Tag Archives: Quicksilver Resources

Business, Finance, Occupation & Industry

Why Quicksilver Resources' Shares Popped

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By Travis Hoium, The Motley Fool

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Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of oil and gas company Quicksilver Resources jumped as much as 41% in early trading today after announcing an asset sale. The stock settled in at a 15% gain later in the day.

So what: The company will sell a 25% stake in its Barnett Shale asset to Tokyo Gas Co. for $485 million. The money will be used to pay down debt, which has been strangling the company.  

Now what: This is progress toward management’s planned deleveraging and analysts are now looking to see if the company can do the same with its Horn River assets. I don’t think this makes the stock a buy, but gross profit has been improving and a reduction in debt is a positive sign. I’ve just seen too many mistakes by Quicksilver over the past few years to be aggressive right now.

Interested in more info on Quicksilver Resources? Add it to your watchlist by clicking here.

The article Why Quicksilver Resources’ Shares Popped originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Business, Finance, Occupation & Industry

Will the Niobrara Be a Boom or a Bust for Oil Companies?

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By Matthew DiLallo, The Motley Fool

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The Niobrara Formation, which is found mainly in Colorado and Wyoming, has been touted by some companies as potentially having more oil than the Bakken, while others have found it to be a complete bust. This presents a problem to the many natural gas producers that are turning to the play in hopes of diversifying their revenue into more lucrative oil and natural gas liquids. Listen to these emerging players talk about the potential of the play and you’ll hear some very mixed signals. Why is the play a bust for some and a boom for others?

The big busts
First, let’s take a look at some of the big busts. Ultra Petroleum was really hoping that the Niobrara would add some liquids production growth to the company’s natural-gas-heavy portfolio. Unfortunately, the Niobrara isn’t turning out to be the solution. On the company’s last earnings call, CEO Michael Watford said:

In Colorado’s DJ Basin, our results in the Niobrara have been disappointing. Although our core and log data indicate the presence of oil in the rocks, the petroleum system is immature, under-pressured and not commercial. This has been verified by completion of test results from both a vertical and a horizontal well. Ultra assembled 139,000 low-cost acres and deployed it over the past two years and has no significant lease expirations until 2014. We’ll continue to monitor industry activity in the region but have no immediate plans for additional exploration in the area.

It turns out that it’s not the only company having trouble in the Niobrara. Rex Energy , a driller focused on the Marcellus and Utica, had also built up a position in the region only to drill a couple of duds. The company entered the DJ Basin in 2010 and was optimistic when giving the initial results of wells in close proximity to the acreage it was building up. Unfortunately, two years later it had written down most of the value of its acquired acreage and was looking to unload it. What happened is that it drilled two non-commercial wells and saw better opportunities to deploy capital within its current portfolio. Such are the risks of energy exploration.

The booms?
Other companies, like Quicksilver Resources , see great potential in its Niobrara acreage. It’s not alone; it recently closed an acquisition and exploration agreement with Shell  that covers 320,000 acres and an area of mutual interest that covers 850,000 acres. Quicksilver not only picked up some cash in the deal but it also picked up a world-class partner. It’s also looking to further de-risk its acreage by signing on another third-party joint venture partner to help further fund its development. Quicksilver is very optimistic about the play and sees the Shell venture as validation of its efforts that this play will pan out. 

Shell’s not the only energy giant that’s looking for big things from the Niobrara. ConocoPhillips has amassed 130,000 acres in what it …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Do Investors Hate This Top-Traded Natural Gas Stock?

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By Matt DiLallo, The Motley Fool

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Natural gas exploration and production company Quicksilver Resources is a day trader’s dream. With millions of shares being traded daily, and more than 20 million shares trading hands last Friday, Quicksilver is a company the market likes to move. Not only are traders buying and selling shares of Quicksilver in rapid-fire action but many of those traders have made bearish bets on the company as evidenced by the 16.8% of its outstanding shares being sold short. 

Those taking bearish bets have to be getting nervous considering that shares are up nearly 40% in the past week. That being said, bearish themes abound and are the force driving shares down 80% over the past two years, taking the company’s market cap below $500 million. With all the heavy trading surrounding this stock let’s take a look at why its both hated and loved by traders. 

Why it’s hated
If there are two things investors hate these days its energy companies that produce a lot of natural gas and have a debt-laden balance sheet. That’s a big problem for Quicksilver as 72% of its production is natural gas and the company’s balance sheet is weighted down by $2.1 billion of debt. Liquidity concerns are a bigger problem for Quicksilver and are a big reason why shares hit a low of $1.67 just on March 6.

The combination of a high debt burden and a focus on natural gas production has been the downfall of another hated natural gas stock: Chesapeake Energy . The company seems to have provided the blueprint followed by so many in the industry, including Quicksilver. While there are a lot of similarities between the two, Chesapeake seems to be a bit further along in its plan to grow its liquids production. The company is spending 85% of its 2013 capital budget to grow liquids production to 26% of total production, while Quicksilver will still be at just 18% liquids production in 2013. Still, there is a silver lining here that investors need to keep an eye on. 

Why it should be loved
Quicksilver is well aware of its liquidity issues. CEO Glenn Darden has said that his company’s “… top priorities are to improve liquidity through asset sales, joint ventures and other measures, further reduce the overall company cost structure, and match capital spending to operational cash flow.” To accomplish this, the company plans to only spend about $120 million in capital for 2013, which is a substantial cut from the $270 million it spent in 2012. The key here is that the company has resolved to limit its spending to its expected cash flow. It’s also promised to reduce spending further if it needs to preserve liquidity. 

One way the company will accomplish this is by concluding its advanced negotiations to monetize its Barnett Shale assets with a deal. The company is considering either an asset sale or an MLP for the assets and is …read more
Source: FULL ARTICLE at DailyFinance