Crestwood Midstream Responds to Quicksilver Announcement
Yesterday, Quicksilver Resources Inc. (“KWKA”) announced its decision to not make an interest payment currently due and to enter a thirty (30) day grace period under the applicable indenture. Based upon the announcement, to the extent the payment is not made during the grace period and a debt restructuring plan is not reached between KWKA and its creditors, this would result in an event of default which may lead to the need for KWKA to seek voluntary protection under Chapter 11 of the United States Bankruptcy Code. We continue to support KWKA’s restructuring efforts and hope that they are successful.
Crestwood Midstream Partners LP (NYSE:CMLP) , through its subsidiaries Cowtown Pipeline Partners L.P. and Cowtown Gas Processing Partners L.P. (together, “Crestwood Midstream”), provides gathering and processing services in the Barnett Shale to KWKA and its partners, Tokyo Gas Barnett Resources LP and Eni Petroleum US LLC, under agreements that extend to 2020. Notwithstanding the announcement, KWKA and its partners are current on all payments to Crestwood Midstream, including payment for services rendered through January 2015. At current throughput levels, Crestwood Midstream anticipates billing approximately $9 million for services rendered in February 2015 to KWKA and its partners. Based on current publicly available information, we believe that KWKA’s net working interest in the dedicated Barnett Shale properties associated with our agreements is approximately 67%. We are closely monitoring KWKA’s liquidity and we expect to continue to receive prompt payment of invoices as submitted to KWKA.
In the event that KWKA does file for Chapter 11 bankruptcy, we will actively participate in the proceedings and believe our business in the Barnett Shale is well positioned:
- Critical Vendor and Lienholder - We believe that amounts owing for pre-petition service will be paid on a timely basis, as we have experienced over the past several months, because Crestwood Midstream is a critical vendor and holds liens to secure payment for its prepetition services. In addition, our gathering and processing system is integral to KWKA’s operations since a substantial portion of KWKA’s revenues derives from the sale of Barnett Shale gas dedicated to Crestwood Midstream’s gathering and processing system.
- Post-Petition Services - We expect that amounts owing for post-petition services will be paid in accordance with terms of the existing agreements as administrative expenses. A bankruptcy filing would not preclude Crestwood Midstream from its contractual right to amounts owing for services subsequently rendered to KWKA and its partners. In addition, the gathering and processing agreements each entitles Crestwood Midstream to adequate assurances of future performance when KWKA experiences a negative credit event.
- Post-Restructuring – We believe that the existing gathering and processing agreements will continue after a potential bankruptcy filing. All of KWKA and its partners’ acreage and gas produced therefrom are dedicated to Crestwood Midstream’s gathering and processing system during the term of those contracts. Importantly, the proceeds from the sale of gas and products are made possible by those agreements.
Crestwood Midstream will continue to cooperate in good faith in any restructuring process and will provide updates of material developments as they occur.
About Crestwood Midstream Partners LP
Houston, Texas, based Crestwood Midstream (NYSE:CMLP) is a master limited partnership that owns and operates midstream businesses in multiple unconventional shale resource plays across the United States. Crestwood Midstream is engaged in the gathering, processing, treating, compression, storage and transportation of natural gas; storage, transportation and terminalling of NGLs; and gathering, storage, terminalling and marketing of crude oil.
This press release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal securities law. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management’s control. These risks and assumptions are described in Crestwood Midstream’s annual reports on Form 10-K and other reports that are available from the United States Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s view only as of the date made. We undertake no obligation to update any forward-looking statement, except as otherwise required by law.
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