Quicksilver Resources Inc. agreed to acquire the assets from various parties in Texas’s Barnett Shale formation for $1.31 billion in cash and stock.
In addition, the natural-gas and crude-oil producer said daily production in the second quarter averaged between 233 million and 235 million cubic feet of natural gas equivalents; Quicksilver’s May forecast was 225 million to 235 million. The company also expects unit expenses to be at the low end of estimates.
The Barnett Shale area near Fort Worth is considered by some to be the nation’s largest onshore natural-gas field. Drilling success there has driven companies to scour the continent for new shale resources — though none has yet rivaled the Barnett field.
Under the agreement with private parties including Chief Resources LLC, Hillwood Oil & Gas LP and Collins and Young LLC, Quicksilver will pay $1 billion in cash and $307 million in its stock for the Barnett Shale assets. The cash portion will be funded through a $700 million 30-month loan, operating cash flow and an existing credit facility.
Quicksilver said the deal, expected to close Aug. 8, would expand its production-growth profile and inventory of low-risk, high-return development projects while keeping costs low.
Upon closing of the deal, Quicksilver expects 2008 total average daily production volumes will increase an additional 8% from prior estimates to 275 million cubic feet, with the acquisition immediately adding to earnings.
Meanwhile, total daily production volumes are projected to jump about 40% and 30% in 2009 and 2010, respectively, after adjusting for the November divestment of Quicksilver’s operations in Michigan, Indiana and Kentucky.
The Barnett Shale properties being acquired produce a net 45 million cubic feet a day. Quicksilver expects they contain more than one trillion cubic feet of recoverable natural gas resources net to the company — about 350 billion cubic feet of proved reserves, of which about 40% are developed, and more than 650 billion cubic feet of additional resource potential.