SOURCE: Quicksilver Gas Services LP

May 07, 2008 06:30 ET

Quicksilver Gas Services Reports First-Quarter 2008 Results

FORT WORTH, TX--(Marketwire - May 7, 2008) - Quicksilver Gas Services LP (NYSE Arca: KGS) today reported net income for the first quarter of 2008 of $2.9 million ($.12 per limited partner unit - diluted), more than a three-fold increase as compared to net income of $0.8 million in the prior-year period.

Earnings before interest, income taxes, depreciation and accretion ("EBITDA"), a non-GAAP measure, was $8.4 million for the first quarter of 2008, as compared with $2.2 million in the first quarter of 2007.

First-Quarter 2008 Highlights

--  Increased quarterly cash distribution 5% to $.315 per unit
--  Increased average gathered volumes to nearly 160 MMcf per day; up 161%
    versus the prior-year quarter
--  Increased average processed volumes to approximately 134 MMcf per day; up
    149% versus the prior-year quarter
--  Connected 34 new wells to the gathering system
--  Connected nearly 27 miles of gathering infrastructure
    

"The rapid ramp-up in total volumes gathered and processed through our system has resulted in significant increases to our net income and distributable cash flow," said Toby Darden, Quicksilver Gas Services president and chief executive officer. "We expect to realize further growth throughout 2008 as producers in the Fort Worth Basin continue development of the Barnett Shale in this area. Through organic expansion of our gathering and processing infrastructure, Quicksilver Gas Services is preparing to meet the increasing need for midstream services in this world-class basin."

Capital expenditures for the first quarter of 2008 totaled $32.7 million, including $0.5 million for maintenance capital and the remainder for organic growth projects. Expenditures during the quarter included the connection of approximately 27 miles of gathering lines and 34 new wells to the gathering system as well as continued construction of a new processing facility that is expected to become operational during the first quarter of 2009 and increase processing capacity by 125 million cubic feet (MMcf) per day.

For the first quarter of 2008, the unit distribution rate was increased 5% to $.315 by the company's general partner. The first-quarter distribution will be paid May 15, 2008 on all units to holders of record as of the close of business April 30, 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 39782113, 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 39782113. 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 EBITDA. 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 08-05



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


                                                            Three Months
                                                           Ended March 31,
                                                          ----------------
                                                            2008     2007
                                                          -------  --------
Revenues
  Gathering and transportation revenue - parent           $ 6,477  $  2,411
  Gathering and transportation revenue                        820       191
  Gas processing revenue - parent                           6,820     2,503
  Gas processing revenue                                      843       267
  Other revenue - parent                                      225         -
                                                          -------  --------
     Total revenues                                        15,185     5,372
                                                          -------  --------
Expenses
  Operations and maintenance - parent                       4,950     2,717
  General and administrative - parent                       1,817       496
  Depreciation and accretion                                3,156     1,295
                                                          -------  --------
     Total expenses                                         9,923     4,508
                                                          -------  --------
Operating income                                            5,262       864

Other income                                                    5        12
Interest expense                                            2,418         -
                                                          -------  --------
Income before income taxes                                  2,849       876

Income tax (benefit) provision                                (35)       41
                                                          -------  --------
Net income                                                $ 2,884  $    835
                                                          =======  ========

 General partner interest in net income                   $    56
 Common and subordinated unitholders' interest in net
  income                                                  $ 2,828

 Earnings per common and subordinated unit - basic        $  0.12
 Earnings per common and subordinated unit - diluted      $  0.12

 Weighted average number of common and subordinated units
  outstanding:
   Basic                                                   23,783
   Diluted                                                 23,924




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



                                                     March 31, December 31,
                                                       2008        2007
                                                     ---------  ----------
                        ASSETS
Current assets
  Cash and cash equivalents                           $     237  $    1,125
  Trade accounts receivable                               1,133         882
  Accounts receivable from parent                             -         800
  Prepaid expenses and other current assets                 579         690
                                                      ---------  ----------
      Total current assets                                1,949       3,497

