Quicksilver Resources Inc. (KWK) announced the pricing of senior notes of $325 million due to mature on Jul 1, 2021. The independent exploration and production company also declared that the notes will carry a yearly interest of 11%.
The net proceeds from this offering – of 94.928% of the face value of senior notes, available cash on hand and earnings from other previous offerings – will be utilized to buy back two outstanding senior notes that are expected to mature by 2015 and 2016. The notes carry interest rate of 8-1/4% and 11-3/4%, respectively. The proceeds will also be used to bear expenses related to tender offers and also to repurchase the remaining portion of the outstanding 2015 and 2016 senior notes, if anything remains after the tender offer.
In the first half of May, Quicksilver posted a loss per share of 4 cents for the first quarter of 2013. The reported loss was wider than the Zacks Consensus Estimate of a loss of 2 cents. The underperformance was on account of a decline in drilling activities, diminished output volume and fall in natural gas liquids (NGL) prices.
Fort Worth, Texas-based Quicksilver is primarily engaged in the development of long-lived, unconventional reservoirs, which include fractured shales, coalbeds and tight sands in the North American continent. The company’s strategy is to provide long-term value to its shareholders by delivering efficient and reliable services. It prioritizes on effective growth in production and reserves by focusing on its unconventional resource plays, onshore North America.The company’s ability to identify and acquire large resources at low cost per acre bodes well for its future growth.
However, Quicksilver does not have the infrastructure to deliver its output and so its marketability largely depends upon the availability, proximity and capacity of pipeline systems owned by third parties. Disruption in transportation operations resulting from weather conditions, accidents, loss of pipeline or gathering system access could severely impact the company’s ability to market, fractionate and deliver production.
Quicksilver currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
Three oil exploration and production firms that are expected to outperform the broader U.S. equity market over the next 1 to 3 months are Anadarko Petroleum Corporation (APC), Encana Corporation (ECA) and EOG Resources Inc. (EOG). All three firms sport a Zacks Rank #2 (Buy).
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