Crestwood Holding Partners LLC completed its previously announced acquisition of Quicksilver Gas Services for US$701 million by acquiring 100% of its general partner interest from Quicksilver Resources Inc (see Gas Processors Report 08/06/10). The agreement includes up to $72 million in additional earn-out payments based on Quicksilver Gas Services achieving certain gathering volumes in 2011 and 2012.

Quicksilver Gas Services owns and operates three natural gas gathering pipeline systems with related natural gas processing, treating and compression assets located in the Barnett shale. These assets are supported by 10-year gathering and processing agreements with Quicksilver Resources that run until 2020. Crestwood Holding Partners has a private equity partnership with First Reserve Corp., a private equity company dedicated to energy.

The Quicksilver Gas Services assets total approximately 316 miles of pipeline with a total design capacity of 820 million cubic feet per day (MMcf/d) along with a CO2 amine treating plant. The three processing plants have a total of 170,000 horsepower of compression and are located in three different parts of the play: the northern section, the Dallas-Fort Worth section and the southwestern section.

“Crestwood is pleased to complete our first midstream acquisition. The Quicksilver transaction represents a great starting point for our disciplined growth strategy. The assets, employees and producer customers we are acquiring in the Barnett shale form a solid platform for future deals in other shale plays, and the new credit facility should provide the financial capacity to support those growth objectives,” Bob Phillips, president and CEO of Crestwood, said.

Crestwood also announced a new $400 million, five-year revolving credit facility for Quicksilver Gas Services. Phillips noted that he was particularly pleased that four members of Quicksilver Gas Services’ previous board of directors – Thomas F. Darden, chairman and president of Quicksilver Resources; John W. Somerhalder III, president and CEO of AGL Resources; Alvin Bledsoe, a retired senior engagement partner for PriceWaterhouseCoopers; and Phillip D. Gettig, a former senior executive of Union Pacific Resources Co. – agreed to join the new board.

“They share our vision of building a successful midstream business around a diversified portfolio of high quality assets and a commitment to best in class customer service,” Phillips said.

The Quicksilver Gas Services executive team will include Phillips, who was named as president, CEO and chairman, along with William Manias as CFO and secretary; Joel Moxley as senior vice president – operations and commercial; and Terry Morrison as senior vice president – business development.

The board of directors has been expanded to nine members along with the aforementioned four remaining members and Phillips as chairman, the board will be composed of Timothy Day, managing director of First Reserve Corp.; J. Hardy Murchison, managing director of First Reserve Corp.; Michael France, vice president of First Reserve Corp.; and Joel Lambert, associate general counsel of First Reserve Corp.

Although Crestwood was formed in late 2007, the company held back in making its move into the midstream because of changes in the economy and the midstream market. “This is a transaction that we though about last year, but the timing wasn’t right. With the improvement in the capital markets in 2010, buyers and sellers are finding it easier to agree on value. MLPs (master limited partnerships) as a sector have returned to their normal valuations. That, along with Quicksilver’s intent to monetize its investment in the midstream business, along with us brining in a new partner in First Reserve, were a recipe for getting a deal signed,” Phillips told Gas Processors Report shortly after the deal was first announced (see Gas Processors Report 08/26/10).

Quicksilver Resources plans on using the proceeds to improve liquidity and to repay its outstanding borrowings under its $1 billion senior secured credit facility. – Frank Nieto