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Quicksilver's 2012 Capex Guidance

Zacks Equity Research

Exploration and production company Quicksilver Resources Inc. (NYSE:KWK - News) provided its 2012 capital expenditure guidance of $370 million. This projection takes into account expenses of $302 million for drilling and completion activities, $46 million related to gathering and $22 million for leasehold activities.

In 2012, the company is expected to spend $108 million in the liquids-rich southern acreage of Fort Worth Basin, $180 million in Canada, and $82 million in the Sandwash Basin in Colorado and the Permian/Delaware basins located in West Texas.

There is a significant decline in the capital expenditure budget for 2012, compared with the previous year level. KWK’s capital expenditure budget in the previous financial year was $690 million, out of which the company spent $550.9 million in the first nine months, ending September 30, 2011.

In 2011, the capital expenditure was directed towards additional lease acquisitions in the Sandwash Basin in Northwest Colorado and the Delaware Basin in West Texas, and drilling of eight horizontal wells in the Horn River Basin in Canada.

KWK has concluded its drilling and completion activities at the Horn River Basin project site. At Horn River, the company has already produced 14.5 million cubic feet of natural gas equivalent (MMcfe) per day as on September 30, 2011, up 137.7% year over year. We expect production from this basin to increase in the days ahead.

The company has 130,000 net acres in Horn River Basin under a lease agreement and will also add new positions in Delaware and Permian Basins. The company continues to leverage its strong acreage position and moves ahead with its strong drilling activities. We expect the company to continue on the lines of its 2011 strategy.

Quicksilver Resources currently retains a Zacks #3 Rank (short-term Hold rating). The company competes head-to-head with peers like Chesapeake Energy Corporation (NYSE:CHK - News) and Denbury Resources Inc. (NYSE:DNR - News).

Based in Fort Worth, Texas, Quicksilver Resources engages in the acquisition, exploration, development production and sale of oil and gas sourced from unconventional and onshore natural gas reserves in the North American continent. Its business model revolves around assembling large acreage positions in early stage developing areas at nominal cost. The company runs operating segments in several parts of the US; and Alberta and British Columbiain Canada.

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