A Tulsa-based firm that has been actively investing in Texas oil and gas fields has agreed to pay $245 million to buy the U.S. assets of Quicksilver Resources, a local energy company that became one of the faces of the Barnett Shale before falling into bankruptcy last year.
BlueStone Natural Resources II emerged as the buyer from a bankruptcy auction Wednesday. BlueStone’s purchase is being backed by Natural Gas Partners, a private-equity firm in Irving that was founded by the late Fort Worth financier Richard Rainwater. Quicksilver announced the sale to its employees late Friday night and filed documents in bankruptcy court early Saturday.
Quicksilver is selling its assets to help pay off more than $2.35 billion in debt. In the U.S., it holds acreage near Alliance Airport and the Texas Motor Speedway in Fort Worth, as well as in the Permian Basin in West Texas. The company also has assets in Canada that were not included in its Chapter 11 bankruptcy filing in Delaware. They are being sold separately.
When Quicksilver filed for bankruptcy in March 2015, it stated that its assets in the United States were valued at $1.21 billion. But volatility in the oil and gas markets in recent months have led energy companies to write down values.
The proposed sale will go before a bankruptcy judge in Delaware for approval during a hearing set for Wednesday.
This sale maximizes value for the benefit of our creditors in the face of difficult market conditions
Quicksilver CEO Glenn Darden
In an email to employees sent at 11 p.m. Friday, Quicksilver CEO Glenn Darden said they are continuing to work on the Canadian sale as well.
“We believe that the marketing and sales process was thorough and resulted in a successful outcome,” Darden said in a statement released Saturday morning. “This sale maximizes value for the benefit of our creditors in the face of difficult market conditions.”
BlueStone has about 70 employees, according to Darden’s email. Quicksilver has 165, according to bankruptcy documents. Headquartered in Burnett Plaza in downtown Fort Worth, Quicksilver has slashed its workforce by 34 percent since January 2015. BlueStone will start interviewing Quicksilver’s staff soon, Darden said.
“We love the assets. We believe in a strong growth strategy in Texas,” said C.B. Rowan, BlueStone’s chief financial officer. “We’re extremely excited about the assets and we love the people.”
Reflecting market uncertainties and falling commodity prices, the auction was postponed in December to give bidders more time to evaluate the value of Quicksilver and prepare bids. Even then, a lead bidder to set a floor price for the company’s assets didn’t emerge until right before the auction. The auction reportedly lasted 20 hours.
Industry observers said there was a lot of “disequilibrium in the market,” making it difficult to come up with a price buyers were willing to pay and creditors were willing to accept. The court filing Saturday noted that a $250 million backup bid was also submitted by Barnett Shale Gas LLP that included $93 million in cash and $157 million credit. Barnett Shale Gas represents Quicksilver’s second lien creditors.
“They were the highest and best bidder that participated in the process. We went out to hundreds of buyers and they were the last one standing,” said Adam Dunayer, managing director at Houlihan Lokey, an investment bank with an expertise in mergers and acquisitions and financial restructuring.
Will Brackett, managing editor of the Powell Shale Digest, an industry publication, said it was always a matter of “how much anyone would want to pay for it.”
“In the heyday of the Barnett Shale, they had some good acreage,” Brackett said.
To show how much things have changed in the Barnett Shale, only one rig was active in North Texas this week, according to a report from RigData. In October 2008, there were about 200 drilling rigs searching primarily for natural gas in North Texas.
Ross Craft, chief executive officer of Approach Resources in Fort Worth, said he had heard that no one wanted to buy Quicksilver because of the low prices. Natural gas was selling for $2.139 per thousand cubic feet on the New York Mercantile Exchange on Friday.
“The acreage is good, but under the current commodity price nobody can make any money,” said Craft, whose company was approached last year about buying Quicksilver. “All of it is in the gutter.”
To show how much things have changed in the Barnett, only one rig was active in North Texas this week, according to a report from RigData. In October 2008, there were about 200 drilling rigs searching primarily for natural gas in North Texas.
Quicksilver made a big move into the Barnett and other natural gas fields during the shale revolution. The company grew in size and influence with holdings across the country, but eventually it concentrated its efforts in the Barnett and Canada. Part of the optimism was fueled by the price of natural gas. In 2008, Quicksilver was getting $7.24 per thousand cubic feet for gas.
In the end, Quicksilver’s four development and exploration areas included the Fort Worth Basin of the Barnett; the Delaware Basin in West Texas; the Horn River Basin in British Columbia, Canada; and the coal beds of Horseshoe Canyon in Alberta, Canada, according to court records.
Prior to the auction, the company tried to sell its holdings in the Horn River Basin in late 2014 and early 2015 — even marketing to them to Asian buyers — but a deal didn’t emerge. Quicksilver has $825 million in second-lien debt, a factor that made it hard to attract investors.
Members of the management team that owns BlueStone Natural Resources II previously worked together in two other private-equity firms, including BlueStone Natural Resources, which was founded in 2006, according to its website. The original BlueStone closed more than 60 transactions and had what the website says was a “valued partnership” with Natural Gas Partners, an arrangement that provided it with ample access to capital.
BlueStone Natural Resources II was created in 2012 with a $115 million commitment from management and Natural Gas Partner Fund X, according to the website. BlueStone II has completed more than 30 transactions, pulling together ownership in more than 800 wells in South Texas and the Barnett shale plays.
Natural Gas Partners’ chief executive officer is Kenneth Hersh, a longtime friend of Rainwater who spoke at his funeral in October. Natural Gas Partners is an affiliate of NGP Energy Capital Management.
Founded by the late Frank Darden, Quicksilver has long been controlled by the Fort Worth family. Glenn served as president and chief executive officer; his brother, Thomas “Toby” Darden, served on the company’s board until December 2013; their sister, Anne Darden Self, is vice president of human resources.
While the announcement does not spell out the future of the Dardens following the sale, observers say the most likely scenario is that the Darden family will be out, even if a future version of the company still bears the name Quicksilver.