EX-99.1 2 exh99_1.htm PRESS RELEASE exh99_1.htm
 
 
Exhibit 99.1    
 
 
   
N e w s   R e l e a s e
      
        QUICKSILVER GAS SERVICES LP  
        777 West Rosedale Street  
Fort Worth, TX  76104  
www.kgslp.com   
 

 
Quicksilver Gas Services Second-Quarter Net Income Surges 44% in 2010

FORT WORTH, TEXAS (August 9, 2010) – Quicksilver Gas Services LP (NYSE: KGS) today reported net income for the 2010 second quarter of $10.1 million, a 44% increase from the comparable prior year’s net income of $7.0 million.  Earnings before interest, income taxes, depreciation and accretion ("EBITDA"), a non-GAAP measure, increased to $18.8 million in the 2010 quarter, up 20% from the comparable prior-year period.

The company’s total gathered volumes for the 2010 second quarter averaged 325.4 million cubic feet (MMcf) per day, an increase of 33% from the comparable prior-year period.  Continued development of the Alliance and Lake Arlington properties by Quicksilver Resources Inc. (NYSE: KWK) is expected to result in total average gathered volumes for Quicksilver Gas Services in the range of approximately 330 MMcf to 340 MMcf per day for all of 2010.  The company purchased the Alliance midstream assets from Quicksilver Resources in January and has reflected their results in the 2009 financial information by virtue of Quicksilver’s ownership position with us.

“The value of our recent acquisition of the Alliance midstream system was evident during the quarter as gathered volumes increased as anticipated,” said Toby Darden, Quicksilver Gas Services president and chief executive officer.  “More importantly, we efficiently integrated this acquisition into our gathering network which helped to reduce our costs per gathered unit by more than 25% from the first quarter of 2010.  We believe that the opportunity for continued, diversified growth will be further enhanced following completion of the sale of the general partner to Crestwood Midstream Partners later this year.”

For the second quarter of 2010, the company incurred approximately $13.5 million of capital costs, including $1.7 million of maintenance capital.  Expenditures during the quarter included the connection of approximately 2.2 miles of gathering lines and 28 new wells to the gathering system.

At June 30, 2010, the company had approximately $227 million drawn on its $320 million credit facility.

On July 22, the company announced that Quicksilver Resources, the owner of 100% of our general partner, Quicksilver Gas Services GP, had entered into a definitive agreement to sell all of its interests in Quicksilver Gas Services to Crestwood Midstream Partners II, LLC, a portfolio company of First Reserve Corporation.  At closing, which is not subject to financing contingencies and is expected to occur in October 2010, subject to customary closing conditions, Quicksilver Resources will convey all of its ownership of us to Crestwood.  The transaction has no direct impact to our historical financial statements.
 
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Also on July 22, 2010, the company announced that our board of directors declared a cash distribution for the 2010 second quarter of $.42 per common unit, an increase of 7.7% from the previous quarterly rate.  For the three months ended June 30, 2010, distributable cash flow, a non-GAAP financial measure, totaled $15.4 million, a 28% increase from the prior-year quarter, and resulted in a distribution coverage rate of more than 1.2 times for the 2010 second quarter.

Conference Call

Quicksilver Gas Services will host a conference call for investors and analysts at 10:00 a.m. eastern time today to discuss the second-quarter 2010 operating and financial results and its outlook for the future.  The company invites interested parties to listen to the call via the company’s website at www.kgslp.com or by calling 1-877-313-7932, using the conference ID number 44423585, approximately 10 minutes prior to the call.  A digital replay of the conference call will be available at 3:00 p.m. eastern time today and will remain available for 30 days.  The replay can be accessed at
1-800-642-1687 using the conference ID number 44423585.  The replay will also be archived for 30 days on the company’s website.

Use of Non-GAAP Financial Measures

This news release and the accompanying schedules include the non-generally accepted accounting principles ("non-GAAP") financial measures of EBITDA, adjusted gross margin and distributable cash flow.  The accompanying schedules on page 7 of this news release provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP").  Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income or operating income or any other GAAP measure of liquidity or financial performance.

About Quicksilver Gas Services

Fort Worth, Texas-based Quicksilver Gas Services is a growth-oriented limited partnership in the business of gathering and processing natural gas produced from the Barnett Shale geologic formation in the Fort Worth Basin of north Texas.  The company began operation in 2004 to provide these services to Quicksilver Resources Inc., which owns our general partner.  For more information about Quicksilver Gas Services, visit www.kgslp.com.

