SOURCE: Quicksilver Gas Services LP

Quicksilver Gas Services LP

February 25, 2009 07:00 ET

Quicksilver Gas Services' Fourth-Quarter Net Income Triples in 2008

FORT WORTH, TX--(Marketwire - February 25, 2009) - Quicksilver Gas Services LP (NYSE Arca: KGS) today reported net income for the fourth quarter of 2008 of $11.5 million, more than triple the $3.2 million of net income in the prior-year period. Full-year 2008 net income of $26.4 million also was up three-fold from the prior-year net income of $8.3 million.

Earnings before interest, income taxes, depreciation and accretion ("EBITDA"), a non-GAAP measure, was $18.5 million for the fourth quarter of 2008, as compared with $8.8 million in the fourth quarter of 2007. For the year, EBITDA was $51.4 million in 2008 versus $21.3 million in 2007.

Fourth-Quarter 2008 Highlights

--  Increased adjusted gross margin, a non-GAAP measure, as a percent of
    revenue to 73% versus the prior-year quarter of 66%
--  Increased average gathered volumes to approximately 266 MMcf per day;
    up 84% versus the prior-year quarter
--  Increased average processed volumes to approximately 167 MMcf per day;
    up 42% versus the prior-year quarter
--  Connected approximately 19 miles of gathering infrastructure
--  Connected 54 new wells to the gathering system
    

"Quicksilver Gas Services' strategy to be 100% fee-based for our services has enabled us to continue to thrive even in a declining commodity price environment," said Toby Darden, Quicksilver Gas Services president and chief executive officer. "This strategy has allowed us to capitalize on our increasing gathering and processing volumes, resulting in higher distributable cash flow and distributions for our unitholders."

Capital Program

Capital expenditures for the fourth quarter of 2008 totaled $54 million, including $.5 million of maintenance capital. Expenditures during the quarter included the connection of approximately 19 miles of gathering lines and 54 new wells to the gathering system as well as capital associated with the company's new Corvette plant, a natural gas processing facility. The Corvette plant adds 125 million cubic feet (MMcf) per day of processing capacity and became fully operational last week. The company now can process more than 325 MMcf per day of liquids-rich natural gas at its three facilities.

Debt and Liquidity

Based on results through December 31, 2008, our total borrowing capacity under the company's senior secured revolving credit facility is $235 million and the company had drawn $174.9 million at year-end 2008, resulting in $60.1 million of available capacity.

Distributions

On February 13, 2009, the company paid a cash distribution for the 2008 fourth quarter of $.37 per unit. For the twelve months ended December 31, 2008, distributable cash flow, a non-GAAP financial measure, totaled $46.8 million, which provided 1.4 times the amount required to cover our total distributions to both the limited and general partners for the year.

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 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 80356462, 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 80356462. 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 pages 7-8 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.

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 or non-performance by third-parties, including suppliers, contractors, operators, processors, transporters and customers; 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; 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 09-03

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



                                                 December 31,  December 31,
                                                     2008          2007
                                                 -----------   ------------
                  ASSETS
Current assets
  Cash and cash equivalents                      $       303   $      1,125
  Accounts receivable                                  2,082            882
  Accounts receivable from Quicksilver                     -            800
  Prepaid expenses and other current assets              594            690
                                                 -----------   ------------
      Total current assets                             2,979          3,497

Property, plant and equipment, net                   488,120        273,948

Other assets                                           1,916            965
                                                 -----------   ------------
                                                 $   493,015   $    278,410
                                                 ===========   ============

      LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
  Current maturities of debt                     $     1,375   $      1,100
  Accounts payable to Quicksilver                     10,502              -
  Accrued additions to property, plant and
   equipment                                          17,433         23,624
  Accounts payable and other                           1,930          2,700
                                                 -----------   ------------
      Total current liabilities                       31,240         27,424

