Bloomberg News

Quicksilver Resources Rises on Partnership IPO Plan

October 20, 2011

(Updates share price in second paragraph. Adds status of Horn River joint venture talks in seventh.)

Oct. 20 (Bloomberg) -- Quicksilver Resources Inc., the target of a failed management-led takeover attempt, gained as much as 8.7 percent after announcing plans to form a master- limited partnership to hold some of its Barnett Shale assets.

Quicksilver, based in Fort Worth, Texas, rose 3.9 percent to $8.48 at 10:05 a.m. in New York, after touching $8.87. The company’s debt also rose.

The initial public offering is expected to raise more than $400 million and proceeds will be used to reduce debt, Quicksilver said in a statement yesterday. Quicksilver said it will retain control of the partnership.

“We believe we will be able to monetize a large maturing asset base at attractive prices which can eliminate all of Quicksilver’s existing public debt over the next few years,” Chief Executive Officer Glenn Darden said in the statement. The company expects to eliminate about $940 million of public debt in the next two years.

Quicksilver intends to sell the partnership 18 percent of its production from the Barnett Shale deposit in the Fort Worth area and 15 percent of its year-end 2010 reserves in the formation. Further sales to the partnership are possible during the next seven years, which may provide enough funding to retire all existing corporate debt, it said.

Energy companies have used master-limited partnerships to raise cash while keeping control of assets. Partnership payouts, unlike corporate dividends, aren’t subject to U.S. income tax.

Horn River Basin

Agreement on a joint venture that would buy pipeline and gas-processing operations in British Columbia’s Horn River Basin is expected “fairly shortly,” Darden said today on a conference call with investors. “The negotiations have dragged on a little longer than we wanted.” Quicksilver had expected a deal by Sept. 30, he said.

Registration papers for the initial public offering may be filed by year-end, Quicksilver said. The company gave advance notice of the decision because some bondholders have options expiring Oct. 28 to sell the debt back, Chief Financial Officer Philip W. Cook said today on the call.

Darden and other family members announced plans to take Quicksilver private in October 2010 and abandoned the plan March 17 after talks with bankers and private-equity firms.

Quicksilver’s $350 million of 7.125 percent notes due in April 2016 surged 7.2 cents to 99.2 cents on the dollar at 9:57 a.m. in New York, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The debt has climbed 14.2 cents since trading at 85 cents on Oct. 6, Trace data show.

The company can redeem the bonds at 103.6 cents on Nov. 21, according to data compiled by Bloomberg.

--With assistance from Tim Catts in New York. Editors: Jasmina Kelemen, Steven Frank

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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