8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_______________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): March 1, 2010

QUICKSILVER GAS SERVICES LP

(Exact Name of Registrant as Specified in Charter)

Delaware	001-33631	56-2639586
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

777 West Rosedale Street

Fort Worth, Texas 76104

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (817) 665-8620

_______________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.      Results of Operations and Financial Condition.

On March 1, 2010, we issued a press release reporting our operating and financial results for the quarter and year ended December 31, 2009.  A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference.  The information contained in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished to the Securities and Exchange Commission and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.

The press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission.  We presented distributable cash flow, EBITDA and adjusted gross margin for all periods presented in the press release.

As part of the press release, we provided a reconciliation of distributable cash flow to net income, which is the most comparable financial measure determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Our management believes that distributable cash flow provides investors with information that is useful to an assessment of our operating performance and the cash flow generated by our operations.  Other companies may calculate their distributable cash flow differently than we calculate our distributable cash flow and, accordingly, our distributable cash flow may not be comparable to similar measures disclosed by other companies.

We also provided a reconciliation of EBITDA and adjusted gross margin to net income, which is the most comparable financial measure determined in accordance with accounting principles generally accepted in the United States of America.  EBITDA is used as a supplemental performance measure by our management to assess:

•   financial performance of our assets without regard to financing methods, capital structure or historical cost basis;  

•   our operating performance as compared to those of other companies in the midstream energy industry without regard to financing methods, capital structure or historical cost basis; and  

•   the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

We also use EBITDA to assess our ability to incur and service debt, fund capital expenditures and make distributions.  Adjusted gross margin is used by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others to evaluate the relationship between our gathering and processing revenues and our cost of operating our facilities and our general and administrative overhead.

Item 9.01.      Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
99.1	Press release dated March 1, 2010.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

QUICKSILVER GAS SERVICES LP
By:	Quicksilver Gas Services GP LLC,
	its General Partner
By:	/s/ Philip Cook
	Philip Cook
	Senior Vice President -
	Chief Financial Officer

Date: March 1, 2010

INDEX TO EXHIBITS

Exhibit Number	Description
99.1	Press release dated March 1, 2010.

EX-99.1

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’ Net Income Increases 26% in 2009 to Record Level

FORT WORTH, TEXAS (March 1, 2010) – Quicksilver Gas Services LP (NYSE: KGS) today reported net income of $33.2 million ($1.21 per diluted unit) for 2009, up approximately 26% from the prior-year net income of $26.4 million ($0.96 per diluted unit).  For the fourth quarter of 2009, net income was $7.7 million ($0.28 per diluted unit) compared to $11.5 million ($0.40 per diluted unit) reported in the prior-year quarter.

Earnings before interest, income taxes, depreciation and accretion ("EBITDA"), a non-GAAP financial measure, for the full year of 2009 was $63.4 million, an increase of 26% from the 2008 full-year EBITDA of $50.4 million.  For the fourth quarter, EBITDA was $15.0 million in 2009 versus $17.7 million in 2008.

2009 Highlights

·   Increased average gathered volumes to approximately 215 MMcf per day; up 11% versus the prior year

·   Reduced unit operating expense 4% to $0.26 per gathered unit

·   Announced acquisition of the Alliance Midstream Assets

·   Connected approximately 21 miles of gathering infrastructure

·   Connected 51 new wells to the gathering system

·   Increased credit facility 36% to $320 million

“Our team did an outstanding job in 2009, increasing gathered volumes and reducing unit operating costs, during a very challenging year for our industry,” said Toby Darden, Quicksilver Gas Services' president and chief executive officer.  “The recent acquisition of the Alliance system coupled with increasing producer activities in the Fort Worth Basin should provide a solid base for significant growth at Quicksilver Gas Services.”

Capital Program

The company incurred approximately $29 million of capital costs in 2009, including approximately $10 million of maintenance capital.  Expenditures during the fourth quarter totaled $6.4 million and included the connection of approximately four miles of gathering lines and 10 new wells to the gathering system.

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Debt and Liquidity

The company’s total commitments under its senior secured revolving credit facility was increased to $320 million in October and at December 31, 2009, the company had approximately $125.4 million drawn on this facility.  Currently, the company has approximately $222.8 million drawn on this facility.

