Quicksilver Resources Inc. has entered into purchase and sale agreements with various private parties including Chief Resources LLC, Hillwood Oil & Gas, L.P. and Collins and Young, L.L.C. to acquire producing, leasehold, royalty and midstream assets, associated with the Barnett Shale formation in northern Tarrant and southern Denton counties of Texas, for $1.307 billion. The acquired properties currently have net production of approximately 45 million cubic feet (MMcf) per day. Quicksilver estimates that these properties contain more than one trillion cubic feet of recoverable natural gas resources net to the company including approximately 350 billion cubic feet (Bcf) of proved reserves, of which approximately 40% are proved developed, and more than 650 Bcf of additional resource potential on 13,000 net acres.

Consideration in the transaction includes $1 billion in cash and $307 million in Quicksilver Resources common stock. Quicksilver expects to fund the cash portion of the transaction through a combination of a $700 million 30-month second-lien term loan facility, operating cash flow, and its existing credit facility. Quicksilver Resources’ common stock issued in the transaction will be valued based on the volume weighted-average price for the 15 consecutive trading days immediately prior to the three trading days prior to closing the transaction. The acquisition is scheduled to close on August 8, 2008, subject to expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the satisfaction or waiver of other customary closing conditions.

“Acquisition of these properties in the Fort Worth Basin enhances our production growth profile, expands our inventory of low-risk, high-return development projects, maintains a low full-cycle cost structure, and is expected to be immediately accretive to earnings and cash flow per share,” said Glenn Darden, Quicksilver president and chief executive officer. “In addition, this transaction enables Quicksilver to lever its existing technical, operating and management efficiencies in the Fort Worth Basin. We believe these acquired properties are similar to the company’s Lake Arlington project, where last week the most recent four wells began production at a combined rate of approximately 26 MMcf per day.”

Upon closing the transaction, Quicksilver estimates that its total company average daily production volumes for 2008 will increase to approximately 275 MMcf of natural gas equivalents per day, an approximate 8% increase from prior estimates, reflecting just five months of production volumes from the acquired properties. The company’s total daily production volumes are projected to increase approximately 40% and 30% in 2009 and 2010, respectively, resulting in a three-year compound annual growth rate of approximately 50%, after adjusting for the November 2007 divestment of Quicksilver’s operations in Michigan, Indiana and Kentucky.

Tags: Chief Resources LLC, Hillwood Oil & Gas, Quicksilver Resources Inc.