SOURCE: Quicksilver Gas Services LP

February 26, 2008 06:30 ET

Quicksilver Gas Services Reports 2007 Results

FORT WORTH, TX--(Marketwire - February 26, 2008) - Quicksilver Gas Services LP (NYSE Arca: KGS) today reported net income for the fourth quarter of 2007 of $3.2 million, as compared to net income of $1.1 million in the prior-year period. Full-year 2007 net income of $8.3 million more than tripled from the prior-year net income of $2.4 million.

Earnings before interest, income taxes, depreciation and accretion ("EBITDA"), a non-GAAP measure, was $8.8 million for the fourth quarter of 2007, as compared with $2.1 million in the fourth quarter of 2006. For the year, EBITDA was $21.3 million in 2007 versus $5.5 million in 2006.

Fourth-Quarter 2007 Highlights

--  Increased adjusted gross margin, a non-GAAP measure, as a percent of
    revenue to 66% versus the prior-year quarter of 52%
--  Increased average gathered volumes to nearly 145 MMcf per day; up 194%
    versus the prior-year quarter
--  Increased average processed volumes to approximately 117 MMcf per day;
    up 151% versus the prior-year quarter
--  Connected 67 new wells to the gathering system
--  Connected approximately 27 miles of gathering infrastructure
    

"We continue to capitalize on our substantial growth in both gathering and processing volumes," said Toby Darden, Quicksilver Gas Services president and chief executive officer. "Increased utilization coupled with our continued focus on achieving operating efficiencies have resulted in further improvement to our adjusted gross margin."

Capital Program

Capital expenditures for the fourth quarter of 2007 totaled $18.6 million. Expenditures during the quarter included the connection of approximately 27 miles of gathering lines and 67 new wells to the gathering system and upgrades to the company's processing facility. The company now has 200 million cubic feet (MMcf) per day of processing capacity and expects an additional 125 MMcf per day of capacity to become operational during the first quarter of 2009.

On February 14, 2008, the company paid a cash distribution for the 2007 fourth quarter of $.30 per unit.

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 2007 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 29723076, 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 and enter the conference ID number 29723076. 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 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, 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.


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


                                                  December 31, December 31,
                                                      2007         2006
                                                  ------------ ------------
                      ASSETS
Current assets
  Cash and cash equivalents                       $      1,125 $      2,797
  Trade accounts receivable                                882           67
  Accounts receivable from parent                          800            -
  Prepaid expenses and other current assets                690          147
                                                  ------------ ------------
      Total current assets                               3,497        3,011

Properties, plant and equipment, net                   273,948      130,791

Other assets                                               965          821
                                                  ------------ ------------
                                                  $    278,410 $    134,623
                                                  ============ ============

         LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
  Current portion of note payable to parent       $      1,100 $          -
  Accrued additions to property, plant and
   equipment                                            23,624        6,608
  Accounts payable and other                             2,700        1,294
                                                  ------------ ------------
      Total current liabilities                         27,424        7,902

Long-term debt                                           5,000            -
Note payable to parent                                  50,569            -
Repurchase obligations to parent                        82,251            -
Asset retirement obligations                             2,793          503
Deferred income tax liability                              173          135

Redeemable partners' capital                                 -        7,431

Partners' capital
  Common unitholders (12,263,625 units issued and
   outstanding at December 31, 2007)                   109,830            -
  Subordinated unitholders (11,513,625 units
   issued and outstanding at December 31, 2007)            356            -
  General partner (469,944 units issued and
   outstanding at December 31, 2007)                        14            -
  Net parent equity                                          -      118,652
                                                  ------------ ------------
      Total partners' capital                          110,200      118,652
                                                  ------------ ------------
                                                  $    278,410 $    134,623
                                                  ============ ============



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



                                       For the Three
                                       Months Ended         Year Ended
                                       December 31,        December 31,
                                    ------------------- -------------------
                                      2007      2006      2007      2006
                                    --------- --------- --------- ---------
Revenues
  Gathering and transportation
   revenue - parent                 $   5,477 $   1,797 $  15,089 $   6,460
  Gathering and transportation
   revenue                                935        53     1,773        53
  Gas processing revenue - parent       5,455     2,016    16,564     7,342
  Gas processing revenue                1,078        63     1,990        63
  Other revenue - parent                  225         -       525         -
                                    --------- --------- --------- ---------
     Total revenues                    13,170     3,929    35,941    13,918
                                    --------- --------- --------- ---------

