Quicksilver CEO: Plenty of life left in Barnett

Quicksilver Resources Inc. is about a decade into the Barnett Shale, but it still has another 10 years of projects ahead, the company’s top executive said last week.

The Fort Worth-based oil and gas exploration company began leasing in the North Texas gas play back in the early 2000s and now produces 250 million cubic feet equivalent of gas per day from its 162,000-acre leasehold, which runs from Denton County southwest to Bosque County.

Speaking at a New York City energy conference last week, President and CEO Glenn Darden said about 40 percent of Quicksilver’s Barnett Shale assets are developed, leaving plenty of work to do to tap its 2.1 trillion cubic feet of reserves the company had at year-end 2009.

“We’ve booked roughly 2 Tcf in the Barnett,” Darden said at the IPAA Oil & Gas Investment Symposium, “and we have another 3 Tcf to book going forward.”

In the northern part of the play, Quicksilver Resources is running three rigs to develop its Alliance and Lake Arlington projects, which combined have about 1 Tcf of gas. Further south, one rig is exploring a portion of the shale play that offers more than just dry gas.

That “combo play,” as Darden puts it – located in eastern Hood, western Johnson, Hill, Somervell and Bosque counties – provides both dry gas and natural gas liquids. The company is producing 130 barrels of NGLs per million cubic feet of gas.

“This is where we’ll book a lot of reserves over the next several years,” Darden said.

Overall, the company expects to drill 100 wells and complete 130 wells to grow production about 25 percent in the Barnett Shale.

Economics

The combination of gas and liquids in the southern portion of the Barnett Shale is attractive to energy exploration companies, that are hesitant to produce gas at a low cost (the Henry Hub spot price at less than $4 per MMBtu as of publication) but are willing to look for oil, which is priced at about $86 per barrel.

Last year, when gas prices averaged less than $4 per MMBtu, was a “trying year” for the industry, Darden said.

Quicksilver Resources’ find and deliver, or F&D, cost is $1.27 per thousand cubic feet equivalent, according to JP Morgan data. The industry median cost is $3.63 per Mcfe.

Taking into account other factors, the company’s full-cycle cost is $3.50 per Mcfe based off $5 per Mcfe gas.

Although the company is producing, the oil and gas industry “can’t live on $5 gas prices,” Darden said.

In December 2009, the company set its 2010 capital budget at $540 million; however, Darden said the company could consider reducing its budget if prices don’t improve.

In North Texas, Quicksilver Resources’ “target this year for growth is roughly a little over 20 percent,” he said. “If we cut back to just three rigs running in the Barnett, we’ll still grow probably 15 percent.”

Other energy plays

Last year, Quicksilver Resources’ production grew 23 percent to 325 MMcfe per day, primarily based off the Barnett Shale. At the same time, reserves increased 9 percent to 2.4 trillion cubic feet equivalent, 68 percent of which is proved developed. Natural gas liquids and oil make up about 25 percent of production, while natural gas takes up the rest.

Texas makes up 89 percent of total reserves, while 10 percent are in Canada and another 1 percent elsewhere.

North of the United States-Canada border, Quicksilver Resources holds 342,000 net acres in Canada’s Horseshoe Canyon, where the company estimates reserves of 253 Bcfe of dry coals.

The company has 130,000 net acres in the Horn River Basin, located further east.

“We’ve got a lot of gas up here in this Horn River Basin,” Darden said. The company has drilled four wells to date, one of which was flaring at more than 10 MMcf per day before being hydraulically fractured. Total resource potential is estimated between 5 Tcf to 10 Tcf. “This is going to be a huge project and will multiply Quicksilver’s reserves many times over.”

The company also holds 208,000 acres in two other U.S. plays in the Rockies and northern Montana, where it expects some oil from its Bakken Shale assets.

By John-Laurent Tronche for Business Press. April 19, 2010.

SOURCE:
Business Press: “Quicksilver CEO: Plenty of life left in Barnett”

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Posted by admin on April 23rd, 2010. Filed under Barnett Shale, Eagle Ford Shale, Shale Basins. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry