Quicksilver Resources files for Chapter 11

May 2015 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

Quicksilver Resources Inc. has announced that it, and its US subsidiaries, have each filed a voluntary petition under Chapter 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware.

Quicksilver Resources Inc. joins a growing list of oil and gas producers which have struggled amid low oil prices.

The Chapter 11 filing lists assets of $1.2bn and debt of $2.35bn. The bankruptcy protection was set in motion after Quicksilver failed to find a buyer amid a backdrop of falling oil prices.

Texas-based Quicksilver Resources is a publicly traded independent oil and gas company engaged in the exploration, development and acquisition of oil and gas, primarily from unconventional reservoirs including shales and coal beds in North America. Quicksilver’s Canadian subsidiary, Quicksilver Resources Canada Inc., is headquartered in Calgary, Alberta. Quicksilver’s common stock is traded on the OTCQB Marketplace under the symbol ‘KWKA’.

Quicksilvers’s US subsidiaries are: Barnett Shale Operating LLC, Cowtown Drilling, Inc., Cowtown Gas Processing L.P., Cowtown Pipeline Funding, Inc., Cowtown Pipeline L.P., Cowtown Pipeline Management, Inc., Makarios Resources International Holdings LLC, Makarios Resources International Inc., QPP Holdings LLC, QPP Parent LLC, Quicksilver Production Partners GP LLC, Quicksilver Production Partners LP, and Silver Stream Pipeline Company LLC.

Quicksilver’s Canadian subsidiaries, however, were not included in the Chapter 11 filing, are not subject to the requirements of the US Bankruptcy Code, and operations are anticipated to continue without interruption from the Chapter 11 filing. This is due to Quicksilver Resources Canada Inc. (QRCI) reaching an agreement with its first lien secured lenders regarding forbearance for a period up to and including 16 June 2015 of any default under QRCI’s first lien credit agreement arising due to the Chapter 11 filing.

Quicksilver has filed a series of motions with the Court to ensure the continuation of normal operations, including requesting Court approval to continue paying employee wages and salaries and providing employee benefits without interruption. Quicksilver has also asked for authority to continue honouring royalty obligations, working interest obligations, and other obligations related to oil and gas leases – requests that Quicksilver expects the Court to approve. During the Chapter 11 process, suppliers will be paid in full for all goods and services provided after the filing date as required by the Bankruptcy Code.

Even before the slide in oil prices over the last few months Quicksilver was struggling to stay afloat. In 2011, the company’s founders, the Darden family, abandoned a bid to take it private, and in recent years have started to sell its assets, including a stake in a Texas shale gas project, in a bid to get its debt under control. But the fates conspired to further worsen Quicksilver’s situation when crude oil prices fell and buyers for oil and gas assets failed to materialise.

And in February 2015, Quicksilver made it clear that it was intending to skip an interest payment to bondholders and, for the first time, raised the possibility that it may have to file for bankruptcy. In the same month, the company said it also planned to avoid making a $13.6m payment to senior unsecured bondholders owed $293.7m in debt that matures in 2019.

“Quicksilver’s strategic marketing process has not produced viable options for asset sales or other alternatives to fully address the company’s liquidity and capital structure issues,” said Glenn Darden, Quicksilver’s chief executive. “We believe that Chapter 11 provides the flexibility to accomplish an effective restructuring of Quicksilver for its stakeholders.”

Quicksilver’s legal advisers for Chapter 11 are Akin Gump Strauss Hauer & Feld LLP in the US and Bennett Jones in Canada. The company’s financial adviser is Houlihan Lokey Capital, Inc.

Fraser Tennant