Quicksilver Resources Inc. Message Board

I bought ARP because of the private drilling partnership business. Anyone can float an E&P MLP. Really, the business model isn't that fantastic, but what separated ARP was, they came public when the market for natural gas assets was in the dump, had no leverage, and had the drilling partnerships which throw off a lot of cash.

If they can ever get the private drilling partnership program back where they are bringing in $250+ million a year, these guys will knock the cover off the ball. Between the Marcellus, Utica, Mississippi Lime, Barnett, Marble Falls etc, they should have enough acreage to produce excellent returns for the private investors(and keep them coming back in subsequent raises), but also have enough acreage that they are not scrambling.

Really, if anything, this is where Cohen really dropped the ball. He continues to give double talk to the investment community regarding the projected raise targets versus the budgeted raises targets. He is an eternal optimist, which typically is good, but his major weakness as a manager is his inability to accept bad news and share it.

I do believe though that last years screwed up tax fiasco severely hurt the drilling partnership business and that with strong results from this year, we will see improvement next year.

I think from what I remember, they collect about $9 million annually from existing well management and services, and that for every $100 million they raise, they get about $22 million of that in the way of fees and carried interests. So, a $250 million annual raise, means about $1/unit in DCF.

The last advantage the the drilling partnerships bring, that the market is overlooking, is that these guys can target acreage that is underdeveloped versus other E&P MLPs.

davidbdc2001,

Yes, they botched the hedges, twice if I remember correctly, refused to get them, then got slaughtered and bought them at the bottom before the recovery...

I agree, would much rather see ARP simply be patient and use private drilling partnership funds to consume acreage. Jus high grade it every year, and drill the best until the money runs out.

With gas prices rising, it will be very interesting to see how much money gets put into the Barnett. I would not be surprised to see yet another Barnett deal..and would actually be quite pleased as long as the pricing is right. I would like to see them build more critical mass in that basin.

EPD is rivaled by Kinder Morgan in terms of total enterprise...granted, Kinder Morgan is 3 (really 4) entities..Kinder Morgan Inc (the GP), Kinder Morgan Energy Partners (the MLP), Kinder Morgan Management (ishares - functionally equivalent to KMP, similar to LNCO/LINE relationship) and then the red headed step child in El Paso Energy Partners...

If one grouped the Energy Transfer family together, they too would come close (though one has to be careful not to double count the LP units held by the GPs). Energy Transfer Partners, Energy Transfer Equity, Sunoco Logistics, Regency Energy Partners..

Of course, Enterprise is the original Enterprise, Gulfterra and Teppco...

jrp1324,

I too have invested in ARP and predecessor companies for many years.

I remain concerned with the latest planned offering that has something to do with excess acreage and investment partnership raises. I would like to see the details, but also am leery of the Cohen's getting to cute and complicated. We are down to (3) Atlas entities. That seems like plenty.

ARP has managed to pull together several good Q's and they appear to have momentum rolling into the upcoming 3rd Q.

An acquisition might be what they need to gain the attention of the market.

Yes, the Colorado deal is behind them. Let's remember, they were in the midst of the Chevron divestiture and really had no acreage available.

Finally, with gas prices creeping upwards towards $4.50/mcf, the Barnett is once again a viable and prospective field for private drilling partnerships and perhaps even for ARP's account.

I remain convinced that the DTE deal will, in a year or two, will be viewed as a steal. The low risk, oily and highly repeatable wells will provide the company with excellent liquids growth. I am optimistic/hopeful that we see continued acreage leasing in this area to expand.

Also, still remains to be seen if the Tennessee Mississippi Lime develops (will need to watch Miller Energy).

Yes, in order to get to $2.35 for 2013, we are looking at exiting the year with a distribution solidly in the $.60's. Given ARP's somewhat unique business model, I think they should trade at a premium to some of the more generic E&P MLPs and thus, it seems very likely we could be pushing $30/unit in 6 months.

These guys have a lot of nice things ling up for them. The big unknown is the private partnership raise. Any increase could really goose results, allow them to ramp up development drilling at push production up solidly.

As always though, it seems like we are always 1 or 2 Q's away from that "explosive" growth..but, we do get nice distribution increases along the way to keep us interested.

I thought it was a good call as well. Results were good, but not stellar. They definately now have a nice tailwind behind them regarding gas prices. Hedge prices are rising going into '14, '15, '16 and '17!!

Cohen was right about the Barnett deals looking good now with gas prices solidly in the $4 range.

I think next Q will be interesting as the Marcellus wells will starting flowing to sales.

Still wish we could get more clarity on the Marble Falls as you said. I view that as a homerun area.

Interesting commentary on the drilling partnerships and whether it is worth having them or not due to having to give up so much acreage/prospects. I'll throw my 2 cents in, I like them A LOT. Yes, we have to give up quality acreage. It also helps reduce risk, provides a nice income stream and helps them develop acreage blocks that otherwise might not be MLP friendly due to needing so much development capital.