Forward-Looking Statements
The statements in this news release regarding future events, occurrences, circumstances, activities, performance, outcomes and results are forward-looking statements.  Although these statements reflect the current views, assumptions and expectations of Quicksilver Gas Services LP’s management, the matters addressed herein are subject to numerous risks and uncertainties, which could cause actual activities, performance, outcomes and results to differ materially from those indicated.  Factors that could result in such differences or otherwise materially affect Quicksilver Gas Services LP’s financial condition, results of operations and cash flows include:  changes in general economic conditions; fluctuations in natural gas prices; failure or delays by our customers in achieving expected production
 
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from natural gas projects; competitive conditions in our industry; actions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; fluctuations in the value of certain of our assets and liabilities; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; construction costs or capital expenditures exceeding estimated or budgeted amounts; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; and the effects of existing and future litigation; as well as other factors disclosed in Quicksilver Gas Services LP’s filings with the Securities and Exchange Commission.  The forward-looking statements included in this news release are made only as of the date of this news release, and we undertake no obligation to update any of these forward-looking statements to reflect subsequent events or circumstances except to the extent required by applicable law.



Investor Contact
Rick Buterbaugh
817-665-4835
 
KGS 10-09
 
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QUICKSILVER GAS SERVICES LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In thousands, except for per unit data - Unaudited
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
Revenue
                       
Gathering revenue - Quicksilver
  $ 18,405     $ 13,731     $ 34,794     $ 27,259  
Gathering revenue
    1,340       389       2,455       1,160  
Processing revenue - Quicksilver
    6,774       8,684       13,253       17,386  
Processing revenue
    675       311       1,431       1,049  
Other revenue - Quicksilver
    -       225       -       450  
Total revenue
    27,194       23,340       51,933       47,304  
                                 
Expenses
                               
Operations and maintenance
    6,588       5,950       14,601       11,171  
General and administrative
    1,833       1,744       4,274       3,736  
Depreciation and accretion
    5,642       5,321       11,007       9,845  
Total expenses
    14,063       13,015       29,882       24,752  
                                 
Operating income
    13,131       10,325       22,051       22,552  
                                 
Other income
    -       1       -       1  
Interest expense
    2,945       2,243       5,623       4,478  
                                 
Income from continuing operations before income taxes
    10,186       8,083       16,428       18,075  
                                 
Income tax provision
    73       248       126       211  
                                 
Net income from continuing operations
    10,113       7,835       16,302       17,864  
                                 
Loss from discontinued operations
    -       (819 )     -       (1,454 )
                                 
Net income
  $ 10,113     $ 7,016     $ 16,302     $ 16,410  
                                 
General partner interest in net income
  $ 677     $ 225     $ 778     $ 497  
Common and subordinated unitholders’ interest in net income
  $ 9,436     $ 6,791     $ 15,524     $ 15,913  
                                 
Basic earnings (loss) per limited partner unit:
                               
From continuing operations per common and subordinated unit
  $ 0.33     $ 0.32     $ 0.54     $ 0.73  
From discontinued operations per common and subordinated unit
  $ -     $ (0.03 )   $ -     $ (0.06 )
Net earnings per common and subordinated unit
  $ 0.33     $ 0.29     $ 0.54     $ 0.67  
                                 
Diluted earnings (loss) per limited partner unit:
                               
From continuing operations per common and subordinated unit
  $ 0.31     $ 0.29     $ 0.52     $ 0.65  
From discontinued operations per common and subordinated unit
  $ -     $ (0.03 )   $ -     $ (0.05 )
Net earnings per common and subordinated unit
  $ 0.31     $ 0.26     $ 0.52     $ 0.60  
                                 
Weighted average number of common and subordinated units outstanding:
                         
                                 
Basic
    28,502       23,827       28,502       23,827  
Diluted
    31,958       28,395       31,952       28,488  
Distributions per unit
  $ 0.42     $ 0.37     $ 0.81     $ 0.74  
 
 
 
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QUICKSILVER GAS SERVICES LP
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except for unit data - Unaudited
 
   
June 30,
   
December 31,
 
   
2010
   
2009
 
ASSETS
           
Current assets
           
Cash and cash equivalents
  $ 556     $ 746  
Accounts receivable
    1,201       1,342  
Accounts receivable from Quicksilver
    2,038       -  
Prepaid expenses and other
    1,140       180  
Total current assets
    4,935       2,268  
                 
Property, plant and equipment, net
    508,850       482,497  
Other assets
    2,417       2,859  
Total assets
  $ 516,202     $ 487,624  
                 
