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Quicksilver Resources (KWK) |
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WIKI ANALYSIS
Quicksilver Resources engages in the exploration, development, and production of unconventional natural gas.[1] The company's segments are divided by region and include Texas Region, Rocky Mountain Region, and Canada.[2] The company's Texas region accounted for nearly 90% of its estimated proved reserves and about three-fourths of its daily production.[3] While Quicksilver's strategy of seeking unconventional natural gas resources has allowed the company to expand and develop in North Texas and Canada, its operations are susceptible to fluctuations in the North American gas market. Persistent low natural gas prices have the potential of significantly reducing its earnings and hindering the company's ability to meet its outstanding obligations.[4]
Business Growth
Quicksilver's growth strategy has been to acquire acreage in unconventional natural gas. Not only is the acreage relatively cheap to more conventional natural gas plays, but Quicksilver's resources have significant potential if large amounts of natural gas can be discovered and extracted.[5] To finance this growth, Quicksilver has twice issued long term debt and utilized short-term funding as well.[6]
Trends and Forces
Quicksilver's operations are dependent on North American Gas Market
Almost all of Quicksilver's operations come from the development and marketing of natural gas in North America. As a result, the Company's financial performance depends on the demand for and price of natural gas in North America.[7] Persistently low natural gas prices have the potential of reducing the Company's revenues and margins significantly. In addition, Quicksilver's natural gas operations face regulatory scrutiny as well.[8]
In addition, Quicksilver develops primarily unconventional reservoirs where hydrocarbons may be found in challenging geological regions. Developing unconventional reservoirs requires sophisticated equipment and expertise.[9] As a result, high production costs can reduce profit margins significantly. As a result of their higher development costs, unconventional reservoirs become more competitive when gas prices are relatively higher.[10]
Quicksilver needs operating cash flow to support it financing obligations
Quicksilver's growth has been funded primarily by short and long term financing as well as operating cash flows.[11] The Company has twice issued long-term debt (with maturities in 2016 and 2019) and has a large amount of shorter-term funding. Lack of operating cash flows have the potential forcing the Company to rely on external sources of capital. If Quicksilver is unable to meet drilling and production requirements embedded in its leases, it could have to forfeit portions of its resource-rich properties.[12]
Competition
Quicksilver competes with other natural gas developers in North America. Some of their most significant competition is as follows:
- Cabot Oil & Gas (COG)
- Oil & Gas Majors like Exxon Mobil (XOM)
- Suncor Energy (SU)
- Baker Hughes (BHI)
- EXCO Resources (XCO)
Footnotes
- ↑ Reuters: Company Overview for Quicksilver Resoruces, Inc.
- ↑ Reuters: Company Overview for Quicksilver Resoruces, Inc.
- ↑ Reuters: Company Overview for Quicksilver Resoruces, Inc.
- ↑ Reuters: Company Overview for Quicksilver Resoruces, Inc.
- ↑ Quicksilver Investor Relations, May 2011
- ↑ Quicksilver Investor Relations, May 2011
- ↑ Quicksilver 2010 Annual Report]
- ↑ Quicksilver 2010 Annual Report]
- ↑ Quicksilver 2010 Annual Report]
- ↑ Quicksilver 2010 Annual Report]
- ↑ Quicksilver 2010 Annual Report]
- ↑ http://quote.morningstar.com/stock/s.aspx?t=KWK®ion=USA&culture=en-US [Morningstar.com: Quicksilver Company Overview]
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