We are initiating coverage on Quicksilver Resources (KWK) with a rating of Buy and a 12-month estimated target price of $39.00 per share. The company has had stellar growth from its late development phase Barnett Shale gas play in North Texas. Projected to ramp up to full-scale production in 2008, Quicksilver should experience a 69% increase in aggregate year over year production and a near 150% increase in North Texas gas production.
The added value of natural gas liquids contained Barnett of the Fort Worth unconventional gas play, coupled with the four Tcfe of potential reserves in Quicksilver's North Texas defined fairway, gives the company a continued platform for low-cost, low-risk reserve and production growth for several years to come. Hence our Buy rating.
With our estimated 2008 EBITDA, Cash Flow and Debt levels, a price target of $39.00 yields an enterprise and price to cash flow multiple of 11X, respectively, both within historical and appropriate ranges. Again, KWK receives a premium with respect to its peers because of the higher than normal future growth expectations mainly attributable to the ramp-up of the Barnett Shale play in the Fort Worth Basin.
Read the full analyst report on KWK.
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