Quicksilver Resources' CEO Discusses Q4 2011 Results - Earnings Call Transcript

This technique has shown significantly better results. The horizontal well, which frac-ed only about 1,500 feet of a 4,500-foot lateral, has a 45-day production average of 230 barrels of oil equivalent per day, primarily oil. The 2 vertical wells completed in this manner are steady producers, with the best well averaging 120 barrels of oil equivalent per day, again mostly oil, over the same 45-day period.

Our initial drilling covered an area approximately 30 miles in an east-west direction. We begin the drilling -- we begin drilling again next month with a series of horizontal and vertical wells. This is a bit different than we had announced, but with our vertical success, we will drill a few more vertical wells to test this as well. While we anticipate mostly oil from this project, the company will also begin work on an initial gas gathering system to capture the rich gas and NGL strength.

Based on completed well costs of approximately $3.5 million per vertical well and approximately $6 million for a horizontal completed well, we believe the economics will be compelling, in excess of 40% rates of return, and we have lots of room to run. We also believe these costs will go down as we move into development. Our land team is working on multiple drilling permits currently to be prepared to accelerate this project.

In West Texas, Quicksilver has secured approximately 105,000 net acres in 3 blocks. These areas have lots of activity around them and we will begin drilling next month with a target of having several wells completed by the summer. Quicksilver's objectives are the Bone Springs and Wolfcamp formations, and we will test each of the 3 acreage blocks.

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