Fort Worth, TX-based producer Quicksilver Resources Inc. last Monday said it agreed to purchase producing, leasehold, royalty and midstream assets associated with the Barnett Shale formation in the Dallas/Fort Worth Metroplex area for $1.307 billion in cash and stock from various private parties, including Chief Resources LLC, Hillwood Oil & Gas LP and Collins and Young LLC.
The properties currently have net production of approximately 45 MMcf/d, according to Quicksilver. It estimates that the assets contain more than 1 Tcf of recoverable natural gas resources net to the company, including an estimated 350 Bcf of proved reserves, of which approximately 40% are proved developed, and more than 650 Bcf of additional resource potential on 13,000 net acres.
Quicksilver said it plans to pay $1 billion in cash and $307 million in its common stock to acquire the properties. It expects to fund the cash portion of the transaction through a combination of a $700 million, 30-month second-lien loan facility, operating cash flow and its existing credit facility. The acquisition is scheduled to close on Aug. 8, subject to the expiration of the Hart-Scott-Rodino waiting period and the satisfaction or waiver of other customary closing conditions, according to the company.
"Acquisition of these properties in the Fort Worth Basin enhances our production growth profile, expands our inventory of low-risk, high-return development projects, maintains a low full-cycle cost structure, and is expected to be immediately accretive to earnings and cash flow per share," said Quicksilver CEO Glenn Darden.
Upon closing of the deal, Quicksilver estimates that its total company average daily production volumes for the current year will increase to approximately 275 MMcf/d of natural gas equivalents, about an 8% hike from prior estimates, reflecting just five months of production volumes from the acquired properties. Its total daily production volumes are projected to increase by about 40% and 20% in 2009 and 2010, respectively, resulting in a three-year compound annual growth rate of approximately 50%, after adjusting for the 2007 divestment of Quicksilver's natural gas, oil and midstream operations in Michigan, Indiana and Kentucky (see NGI, Sept. 17, 2007).
Quicksilver said it has expanded its hedges through 2010 by approximately 40,000 MMBtu/d of natural gas production, using costless collars ranging from $12/MMBtu to $16.60/MMBtu in the current year, from $11.13/MMBtu to $13.75/MMBtu in 2009 and from $10/MMBtu to $13.50/MMBtu in 2010.
The company said it has increased its estimate for total average daily production for the second quarter of the current year to a range of 233/MMcfe to 235 MMcfe, which excludes any volumes from the announced acquisition.
Quicksilver is engaged in the development and acquisition of long-lived, unconventional natural gas reserves in North America, including coalbed methane, shale gas and tight sands.
Intelligence Press Inc. All rights reserved. The preceding news report
may not be republished or redistributed, in whole or in part, in any
form, without prior written consent of Intelligence Press, Inc.