Property, plant and equipment, net                      321,819     273,948

Other assets                                              1,198         965
                                                      ---------  ----------
                                                      $ 324,966  $  278,410
                                                      =========  ==========

            LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
  Current portion of note payable to parent           $   1,100  $    1,100
  Accounts payable to parent                                105           -
  Accrued additions to property, plant and equipment     18,667      23,624
  Accounts payable and other                              2,690       2,700
                                                      ---------  ----------
      Total current liabilities                          22,562      27,424

Long-term debt                                           31,500       5,000
Note payable to parent                                   51,091      50,569
Repurchase obligations to parent                        110,743      82,251
Asset retirement obligations                              2,975       2,793
Deferred income tax liability                                22         173

Partners' Capital
  Common unitholders (12,269,714 and 12,263,625 units
   issued and outstanding at March 31, 2008 and
   December 31, 2007, respectively)                     107,872     109,830
  Subordinated unitholders (11,513,625 units issued
   and outstanding at March 31, 2008 and December 31,
   2007)                                                 (1,729)        356
  General Partner                                           (70)         14
                                                      ---------  ----------
      Total partners' capital                           106,073     110,200
                                                      ---------  ----------
                                                      $ 324,966  $  278,410
                                                      =========  ==========



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


                                                            Three Months
                                                           Ended March 31,
                                                          ----------------
                                                            2008     2007
                                                          -------  -------
Operating activities:
  Net income                                              $ 2,884  $   835
     Items included in net income not affecting cash
        Depreciation                                        3,115    1,287
        Accretion of asset retirement obligation               41        8
        Deferred income taxes                                (151)      41
        Equity-based compensation                             267        -
        Amortization of debt issuance costs                    52        -
        Amortization of other current assets                  140        -
        Non-cash interest expense on repurchase
         obligations to parent                              1,434        -
        Non-cash interest expense on note payable to parent   797        -
     Changes in assets and liabilities
        Accounts receivable                                  (251)    (204)
        Prepaid expenses and other current assets             (29)    (326)
        Accounts receivable from parent                     4,557        -
        Accounts payable and other                            (10)     118
                                                          -------  -------
Net cash provided by operating activities                  12,846    1,759
                                                          -------  -------

Investing activities:
  Additions to property, plant and equipment              (32,681) (23,702)
                                                          -------  -------
Net cash used in investing activities                     (32,681) (23,702)
                                                          -------  -------

Financing activities:
  Proceeds from revolving credit facility borrowings       26,500        -
  Repayment of subordinated note to parent                   (275)       -
  Issuance costs of equity units paid                          (3)       -
  Contributions by parent                                       -   21,955
  Contributions by other partners                               -      167
  Distributions to unitholders                             (7,275)       -
                                                          -------  -------
Net cash provided by financing activities                  18,947   22,122
                                                          -------  -------

Net (decrease) increase in cash                              (888)     179

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

Cash at end of period                                     $   237  $ 2,976
                                                          =======  =======




                        QUICKSILVER GAS SERVICES LP
                           OPERATING STATISTICS
                                Unaudited


                                                        Three Months Ended
                                                            March 31,
                                                          2008      2007
                                                        --------  ---------

Volume Data:
  Volumes gathered (MMcf)                                 14,551      5,518
  Volumes processed (MMcf)                                12,156      4,830




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


                                                        Three Months Ended
                                                            March 31,
                                                          2008      2007
                                                        --------  ---------

Total revenues                                          $ 15,185  $   5,372
  Operations and maintenance expense                       4,950      2,717
  General and administrative expense                       1,817        496
                                                        --------  ---------
Adjusted gross margin                                      8,418      2,159

  Other income                                                 5         12
                                                        --------  ---------
EBITDA                                                     8,423      2,171
  Depreciation and accretion expense                       3,156      1,295
                                                        --------  ---------
Operating income                                           5,267        876
  Interest expense                                         2,418          -
  Income tax (benefit) provision                             (35)        41
                                                        --------  ---------
Net income                                              $  2,884  $     835
                                                        ========  =========

Contact Information

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