Natural gas-weighted Quicksilver Resources Inc., which has seen its shares trading lately at less than one-third of their 52-week high, last week announced a capital budget and drilling plan intended to hold the fort while it transitions to oil/liquids and shops for joint venture (JV) partners in the Horn River Basin and in West Texas.

The Fort Worth, TX-based company plans to spend $370 million this year, composed of about $302 million for drilling and completions, $46 million for gathering and $22 million for leasehold. This year’s spending marks a 47% decline from last year’s budget of $696 million.

About $108 million is to be spent in the Fort Worth Basin, mainly in the company’s liquids-rich southern acreage; $180 million in Canada and $82 million in emerging oil plays in the Sandwash Basin in Colorado and the Permian/Delaware basins in West Texas. The Fort Worth Basin’s Barnett Shale accounts for most of the company’s production.

“Quicksilver’s 2012 operating budget is primarily directed to advance our new projects to the development stage, two of which are dedicated to oil,” said CEO Glenn Darden. “Much like the last two years, the company plans to match the operating budget to cash flows supplemented by anticipated sales of certain assets or joint venture partner interests.”

Production for 2012 is projected to be essentially flat compared with last year. Average daily production is expected to consist of 80% natural gas and 20% natural gas liquids and crude oil. For 2012 the company has 56% of its production hedged at a price of $6.16/Mcfe.

Quicksilver is still looking for a JV partner in the Horn River and in West Texas and plans to announce something during the first half of this year, according to Wells Fargo Securities Analyst David Tameron. The company recently hired advisers and began a formal process in pursuit of partners.

“We believe that KWK [Quicksilver] is taking appropriate action to address Street concerns, and we expect that reaction to guidance will be muted as investors remain focused on the bigger picture,” Tameron said in a note. “Potential JVs in the Horn River and West Texas could dramatically alter the outlook, in our view, but not yet willing to step up given the risk-reward proposition.” Tameron maintained his “market perform” rating on the shares and offered a valuation range of $5-7/share based upon a net asset value estimate of $7.51/share.

Analysts at Tudor, Pickering, Holt & Co. said they want to see the Barnett assets in a master limited partnership, plans for which were announced last fall (see NGI, Oct. 24, 2011) while Quicksilver chases oil. As for the Horn River, TPH said a JV with a liquefied natural gas export component would be nice “even if they sell a little more resource than they’d like.”

In the Fort Worth Basin Quicksilver said it expects to operate two rigs in the first quarter, with a scale-down to one rig for the remainder of the year, resulting in the drilling of about 25 gross (20 net) wells. The company said it expects to complete 36 gross (31 net) additional wells from its inventory of drilled but uncompleted wells. Drilling and completion activity in the Fort Worth Basin is to be concentrated in the liquids-rich southern acreage.

Drilling activity in the Horn River Basin is expected at a level to meet land requirements and commitments under transportation and processing agreements to third parties and to the newly formed partnership with Kohlberg Kravis Roberts & Co. LP (KKR) (see NGI, Jan. 9).

In the Sandwash Basin the company plans to drill and complete up to seven horizontal wells to confirm “encouraging” results from its initial wells in the Niobrara and Lower Mancos formations. One rig is expected to be deployed to West Texas in the second quarter to begin a drilling program in the Wolfpack prospect.

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