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Quicksilver Resources Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 10, 2012 04:49PM
Quicksilver Resources Inc. (KWK) filed Quarterly Report for the period ended 2012-03-31. Quicksilver Res has a market cap of $715.8 million; its shares were traded at around $4.29 with a P/E ratio of 34.8 and P/S ratio of 0.8.
Highlight of Business Operations:Natural gas revenue for the 2012 quarter decreased from the 2011 quarter despite the increase in hedge revenue. Realized prices, without hedge gains, were 35% lower for the 2012 quarter as compared to the 2011 quarter. The 5% decrease in natural gas volume from our Barnett Shale Asset was primarily due to production decline resulting from the aging of existing wells and our capital spending pattern.
Utilization of derivatives to hedge our sales of natural gas and NGL may result in realized prices varying from market prices that we receive from the sale of our production. Our production revenue for the 2012 quarter and 2011 quarter was higher by $48.8 million and $24.0 million, respectively, because of our hedging activities.
Other revenue for the three months ended March 31, 2012 decreased from the 2011 quarter due to the recognition of realized losses in 2012 from our restructuring of our hedge platform. In January and February 2012, we terminated a number of our ten-year derivative instruments in exchange for derivative instruments with shorter durations at above market terms. The decrease in the fair value between the terminated ten-year instrument and the new shorter-term instrument was recognized in the current period as a realized loss. Losses from hedge ineffectiveness were $3.2 million for the 2012 quarter as compared to less than $0.1 million for the 2011 quarter as our derivative instruments are based on NYMEX pricing and our production is sold at market prices other than NYMEX. At March 31, 2012, we do not have any basis swaps to offset the price differential. Unrealized losses recognized in 2012 is the difference between the estimated fair value at the inception date and transaction cost for ten-year derivative instruments entered into during the period.
We recorded our portion of BBEPs earnings during the quarter in which its financial statements became publicly available. As a result, our 2011 quarter results of operations included BBEPs earnings for the three months ended December 31, 2010. We sold the last of our BBEP Units in the fourth quarter of 2011.
Managements discussion and analysis of financial condition and results of operations are based on our condensed consolidated interim financial statements and related footnotes contained within this report. The process of preparing financial statements in conformity with GAAP requires the use of estimates and assumptions to determine certain of the assets, liabilities, revenue and expense. Our more critical accounting estimates used in the preparation of the consolidated financial statements were discussed in our 2011 Annual Report on Form 10-K. These critical estimates, for which no significant changes occurred during the three months ended March 31, 2012, include estimates and assumptions for:
Stocks Discussed: KWK,