Fort Worth-based Quicksilver Resources Inc. (NYSE: KWK) may be ripe for picking by a major oil with an eye on growing a U.S. shale-gas position, says Jeb Armstrong, E&P analyst for Calyon Securities (USA) Inc.

“While we do not believe management would agree to be acquired right now, given the stock's depressed valuation, we view Quicksilver’s asset base as attractive for a global major oil company that may be looking to gain expertise in and grow its exposure to North American shale plays,” he says.

A Barnett player with U.S. onshore oil interests by virtue of its unit-holding in BreitBurn Energy Partners LP (Nasdaq: BBEP), Quicksilver is among producers whose cash flow and other fiscal-fitness measures are being revised downward by analysts, upon declining oil and natural gas prices.

How alarming is the new commodity-price regime? Enough for Armstrong to add this note, which may become a commonplace caveat in E&P analyst’s commentary on U.S. producers’ stocks: “We do not believe Quicksilver is at risk of failure unless oil and gas prices drop precipitously.”

He is keeping his target for the $12 stock strong at $44, but he has lowered his aim from $50. He has also lowered his 2009 expectations for Quicksilver’s earnings per share (to $1.15 from $1.60) and cash flow per share (to $3.35 from $4.25).

Quicksilver has announced reduced 2008 and 2009 capex plans, joining other producers, particularly shale-gas-focused producers, in lowering forecasted spending on drilling and development. (For that story, see “Quicksilver Resources Cuts Capital Program; Reducing Rigs In Fort Worth Basin” at OilandGasInvestor.com, and find other capex-cut stories there as well.)

November-contract U.S. natural gas prices on Nymex have fallen below $7 per MMBtu, hitting both producers’ cash-flow expectations as well as their ability to hedge in financing acquisitions (as hedging below $7/MMBtu is locking in failure for many shale-gas players).

“Although not yet completely out of the woods, (Quicksilver’s) cut to capex for the remainder of 2008 and 2009 substantially mitigates the financial strain Quicksilver was facing after its third-quarter acquisition of 13,000 net acres in the Barnett,” Armstrong says.

“We believe the move is positive for the shares by giving the market confidence that management can make the tough decisions needed to keep the company on a firm footing.”

Armstrong says Quicksilver was facing a “near-term financial squeeze.”

“The company continues to face a high balance on its credit facility that is likely to continue to grow through next year. While Quicksilver may have trouble rolling the balance into long-term fixed debt, current cash-flow expectations should keep the balance just below the facility's $1.2-billion commitment amount.”

–Nissa Darbonne, Executive Editor, Oil and Gas Investor, A&D Watch, OilandGasInvestor.com Today, OilandGasInvestor.com, A-Dcenter.com; ndarbonne@hartenergy.com