SOURCE: Quicksilver Gas Services LP

November 06, 2007 06:40 ET

Quicksilver Gas Services Announces Third-Quarter 2007 Results

FORT WORTH, TX--(Marketwire - November 6, 2007) - Quicksilver Gas Services LP (NYSE Arca: KGS) today reported net income for the third quarter of 2007 of 2.1 million ($1.6 million attributable to the limited partner's interest from the initial public offering at August 10, 2007 through September 30, 2007 or $.07 per limited partner unit -- diluted), an increase of $2.0 million versus the prior-year period. Adjusted earnings before interest, income taxes, depreciation, amortization and accretion ("EBITDA"), a non-GAAP measure, was $6.1 million for the third quarter of 2007, more than a four-fold increase as compared with $1.2 million in the third quarter of 2006.

Third-Quarter 2007 Highlights

--  Completed initial public offering on August 10, 2007
--  Doubled adjusted gross margin as a percent of revenue to 58% versus
    the prior-year quarter
--  Increased throughput 140% versus the prior-year quarter
--  Connected 54 new wells to the gathering system
--  Installed approximately 30 miles of gathering infrastructure
    

"The significant increase in both operating and financial results achieved during our first quarter as a public entity indicates that our growth plan is on track," said Toby Darden, Quicksilver Gas Services president and chief executive officer. "The utilization rate of our newest processing plant at the Cowtown facility increased to more than 87 percent at the end of the quarter, resulting in continued improvement in our adjusted gross margins. Refurbishment of the initial plant is nearly complete, which will support further growth in distributable cash flow as we meet the needs of our customers' growing production volumes."

On October 17, 2007 the company announced that the board of directors of its general partner declared a cash distribution for the 2007 third quarter of $.1675 per unit, which represents a pro rata portion of a $.30 quarterly distribution from the date of closing its initial public offering on August 10, 2007. This distribution will be paid November 14, 2007 on all units to holders of record as of the close of business on October 31, 2007.

Separately, Quicksilver Gas Services has signed a contract with Exterran Energy Solutions, L.P. to construct an additional natural gas processing plant, with capacity of approximately 125 million cubic feet (MMcf) per day, to serve producers in the Fort Worth Basin of north Texas. The new plant, which is expected to be on line during the first quarter of 2009, will bring the company's total processing capacity to approximately 325 MMcf per day.

"Our customers' rapidly increasing production of liquids-rich natural gas from this world-class basin dictates the need to continue expansion of our processing capacity," added Darden.

Conference Call

Quicksilver Gas Services will host a conference call for investors and analysts at 1:00 p.m. eastern time today to discuss the operating and financial results. 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 21213090, approximately 10 minutes prior to the call. A digital replay of the conference call will be available at 4:00 p.m. eastern time today and will remain available for 30 days. The replay can be dialed at 1-800-642-1687 and reference should be made to the conference ID number 21213090. 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 and Adjusted Gross Margin. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measure 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, 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 Statement

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 the Parent and third parties achieving expected production from natural gas projects; competitive conditions in our industry; actions taken by third-party operators, processors and transporters; 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 costs or expenditures; the effects of existing and future laws and governmental regulations; and the effects of future litigation; as well as other factors disclosed in Quicksilver Gas Services LP's filings with the Securities and Exchange Commission. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

                        QUICKSILVER GAS SERVICES LP
                        CONSOLIDATED BALANCE SHEETS
                         In thousands - Unaudited


                                                September 30, December 31,
                                                    2007          2006
                                                ------------- -------------
                    ASSETS
Current assets
     Cash and cash equivalents                  $      18,099 $       2,797
     Trade accounts receivable                            925            67
     Other current assets                                 553           147
                                                ------------- -------------
  Total current assets                                 19,577         3,011

  Property, plant and equipment - net                 227,825       130,791

Other assets                                              959           821
                                                ------------- -------------
  Total assets                                  $     248,361 $     134,623
                                                ============= =============

