Deutsche Bank Comments on Quicksilver Resources (KWK): Sees Deal With Eni (E) Mildly Accretive, But Today's Move Overdone
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Deutsche Bank comments on Quicksilver Resources (NYSE: KWK), raises price target from $11 to $12.
Deutsche analyst says, "As an initial move to shore up its financial position, KWK announced a strategic partnership with Eni. S.p.A (NYSE: E), whereby Eni will acquire 27.5% stake in KWK's Alliance properties in the Barnett shale. KWK said closing should occur in mid-June; expected net proceeds of $280MM will target debt reduction. Giving effect for the transaction, our 2009 production forecast falls from 119.6 to 115.6 Bcfe; however, lower interest expense largely offsets the impact on our EPS and CFPS estimates....Deal appears mildly accretive to our NAV... Today's strength in the stock appears overdone to us, as we believe this transaction falls short of alleviating KWK's financial constraints. The $280MM debt reduction leaves the company with just under $2.2B in pro forma midyear net debt (excluding non-recourse KGS debt), per our estimate, and only about $300MM of borrowing capacity. KWK has expressed its intent to pursue additional asset sales to ease its liquidity constraints (as opposed to equity issuance). We think it may prove challenging to consummate additional accretive deals, as KWK moves down the list from its best Barnett Assets, amid the current "buyers market" for upstream properties."
Quicksilver Resources Inc., an independent energy company, engages in the acquisition, exploitation, exploration, development, production, and sale of natural gas, natural gas liquids, and crude oil in North America.
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More Acquiring about to start?
Scooter on May 20, 2009 04:58 AMEni could have concentrated on other Operators in other, BETTER, Shale Plays, so likely Deutsche Bank's frown on this deal. Speculation abounds that other Foreign Purchasers are near similar acquisition announcements in the BETTER Shale Plays.