Quicksilver Resources (KWK)
Q1 2010 Earnings Call
May 10, 2010 11:00 am ET
Philip Cook - Chief Financial Officer and Senior Vice President
Thomas Darden - Chairman of the Board, Chairman of the Board of MSR, Chief Executive Officer of MSR and President of MSR
Richard Buterbaugh - Vice President of Investor Relations & Corporate Planning
Glenn Darden - Chief Executive Officer, President and Director
David Snow - Energy Equities
Philip Dodge - Stanford Group Company
Noel Parks - Ladenburg Thalmann
Michael Scialla - Thomas Weisel Partners Equity Research
Wei Romualdo - Stone Harbor
Brian Corales - Coker & Palmer
David Kistler - Simmons & Company
David Heikkinen - Tudor, Pickering, Holt
Previous Statements by KWK
» Quicksilver Resources Inc. Q4 2009 Earnings Call Transcript
» Quicksilver Resources Inc. Q3 2009 Earnings Call Transcript
» Quicksilver Resources Inc. Q2 2009 Earnings Call Transcript
Good morning. My name is Debbie and I will be your conference operator today. At this time, I would like to welcome everyone to the Quicksilver Resources First Quarter 2010 Earnings Call. [Operator Instructions] Thank you. Mr. Rick Buterbaugh, you may begin your call.
Thank you, Debbie, and good morning. Joining me today are Glenn Darden, President and Chief Executive Officer of Quicksilver Resources; Toby Darden, Chairman; and Phil Cook, Senior Vice President and Chief Financial Officer.
This morning, the company issued a press release detailing Quicksilver's results for the first quarter of 2010. If you do not have a copy of the release, you can retrieve a copy of it on the company's website at www.qrinc.com under the News and Updates tab.
During today's call, the company will be making forward-looking statements, which are subject to risks and uncertainties. Actual results might differ materially from those projected in these forward-looking statements. Additional information concerning risk factors that could cause such differences is detailed in the company's filings with the SEC.
Today's presentation will include information regarding adjusted net income and net cash from operating activities before changes in working capital, which are non-GAAP financial measures. As required by SEC rules, reconciliations of adjusted net income and net cash from operating activities before changes in working capital to the most directly comparable GAAP measure are available on our website under the Investor Relations tab.
At this time, I will turn the call over to Glenn Darden to review our financial and operating activities in more detail.
Thank you, Rick. Good morning. Quicksilver Resources reported net income of $8.2 million or $0.05 per diluted share for the first quarter of 2010. First quarter 2010 adjusted net income was $33.8 million or $0.20 per diluted share.
For the first quarter, average production was approximately 318 million cubic feet equivalent per day. This compares to 332 million per day for the same period last year, which included approximately 17 million cubic feet per day of gas production in the Alliance Project, which was sold to Eni in June 2009.
As we have discussed before and given guidance on, gas volumes will ramp up as this year progresses. What has changed is our decision to reduce the 2010 capital program, and we intend to reduce our drilling and completion activities in the Fort Worth Basin. This decision was made to conserve our resources in light of current natural gas prices. Despite our significant hedge position, which covers roughly 70% of our gas volumes with minimum prices of $7.40 per Mcf, we feel it is not prudent to significantly grow volumes in this price environment. As a result, the company will increase volumes approximately 11% to 14% over 2009 daily volumes versus the 20% growth number we previously guided to. And while we will reduce overall spending, the company has shifted some dollars to add key leasehold acreage in both the Barnett and Horn River Basin areas. This will add to the inventory for future development. We believe these moves will help us capture more value for our shareholders in the future.
We are seeing more opportunities to add to our position to where Quicksilver has operational efficiencies, and we'll make those moves when it makes financial sense. On the operational front, we're currently running three drilling rigs in the Barnett. The company drilled 28 gross wells or 22 net, and connected 21 gross wells or 17 net wells to sales in the first quarter. Quicksilver now expects to drill approximately 75 net wells in the Fort Worth Basin in 2010. We do plan to complete approximately 30 additional net wells from the existing inventory of drilled but uncompleted wells and should exit the year with approximately 120 wells in the drilled but not completed inventory.
In Canada, we have slowed activity as well at particularly in the Horseshoe Canyon coals project and completed five wells in the first quarter. Currently, all operations are suspended due to the spring/fall breakup season. More of our capital has been directed to the Northeast British Columbia project where we have drilled to more wells in the Muskwa formation in the Horn River Basin. Completion activity on the first of these wells is expected in late summer, and the second well will be completed in the winter season.
Quicksilver now has only six more wells to drill over the next three years to validate all exploratory licenses that cover our 130,000 net acre block. We also plan to test the Exshaw formation at approximately 4,000 feet, where we have encountered oil shales in each of the four wells drilled to date. This will occur in early 2011.
Quicksilver has been in joint venture discussions with several parties on the upstream and midstream/downstream parts of our Horn River project. There's been quite a lot of interest and we may choose that path as the way to secure financing for that long-term project. In Northwest Montana, where we have a significant acreage position held by production, we will continue to monitor drilling and completion activity around as companies test the Alberta Bakken at relatively shallow depths. Our intent is to begin testing our acreage block in 2011.