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Quicksilver Resources To Invest In Two Oil Plays
Quicksilver Resources (NYSE:KWK) recently provided additional details on its operations in the Niobrara and Wolfpack prospect, two early stage oil plays in the company's portfolio. In 2012, the company hopes to validate the potential of these areas and use them in the future to increase its oil production. (For additional reading, check out A Guide To Investing In Oil Markets.)
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Niobrara
Quicksilver Resources has 210,000 net acres under lease at the Thunderhead project in Colorado and is targeting the Niobrara formation, which consists of several different oil producing zones. The area has produced oil for many years from the Niobrara and Lower Mancos utilizing vertical development with no stimulation, and Quicksilver Resources now plans to use horizontal drilling and hydraulic fracturing to develop its properties.
The company outlined the characteristics that the company believes will make the play attractive to develop. The Niobrara is present on a large part of the Thunderhead project area and is approximately 1,200 feet thick. The oil is high quality with an estimated API gravity of 40 degrees and is at relatively shallow depths from 4,500 to 9,000 feet.
Quicksilver has drilled and completed one horizontal well at the Thunderhead project, and reported production of 500 barrels of oil per day, approximately five times the production from a typical vertical well. The company used a 3,000 foot lateral on this well and expects production to be higher if it uses longer laterals on future wells.
It reported that the Niobrara horizontal well cost approximately $8.5 million, but on a developmental basis, the company expects costs to drop to $6.5 million to $7 million per well.
The company estimates that the reserve potential at the Thunderhead project is 500 million barrels of oil.
Another company with acreage prospective for the Niobrara is Crimson Exploration (Nasdaq:CXPO). The company is deferring development here until other operators prove the potential of this play.
Wolfpack Prospect
Quicksilver Resources has also assembled 155,000 net acres in four separate areas in the Permian Basin and is targeting multiple zones on its properties, including the Wolfcamp and Bone Springs plays. The company is confident on this acreage because it is close to other operators that have successfully developed properties here, including Exxon Mobil (NYSE:XOM), BHP Billiton (NYSE:BHP) and Concho Resources (NYSE:CXO).
Quicksilver Resources estimates that the company has 1,000 drilling locations on its acreage with reserve potential of 300 million barrels of oil. The company is seeking a joint venture partner to help with the cost of developing the Wolfpack prospect.
The Bottom Line
Quicksilver Resources is moving away from natural gas development and has built up acreage in two crude oil plays in the United States. The company plans to move slowly in 2012 with continued testing of its acreage, while also attempting to secure financing before full-scale development begins. This is a sound strategy that will benefit the company and shareholders in the long term. (To know more about oil and gas, read Oil And Gas Industry Primer.)
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
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Niobrara
Quicksilver Resources has 210,000 net acres under lease at the Thunderhead project in Colorado and is targeting the Niobrara formation, which consists of several different oil producing zones. The area has produced oil for many years from the Niobrara and Lower Mancos utilizing vertical development with no stimulation, and Quicksilver Resources now plans to use horizontal drilling and hydraulic fracturing to develop its properties.
The company outlined the characteristics that the company believes will make the play attractive to develop. The Niobrara is present on a large part of the Thunderhead project area and is approximately 1,200 feet thick. The oil is high quality with an estimated API gravity of 40 degrees and is at relatively shallow depths from 4,500 to 9,000 feet.
Quicksilver has drilled and completed one horizontal well at the Thunderhead project, and reported production of 500 barrels of oil per day, approximately five times the production from a typical vertical well. The company used a 3,000 foot lateral on this well and expects production to be higher if it uses longer laterals on future wells.
It reported that the Niobrara horizontal well cost approximately $8.5 million, but on a developmental basis, the company expects costs to drop to $6.5 million to $7 million per well.
Another company with acreage prospective for the Niobrara is Crimson Exploration (Nasdaq:CXPO). The company is deferring development here until other operators prove the potential of this play.
Wolfpack Prospect
Quicksilver Resources has also assembled 155,000 net acres in four separate areas in the Permian Basin and is targeting multiple zones on its properties, including the Wolfcamp and Bone Springs plays. The company is confident on this acreage because it is close to other operators that have successfully developed properties here, including Exxon Mobil (NYSE:XOM), BHP Billiton (NYSE:BHP) and Concho Resources (NYSE:CXO).
Quicksilver Resources estimates that the company has 1,000 drilling locations on its acreage with reserve potential of 300 million barrels of oil. The company is seeking a joint venture partner to help with the cost of developing the Wolfpack prospect.
The Bottom Line
Quicksilver Resources is moving away from natural gas development and has built up acreage in two crude oil plays in the United States. The company plans to move slowly in 2012 with continued testing of its acreage, while also attempting to secure financing before full-scale development begins. This is a sound strategy that will benefit the company and shareholders in the long term. (To know more about oil and gas, read Oil And Gas Industry Primer.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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