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Why Quicksilver Resources Inc. Shares Sank

By Jeremy Bowman - Mar 5, 2014 at 5:29PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Quicksilver Resources Inc. (NYSE: KWK) were slipping today, falling as much as 10% and finishing down 7% after it agreed to sell land to Southwestern Energy.

So what: The oil-and-gas producer said it would sell all of its jointly owned holdings in Northwestern Colorado's Sand Wash Basin, a total of 312,000 acres, for $180 million, half of which it will keep after dividing the payment with SWEPI LP. CEO Glenn Darden said the sale "enables us to focus our development efforts on the Barnett and Canadian projects as well as our previously announced joint ventures in West Texas, and provides the opportunity to enhance company liquidity."

Now what: The deal is expected to close on May 1, and Southwestern could begin drilling as early as June. Quicksilver has nearly $2 billion in debt on its balance sheet so a $90 million infusion looks like just a drop in the bucket as far as liquidity is concerned. The market seems to view the sale as a poor deal for Quicksilver as it's giving up a "liquids-rich resource play" for what seems a relatively insignificant cash sum. We may even similar land sales as management seems to be saying it could benefit from greater liquidity and streamlining operations, not a surprise considering Quicksilver's been operating at a loss. We should learn more about the sale and the company's future prospects when it reports earnings next week. Analysts are expecting a loss of $0.03 a share. 

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