Quicksilver Gas Services Reports Second-Quarter 2009 Results

FORT WORTH, TX--(Marketwire - August 10, 2009) - Quicksilver Gas Services LP 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 ======== ======== ======== ========