Quicksilver Resources Inc. (KWK) announced today that it has acquired additional interests in the company’s operated Lake Arlington project in Tarrant County, Texas from a private party for $62 million in cash. The acquisition represents roughly 25% working interest in Lake Arlington and related assets.
The deal is subject to customary adjustments as provided in the purchase agreement, besides 3,619,901 units of BreitBurn Energy Partners L.P. (BBEP) that were previously owned by Quicksilver.
The acquired interests include reserves of about 125 billion cubic feet (Bcf) of natural gas, of which 82% are proved developed; about 20 Bcf of additional potential resources; and net daily production of roughly 10 million cubic feet of natural gas equivalents (MMcfe) at the time of the transaction.
Following the acquisition, the company expects the capital program to total $450 million (excluding acquisitions) for 2010. The company reiterated its production guidance for 2010 in the range of 360 MMcfe to 370 MMcfe per day, an increase of roughly 11%-14% from the 2009 average daily volumes.
With this transaction, Quicksilver now holds approximately 17.7 million units of BreitBurn, representing an approximate 33% interest in the BreitBurn Energy limited partnership. Quicksilver will receive the full distribution attributable to the first quarter of 2010 on all of its previously owned 21.3 million units, which will be approximately $8.0 million and is expected to be received in mid-May.
Fort Worth, Texas-based Quicksilver Resources is an independent exploration and production company, primarily engaged in the development of long-lived, unconventional onshore natural gas reserves in the North American continent. In the U.S., the company has offices in Fort Worth, Texas; Glen Rose, Texas and Cut Bank, Montana. Quicksilver’s Canadian subsidiary, Quicksilver Resources Canada Inc., is headquartered in Calgary, Alberta.
Quicksilver’s growth story remains strong and the company looks to further increase its prospects in the prolific Barnett Shale play. We believe the company will continue to strengthen its liquidity and balance sheet by monetizing assets and reducing capex levels in the near term. This will make the company more appealing to investors and enable it to pursue more aggressive growth initiatives in the right environment. We maintain our Neutral recommendation on KWK shares.
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