Quicksilver Resources Inc. (KWK) successfully completed the previously announced sale of all its ownership interests in Quicksilver Gas Services GP LLC and Quicksilver Gas Services L.P. (KGS) to Crestwood Holdings Partners LLC.
 
Quicksilver Gas Services, a master limited partner (MLP), owns and operates midstream assets for Quicksilver Resources. The partnership’s assets include three natural gas gathering pipeline systems with related natural gas processing, treating and compression assets located at the Barnett Shale play in the Fort Worth basin in north Texas.
 
Quicksilver Resources sold these midstream assets for $701 million in cash, received on closing. Additionally, the company expects to receive up to an additional $72 million in earn-out payments in 2012 and 2013.
 
The sale includes 469,944 general partner units, representing 100% of the general partner interests in Quicksilver GP, 5,696,752 common units, 11,513,625 subordinated units in Quicksilver Gas Services and the notes receivable from Quicksilver Gas Services L.P., which had a balance of approximately $58 million at closing.
 
Quicksilver Resources expects to use the proceeds from the sale to fully repay the company’s $1 billion senior secured credit facility, which had an outstanding balance of approximately $529 million on September 30, 2010.
 
In connection with the transfer of Quicksilver Gas Services’ general partner interests to Crestwood, Crestwood founder Robert Phillips has been named chairman, president and chief executive of Quicksilver GP.
 
Apart from executive appointments, Crestwood has arranged for a new $400 million Quicksilver Gas Services credit facility as part of the transaction, which became effective at close. The new revolving credit facility extends for a five-year term.
 
Quicksilver Resources is an independent exploration and production company based in Fort Worth, Texas. The company is primarily engaged in the development of long-lived, unconventional onshore natural gas reserves in the North American continent. The company has operating segments in the U.S. and Alberta, Canada.
 
Quicksilver Resources is the largest natural gas producer on the Quicksilver Gas Services pipeline system. Quicksilver Resources is the general partner of Quicksilver Gas Services L.P. and has a 61% ownership in the midstream MLP.
 
We maintain our Neutral recommendation on Quicksilver Resources. The company currently has a short-term Zacks #3 Rank (‘Hold’).
 
QUICKSILVER GAS (KGS): Free Stock Analysis Report
 
QUICKSILVER RES (KWK): Free Stock Analysis Report
 
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