Exploration and production company Quicksilver Resources Inc. (KWK) adjusted its previously announced net income for the fourth quarter and fiscal 2011 taking into consideration some one-time items.
On March 15, 2012, Quicksilver reported preliminary net income of $27.4 million or 16 cents per share for the fourth quarter and $93.9 million or 55 cents per share for fiscal 2011. After taking into account the effect of additional non-cash impairment of its U.S. midstream assets and a non-cash reduction in the fair value of certain commodity derivatives, net income came to 14 cents per share for the fourth quarter and 52 cents per share for the full year.
However, these one-time items did not affect the adjusted net income of the company for the quarter as well as for the fiscal. Adjusted earnings continue to remain breakeven for the quarter and at 12 cents for the fiscal year.
A Peek into 2012
Natural gas activities constitute the major source of Quicksilver’s revenues. At the 2011 earnings call, the company forecast natural gas volume in a band of 375- 385 million cubic feet (MMcfe) per day for the first quarter of 2012. It also predicted a gradual increase in volumes through the second and third quarters of the year.
In recent times we have seen a sharp decline in natural gas prices primarily because of increased production and lower demand due to a mild winter. We believe the demand for natural gas will eventually pick up as many coal-fired plants are replaced by natural gas as the generating fuel. Low prices would still continue to restrain profitability.
Quicksilver had also guided during the release that it aims to increase its liquid production in 2012 by 62% from 2011 levels. We believe liquid production might partially ward off the negative impact of depressed natural gas prices.
Quicksilver Resources currently retains a Zacks #3 Rank which translates into a short-term Hold rating on the stock. Cabot Oil & Gas Corp. (COG) another operator in the region also retains a Zacks # 3 Rank.
Based in Fort Worth, Texas, independent exploration and production company Quicksilver Resources is primarily engaged in the development of long-lived, unconventional onshore natural gas reserves in the North American continent.
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