LIABILITIES, REDEEMABLE PARTNERS’ CAPITAL AND
              PARTNERS’ CAPITAL
Current liabilities
     Current portion of long-term debt          $         825 $           -
     Accounts payable to parent                        10,179             -
     Accrued additions to property, plant and
      equipment                                         7,180         6,608
     Accounts payable and other                         2,332         1,294
                                                ------------- -------------
       Total current liabilities                       20,516         7,902

     Repurchase obligations to parent                  64,458             -
     Long-term debt                                    49,800             -
     Asset retirement obligations                       1,893           503
     Deferred income tax liabilities                      151           135
     Commitments and contingent liabilities                 -             -
     Redeemable partners’ capital                           -         7,431

 Partners’ Capital
     Common unitholders (12,263,625 units
      issued and outstanding at September 30,
      2007)                                           110,740             -
     Subordinated unitholders (11,513,625 units
      issued and outstanding at September 30,
      2007)                                               771             -
     General partner (469,944 units issued and
      outstanding at September 30, 2007)                   32             -
     Net parent equity                                      -       118,652
                                                ------------- -------------
           Total partners’ capital                    111,543       118,652
                                                ------------- -------------
Total liabilities, redeemable partners’ capital
 and partners’ capital                          $     248,361 $     134,623
                                                ============= =============




                       QUICKSILVER GAS SERVICES LP
                    CONSOLIDATED STATEMENTS OF INCOME
              In thousands except per unit data - Unaudited


                                             For the Three   For the Nine
                                             Months Ended    Months Ended
                                            --------------- ---------------
                                             September 30,   September 30,
                                            --------------- ---------------
                                              2007    2006    2007    2006
                                            ------- ------- ------- -------
Revenues:
     Gathering and transportation revenue -
      parent                                $ 4,102 $ 1,948 $ 9,612 $ 4,663
     Gathering and transportation revenue       500       -     838       -
     Gas processing revenue - parent          4,892   2,125  11,109   5,327
     Gas processing revenue                     521       -     912       -
     Other revenue - parent                     267       -     300       -
                                            ------- ------- ------- -------
          Total revenues                     10,282   4,073  22,771   9,990
Expenses:
     Operations and maintenance - parent      3,072   2,409   8,063   5,691
     General and administrative - parent      1,217     489   2,353     833
     Depreciation and amortization            2,188   1,032   5,307   2,119
                                            ------- ------- ------- -------
          Total expenses                      6,477   3,930  15,723   8,643
                                            ------- ------- ------- -------

Operating income                              3,805     143   7,048   1,347

Other income                                    114       -     149       -
Interest expense                              1,728       -   1,939       -
                                            ------- ------- ------- -------

Income before income taxes                    2,191     143   5,258   1,347
Income tax provision                             92       -     189       -
                                            ------- ------- ------- -------
Net income                                  $ 2,099 $   143 $ 5,069 $ 1,347
                                            ======= ======= ======= =======

Allocation of net income for the three and
 nine month periods ended September 30,
 2007:
  Net income attributable to the period
   from beginning of period to August 9,
   2007                                     $   474         $ 3,444
  Net income attributable to the period
   from August 10, 2007 to September 30,
   2007                                       1,625           1,625
                                            -------         -------
  Net income                                $ 2,099         $ 5,069
                                            =======         =======

General partner interest in net income for
 the period from August 10, 2007 to
 September 30, 2007                         $    32         $    32
                                            =======         =======
Limited partners’ interest in net income
 for the period from August 10, 2007 to
 September 30, 2007                         $ 1,593         $ 1,593
                                            =======         =======

Basic net income per limited partner unit   $  0.07         $  0.07
                                            =======         =======

Diluted net income per limited partner unit $  0.07         $  0.07
                                            =======         =======

Basic average number of limited partners’
 units outstanding                           23,777          23,777
Diluted average number of limited partners’
 units outstanding                           23,787          23,787





                        QUICKSILVER GAS SERVICES LP
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                         In thousands - Unaudited

