SOURCE: Quicksilver Gas Services LP

Quicksilver Gas Services LP

August 10, 2009 07:00 ET

Quicksilver Gas Services Reports Second-Quarter 2009 Results

FORT WORTH, TX--(Marketwire - August 10, 2009) - Quicksilver Gas Services LP (NYSE: KGS) today reported net income for the second quarter of 2009 of $7.4 million, up 32% from $5.6 million reported in the prior-year period. Earnings before interest, income taxes, depreciation and accretion ("EBITDA"), a non-GAAP measure, was $16.2 million for the second quarter of 2009, an increase of 42% from the 2008 second quarter EBITDA of $11.5 million.

Second-Quarter 2009 Highlights

--  Increased average gathered volumes to approximately 223 MMcf per day;
    up 18% versus the prior-year quarter
--  Increased distributable cash flow to $12.6 million; up 20% year-over-
    year
--  Connected approximately 12 miles of gathering infrastructure
--  Connected 21 new wells to the gathering system
    

"Strong year-over-year growth in revenues, net income and distributable cash flow, during a very challenging period for our industry, is a testament to the quality of our assets and operating structure," said Toby Darden, Quicksilver Gas Services president and chief executive officer. "Producers' reduced activity levels in the Fort Worth Basin have lowered our near-term growth estimates and we are responding prudently by minimizing capital spending and maximizing financial flexibility. We believe that this approach will serve us well as we continue to pursue accretive growth opportunities."

Capital Program

For the second quarter of 2009, the company incurred approximately $12.5 million of capital costs, including $2.5 million of maintenance capital. Expenditures during the quarter included the connection of approximately 12 miles of gathering lines and 21 new wells to the gathering system.

Debt and Liquidity

Based on results through June 30, 2009, the company's total borrowing capacity under its senior secured revolving credit facility is $235 million and the company had drawn $195.9 million, resulting in $39.1 million of available capacity.

Distributions

On July 20, 2009, the company announced a cash distribution for the 2009 second quarter of $.37 per unit. For the three months ended June 30, 2009, distributable cash flow, a non-GAAP financial measure, totaled $12.6 million, which provided 1.39 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 second-quarter 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 80360462, 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 80360462. 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 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; and the effects of current and 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 09-08

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


                      Three Months Ended June 30, Six Months Ended June 30,
                      --------------------------- -------------------------
                          2009          2008          2009         2008
                      ------------- ------------- ------------ ------------
Revenue
    Gathering and
     transportation
     revenue -
     Quicksilver      $      14,092 $       7,199 $     28,166 $     13,676
    Gathering and
     transportation
     revenue                    669         1,633        1,644        2,453
    Gas processing
     revenue -
     Quicksilver              8,684         7,701       17,386       14,521
    Gas processing
     revenue                    311         1,447        1,049        2,290
    Other revenue -
     Quicksilver                225           225          450          450
                      ------------- ------------- ------------ ------------
       Total revenue         23,981        18,205       48,695       33,390
                      ------------- ------------- ------------ ------------

Expenses
    Operations and
     maintenance              6,003         5,312       11,414       10,262
    General and
     administrative           1,738         1,422        3,730        3,239
    Depreciation and
     accretion                5,768         3,407       10,809        6,563
                      ------------- ------------- ------------ ------------
       Total expenses        13,509        10,141       25,953       20,064
                      ------------- ------------- ------------ ------------

Operating income             10,472         8,064       22,742       13,326

Other income                      1             1            1            6
Interest expense              2,813         2,421        5,686        4,839
                      ------------- ------------- ------------ ------------

Income before income
 taxes                        7,660         5,644       17,057        8,493

Income tax provision            248            38          211            3
                      ------------- ------------- ------------ ------------
Net income            $       7,412 $       5,606 $     16,846 $      8,490
                      ============= ============= ============ ============

  General partner
   interest in net
   income             $         233 $         126 $        504 $        182

  Common and
   subordinated
   unitholders'
   interest in net
   income                     7,179         5,480       16,342        8,308

  Earnings per common
   and subordinated
   unit:
    Basic             $        0.30 $        0.23 $       0.69 $       0.35
    Diluted                    0.27          0.23         0.61         0.35

  Weighted average
   number of common
   and subordinated
   units outstanding:
    Basic                    23,827        23,783       23,827       23,783
    Diluted                  28,395        23,924       28,489       23,924




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


                                                   June 30,   December 31,
                                                     2009         2008
                                                   ---------  ------------
                         ASSETS
Current assets
  Cash and cash equivalents                        $     581  $        303
  Accounts receivable                                    583         2,082
  Accounts receivable from Quicksilver                 1,317             -
  Prepaid expenses and other current assets              577           594
                                                   ---------  ------------
      Total current assets                             3,058         2,979

