SOURCE: Quicksilver Gas Services LP

August 06, 2008 06:30 ET

Quicksilver Gas Services Reports Second-Quarter 2008 Results

FORT WORTH, TX--(Marketwire - August 6, 2008) - Quicksilver Gas Services LP (NYSE Arca: KGS) today reported net income for the second quarter of 2008 of $5.6 million ($.23 per limited partner unit - diluted), an increase of more than 160% as compared to net income of $2.1 million in the prior-year period. For the six months ended June 30, 2008, net income totaled $8.5 million ($.35 per limited partner unit - diluted), up more than 180% from the $3.0 million reported in the 2007 period.

Distributable cash flow for the 2008 second quarter increased 150% to $10.5 million ($.43 per limited partner unit) from $4.2 million in the 2007 quarter. For the six months ended June 30, 2008, distributable cash flow totaled $18.2 million ($.75 per limited partner unit) compared to $6.4 million in the 2007 period.

Second-Quarter 2008 Highlights

--  Increased quarterly cash distribution to limited partners 11% to $.35 per
    unit
--  Increased average gathered volumes to 188 MMcf per day; up 159% versus
    the prior-year quarter
--  Increased average processed volumes to 160 MMcf per day; up 137% versus
    the prior-year quarter
--  Connected 57 new wells to the gathering system from Quicksilver Resources
    Inc.
--  Connected nearly 32 miles of gathering infrastructure
    

"Revenues grew more than 150%, as anticipated, due to increased gathering and processing volumes from Quicksilver Resources and third-party producers," said Toby Darden, Quicksilver Gas Services president and chief executive officer. "Our continued focus on stringent cost control enabled us to fully realize the value from the higher throughput volumes resulting in an increase of more than 160% in net income. As a result, our distributable cash flow increased to support an additional 11% increase in our quarterly distribution."

Gathered volumes increased to 17,127 million cubic feet (MMcf) in the second quarter of 2008, up 159% from 6,613 MMcf in the prior-year quarter. Processed volumes increased 137% to 14,593 MMcf in the second quarter of 2008 from 6,154 MMcf in the 2007 quarter. Volumes from third parties made up 21% and 20% of the total gathered and processed volumes for the second quarter of 2008, respectively. For the second quarter of 2008 the company realized an average of $.516 per thousand cubic feet (Mcf) gathered and $.627 per Mcf processed.

Capital expenditures for the second quarter of 2008 totaled $26.8 million, including $.5 million for maintenance capital and the remainder for organic growth projects. In addition, the company accrued $19.7 million of capital associated with the repurchase obligation to Quicksilver Resources Inc. Expenditures during the quarter included the connection of approximately 32 miles of gathering lines and 57 new wells to the gathering system from Quicksilver Resources, as well as the ongoing construction of a new processing facility that is expected to become operational during the first quarter of 2009, increasing processing capacity 62.5% to a total of 325 MMcf per day.

For the second quarter of 2008, the unit distribution rate for limited partners was increased 11% to $.35 by the company's general partner. The second-quarter distribution will be paid August 14, 2008 on all units to holders of record as of the close of business July 31, 2008.

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 first-quarter 2008 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 39787132, 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 by entering the conference ID number 39787132. 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 measure of distributable cash flow. The accompanying schedules provide a reconciliation of this non-GAAP financial measure to the 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 an alternative 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 Quicksilver Resources Inc. 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.

KGS 08-07

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


                                           Three Months     Six Months
                                          Ended June 30,   Ended June 30,
                                        ----------------- -----------------
                                          2008     2007     2008     2007
                                        -------- -------- -------- --------
Revenues
  Gathering and transportation revenue
   - parent                             $  7,199 $  3,100 $ 13,676 $  5,510
  Gathering and transportation revenue     1,633      147    2,453      338
  Gas processing revenue - parent          7,701    3,714   14,521    6,217
  Gas processing revenue                   1,447      124    2,290      391
  Other revenue - parent                     225       33      450       33
                                        -------- -------- -------- --------
     Total revenues                       18,205    7,118   33,390   12,489
                                        -------- -------- -------- --------
Expenses
  Operations and maintenance - parent      5,312    2,228   10,262    4,945
  General and administrative - parent      1,422      686    3,239    1,182
  Depreciation and accretion               3,407    1,824    6,563    3,119
                                        -------- -------- -------- --------
     Total expenses                       10,141    4,738   20,064    9,246
                                        -------- -------- -------- --------
Operating income                           8,064    2,380   13,326    3,243
Other income                                   1       23        6       35
Interest expense                           2,421      211    4,839      211
                                        -------- -------- -------- --------
Income before income taxes                 5,644    2,192    8,493    3,067
Income tax provision                          38       57        3       97
                                        -------- -------- -------- --------
Net income                              $  5,606 $  2,135 $  8,490 $  2,970
                                        ======== ======== ======== ========


