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Quicksilver Considering Options After Failing to Make Interest Payment

Onshore operator Quicksilver Resources Inc. said it may seek Chapter 11 protection to restructure after announcing it did not make a $13.6 million interest payment due Tuesday.

Under the terms of the 9.125% senior notes due in 2019, the Fort Worth, TX-based independent has a 30-day grace period before it defaults. The company said it was in the "best interests of its stakeholders" to continue to focus on actively addressing debt and capital structure and would continue discussions with its creditors during the grace period.

The company has retained advisers to evaluate options to address near-term debt, enhance the liquidity position and evaluate strategic alternatives.

"However, there can be no assurances that the company will be able to successfully restructure its indebtedness, improve its short- and long-term liquidity position, or complete any strategic transactions in a timely manner or at all,” the company said. “Accordingly, the company may need to seek voluntary protection under chapter 11 of title 11 of the U.S. Code to restructure its capital structure."

Last week Quicksilver laid off 10% of it workforce in the United States and Canada.The company had around 350 employees total in Fort Worth and Calgary, with field offices across the country.

During 3Q2014, production totaled 22.6 Bcfe (246 MMcfe/d), a 10.3% decline from 3Q2013 (see Shale DailyNov. 10, 2014). At that time the company disclosed it had spent about $2 million to add 8,000 net acres to its position in the southern Barnett.

Houston-based Crestwood Midstream Partners LP and its affiliates provide gathering and processing services in the Barnett to Quicksilver and its partners, Tokyo Gas Barnett Resources LP and Eni Petroleum US LLC under agreements to 2020.

Crestwood said Wednesday Quicksilver and its partners are “current on all payments” through January. At current throughput levels, Crestwood expects to bill about $9 million for services rendered in February.

“Based on current publicly available information, we believe that Quicksilver’s net working interest in the dedicated Barnett Shale properties associated with our agreements is approximately 67%,” Crestwood noted. “We are closely monitoring Quicksilver’s liquidity and we expect to continue to receive prompt payment of invoices as submitted…”

If Quicksilver were to file for bankruptcy protection, “we will actively participate in the proceedings and believe our business in the Barnett Shale is well positioned,” Crestwood said.

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