Long-term debt                                       174,900          5,000
Note payable to Quicksilver                           52,271         50,569
Repurchase obligations to Quicksilver                123,298         82,251
Asset retirement obligations                           5,234          2,793
Deferred income tax liability                            369            173

Partners' capital
  Common unitholders (12,269,714 and 12,263,625
   units issued and outstanding at December 31,
   2008 and 2007, respectively)                      108,014        109,830
  Subordinated unitholders (11,513,625 units
   issued and outstanding at December 31, 2008
   and 2007)                                          (2,322)           356
  General partner                                         11             14
                                                 -----------   ------------
      Total partners' capital                        105,703        110,200
                                                 -----------   ------------
                                                 $   493,015   $    278,410
                                                 ===========   ============






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



                                           Three Months
                                              Ended           Year Ended
                                           December 31,      December 31,
                                        ----------------- -----------------
                                          2008     2007     2008     2007
                                        -------- -------- -------- --------
Revenues
  Gathering and transportation revenue
   - Quicksilver                        $ 13,712 $  5,477 $ 36,061 $ 15,089
  Gathering and transportation revenue     1,606      935    5,612    1,773
  Gas processing revenue - Quicksilver     8,261    5,455   30,127   16,564
  Gas processing revenue                   1,561    1,078    5,358    1,990
  Other revenue - Quicksilver                225      225      900      525
                                        -------- -------- -------- --------
     Total revenues                       25,365   13,170   78,058   35,941
                                        -------- -------- -------- --------
Expenses
  Operations and maintenance -
   Quicksilver                             5,216    3,449   20,250   11,512
  General and administrative -
   Quicksilver                             1,695    1,026    6,407    3,379
  Depreciation and accretion               4,137    2,763   14,566    8,070
                                        -------- -------- -------- --------
     Total expenses                       11,048    7,238   41,223   22,961
                                        -------- -------- -------- --------
Operating income                          14,317    5,932   36,835   12,980
Other income                                   1       87       11      236
Interest expense                           2,635    2,707   10,177    4,647
                                        -------- -------- -------- --------
Income before income taxes                11,683    3,312   26,669    8,569
Income tax provision                         145      124      253      313
                                        -------- -------- -------- --------
Net income                              $ 11,538 $  3,188 $ 26,416 $  8,256
                                        ======== ======== ======== ========

 Net income attributable to the period
  from beginning of period to
  August 9, 2007                                 $      -          $  3,444
 Net income attributable to the period
  from August 10, 2007 to December 31,
  2007                                              3,188             4,812
                                                 --------          --------
 Net income                                      $  3,188          $  8,256
                                                 ========          ========
 General partner interest in net income
  (1)                                   $    339 $     62 $    652 $     93
 Common and subordinated unitholders'
  interest in net income (1)            $ 11,199 $  3,126 $ 25,764 $  4,719
 Earnings per common and subordinated
  unit: (1)
   Basic                                $   0.47 $   0.13 $   1.08 $   0.20
   Diluted                              $   0.40 $   0.13 $   0.96 $   0.20
 Weighted average number of common and
  subordinated units outstanding: (1)
   Basic                                  23,783   23,777   23,783   23,777
   Diluted                                29,583   23,787   29,583   23,787


(1) Amounts for 2007 represent the post- IPO period from August 10, 2007 to
    December 31, 2007





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


                                                            Year Ended
                                                           December 31,
                                                        ------------------
                                                          2008      2007
                                                        --------  --------
Operating activities:
  Net income                                            $ 26,416  $  8,256
    Items included in net income not affecting cash:
      Depreciation                                        14,382     7,987
      Accretion of asset retirement obligation               184        83
      Deferred income taxes                                  196        38
      Equity-based compensation                            1,017       130
      Amortization of debt issuance costs                    243        88
      Non-cash interest expense                            8,825     4,294
    Changes in assets and liabilities:
      Accounts receivable                                 (1,200)     (815)
      Prepaid expenses and other assets                     (612)     (543)
      Accounts receivable from Quicksilver                 4,002    (5,975)
      Accounts payable and other                            (770)    1,406
                                                        --------  --------
Net cash provided by operating activities                 52,683    14,949
                                                        --------  --------

