SOURCE: Quicksilver Gas Services LP

Quicksilver Gas Services LP

March 01, 2010 07:30 ET

Quicksilver Gas Services' Net Income Increases 26% in 2009 to Record Level

FORT WORTH, TX--(Marketwire - March 1, 2010) - Quicksilver Gas Services LP (NYSE: KGS) today reported net income of $33.2 million ($1.21 per diluted unit) for 2009, up approximately 26% from the prior-year net income of $26.4 million ($0.96 per diluted unit). For the fourth quarter of 2009, net income was $7.7 million ($0.28 per diluted unit) compared to $11.5 million ($0.40 per diluted unit) reported in the prior-year quarter.

Earnings before interest, income taxes, depreciation and accretion ("EBITDA"), a non-GAAP financial measure, for the full year of 2009 was $63.4 million, an increase of 26% from the 2008 full-year EBITDA of $50.4 million. For the fourth quarter, EBITDA was $15.0 million in 2009 versus $17.7 million in 2008.


2009 Highlights

--  Increased average gathered volumes to approximately 215 MMcf per day;
    up 11% versus the prior year
--  Reduced unit operating expense 4% to $0.26 per gathered unit
--  Announced acquisition of the Alliance Midstream Assets
--  Connected approximately 21 miles of gathering infrastructure
--  Connected 51 new wells to the gathering system
--  Increased credit facility 36% to $320 million

"Our team did an outstanding job in 2009, increasing gathered volumes and reducing unit operating costs, during a very challenging year for our industry," said Toby Darden, Quicksilver Gas Services' president and chief executive officer. "The recent acquisition of the Alliance system coupled with increasing producer activities in the Fort Worth Basin should provide a solid base for significant growth at Quicksilver Gas Services."

Capital Program

The company incurred approximately $29 million of capital costs in 2009, including approximately $10 million of maintenance capital. Expenditures during the fourth quarter totaled $6.4 million and included the connection of approximately four miles of gathering lines and 10 new wells to the gathering system.

Debt and Liquidity

The company's total commitments under its senior secured revolving credit facility was increased to $320 million in October and at December 31, 2009, the company had approximately $125.4 million drawn on this facility. Currently, the company has approximately $222.8 million drawn on this facility.

Distributions

On January 18, 2010, the company announced a cash distribution for the 2009 fourth quarter of $0.39 per unit. For the three months ended December 31, 2009, distributable cash flow, a non-GAAP financial measure, totaled $11.5 million, which provided 1.0 times the amount required to cover the total distributions to both the limited and general partners for the period.

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 and full-year of 2009 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 44416698, 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 44416698. 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 page 7 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 Statements

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; fluctuations in the value of certain of our assets and liabilities; 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, including environmental and climate change requirements; and the effects of existing and future litigation; as well as other factors disclosed in Quicksilver Gas Services LP's filings with the Securities and Exchange Commission. The forward-looking statements included in this press release are made only as of the date of this press release, and we undertake no obligation to update any of these forward-looking statements to reflect subsequent events or circumstances except to the extent required by applicable law.

                     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,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------
Revenue
  Gathering and transportation
   revenue - Quicksilver            $ 12,686  $ 12,874  $ 53,253  $ 34,468
  Gathering and transportation
   revenue                               682     1,464     2,125     5,231
  Gas processing revenue -
   Quicksilver                         7,064     8,261    32,605    30,127
  Gas processing revenue                 738     1,561     2,082     5,358
  Other revenue - Quicksilver            500       225     1,641       900
                                    --------  --------  --------  --------
     Total revenue                    21,670    24,385    91,706    76,084
                                    --------  --------  --------  --------
Expenses
  Operations and maintenance           4,509     4,989    20,677    19,284
  General and administrative           2,146     1,695     7,609     6,407
  Depreciation and accretion           4,881     3,570    19,324    12,968
                                    --------  --------  --------  --------
     Total expenses                   11,536    10,254    47,610    38,659
                                    --------  --------  --------  --------
Operating income                      10,134    14,131    44,096    37,425
Other income                               -         1         1        11
Interest expense                       2,303     2,057     8,519     8,437
                                    --------  --------  --------  --------
Income from continuing operations
 before income taxes                   7,831    12,075    35,578    28,999
Income tax provision                     (47)      145       399       253
                                    --------  --------  --------  --------
Net income from continuing
 operations                            7,878    11,930    35,179    28,746
Loss from discontinued operations       (190)     (392)   (1,992)   (2,330)
                                    --------  --------  --------  --------
Net income                          $  7,688  $ 11,538  $ 33,187  $ 26,416
                                    ========  ========  ========  ========

  General partner interest in net
   income                           $    381  $    338  $  1,189  $    652
  Common and subordinated
   unitholders' interest in net
   income                              7,307    11,200    31,998    25,764
  Basic earnings per unit:
    From continuing operations per
     common and subordinated unit   $   0.31  $   0.49  $   1.41  $   1.18
    From discontinued operations
     per common and subordinated
     unit                           $  (0.01) $  (0.02) $  (0.08) $  (0.10)
    Net earnings per common and
     subordinated unit              $   0.30  $   0.47  $   1.33  $   1.08

  Diluted earnings per unit:
    From continuing operations per
     common and subordinated unit   $   0.29  $   0.42  $   1.28  $   1.04
    From discontinued operations
     per common and subordinated
     unit                           $  (0.01) $  (0.01) $  (0.07) $  (0.08)
    Net earnings per common and
     subordinated unit              $   0.28  $   0.40  $   1.21  $   0.96

  Weighted average number of common
   and subordinated units outstanding:
    Basic                             24,740    23,783    24,057    23,783
    Diluted                           28,051    29,583    28,189    29,583