LIABILITIES AND PARTNERS' CAPITAL
               
Current liabilities
               
Current maturities of debt
  $ 3,025     $ 2,475  
Accounts payable to Quicksilver
    -       1,727  
Accrued additions to property, plant and equipment
    7,396       8,015  
Accounts payable and other
    5,755       2,240  
Total current liabilities
    16,176       14,457  
                 
Long-term debt
    226,800       125,400  
Note payable to Quicksilver
    53,927       53,243  
Asset retirement obligations
    9,425       8,919  
Deferred income taxes
    895       768  
                 
Partners' capital
               
Common unitholders (16,988,429 and 16,313,451 units issued and outstanding at June 30, 2010 and December 31, 2009, respectively)
    208,209       281,239  
Subordinated unitholders (11,513,625 units issued and outstanding at June 30, 2010 and December 31, 2009)
    331       3,040  
General partner
    439       558  
Total partners' capital
    208,979       284,837  
    $ 516,202     $ 487,624  
 
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QUICKSILVER GAS SERVICES LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands - Unaudited
 
   
Six Months Ended June 30,
 
   
2010
   
2009
 
Operating activities:
           
Net income
  $ 16,302     $ 16,410  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    10,765       11,030  
Accretion of asset retirement obligations
    242       178  
Deferred income taxes
    126       211  
Equity-based compensation
    1,334       870  
Non-cash interest expense
    2,709       3,252  
Changes in assets and liabilities:
               
Accounts receivable
    141       1,499  
Prepaid expenses and other
    (1,011 )     32  
Accounts receivable and payable with Quicksilver
    (6,323 )     (2,284 )
Accounts payable and other
    2,464       2,051  
Net cash provided by operating activities
    26,749       33,249  
                 
Investing activities:
               
Capital expenditures
    (34,845 )     (35,780 )
Distribution to Quicksilver
    (80,276 )     -  
Net cash used in investing activities
    (115,121 )     (35,780 )
                 
Financing activities:
               
                 
Proceeds from revolving credit facility borrowings
    124,500       31,500  
Repayments of credit facility
    (23,100 )     (10,500 )
Proceeds from issuance of equity
    11,088       -  
Issuance costs of equity units paid
    (34 )     -  
Contributions by Quicksilver
    -       37  
Distributions to unitholders
    (23,128 )     (18,165 )
Taxes paid for equity-based compensation vesting
    (1,144 )     (63 )
Net cash provided by financing activities
    88,182       2,809  
                 
Net cash increase (decrease)
    (190 )     278  
                 
Cash at beginning of period
    746       303  
Cash at end of period
  $ 556     $ 581  
 
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QUICKSILVER GAS SERVICES LP
OPERATING STATISTICS
Unaudited
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
Volume Data:
                       
Volumes gathered (MMcf)
    29,609       22,232       55,406       47,202  
Volumes processed (MMcf)
    11,494       14,108       22,738       28,760  
 
 
QUICKSILVER GAS SERVICES LP
RECONCILIATION OF DISTRIBUTABLE CASH FLOW
TO NET INCOME
In thousands  - Unaudited
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
                         
Net income from continuing operations
  $ 10,113     $ 7,835     $ 16,302     $ 17,864  
Depreciation and accretion expense
    5,642       5,321       11,007       9,845  
Income tax provision
    73       248       126       211  
Non-cash interest expense, net of capitalized interest cost paid
    1,245       1,124       2,709       1,734  
Maintenance capital expenditures
    (1,650 )     (2,500 )     (3,300 )     (5,000 )
Distributable cash flow
  $ 15,423     $ 12,028     $ 26,844     $ 24,654  
 
QUICKSILVER GAS SERVICES LP
RECONCILIATION OF ADJUSTED GROSS MARGIN 
AND EBITDA TO NET INCOME
In thousands - Unaudited
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
                         
Total revenues
  $ 27,194     $ 23,340     $ 51,933     $ 47,304  
Operations and maintenance expense
    6,588       5,950       14,601       11,171  
General and administrative expense
    1,833       1,744       4,274       3,736  
Adjusted gross margin
    18,773       15,646       33,058       32,397  
Other income
    -       1       -       1  
EBITDA
    18,773       15,647       33,058       32,398  
Depreciation and accretion expense
    5,642       5,321       11,007       9,845  
Interest expense
    2,945       2,243       5,623       4,478  
Income tax provision
    73       248       126       211  
Net income from continuing operations
  $ 10,113     $ 7,835     $ 16,302     $ 17,864  
 
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