Barnett Shale Keeps Giving
Quicksilver Resources' core area is the Barnett Shale in the Fort Worth Basin in Texas. The company has 192,000 net acres under lease, and 1.9 trillion cubic feet equivalent (Tcfe) of proven reserves as of the end of 2008.
The company has a multi-year inventory of wells to develop in the Barnett Shale, and also has a 150 well inventory that has been drilled but not completed. In 2010, Quicksilver Resources has announced a $540 million capital budget, and will allocate $465 million in Texas, with, presumably, almost all of that directed to Barnett Shale development.
Quicksilver Resources will operate five rigs there in 2010, and drill 100 new wells. The company will also begin to whittle down its inventory of drilled but uncompleted wells and will complete thirty of these in 2010.
Horn River Basin
Quicksilver Resources has several early stage exploratory programs, the most promising of which is in the Horn River Basin in British Columbia. The company has 130,000 net acres under lease, and has started to build out infrastructure to assist with development. The company has drilled and completed several test wells to various formations and has seen some promising initial production rates.
One issue with the development of the Horn River Basin is where the future natural gas production will be sent, since shale plays in the lower 48 States may be prolific enough to supply the needs of the United States.
Apache Petroleum (NYSE:APA) may have answered that question with its recent investment in the Kitimat liquefied natural gas (LNG) project located in Vancouver. Apache Petroleum bought 51% ownership of the project as well as 51% of the future capacity.
The plant will cost $3 billion and have a capacity of 700 million cubic feet per day of natural gas, part of which will be piped from the Horn River Basin, and then exported to Asian markets.
In July 2009, EOG Resources (NYSE:EOG) signed up as the first supplier for Kitimat, and will need capacity of 100-200 million cubic feet per day.
Other exploration and production companies with acreage under lease in the Horn River Basin include Devon Energy (NYSE:DVN) with 153,000 acres, and EnCana Corp (NYSE:ECA) with 260,000 acres.
Horseshoe Canyon
Quicksilver Resources also has a significant coal bed methane operation in the Horseshoe Canyon area in Alberta, Canada. The company has 350,000 net acres under lease and 1200 future drilling locations. Quicksilver Resources has 333 Bcfe of proved reserves there at the end of 2008.
Quicksilver Resources produced an estimated 325 million cubic feet equivalent per day in 2009, and expects this capital program, if executed properly, to increase production to 390-400 million cubic feet equivalent per day. This would represent growth of approximately 20%.
Bottom Line
Quicksilver Resources is tasked in 2010 with continuing its strong production growth from its core properties in the Barnett Shale and the Horseshoe Canyon. The company must also demonstrate progress in getting its next high-growth basin ready for development. If history is a guide, Quicksilver Resources should succeed as it has in the past. (Drill down into financial statements to tap into the right companies and let returns flow. Read Unearth Profits In Oil Exploration And Production.)
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