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


                                               December 31,   December 31,
                                                   2009           2008
                                               -------------  ------------
                       ASSETS
Current assets
  Cash and cash equivalents                    $         746  $        303
  Accounts receivable                                  1,342         1,908
  Prepaid expenses and other current assets              180           594
                                               -------------  ------------
      Total current assets                             2,268         2,805

Property, plant and equipment, net                   396,952       432,272
Assets of discontinued operations                          -        56,022
Other assets                                           2,859         1,916
                                               -------------  ------------
                                               $     402,079  $    493,015
                                               =============  ============

         LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
  Current maturities of debt                   $       2,475  $      1,375
  Accounts payable to Quicksilver                      1,727        10,917
  Accrued additions to property, plant and
   equipment                                           4,011        13,755
  Accounts payable and other                           2,240         1,852
                                               -------------  ------------
      Total current liabilities                       10,453        27,899

Long-term debt                                       125,400       174,900
Note payable to Quicksilver                           53,243        52,271
Repurchase obligations to Quicksilver                      -        66,997
Asset retirement obligations                           7,654         4,574
Deferred income tax liability                            768           369
Liabilities of discontinued operations                     -        60,302
Partners' capital
  Common unitholders (16,313,451 and 12,269,714
   units issued and outstanding at December 31,
   2009 and December 31, 2008, respectively)         200,963       108,036
  Subordinated unitholders (11,513,625 units
   issued and outstanding at December 31, 2009
   and 2008)                                           3,040        (2,328)
  General partner                                        558            (5)
                                               -------------  ------------
      Total partners' capital                        204,561       105,703
                                               -------------  ------------
                                               $     402,079  $    493,015
                                               =============  ============





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


                                                 Year Ended December 31,
                                                --------------------------
                                                    2009          2008
                                                ------------  ------------
Operating activities:
  Net income                                    $     33,187  $     26,416
    Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation                                    21,542        14,382
      Accretion of asset retirement obligations          394           184
      Deferred income taxes                              399           196
      Equity-based compensation                        1,705         1,017
      Non-cash interest expense                        6,191         9,787
    Changes in assets and liabilities:
      Accounts receivable                                740        (1,200)
      Prepaid expenses and other assets                  387          (612)
      Accounts receivable and payable with
       Quicksilver                                     3,621         4,002
      Accounts payable and other                         (33)       (1,489)
                                                ------------  ------------
Net cash provided by operating activities             68,133        52,683
                                                ------------  ------------
Investing activities:
      Capital expenditures                           (54,818)     (148,079)
                                                ------------  ------------
Net cash used in investing activities                (54,818)     (148,079)
                                                ------------  ------------
Financing activities:
      Proceeds from revolving credit facility
       borrowings                                     56,000       169,900
      Debt issuance costs paid                        (1,446)         (486)
      Repayment of repurchase obligation to
       Quicksilver                                    (5,645)      (42,085)
      Repayments of credit facility                 (105,500)            -
      Repayment of subordinated note payable to
       Quicksilver                                         -          (825)
      Proceeds from issuance of equity units          80,760             -
      Issuance costs of equity units paid                (31)            -
      Distributions to unitholders                   (36,947)      (31,930)
      Other                                              (63)            -
                                                ------------  ------------
Net cash provided by (used in) financing
 activities                                          (12,872)       94,574
                                                ------------  ------------
Net cash increase (decrease)                             443          (822)
Cash at beginning of period                              303         1,125
                                                ------------  ------------
Cash at end of period                           $        746  $        303
                                                ============  ============





                        QUICKSILVER GAS SERVICES LP
                           OPERATING STATISTICS
                                Unaudited


                              Three Months Ended         Year Ended
                                 December 31,            December 31,
                            ----------------------- -----------------------
                               2009        2008        2009        2008
                            ----------- ----------- ----------- -----------

Volume Data:
  Volumes gathered (MMcf)        18,462      21,960      78,469      70,617
  Volumes processed (MMcf)       12,428      15,355      54,386      56,225





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


                              Three Months Ended         Year Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------

Net income from continuing
 operations                 $    7,878  $   11,930  $   35,179  $   28,746
   Depreciation and
    accretion expense            4,881       3,570      19,324      12,968
   Income tax
    provision/(payments)           (47)        145         399         (79)
   Non-cash interest
    expense, net of
    capitalized interest
    cost paid                    1,320       1,181       3,837       6,096
   Maintenance capital
    expenditures                (2,500)       (473)    (10,000)     (1,890)
                            ----------  ----------  ----------  ----------
Distributable cash flow     $   11,532  $   16,353  $   48,739  $   45,841
                            ==========  ==========  ==========  ==========





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


                              Three Months Ended         Year Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------

Total revenues              $   21,670  $   24,385  $   91,706  $   76,084
  Operations and
   maintenance expense           4,509       4,989      20,677      19,284
  General and
   administrative expense        2,146       1,695       7,609       6,407
                            ----------  ----------  ----------  ----------
Adjusted gross margin           15,015      17,701      63,420      50,393
  Other income                       -           1           1          11
                            ----------  ----------  ----------  ----------
EBITDA                          15,015      17,702      63,421      50,404
  Depreciation and
   accretion expense             4,881       3,570      19,324      12,968
  Interest expense               2,303       2,057       8,519       8,437
  Income tax provision
   (benefit)                       (47)        145         399         253
                            ----------  ----------  ----------  ----------
Net income from continuing
 operations                      7,878      11,930      35,179      28,746
Loss from discontinued
 operations                       (190)       (392)     (1,992)     (2,330)
                            ----------  ----------  ----------  ----------
Net income                  $    7,688  $   11,538  $   33,187  $   26,416
                            ==========  ==========  ==========  ==========

KGS 10-03

Contact Information

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