Quicksilver Resources Inc. set another production record in the second quarter and rebounded from a 1Q2011 net loss with net income of $109 million (61 cents/share) in 2Q2011. Production in the Barnett Shale, which has been a primary driver of the company's recent growth, is expected to ramp up through at least the end of the year.
The Fort Worth, TX-based exploration and production company reported production of 417.2 MMcfe/d, a 19% increase compared with 349.9 MMcfe/d in 2Q2010. Production was 80% natural gas, 19% natural gas liquids (NGL) and 1% crude oil and condensate.
"The growth is primarily driven by the Barnett," CEO Glenn Darden said during a conference call with financial analysts Monday. "Our Horseshoe Canyon [in Alberta] is about flat, and the Horn River [Basin in northeast British Columbia] is growing a little bit...but we're just climbing the ladder in the Barnett." Quicksilver's liquids production "is having a disproportionately positive impact on returns and cash flow," while costs are being driven down, he said.
Average daily production volume is expected to increase about 3% sequentially in 3Q2011 to 425-435 MMcfe/d, according to Darden.
Quicksilver previously reported a production record in the first quarter -- 392.3 MMcfe/d, up 23% from the prior-year quarter -- which was also driven by higher volumes from its Barnett and Horn River operations (see Shale Daily, May 10). But that positive production news was offset by a net loss for 1Q2011 due to one-time items and lower natural gas prices.
Quicksilver drilled 11 net operated wells in its Fort Worth Basin Barnett Shale asset during 2Q2011 and at quarter's end had a remaining inventory of approximately 85 gross operated wells that have been drilled in the Barnett but await completion or connection to sales lines. The company expects to exit the year with approximately 45 wells in its uncompleted well inventory in the Barnett.
Despite Quicksilver's Barnett bullishness, rig counts in the play have slipped over the last year, according to NGI's Shale Daily's Unconventional Rig Count. There were 65 rigs in the Barnett last week, one less than in the previous week and two fewer than a month ago. The number of rigs in the Barnett has fallen 23% compared with 84 in the play last year. Earlier this year pipeline flows recorded by Bentek Energy LLC showed that Louisiana's Haynesville Shale region had surpassed the Fort Worth Basin/Barnett Shale region in natural gas output, though the two shale plays themselves were neck and neck in output (see Shale Daily, March 22). The Barnett has been the country's top shale gas producer for about a decade.
In the Horn River Basin, Quicksilver has drilled a total of eight horizontal wells into the Muskwa and Klua formations, of which four wells have commenced production. The company has also drilled its first horizontal well into the shallower Exshaw oil formation and expects to have it completed this summer. Quicksilver also completed construction and compression related to its 20-mile, 20-inch diameter gathering line, which will allow Quicksilver to flow gas from its completed gas wells at unrestricted rates of more than 30 MMcf/d and minimize transportation costs.
Also during 2Q2011, Quicksilver expanded its acreage position in the Delaware Basin in West Texas to approximately 105,000 net acres and in the Sandwash Basin in northwest Colorado to approximately 210,000 net acres. Those acquisitions recently prompted the company's board of directors to approve an increase in Quicksilver's 2011 capital program to approximately $696 million, up from the previously announced $480 million.