The company closed on its Acquisition and Exploration Agreement with SWEPI LP, a subsidiary of Royal Dutch Shell plc, on December 28, 2012. Quicksilver now owns a 50% interest in over 320,000 net acres in the Sand Wash Basin in Northwest Colorado, which will be jointly developed with SWEPI. The agreement also established an Area of Mutual Interest covering in excess of 850,000 acres in the basin.
United States - West Texas
In the fourth quarter, the company completed the Vande Ranch State 1H, Quicksilver's second short-lateral well, which targeted the Wolfcamp formation in Upton County. The well is producing 38 Boed and continues to improve after recovering 32% of its load water. The Price Ranch #1H well, Quicksilver's first short lateral well drilled in Pecos County, averaged 129 Boed over its first 100 days of production from the Bone Springs formation.
Quicksilver holds approximately 105,000 net acres across the Delaware and Midland basins of West Texas, which are situated in the oil window of the Wolfcamp and Bone Springs formations.
The Securities and Exchange Commission (SEC) requires proved reserve volumes to be calculated using an average of the NYMEX and West Texas Intermediate (WTI) spot prices for sales of gas and crude oil, respectively, on the first calendar day of each month during the reporting year. On this basis, the prices for gas and crude oil for 2012 reserves reporting purposes were $2.76 per million British thermal units (MMbtu) and $94.71 per barrel. The prices used to calculate proved reserves for year-end 2011 were $4.12 per MMBtu of gas and $95.71 per barrel of crude oil.
Quicksilver's preliminary year-end 2012 SEC proved reserves based on SEC pricing total approximately 1.5 trillion cubic feet of natural gas equivalents (Tcfe). The company's total proved developed reserves percentage increased to 88% from 69% in the prior year as more than 90% of the wells drilled in the Barnett Shale in 2012 were proved undeveloped (PUD) locations at year-end 2011. A significant amount of proved undeveloped reserves were no longer recognized as proved reserves based on both future development plans and prices used to determine 2012 SEC reserves.