Quicksilver Resources Inc. late Thursday agreed to sell all of its interests in its midstream unit Quicksilver Gas Services to Crestwood Midstream Partners II, LLC, a portfolio company of First Reserve Corp. for $701 million in cash at closing plus up to $72 million in additional earn-out payments.
The transaction is not subject to financing contingencies and is expected to close in October. Proceeds would be used to enhance the Fort Worth, TX-based producer's liquidity. Once the transaction closes, Quicksilver Resources expects to repay all outstanding borrowings under its $1 billion senior secured credit facility, of which approximately $528 million is currently outstanding, resulting in total liquidity of more than $1 billion.
"This transaction further validates Quicksilver's integrated approach to developing its natural gas resources," said CEO Glenn Darden. "After building the gathering and processing infrastructure for our Fort Worth Basin assets, we are now able to realize significant value that can be redeployed into our core, higher return exploration and development opportunities including the Fort Worth and Horn River basins.
"The sale to Crestwood enables Quicksilver to retain a reliable provider of midstream service for our ongoing Fort Worth Basin development, at an attractive cost for gathering and processing."
Privately held Crestwood was formed in 2007, helmed by former Enterprise Products Partners CEO Bob Phillips (see Daily GPI, Dec. 5, 2007). Blackstone Group and affiliate GSO Capital Partners LP acquired ownership interests in 2008, joining then owners Kayne Anderson Energy Funds and Crestwood Management LLC (see Daily GPI, June 26, 2008).
Last month at Bentek Energy LLC's Benposium, Phillips noted the growth in NGL infrastructure because of higher prices. "Those of us who have been in the NGL business have been observing the growth of the NGL infrastructure and the NGL supply and the NGL demand for years now" (see Daily GPI, June 14). "There is absolutely no doubt...when you can add 300 to 500 to 600 bbl of NGLs or oil to an Mcf of gas, that's like selling that gas for $8/Mcf at the wellhead."
With the transaction, Quicksilver Resources' net debt is expected to drop to around 83 cents/Mcfe, and net debt as a percent of total capitalization is expected to be reduced to about 59%, pro forma after the transaction.
Quicksilver Resources, which has been on the short list as a possible acquisition target, a few days ago was said to be in discussions with India's Reliance Industries Ltd. concerning a possible joint venture or even a takeover (see Daily GPI, July 20). The company has not commented on the rumors. A conference call was scheduled for early Friday to discuss the Crestwood transaction.
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