Property, plant and equipment, net                   507,462       488,120

Other assets                                           1,731         1,916
                                                   ---------  ------------
                                                   $ 512,251  $    493,015
                                                   =========  ============


                LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
  Current maturities of debt                       $   1,925  $      1,375
  Accounts payable to Quicksilver                          -        10,502
  Accrued additions to property, plant and
   equipment                                          10,105        17,433
  Accounts payable and other                           3,392         1,930
                                                   ---------  ------------
      Total current liabilities                       15,422        31,240

Long-term debt                                       195,900       174,900
Note payable to Quicksilver                           52,817        52,271
Repurchase obligations to Quicksilver                133,443       123,298
Asset retirement obligations                           8,898         5,234
Deferred income tax liability                            580           369

Partners' capital
  Common unitholders (12,313,451 and 12,269,714
   units issued and outstanding at June 30, 2009
   and December 31, 2008, respectively)              108,176       108,036
  Subordinated unitholders (11,513,625 units issued
   and outstanding at June 30, 2009 and December
   31, 2008)                                          (2,951)       (2,328)
  General partner                                        (34)           (5)
                                                   ---------  ------------
      Total partners' capital                        105,191       105,703
                                                   ---------  ------------
                                                   $ 512,251  $    493,015
                                                   =========  ============




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


                                                Six Months Ended June 30,
                                                --------------------------
                                                    2009          2008
                                                ------------  ------------
Operating activities:
  Net income                                    $     16,846  $      8,490
    Adjustments to reconcile net income to
     net cash provided by
     operating activities:
      Depreciation                                    10,631         6,478
      Accretion of asset retirement
       obligation                                        178            85
      Deferred income taxes                              211           (55)
      Equity-based compensation                          870           501
      Non-cash interest expense                        3,252         4,607
    Changes in assets and liabilities:
      Accounts receivable                              1,499        (1,435)
      Prepaid expenses and other assets                   32          (562)
      Accounts receivable and payable with
       Quicksilver                                    (2,284)        5,170
      Accounts payable and other                       2,051           801
                                                ------------  ------------
Net cash provided by operating activities             33,286        24,080
                                                ------------  ------------

Investing activities:
  Capital expenditures                               (35,780)      (59,434)
                                                ------------  ------------
Net cash used in investing activities                (35,780)      (59,434)
                                                ------------  ------------

Financing activities:
  Proceeds from revolving credit facility
   borrowings                                         31,500        50,300
  Repayment of credit facility                       (10,500)            -
  Repayment for subordinated note payable to
   Quicksilver                                             -          (550)
  Distributions to unitholders                       (18,165)      (14,914)
  Other                                                  (63)            -
                                                ------------  ------------
Net cash provided by financing activities              2,772        34,836
                                                ------------  ------------

Net cash increase (decrease)                             278          (518)

Cash at beginning of period                              303         1,125
                                                ------------  ------------

Cash at end of period                           $        581  $        607
                                                ============  ============



                        QUICKSILVER GAS SERVICES LP
                           OPERATING STATISTICS
                                Unaudited

                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------

Volume Data:
Volumes gathered (MMcf)               20,263    17,127    44,049    31,678
Volumes processed (MMcf)              14,108    14,593    28,760    26,749




                        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,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------

Net income                          $  7,412  $  5,606  $ 16,846  $  8,490
  Depreciation and accretion
   expense                             5,768     3,407    10,809     6,563
  Income tax provision                   248        38       211         3
  Non-cash interest expense, net of
   capitalized interest cost paid      1,693     1,947     2,941     4,100
  Maintenance capital expenditures    (2,500)     (473)   (5,000)     (945)
                                    --------  --------  --------  --------
Distributable cash flow             $ 12,621  $ 10,525  $ 25,807  $ 18,211
                                    ========  ========  ========  ========




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

                                       Three Months Ended  Six Months Ended
                                            June 30,           June 30,
                                       ------------------ -----------------
                                          2009     2008     2009     2008
                                        -------- -------- -------- --------
                                                  (In thousands)

Total revenues                          $ 23,981 $ 18,205 $ 48,695 $ 33,390
  Operations and maintenance expense       6,003    5,312   11,414   10,262
  General and administrative expense       1,738    1,422    3,730    3,239
                                        -------- -------- -------- --------
Adjusted gross margin                     16,240   11,471   33,551   19,889
  Other income                                 1        1        1        6
                                        -------- -------- -------- --------
EBITDA                                    16,241   11,472   33,552   19,895
  Depreciation and accretion expense       5,768    3,407   10,809    6,563
  Interest expense                         2,813    2,421    5,686    4,839
  Income tax provision                       248       38      211        3
                                        -------- -------- -------- --------
Net income                              $  7,412 $  5,606 $ 16,846 $  8,490
                                        ======== ======== ======== ========

Contact Information

  • Investor and Media Contact
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    817-665-4835