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Quicksilver Resources' CEO Discusses Q1 2012 Results - Earnings Call Transcript

This quarter shows higher costs on the lease operating side, which is primarily attributable to gas lift costs in certain projects. We are aggressively attacking these costs and have shut in certain production pads. These shut-ins will positively affect company EBITDA, but will have a minimal effect on company production volumes.

Additionally, in the Barnett, the company is on track to launch our master limited partnership when it receives final approval from the SEC, which we expect relatively shortly.

Quicksilver has certain development commitments in the Horn River Basin project in Northeast British Columbia. These commitments tie to contracts for pipeline transportation. Quicksilver's volume commitment is 75 million cubic feet per day for the rest of 2012, building to 100 million per day in May of 2013. There may be certain delays on the Spectra side on the pipeline -- and processing side, which could allow us to delay some of that ramp-up to 75 million a day. But we'll keep you abreast of that as that develops.

The commitments to KKR in our midstream joint venture are contained within these volumes and are not in addition to them. We will be bringing on our first multi-well development pad in the next 30 days in order to satisfy these obligations. In anticipation of this activity and new production, Quicksilver has the majority of Canadian gas hedged. It also is important to note that Quicksilver has 2/3 of total company production hedged for the remainder of the year at an average price of $6.02 per Mcf equivalent.

In addition to meeting pipeline commitments, we believe that these new Horn River wells will showcase the quality of the reservoir and production for our potential partners. We anticipate securing an upstream partner for this project later this year. Quicksilver's land team has been busy finalizing drilling permits and clearing title in both Colorado and West Texas. We have begun drilling a 6-well program in West Texas and we're roughly at total depth on our first well today, and we'll commence our second round of drilling up to another half a dozen wells or so in Colorado by the end of the month.

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