                                                      For the Nine Months
                                                             Ended
                                                          September 30,
                                                      --------------------
                                                         2007       2006
                                                      ---------  ---------
Operating activities:
   Net income                                         $   5,069  $   1,347
   Adjustments to reconcile net income to net cash
    provided by operating activities:
     Depreciation and amortization                        5,253      2,104
     Accretion of asset retirement obligations               54         15
     Amortization of debt issuance costs                     33          -
     Equity-based compensation                               45          -
     Deferred income tax expense                             16          -
     Non-cash interest expense on repurchase
      obligations                                         1,228          -
     Non-cash interest expense on note payable to
      parent                                                625          -
   Changes in assets and liabilities:
     Accounts receivable                                   (858)         -
     Other current assets                                  (229)         -
     Accounts payable to parent                          (1,095)         -
     Accounts payable and other                           1,038        707
                                                      ---------  ---------
Net cash provided by operating activities                11,179      4,173
                                                      ---------  ---------

Investing activities:
   Additions to property, plant and equipment           (55,184)   (53,818)
                                                      ---------  ---------
Net cash used in investing activities                   (55,184)   (53,818)
                                                      ---------  ---------

Financing activities:
   Proceeds from sale of assets to parent                29,508          -
   Debt issuance costs paid                                (715)         -
   Proceeds from initial public offering                112,298          -
   Costs incurred in connection with initial public
    offering                                               (190)         -
   Distribution of initial public offering proceeds
    to partners                                        (119,806)         -
   Contributions by parent                               38,045     45,139
   Contributions by redeemable partners                     167      4,506
                                                      ---------  ---------
Net cash provided by financing activities                59,307     49,645
                                                      ---------  ---------

Net increase in cash and cash equivalents                15,302          -

Cash and cash equivalents at beginning of period          2,797          -
                                                      ---------  ---------

Cash and cash equivalents at end of period            $  18,099  $       -
                                                      =========  =========

Non-cash transactions:
   Changes in working capital related to the
    acquisition of property, plant and equipment      $ (12,045) $  (7,582)
   Prepaid insurance paid by parent                   $    (176) $       -
   Debt issuance costs paid by parent                 $    (277) $       -
   Cost in connection with the initial public
    offering paid by parent                           $  (2,465) $       -
   Distribution of subordinated note payable to
    parent                                            $  50,000  $       -
   Repurchase obligations to parent:
     Acquisition of property, plant and equipment by
      parent                                          $ (33,722) $       -





                        QUICKSILVER GAS SERVICES LP
                      RECONCILIATION OF NET INCOME TO
                     ADJUSTED GROSS MARGIN AND EBITDA
                         In thousands - Unaudited

                                                       Three months ended
                                                          September 30,
                                                      ---------------------
                                                         2007       2006
                                                      ---------- ----------
                                                         (in thousands)
Total revenues                                        $   10,282 $    4,073
  Operations and maintenance expense                       3,072      2,409
  General and administrative expense                       1,217        489
                                                      ---------- ----------

Adjusted gross margin                                      5,993      1,175

  Other income                                               114          -
                                                      ---------- ----------

EBITDA                                                     6,107      1,175
  Depreciation and amortization expense                    2,188      1,032
  Interest expense                                         1,728          -
  Income tax provision                                        92          -
                                                      ---------- ----------

Net income                                            $    2,099 $      143
                                                      ========== ==========

Operating Data:
  Daily throughput (MMcf)                                   98.2       40.9
  Total throughput (Mcf)                               9,031,571  3,762,661



                                                        Nine months ended
                                                          September 30,
                                                      ---------------------
                                                         2007       2006
                                                      ---------- ----------
                                                         (in thousands)
Total revenues                                        $   22,771 $    9,990
  Operations and maintenance expense                       8,063      5,691
  General and administrative expense                       2,353        833
                                                      ---------- ----------

Adjusted gross margin                                     12,355      3,466

  Other income                                               149          -
                                                      ---------- ----------

EBITDA                                                    12,504      3,466
  Depreciation and amortization expense                    5,307      2,119
  Interest expense                                         1,939          -
  Income tax provision                                       189          -
                                                      ---------- ----------

Net income                                            $    5,069 $    1,347
                                                      ========== ==========

Operating Data:
  Daily throughput (MMcf)                                   73.3       33.2
  Total throughput (Mcf)                              20,014,673  9,054,755

Contact Information

  • Investor and Media Contact:
    Rick Buterbaugh
    817-665-4835