Investing activities:
  Capital expenditures                                  (148,079)  (73,797)
                                                        --------  --------
Net cash used in investing activities                   (148,079)  (73,797)
                                                        --------  --------

Financing activities:
  Proceeds from revolving credit facility borrowings     169,900     5,000
  Repayment of repurchase obligation to Quicksilver      (42,085)        -
  Repayment of subordinated note payable to
   Quicksilver                                              (825)        -
  Issuance costs of equity units paid                          -    (2,933)
  Contributions by Quicksilver                                 -    38,045
  Contributions by other partners                              -       167
  Distributions to unitholders                           (31,930)   (4,062)
  Proceeds from sale of assets to Quicksilver                  -    29,508
  Debt issuance costs                                       (486)   (1,041)
  Net proceeds from issuance of equity units                   -   112,298
  Distribution of offering proceeds to partners                -  (119,806)
                                                        --------  --------
Net cash provided by financing activities                 94,574    57,176
                                                        --------  --------

Net (decrease) in cash                                      (822)   (1,672)

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

Cash at end of period                                   $    303  $  1,125
                                                        ========  ========





                        QUICKSILVER GAS SERVICES LP
                           OPERATING STATISTICS
                                Unaudited


                                    Three Months Ended      Year Ended
                                       December 31,        December 31,
                                    ------------------  ------------------
                                      2008      2007      2008      2007
                                    --------  --------  --------  --------

Volume Data:
Volumes gathered (MMcf)               24,432    13,310    75,701    34,995
Volumes processed (MMcf)              15,355    10,788    56,225    30,802



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


                                    Three Months Ended      Year Ended
                                       December 31,        December 31,
                                    ------------------  ------------------
                                      2008      2007      2008      2007
                                    --------  --------  --------  --------

Net income                          $ 11,538  $  3,188  $ 26,416  $  8,256
  Depreciation and accretion
   expense                             4,137     2,763    14,566     8,070
  Income tax provision/(payments)        145       124       (79)      313
  Non-cash interest expense            1,759     2,441     7,836     4,294
  Maintenance capital expenditures      (473)     (625)   (1,890)   (1,250)
                                    --------  --------  --------  --------
Distributable cash flow             $ 17,106  $  7,891  $ 46,849  $ 19,683
                                    ========  ========  ========  ========




                        QUICKSILVER GAS SERVICES LP
                       RECONCILIATION OF NET INCOME
                    TO ADJUSTED GROSS MARGIN AND EBITDA



                                           Three Months
                                              Ended          Year Ended
                                           December 31,      December 31,
                                        ----------------- -----------------
                                          2008     2007     2008     2007
                                        -------- -------- -------- --------
                                         (In thousands)    (In thousands)

Total revenues                          $ 25,365 $ 13,170 $ 78,058 $ 35,941
  Operations and maintenance expense       5,216    3,449   20,250   11,512
  General and administrative expense       1,695    1,026    6,407    3,379
                                        -------- -------- -------- --------
Adjusted gross margin                     18,454    8,695   51,401   21,050
  Other income                                 1       87       11      236
                                        -------- -------- -------- --------
EBITDA                                    18,455    8,782   51,412   21,286
  Depreciation and accretion expense       4,137    2,763   14,566    8,070
  Interest expense                         2,635    2,707   10,177    4,647
  Income tax provision                       145      124      253      313
                                        -------- -------- -------- --------
Net income                              $ 11,538 $  3,188 $ 26,416 $  8,256
                                        ======== ======== ======== ========

Contact Information

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

    QUICKSILVER GAS SERVICES LP
    777 West Rosedale Street
    Fort Worth, TX 76104
    www.kgslp.com