New MLP Headed to Market (KWK)

Quicksilver Resources Inc. (NYSE: KWK) ha snot been all that successful if you just look at the stock alone.  After a 4% drop today to $5.15, the 52-week range is $4.14 to $15.98.  This morning came word that its unit called Quicksilver Production Partners (“QPP”)has filed its S-1 registration statement with the SEC to allow for its proposed IPO of common units.

Under the MLP structure, these units represent ‘interests’ rather than shares.  Quicksilver aims to contribute certain Barnett Shale assets it owns as well as some related derivatives to QPP.

The MLP plans to use the IPO proceeds with borrowings under a planned new bank credit facility as consideration for the contribution by Quicksilver of these assets.  In turn, Quicksilver pans on using its funds received from QPP to retire a portion of its corporate debt.

J.P. Morgan and Credit Suisse are listed as the lead book-running managers for this IPO. 

Quicksilver is now worth only $870 million in its market capitalization rate and on a standalone basis it is not expected to have much profitability as the company sits today. Its problem is that it is big in natural gas and you probably do not need to be reminded about what has happened to the market price of natural gas.

If there is going to be value to unlock here, the company better proceed while the market will still allow it to.