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Texas-based gas producer Quicksilver Resources says may be forced into Chapter 11

Houston (Platts)--18 Feb 2015 546 pm EST/2246 GMT


Troubled US exploration-and-production company Quicksilver Resources this week signaled that it might be forced to file for bankruptcy after it was unable to meet an important debt obligation.

In a statement Tuesday, the Fort Worth-based energy producer said it had decided not to make the approximately $13.6 million interest payment due on its 9.125% senior notes due 2019. Under the terms governing the notes, the company has a 30-day grace period before the failure to make the interest payment results in a default.

The company said it plans to continue discussions with its creditors and "to focus on actively addressing the company's debt and capital structure" during the 30-day grace period.

However, if Quicksilver is unable to restructure its debt or take other steps to improve its short- and long-term liquidity, it said it might be forced to seek voluntary protection under Chapter 11 of the US Bankruptcy Code.

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Quicksilver, a gas-oriented producer with operations in the Barnett Shale and Permian Basin in Texas, and in western Canada, has been buffeted for several years by the relatively low price deck for natural gas.

Crestwood Midstream Partners, which provides gathering and processing services in the Barnett Shale to Quicksilver and its partners, affiliates of Tokyo Gas and Italy's Eni Petroleum, said on Wednesday that a Quicksilver bankruptcy would not negatively impact Crestwood's own operations.

"In the event the Quicksilver does file for Chapter 11 bankruptcy we will actively participate in the proceedings and believe our business in the Barnett Shale is well positioned," Crestwood said in a statement.

Quicksilver's financial problems have been several months in the making. Earlier this month, Quicksilver announced that it would lay off about 10% of its 500-person workforce in the US and Canada.

In January, the company said it was being removed from the New York Stock Exchange after the exchange determined that the 30-trading-day average closing price of the company's common stock had fallen below $1/share, the minimum average share price required for continued listing.

At the time of delisting, Quicksilver's common stock was selling for 15 cents/share.

An equity analyst, who asked to remain anonymous, said the announcement of a possible bankruptcy did not come as a shock to those familiar with Quicksilver's financial troubles. "I don't think it's a surprise to anybody," he said.

The producer likely will have to "do some kind of restructuring," either a so-called prepackaged bankruptcy proceeding or a more problematic non-prepackaged bankruptcy, he said.

The analyst said Quicksilver was a victim of sustained low gas prices over a number of years and an inability to sell some of its less-commercial assets, such as its stranded natural gas assets in northwest Canada.

Over the past two years, however, Quicksilver was able to divest itself of some assets. Last March the company sold 312,000 acres, which it held in partnership with Shell subsidiary SWEPI, in the Niobrara Shale play in northwestern Colorado to Southwestern Energy for $180 million.

In April 2013, Quicksilver sold a quarter of its interest in its Barnett Shale oil and gas assets to TG Barnett Resources, a wholly owned US subsidiary of Tokyo Gas, Japan's largest gas provider.

However, unlike many of its rivals that over the past few years have successfully reinvented themselves as oil-oriented producers, Quicksilver remained primarily a gas producer.

In its statement, Quicksilver observed that if the company does not make the interest payment before the end of the grace period, "the trustee or the holders of at least 25% in the aggregate principal amount of the outstanding 2019 notes may declare the principal and accrued interest for all 2019 notes due and payable immediately."

Quicksilver has retained Houlihan Lokey Capital, Inc., Deloitte Transactions and Business Analytics and other advisers to help evaluate the company's options.

Platts was unable to reach a Quicksilver spokesman for comment.

--Jim Magill, jim.magill@platts.com
--Edited by Lisa Miller, lisa.miller@platts.com

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