BreitBurn Energy Partners LP, Los Angeles, (Nasdaq: BBEP) plans to acquire the E&P and midstream assets in Michigan, Indiana and Kentucky owned by Quicksilver Resources Inc., Fort Worth, Texas, (NYSE: KWK) for $750 million in cash and approximately $704.5 million in stock for a total deal value of $1.45 billion.

The assets include more than 5,400 producing wells on 922,564 gross acres (529,698 net), related gas-gathering and processing systems and Quicksilver's interests in approximately 260,000 net undeveloped acres as of Dec. 31.

The Michigan assets include substantial Antrim shale growth opportunities and extensive non-Antrim development opportunities including Prairie du Chien, Richfield, and Detroit River areas. The Indiana and Kentucky assets are in the New Albany shale and include geology similar to the Antrim assets, adjacent acreage leasing opportunities, low price differentials and ownership of key regional pipeline systems.

Net production is 76 million cu. ft. of gas equivalent per day, representing 38% of Quicksilver's production. Proved reserves as of Dec. 31 were 539 billion cu. ft. equivalent (96% gas, 89% proved developed producing).

The assets also include low-risk development opportunities with potential for more than 2,500 additional drilling locations and more than 825 additional recompletions.

The Michigan midstream assets include 114,000 horsepower of operated compression, 297 miles of pipeline including 138 miles of transmission and 159 miles of high-pressure gathering and more than 1,000 miles of low-pressure gathering pipelines. The assets also feature three gas-processing plants for removal of carbon dioxide and four gas-liquid-recovery plants.

Pro forma, BreitBurn's gross producing wells will increase from 488 to 5,924 and net land will increase from 52,749 acres to 582,447. Production will increase from 46.2 million cu. ft. equivalent to 122 million equivalent per day. Proved reserves will increase from 289 billion cu. ft. equivalent (48 million BOE) to 819 billion equivalent (137 million BOE).

BreitBurn is an MLP subsidiary of Provident Energy Trust, Calgary (Toronto: PVE-UN; NYSE: PVX). The deal reduces Provident's ownership in BreitBurn from approximately 51% to approximately 23%.

Provident president and chief executive Tom Buchanan says, "This latest acquisition by BreitBurn further validates Provident's strategy of increasing the value of our U.S. energy business by establishing BBEP as a publicly traded master limited partnership. Provident unit-holders benefit from this deal through the projected increase in cash flow from BreitBurn's distributions, as well as through the value of our direct equity ownership position in a growing U.S. oil and gas business of significant size and scale."

BreitBurn co-CEO Hal Washburn says, "This acquisition truly transforms our company by nearly tripling our estimated proved reserves and production while adding Quicksilver's Michigan-based management, technical and operating teams with extensive experience in shale-gas development to our current team. Our operating and growth platform is strengthened and we are positioned to compete for both oil and gas opportunities going forward. The acquisition provides BreitBurn significant operating scale in Michigan making us the largest gas producer in Michigan and one of the top producers in the Antrim Shale."

Quicksilver president and CEO Glenn Darden says, "As a result of this transaction, Quicksilver will be better prepared to develop our large inventory of higher-return, higher-growth properties in the Fort Worth Basin and other areas."

BreitBurn will fund the deal with a $450-million private placement of equity and a $1.5-billion amended and restated bank credit facility underwritten by Wells Fargo Bank NA and an affiliate of Credit Suisse Securities (USA) LLC.

J.P. Morgan Securities is financial advisor to Quicksilver and Credit Suisse is financial advisor to BreitBurn. The deal is expected to close by Nov. 1.

Standard & Poor's Ratings Services reports that Quicksilver's BB- rating and Stable outlook would not be affected by the deal. Although the transaction reduces Quicksilver's production and reserves by about one-third, use of approximately $590 million in after-tax proceeds to pay bank borrowings is favorable for credit. The reduction in debt gains Quicksilver needed financial flexibility to pursue an aggressive development program in the Barnett shale, S&P reports.

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