Distributions

On January 18, 2010, the company announced a cash distribution for the 2009 fourth quarter of $0.39 per unit.  For the three months ended December 31, 2009, distributable cash flow, a non-GAAP financial measure, totaled $11.5 million, which provided 1.0 times the amount required to cover the total distributions to both the limited and general partners for the period.

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 fourth-quarter and full-year of 2009 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 44416698, 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 44416698.  The replay will also be archived for 30 days on the company’s website.

Use of Non-GAAP Financial Measures

This press 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.

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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 in Quicksilver Resources Inc. and third parties achieving expected production 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 press release are made only as of the date of this press 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 and Media Contact

Rick Buterbaugh

817-665-4835

KGS 10-03

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QUICKSILVER GAS SERVICES LP

CONSOLIDATED STATEMENTS OF INCOME

In thousands, except for per unit data - Unaudited

	Three Months Ended December 31,						Year Ended December 31,
	2009			2008			2009			2008
Revenue
Gathering and transportation revenue - Quicksilver	$	12,686		$	12,874		$	53,253		$	34,468
Gathering and transportation revenue		682			1,464			2,125			5,231
Gas processing revenue - Quicksilver		7,064			8,261			32,605			30,127
Gas processing revenue		738			1,561			2,082			5,358
Other revenue - Quicksilver		500			225			1,641			900
Total revenue		21,670			24,385			91,706			76,084
Expenses
Operations and maintenance		4,509			4,989			20,677			19,284
General and administrative		2,146			1,695			7,609			6,407
Depreciation and accretion		4,881			3,570			19,324			12,968
Total expenses		11,536			10,254			47,610			38,659
Operating income		10,134			14,131			44,096			37,425
Other income		-			1			1			11
Interest expense		2,303			2,057			8,519			8,437
Income from continuing operations before income taxes		7,831			12,075			35,578			28,999
Income tax provision		(47	)		145			399			253
Net income from continuing operations		7,878			11,930			35,179			28,746
Loss from discontinued operations		(190	)		(392	)		(1,992	)		(2,330	)
Net income	$	7,688		$	11,538		$	33,187		$	26,416
General partner interest in net income	$	381		$	338		$	1,189		$	652
Common and subordinated unitholders’ interest in net income		7,307			11,200			31,998			25,764
Basic earnings per unit:
From continuing operations per common and subordinated unit	$	0.31		$	0.49		$	1.41		$	1.18
From discontinued operations per common and subordinated unit	$	(0.01	)	$	(0.02	)	$	(0.08	)	$	(0.10	)
Net earnings per common and subordinated unit	$	0.30		$	0.47		$	1.33		$	1.08
Diluted earnings per unit:
From continuing operations per common and subordinated unit	$	0.29		$	0.42		$	1.28		$	1.04
From discontinued operations per common and subordinated unit	$	(0.01	)	$	(0.01	)	$	(0.07	)	$	(0.08	)
Net earnings per common and subordinated unit	$	0.28		$	0.40		$	1.21		$	0.96
Weighted average number of common and subordinated units outstanding:
Basic		24,740			23,783			24,057			23,783
Diluted		28,051			29,583			28,189			29,583

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QUICKSILVER GAS SERVICES LP

CONSOLIDATED BALANCE SHEETS

In thousands, except for unit data - Unaudited

	December 31,		December 31,
	2009		2008
ASSETS
Current assets
Cash and cash equivalents	$	746	$	303
Accounts receivable		1,342		1,908
Prepaid expenses and other current assets		180		594
Total current assets		2,268		2,805
Property, plant and equipment, net		396,952		432,272
Assets of discontinued operations		-		56,022
Other assets		2,859		1,916
	$	402,079	$	493,015
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current maturities of debt	$	2,475	$	1,375
Accounts payable to Quicksilver		1,727		10,917
Accrued additions to property, plant and equipment		4,011		13,755
Accounts payable and other		2,240		1,852
Total current liabilities		10,453		27,899
Long-term debt		125,400		174,900
Note payable to Quicksilver		53,243		52,271
Repurchase obligations to Quicksilver		-		66,997
Asset retirement obligations		7,654		4,574
Deferred income tax liability		768		369
Liabilities of discontinued operations		-		60,302
Partners' capital
Common unitholders (16,313,451 and 12,269,714 units issued and outstanding at December 31, 2009 and December 31, 2008, respectively)		200,963		108,036
Subordinated unitholders (11,513,625 units issued and outstanding at December 31, 2009 and 2008)		3,040		(2,328	)
General partner		558		(5	)
Total partners' capital		204,561		105,703
	$	402,079	$	493,015

