NEW YORK (AP) -- Quicksilver Resources' stock surged in Monday afternoon trading as the natural gas producer agreed to sell a 25 percent stake in its Barnett Shale oil and gas assets to a subsidiary of Tokyo Gas Co. for $485 million.
THE SPARK: On Friday, Quicksilver Resources Inc. announced that it was selling the stake, but said that it would still operate the assets located in Texas. The company said it expected to use proceeds from the sale to reduce debt. The deal is expected to close on April 30.
THE ANALYSIS: KeyBanc Capital Markets' David Deckelbaum said in a client note that the minority stake sale may have been the best option for Quicksilver Resources as it looks for a way to monetize part of its Barnett Shale interest. The analyst anticipates that the company may use the proceeds to pay down its $438 million in notes due 2015.
Deckelbaum said the sale may also help Quicksilver Resources strike future deals with Tokyo Gas. He kept a "Hold" rating on Quicksilver.
Jefferies analyst Subash Chandra said Quicksilver Resources delivered on its promise to partially monetize its Barnett Shale interest, but the analyst said the company still needs a Horn River joint venture to support his reduced price target of $2.50, down from $3.
Chandra said that while Quicksilver will probably use the sale's proceeds for the 2015 notes and $591 million of notes due in 2016, a lot will depend on lender input. The analyst said that the banks will likely request that Quicksilver Resources pay down some of its $388 million of bank debt.
Chandra kept a "Hold" rating on the shares.
Quicksilver Resources declined to comment on the analyst reports.
SHARE ACTION: Quicksilver Resources, based in Fort Worth, Texas, rose 45 cents, or 20 percent, to $2.70 in afternoon trading. The stock has traded in a 52-week range of $1.62 to $5.90. Shares are off about 6 percent for the year-to-date.