  General partner interest in net
   income                               $    126          $    182
  Common and subordinated unitholders'
   interest in net income               $  5,480          $  8,308
  Earnings per common and subordinated
   unit - basic                         $   0.23          $   0.35
  Earnings per common and subordinated
   unit - diluted                       $   0.23          $   0.35
  Weighted average number of common and
   subordinated units outstanding:
    Basic                                 23,783            23,783
    Diluted                               23,924            23,924


                        QUICKSILVER GAS SERVICES LP
                  CONDENSED CONSOLIDATED BALANCE SHEETS
              In thousands, except for unit data - Unaudited



                                                     June 30,  December 31,
                                                       2008        2007
                                                     ---------  ----------
                            ASSETS
Current assets
  Cash and cash equivalents                          $     607  $    1,125
  Trade accounts receivable                              2,317         882
  Accounts receivable from parent                            -         800
  Prepaid expenses and other current assets                972         690
                                                     ---------  ----------
      Total current assets                               3,896       3,497

Property, plant and equipment, net                     372,633     273,948

Other assets                                             1,140         965
                                                     ---------  ----------
                                                     $ 377,669  $  278,410
                                                     =========  ==========

              LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
  Current maturities of debt                         $   1,100  $    1,100
  Accounts payable to parent                             4,446           -
  Accrued additions to property, plant and equipment    22,236      23,624
  Accounts payable and other                             3,586       2,700
                                                     ---------  ----------
      Total current liabilities                         31,368      27,424

Long-term debt                                          55,300       5,000
Note payable to parent                                  51,508      50,569
Repurchase obligations to parent                       131,911      82,251
Asset retirement obligations                             3,187       2,793
Deferred income tax liability                              118         173

Partners' Capital

  Common unitholders (12,269,714 and 12,263,625 units
   issued and outstanding at June 30, 2008 and
   December 31,2007, respectively)                     107,072     109,830
  Subordinated unitholders (11,513,625 units issued
   and outstanding at June 30, 2008 and December 31,
   2007)                                                (2,703)        356
  General Partner                                          (92)         14
                                                     ---------  ----------
      Total partners' capital                          104,277     110,200
                                                     ---------  ----------
                                                     $ 377,669  $  278,410
                                                     =========  ==========



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

                                                          Six Months Ended
                                                              June 30,
                                                          ----------------
                                                            2008     2007
                                                          -------  -------
Operating activities:
    Net income                                            $ 8,490  $ 2,970
       Items included in net income not affecting cash
          Depreciation                                      6,478    3,088
          Accretion of asset retirement obligation             85       31
          Deferred income taxes                               (55)       -
          Equity-based compensation                           501        -
          Amortization of debt issuance costs                 105        -
          Non-cash interest expense on repurchase
           obligations to parent                            2,928      211
          Non-cash interest expense on note payable to
           parent                                           1,489        -
       Changes in assets and liabilities
          Accounts receivable                              (1,435)    (104)
          Prepaid expenses and other assets                  (562)    (246)
          Accounts receivable from parent                   5,170        -
          Accounts payable and other                          886      108
                                                          -------  -------
Net cash provided by operating activities                  24,080    6,058
                                                          -------  -------

Investing activities:
    Capital expenditures                                  (59,434) (45,040)
                                                          -------  -------
Net cash used in investing activities                     (59,434) (45,040)
                                                          -------  -------

Financing activities:
    Proceeds from revolving credit facility borrowings     50,300        -
    Repayment of subordinated note to parent                 (550)       -
    Contributions by parent                                     -   39,017
    Contributions by other partners                             -      167
    Distributions to unitholders                          (14,914)       -
                                                          -------  -------
Net cash provided by financing activities                  34,836   39,184
                                                          -------  -------

Net (decrease) increase in cash                              (518)     202

Cash at beginning of period                                 1,125    2,797
                                                          -------  -------

Cash at end of period                                     $   607  $ 2,999
                                                          =======  =======


                       QUICKSILVER GAS SERVICES LP
                           OPERATING STATISTICS
                                Unaudited

                                     Three Months Ended   Six Months Ended
                                          June 30,            June 30,
                                       2008      2007      2008      2007
                                    --------- --------- --------- ---------

Volume Data:
  Volumes gathered (MMcf)              17,127     6,613    31,678    12,130
  Volumes processed (MMcf)             14,593     6,154    26,749    10,983



                        QUICKSILVER GAS SERVICES LP
                      RECONCILIATION OF NET INCOME TO
                          DISTRIBUTABLE CASH FLOW
                         In thousands - Unaudited

                                     Three Months Ended   Six Months Ended
                                          June 30,            June 30,
                                       2008      2007      2008      2007
                                    --------  --------- --------  ---------

Net income                         $  5,606  $   2,135  $  8,490  $   2,970
  Depreciation and accretion
   expense                            3,407      1,824     6,563      3,119
  Income tax provision                   38         57         3         97
  Non-cash interest expense           1,947        211     4,100        211
  Maintenance capital expenditures     (473)         -      (945)         -
                                   --------  ---------  --------  ---------
Distributable cash flow            $ 10,525  $   4,227  $ 18,211  $   6,397
                                   ========  =========  ========  =========

Contact Information

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