BlueStone bid for Quicksilver Resources wins bankruptcy court approval

A federal bankruptcy judge Wednesday approved the sale of Quicksilver Resources’ U.S. assets to a Tulsa-based firm for $245 million, ending a local energy company’s big bet on the Barnett Shale.

BlueStone Natural Resources II made the winning bid for Quicksilver in an auction last week that lasted about 19 hours over two days. It is paying $240 million in cash for Quicksilver’s Barnett Shale natural gas assets, which include acreage near Alliance Airport and Texas Motor Speedway.

BlueStone is paying another $5 million for the company’s oil-rich acreage in the Delaware Basin in West Texas. The company once held about 90,000 acres in Pecos, Crockett and Upton counties.

When cash-strapped Quicksilver filed for bankruptcy in March, it stated that its assets were worth about $1.21 billion, but that it was saddled with $2.35 billion in debt.

Quicksilver Resources CEO Glenn Darden on Saturday said that “the sale maximizes value for the benefit of our creditors in the face of difficult market conditions.” BlueStone, which is already active in the Barnett Shale, said it was “extremely excited” about the purchase.

BlueStone is backed by Natural Gas Partners, a private-equity firm in Irving founded by the late Fort Worth financier Richard Rainwater. BlueStone owns more than 800 wells in South Texas and in the Barnett Shale.

Officials at Quicksilver and BlueStone could not be reached for comment Wednesday.

Analysts said the price BlueStone is paying for Quicksilver, once one of the faces of the Barnett Shale, is not surprising given the volatility of the market. One bankruptcy consultant said it is a sign of things to come, especially if natural gas and oil prices remain at their current low prices.

The Quicksilver auction was postponed for more than a month to allow “for a more robust auction” to maximize value, court documents state.

“That is a funny thing about book value of assets, they don’t stand up in real life,” said Ted Gavin, founding partner of Gavin/Solmonese, a Delaware-based corporate turnaround consulting firm. “The $245 million on $1.21 billion is not the worst ratio I’ve seen.”

“No one is looking for a premium sale from a buyer's standpoint. They don't look to pay the top price,” Gavin said. Instead, they are looking to “pay the least for this asset,” he said.

Quicksilver also is selling its Canadian assets, which are in the Horn River Basin in British Columbia and Horseshoe Canyon in Alberta, at a separate auction.

U.S. Bankruptcy Judge Laurie Silverstein in Delaware approved the sale over the objection of several creditors.

Houlihan Lokey, an investment bank with an expertise in mergers and acquisitions, coordinated Quicksilver’s auction. It contacted 238 potential purchasers with 186 expressing initial interest. But, in the end, only six bids were received for some or all of the assets, according to court documents.

BlueStone was selected after a “multi-round bidding process” over two days that improved both the purchase price and contract terms, records show. A $250 million backup bid made by Barnett Shale Gas was also selected. It included $93 million in cash and $157 million in credit. Barnett Shale represented Quicksilver’s second-lien creditors.

Quicksilver’s core Barnett Shale assets were good but the “upside” to BlueStone’s bid was the purchase of the West Texas acreage, said Ross Craft, CEO of Approach Resources in Fort Worth. If it includes the Bone Springs/Wolfcamp fields, “then the price paid was fair,” Craft said.

As oil and natural gas prices linger at lower prices, putting pressure on over-leveraged energy companies, analyst said bankruptcies and sales will become commonplace.

In November, the Haynes and Boone law firm reported that the number of U.S. energy company bankruptcies had steadily increased from only a handful in January 2015 to more than 30 in October. The firm said the cumulative debt for energy producers was $12.5 billion.

Gavin’s firm also predicts more doom and gloom. The firm’s research indicated that 80 oil companies had filed for bankruptcy protection from September 2014, when oil was trading at $92.88 a barrel, to the end of December. It said 49 of the companies were in Texas.

“We’re going to have another year of this, easily,” Gavin said. “The market has some things to shake out.”

“The first two circles of people in the service industry already have hit the wall and shut down. ... The companies that have been healthy are going to have some troubled times as well,” he said.

This story was originally published January 27, 2016 at 11:53 AM with the headline "BlueStone bid for Quicksilver Resources wins bankruptcy court approval."