. The 13,000 acre block produces a net 45 million cubic feet a day and could hold more than one trillion cubic feet of recoverable natural gas resources.

CFO Phil Cook told analysts on a conference call that the company expected production to climb to the range of 280 million to 290 million cubic feet a day (on an equivalent basis), which includes uplift from the recent Barnett Basin transaction.

The implied proved developed reserve life of the North Texas asset base is approximately 17.5 years, with peak production expected about 2015, according to management.

Management said on the call that projected total daily production volume is projected to jump to about 390 million cubic feet a day in 2009. Capacity could be adjusted upward, depending on how quickly the company can secure commitments to key services, such as piping, pressure pumping, and personnel.

The company paid, on average, $420 an acre for its 247,000-acreage position in the Fort Worth Basin. Last month, Plains Exploration paid $30,000 per leasehold for a 20 percent interest in Chesapeake Energy's Haynesville Shale venture in East Texas!

Management tacitly acknowledged on the earnings call that it has identified potentially attractive other resource plays, but had no additional comment. The company is discreetly acquiring large contiguous leases on other unconventional onshore locations.

The Question: Delaware Basin (West Texas), Green River (Wyoming), Antrim Shale (Northern Michigan) -- where oh where is the next Barnett Shale play to be found?

  • David Phillips

    David Phillips has more than 25 years' experience on Wall Street, first as a financial consultant and then as an equity analyst for several investment banking firms. He sifts through SEC filings for his blog The 10Q Detective, looking for financial statement soft spots, such as depreciation policies, warranty reserves and restructuring charges. He has been widely quoted in outlets such as BusinessWeek, The International Herald Tribune, Investor's Business Daily, Kiplinger's Personal Finance, and The Wall Street Journal.