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Bankruptcy Watch: Quicksilver Resources

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The market is still assuming E&P restructuring's are waiting to be filed in order address the maturing obligations and bank covenants.  To date, the filings have been few, but that may pick up after Spring Re-Determination, which may be much more aggressive than the previous Fall process.  This week we focus on the Quicksilver Resources, which is expected to receive judgment by March 31st, 2016


Quicksilver Update:  This is a closely followed case related to the proposed sale of acreage from the bankrupt Quicksilver Resources to Bluestone Natural Resources.  What is being contested is whether the dedicated gas processing and transportation agreements between Crestwood and Quicksilver can be terminated upon the sale of the acreage, a condition which Bluestone has placed on completing the $245MM transaction.  Crestwood's position is that the gathering agreements are connected to the land, regardless of ownership, arguing that they otherwise would not have paid $741MM for the Quicksilver Gas Services pipelines on October 1, 2010.  Being the largest producer on the network, Crestwood's position is that the gathering system's value is predicated upon the acreage for which is was developed.   Bluestone's position is that the $65MM paid for gathering, processing and transportation through September 30, 2016 is above the prevailing market rates, despite the fact that Quicksilver recorded a $454MM gain when they sold the pipelines to Crestwood, as well as renegotiated the rates up to 65% lower in July 2014.  Below are Quicksilver's rates and future volume commitments (excluding compression agreements in place with CSI Compressco as disclosed in their most recent 10k





The company previously opted not to pay gathering fees for their Canadian Horn River acreage, which resulted in termination of service prior to any proposed acreage sale, which may be a key factor in the Bluestone transaction, as noted by Judge Silverstein





Judge Silverstein indicated she will do her best to render a decision by the March 31st deadline for Bluestone to complete their purchase of the Quicksilver assets.  A decision which allows the gathering agreements to be terminated will likely be a key factor in the sale of future acreage by struggling producers.




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