Quicksilver Resources Inc. (KWK) made a public offering of around 6.97 million units of BreitBurn Energy Partners L.P. (BBEP). Quicksilver will allow the underwriters of the issue a window of 30 days to purchase up to 1,045,177 additional common units to cover over-allotments, if necessary.
Although the company is silent about the possible use of the proceeds, historically it has been seen that the company uses the proceeds for repaying a portion of its outstanding borrowings under the senior secured credit facility and for general corporate purposes.
In November 2007, Quicksilver sold all of its legacy oil and gas assets in Michigan, Indiana and Kentucky to BreitBurn Energy Partners for $750 million and 21.3 million common units, obtaining as a result 40% limited partner interest in BreitBurn Energy Partners. As of September 30, 2011, Quicksilver owned approximately 8.0 million units of BreitBurn Energy Partners, which translated into a 13.6% interest in the partnership.
In November 2011, Quicksilver received $3.0 million in cash distribution for its equity investment in BreitBurn Energy Partners. In addition, Quicksilver sold approximately 7.6 million units of BreitBurn Energy Partners during the second quarter and recognized a gain of $122 million on the transaction.
Quicksilver has time and again offered BBEP units in accordance to the shelf prospectus filed by the latter. The company utilized the proceeds from unit issue to address its fund requirements. We believe this current offering from Quicksilver will nearly exhaust its unit holdings in BBEP and dry a source for the company that was commonly used to generate funds.
Based in Fort Worth, Texas, independent exploration and production Company Quicksilver Resources is primarily engaged in the development of long-lived, unconventional onshore natural gas reserves in the North American continent. Quicksilver Resources currently retains a Zacks #3 Rank, which translates into a short-term Hold rating on the stock.
