Quicksilver Resrcs Downgraded

We are downgrading Quicksilver Resources (KWK - Analyst Report) from a Buy to a Hold and decreasing our 6-month target price from $22.00 to $5.50 per share. The company's growth story remains strong and with the recent accretive Alliance acquisition, the company looks to further increase its growth prospects in the prolific Barnett Shale. KWK will likely grow production by 20% while decreasing operating cash costs in 2009.

However, the current weak commodity and credit environments will prevent significant upside movement in its stock price. Additionally, its above-industry-average debt levels makes it a less attractive investment given the current emphasis on corporate balance sheets.

We believe that current natural gas demand destruction, softness in commodity prices and credit problems will continue to be the dominating factors throughout the majority of 2009. Coincidentally, we think that all of the potential downside of the current macroeconomic backdrop has been priced into the stock and it will not go down from current levels.