NEW YORK (TheStreet) -- Quicksilver Resources (KWK) was gaining 10.1% to $1.31 Wednesday after announcing initial results of its first horizontal well under its exploration agreement with Eni in Pecos County, Texas.

The company announced that the Stallings #1H well started flow on August 15, and is currently flowing up casing on a restricted choke setting of 34/64, at a rate of 750 barrels of oil equivalent a day. About 15% of the fracture fluid in the Third Bone Spring interval where the well is located has been recovered.

Quicksilver is currently drilling Mitchell #1H, which will be its second joint venture well with Eni. The well is targeting a combined section of the Bone Springs and Wolfcamp formations.

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TheStreet Ratings team rates QUICKSILVER RESOURCES INC as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

"We rate QUICKSILVER RESOURCES INC (KWK) a SELL. This is based on several weak investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 114.9% when compared to the same quarter one year ago, falling from $242.53 million to -$36.10 million.
  • The gross profit margin for QUICKSILVER RESOURCES INC is currently lower than what is desirable, coming in at 33.62%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -30.58% is significantly below that of the industry average.
  • The share price of QUICKSILVER RESOURCES INC has not done very well: it is down 15.44% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • QUICKSILVER RESOURCES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, QUICKSILVER RESOURCES INC turned its bottom line around by earning $0.90 versus -$13.83 in the prior year. For the next year, the market is expecting a contraction of 130.7% in earnings (-$0.28 versus $0.90).
  • The revenue fell significantly faster than the industry average of 2.4%. Since the same quarter one year prior, revenues fell by 32.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: KWK Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.