Fort Worth-based Quicksilver Resources is slashing its capital spending budget almost in half this year in response to the lowest natural gas prices in a decade.
Quicksilver, predominantly a gas producer, announced today that it intends to spend $370 million in 2012 for drilling and completion of wells and related activities. That's a 47 percent drop from its 2011 capital budget of $696 million.
The company plans to spend $108 million in North Texas' gas-rich Barnett Shale, which accounts for most of its production. But Quicksilver said it would focus on the southern portion of the play, where its production includes natural gas liquids such as propane and butane, which fetch more attractive prices than "dry" natural gas.
Quicksilver will devote $180 million to Canada, including the promising Horn River Basin gas play in far northeast British Columbia, which also offers the potential for oil production.
Like other natural gas producers, Quicksilver is moving toward more production of oil and natural gas liquids because of the more-attractive pricing. It hopes to realize more liquids production through development of projects in the Permian and Delaware basins in West Texas and the Sandwash Basin in northwest Colorado. It is allocating $82 million to these areas in 2012.
"Quicksilver's 2012 operating budget is primarily directed to advance our new projects to the development stage, two of which are dedicated to oil," CEO Glenn Darden said. "Much like the last two years, the company plans to match the operating budget to cash flows supplemented by anticipated sales of certain assets or joint venture partner interests."
Quicksilver expects its 2012 production "to be essentially flat" compared to 2011.
The company's stock (ticker: KWK), which was trading above $14 a share last spring, has plunged along with natural gas prices. The stock closed today at $5.01, down 27 cents, on a day when gas prices made a steep 21-cent drop to $2.50 per million British thermal units in futures trading in New York.
--Jack Z. Smith