May 8, 2012 / 12:22 PM / 5 years ago

UPDATE 3-Quicksilver outlook sparks concerns, shares fall

* Q1 adj loss/shr $0.09 vs est $0.04 loss/shr

* Sees Q2 average daily production volume of 375-385 mmcfed

* Sees FY average production 5 pct higher

* Expects Barnett Shale MLP to go public in summer

* Shares fall 13 pct

May 8 (Reuters) - Quicksilver Resources Inc shares fell as much as 13 percent after the gas-focused company forecast lower second-quarter output, raising concerns that it might not meet its full-year production outlook.

The company, which owns acerages in Texas, Colorado, and Wyoming in the United States and Alberta and British Columbia in Canada, said it expects 2012 volumes to be similar to its 2011 production of 412 million cubic feet equivalent per day (mmcfe/d).

“Given the reduced drilling activity and lower-than-expected second-quarter (average production volume) guidance, we do not expect Quicksilver to meet its prior 2012 guidance of flat year-over-year production,” UBS analyst William Featherston said in a note to clients.

Quicksilver shares, which have lost about 26 percent of their value in the last three months, fell to $4.02 on Tuesday on the New York Stock Exchange.

The company maintained its full-year capital spending forecast of about $370 million.

“On a capex basis, Quicksilver appears ahead of plan by spending $136 million in first quarter, which would imply a straight line run rate of about $545 million, well above its reaffirmed 2012 capex budget,” Simmons & Co analyst Bill Herbert said in a note to clients.

Exploration and production companies usually tend to outspend cashflow due to expensive drilling processes and weak natural gas prices are further straining their balance sheet.

Quicksilver, which has a market value of about $800 million, had cash and equivalents of $13.2 million, while its long-term debt stood at $1.9 billion as of Dec. 31, according to Thomson Reuters data.

Fort Worth, Texas-based Quicksilver expects production in the current quarter to dip 9 percent to average between 375 mmcfe/d and 385 mmcfe/d.

“Volumes will build back in the second half of the year,” Chief Executive Glenn Darden said on a conference call with analysts.

SEEKING FUNDS

Quicksilver has been actively pursuing joint venture options to help fund its drilling activities. It announced a midstream deal with KKR & Co in November for its operations in Canada’s Horn River basin.

On Tuesday, Quicksilver said it was close to securing a partner for its West Texas joint venture. Quicksilver holds about 155,000 net acres across the oil-rich Delaware and Midland basins of West Texas.

The company, which is betting on its Barnett shale master limited partnership, Quicksilver Production Partners, to raise additional capital, said the unit is expected to go public this summer.

Energy companies have gained in recent years by using a financial structure known as master limited partnerships (MLPs) in which they are not required to pay any corporate taxes.

Quicksilver posted an adjusted loss of 9 cents a share in the first quarter.

Analysts on average had expected a loss of 4 cents per share, according to Thomson Reuters I/B/E/S.

Total revenue fell 31 percent to $145 million, while analysts expected $188.3 million.

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