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QUICKSILVER GAS SERVICES LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands - Unaudited

	Year Ended December 31,
	2009			2008
Operating activities:
Net income	$	33,187		$	26,416
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		21,542			14,382
Accretion of asset retirement obligations		394			184
Deferred income taxes		399			196
Equity-based compensation		1,705			1,017
Non-cash interest expense		6,191			9,787
Changes in assets and liabilities:
Accounts receivable		740			(1,200	)
Prepaid expenses and other assets		387			(612	)
Accounts receivable and payable with Quicksilver		3,621			4,002
Accounts payable and other		(33	)		(1,489	)
Net cash provided by operating activities		68,133			52,683
Investing activities:
Capital expenditures		(54,818	)		(148,079	)
Net cash used in investing activities		(54,818	)		(148,079	)
Financing activities:
Proceeds from revolving credit facility borrowings		56,000			169,900
Debt issuance costs paid		(1,446	)		(486	)
Repayment of repurchase obligation to Quicksilver		(5,645	)		(42,085	)
Repayments of credit facility		(105,500	)		-
Repayment of subordinated note payable to Quicksilver		-			(825	)
Proceeds from issuance of equity units		80,760			-
Issuance costs of equity units paid		(31	)		-
Distributions to unitholders		(36,947	)		(31,930	)
Other		(63	)		-
Net cash provided by (used in) financing activities		(12,872	)		94,574
Net cash increase (decrease)		443			(822	)
Cash at beginning of period		303			1,125
Cash at end of period	$	746		$	303

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QUICKSILVER GAS SERVICES LP

OPERATING STATISTICS

Unaudited

	Three Months Ended December 31,				Year Ended December 31,
	2009		2008		2009		2008
Volume Data:
Volumes gathered (MMcf)		18,462		21,960		78,469		70,617
Volumes processed (MMcf)		12,428		15,355		54,386		56,225

 

QUICKSILVER GAS SERVICES LP

RECONCILIATION OF DISTRIBUTABLE CASH FLOW

TO NET INCOME

In thousands  - Unaudited

	Three Months Ended December 31,						Year Ended December 31,
	2009			2008			2009			2008
Net income from continuing operations	$	7,878		$	11,930		$	35,179		$	28,746
Depreciation and accretion expense		4,881			3,570			19,324			12,968
Income tax provision/(payments)		(47	)		145			399			(79	)
Non-cash interest expense, net of capitalized interest cost paid		1,320			1,181			3,837			6,096
Maintenance capital expenditures		(2,500	)		(473	)		(10,000	)		(1,890	)
Distributable cash flow	$	11,532		$	16,353		$	48,739		$	45,841

 

QUICKSILVER GAS SERVICES LP

RECONCILIATION OF ADJUSTED GROSS MARGIN 

and EBITDA TO NET INCOME

In thousands - Unaudited

	Three Months Ended December 31,						Year Ended December 31,
	2009			2008			2009			2008
Total revenues	$	21,670		$	24,385		$	91,706		$	76,084
Operations and maintenance expense		4,509			4,989			20,677			19,284
General and administrative expense		2,146			1,695			7,609			6,407
Adjusted gross margin		15,015			17,701			63,420			50,393
Other income		-			1			1			11
EBITDA		15,015			17,702			63,421			50,404
Depreciation and accretion expense		4,881			3,570			19,324			12,968
Interest expense		2,303			2,057			8,519			8,437
Income tax provision (benefit)		(47	)		145			399			253
Net income from continuing operations		7,878			11,930			35,179			28,746
Loss from discontinued operations		(190	)		(392	)		(1,992	)		(2,330	)
Net income	$	7,688		$	11,538		$	33,187		$	26,416

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