Expenses
  Operations and maintenance -
   parent                               3,449     1,783    11,512     7,475
  General and administrative -
   parent                               1,026       104     3,379       937
  Depreciation and accretion            2,763       844     8,070     2,963
                                    --------- --------- --------- ---------
     Total expenses                     7,238     2,731    22,961    11,375
                                    --------- --------- --------- ---------
Operating income                        5,932     1,198    12,980     2,543

Other income                               87        13       236        13
Interest expense                        2,707         -     4,647         -
                                    --------- --------- --------- ---------
Income before income taxes              3,312     1,211     8,569     2,556

Income tax provision                      124       135       313       135
                                    --------- --------- --------- ---------
Net income                          $   3,188 $   1,076 $   8,256 $   2,421
                                    ========= ========= ========= =========


  Common and subordinated
   unitholders’ interest in net
   income for the period from
   September 30, 2007 to December
   31, 2007 and August 10, 2007 to
   December 31, 2007, respectively  $   3,126           $   4,719
  Earnings per common and
   subordinated unit - basic        $    0.13           $    0.20
  Earnings per common and
   subordinated unit - diluted      $    0.13           $    0.20
  Weighted average number of
   common and subordinated units
   outstanding - basic                 23,777              23,777
  Weighted average number of
   common and subordinated units
   outstanding - diluted               23,787              23,787




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


                                                            Year Ended
                                                           December 31,
                                                        ------------------
                                                          2007      2006
                                                        --------  --------
Operating activities:
    Net income                                          $  8,256  $  2,421
       Items included in net income not affecting cash
          Depreciation                                     7,987     2,942
          Accretion of asset retirement obligation            83        21
          Deferred income taxes                               38       135
          Equity-based compensation                          130         -
          Amortization of debt issuance costs                 88         -
          Non-cash interest expense on repurchase
           obligations to parent                           2,625         -
          Non-cash interest expense on note payable to
           parent                                          1,669         -
       Changes in assets and liabilities
          Accounts receivable                               (815)      (66)
          Prepaid expenses and other current assets         (543)     (146)
          Accounts receivable from parent                 (5,975)        -
          Accounts payable and other                       1,406     1,138
                                                        --------  --------
Net cash provided by operating activities                 14,949     6,445
                                                        --------  --------

Investing activities:
    Additions to properties, plant and equipment         (73,797)  (77,539)
    Long-term deposit                                          -      (821)
                                                        --------  --------
Net cash used in investing activities                    (73,797)  (78,360)
                                                        --------  --------

Financing activities
    Proceeds from sale of assets to parent                29,508         -
    Proceeds from revolving credit facility borrowings     5,000         -
    Debt issuance costs paid                              (1,041)        -
    Net proceeds from issuance of equity units           112,298         -
    Issuance costs of equity units paid                   (2,933)        -
    Distribution of offering proceeds to partners       (119,806)        -
    Contributions by parent                               38,045    67,421
    Contributions by other partners                          167     7,291
    Distributions to unitholders                          (4,062)        -
                                                        --------  --------
Net cash provided by financing activities                 57,176    74,712
                                                        --------  --------

Net increase (decrease) in cash                           (1,672)    2,797

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

Cash at end of period                                   $  1,125  $  2,797
                                                        ========  ========




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


                                 For the Three
                                 Months Ended              Year ended
                                 December 31,             December 31,
                            ----------------------  -----------------------
                               2007        2006         2007        2006
                            ----------  ----------  ----------- -----------

Total revenues              $   13,170  $    3,929  $    35,941 $    13,918
Operations and maintenance
 expense                         3,449       1,783       11,512       7,475
General and administrative
 expense                         1,026         104        3,379         937
                            ----------  ----------  ----------- -----------
Adjusted gross margin            8,695       2,042       21,050       5,506

Other income                        87          13          236          13
                            ----------  ----------  ----------- -----------
EBITDA                           8,782       2,055       21,286       5,519

Depreciation and accretion
 expense                         2,763         844        8,070       2,963
Interest expense                 2,707           -        4,647           -
Income tax provision               124         135          313         135
                            ----------  ----------  ----------- -----------
Net income                  $    3,188  $    1,076  $     8,256 $     2,421
                            ==========  ==========  =========== ===========
Operating Data:
  Volumes gathered (MMcf)       13,310       4,521       34,995      14,263
  Volumes processed (MMcf)      10,788       4,300       30,802      13,496


KGS 08-02

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