Agree, if they are to meet the $2.35 in distributions, we need to see a serious increase over the next 2 Q's.

I am curious as to what the next acquisition will be. I was upset to see both Pioneer and Quicksilver deals not come to fruition.

There is plenty of mature shale production coming to the market. I would not be surprised to see them land some more mature shale production.

The cbm assets are nearly worthless at these prices. Yes, they can obtain marginal rates of return at $5/mcf but it needs to be much higher, which isn't going to happen.

The Osage Concession has very little value...it expires in 2020. Gas prices may go up, but these are still marginal wells even at $5/mcf.

The real value is in milking the existing gas production, paying down as much debt as possible and building oil production.

This is a hurry up and wait play. The divestiture of the Robinson's Bend assets shed light on the "hidden value" remaining.

The huge reduction in debt certainly removes some risk, but also means a huge drop in cash flow.

What remains to be seen is how aggressively they can grow oil production and at what cost and how stable is that production (i.e. decline rates).

We are undervalued at these prices, but management still has not been able to reduce costs, and the Robinson's Bend divestiture only hurts as the per mcfe costs will likely go up.

Of course as has been noted, per mcfe costs may not matter when much of that production is actually oil and valued at 10x gas on an mcfe basis.

Still, would love to see them cut costs significantly, restore a small distrbution and use their units as a currency to make modest acquisitions.

Management is indeed milking the company. Look at the salaries of management relative to the total EBITDA of the comany.

Outrageous.

These guys cannot cut costs. SG&A has remained bloated for years. They need to lower per unit costs.

I think it will go lower. The story is really playing out slowly. Yes, they are projecting oil growth, but even on the call, they state they have a few years worth of oil prospects. The cbm undrilled acreage isn't worth much of anything unless gas goes up significantly, which isn' going to happen.

The existing cbm production is valuable...especially if a larger player could absorb them and drive down costs.

I am thrilled to see you finally acknowledge that Debt/EBITDA metric does indeed exist. This is a big accompishment for you norrisdad.

You denied it for so long, but finally you saw the light. There is hope for you afterall. With a lot of hard work and the help of skilled pyschologists there is hope for you yet.

Yes, I've done the math as well to calculate the spread between Propylene and Propane. I think PDH is cheap at these prices.

There are plenty of NGLs headed to Mt. Belvieu

I listened. Not a whole lot new. SG&A is still outrageously high. They are still looking for acquisitions, even though they just divested 1/3 of their production. Same pathetic reporting of lumping workovers, recompletions and new drilling into one bucket.

Oil production is up to nearly 396 bbl/d average, though one must account for the 5000 bbl/d that was in storage at the end of last Q (why last Q's oil bpd was so low).

The commentary on PostRock revealed clearly the relationship is not working well.

No doubt that these guys would gain some synergy with a merger with PSTR, but PSTR is in far worse shape and that would kill CEP's upside.

I think these guys have finally hit rock bottom. They have the debt down to a manageable level. I think they might benefit, as Abella was intimating, that a distribution might build some support.

These guys have their debt down to a point where a $.20/unit distribution (a cash draw of less than $5 million annually), might provide them with a currency to make acquisitions of oily PDP properties.

Same here. Bought in the mid to low $22's plus a bit near the bottom. I really think this can go to $30 or higher...especially if they manage to pull off another couple of acquisitions at rock bottom prices.

No doubt, ATLS benefits from the growth of both ARP and APL. Income (i.e. distributions) at ATLS ought to be growing at a dizzying clip over the next 12-24 months provided APL and ARP can continue to grow.

For an income play, I like ARP, for growth, I like ATLS.

A good mix of both should give an investor a nice mix of high income and high growth.

I do think that ARP has a lot of coiled energy,,just waiting to be released. A strong fund raise this year will really help get them going. Good results in the Utica, Marcellus, Mississippi Lime, Marble Falls will also help. Plus, I still believe their Tennessee Chattanooga shale may be prospective for Mississippi Lime as Miller has found.

That would open up another front for liquids drilling.

I think we will be looking at a much larger ARP 12 months from now...probably a handful of deals mande during that time frame as well.

jrp1324,

What is a bit comical to think about is that the next batch of Marcellus wells, when they come online, the peak production from those handful of wells will rival the production of the bulk of their legacy wells from over 9500 shallow Devonian wells.

Yes, I heard Cohen's remarks on the conference call. I am interested and wish they could have revealed more info...I guess once they do their filing, the quiet period will be over.

If they can consistently raise $200 million/yr, you are talking about nearly $50 million in what amounts to carried interest.

They will be able to chew through some funds in the Mississippi Lime, especially at $3 million a well.

Any ideas on how the new MLP will be structured?