Even as Barnett Shale operators look far and wide for the next great shale plays, Quicksilver Resources Inc.’s $1.3 billion purchase of property in Tarrant and Denton counties shows the Metroplex’s party isn’t over yet.
The Fort Worth-based company said it will purchase 13,000 acres of producing, leasehold, royalty and midstream assets in northern Tarrant and southern Denton counties from Chief Resources LLC, Hillwood Oil & Gas LP and Collins and Young LLC. The properties currently produce about 45 million cubic feet of natural gas per day and Quicksilver estimates total reserves of 1 trillion cubic feet of natural gas resources, 350 billion of which are proved, according to a statement.
“Every once in a while an opportunity comes along that can enhance one of our existing projects and we can capitalize on our experience gained in a basin,” said President and CEO Glenn Darden in a post-announcement press conference. “This Fort Worth Basin acquisition is one of those.”
The purchase boosts the company’s Fort Worth Basin reserves by 22 percent, and area acreage
to about 263,000 acres, 173,000 of which currently are the initial focus. The company will spend
between $220 million and $230 million to develop the property, said Chief Financial Officer Phil Cook.
Energy analyst Irene O. Haas said the company saw a good chunk of land in the heart of the Barnett Shale and made a wise decision to jump in and secure it from private landowners.
“I think it’s a fantastic deal,” said Haas, an analyst in the Houston office of financial services firm Canaccord Adams. “Actually, it was a bit of an opportunistic deal on Quicksilver’s’ side,” and should give the company’s production a boost.
The only drawback to the deal is the amount of debt the company incurs will increase, but Haas said the company has a good history of raising cash and won’t suffer.
“I think in the long run the debt structure will come back down,” she said.
Wall Street reacted unenthusiastically to the announcement, and shares of Quicksilver, traded under KWK on the New York Stock Exchange, fell about 5 percent in the days following the announcement before rebounding, though most other Barnett Shale operators experienced similar drops during the same time. Shares of the company have risen more than 19 percent for the year, trading above $35, but shares have been as high as almost $45.
The company sought the property for various reasons: most of the drilling pads have been cleared; the water resource wells and saltwater injection wells have been identified; and there are opportunities for midstream subsidiary, Quicksilver Gas Services LP.
“Perhaps the most attractive aspect is the low
royalty rate, effectively at 12 percent royalty,” said Glenn Darden, statements echoed by brother and Chairman of the Board Thomas “Toby” Darden, who said that rate – about half of what present rates
tend to be – makes the property low risk and high efficiency.
The area also is comprised of few leases, said Toby Darden, making title work faster and easier.
“Most of the northern Tarrant and Denton county areas have been complex from rooftops and other complicating factors,” he said. “This was very simple and our engineers had plenty of time to pick through the details in minute detail.”
The 13,000 land grab wasn’t the biggest single purchase Quicksilver has made, but one of the biggest recent grabs, said Rick Buterbaugh, vice president for investor relations and corporate planning.
The company likens the new property to its Lake Arlington project, where Quicksilver currently is drilling on about 4,000 acres into shale between 350 feet and 500 feet thick.
Wyoming, Montana, Canada and West Texas are the company’s other areas of interest and exploration.