Quicksilver Resources goes on the auction block

Quicksilver Resources, the Fort Worth energy firm that made a big bet on the once highflying Barnett Shale, is scheduled to sell its assets on the auction block Wednesday.

The sale includes Quicksilver’s assets in North Texas including acreage near Alliance Airport and the Texas Motor Speedway, as well as the Permian Basin in West Texas. The sale is being held as part of Quicksilver’s Chapter 11 bankruptcy, which was filed in March. The company said it had $1.21 billion in assets and $2.35 billion in debts.

Originally scheduled for December, the sale was postponed to allow potential buyers time to evaluate Quicksilver’s value and prepare bids. The volatility of the energy market has made this difficult for bidders, and oil prices have plummeted further since the first of the year.

A separate auction of Quicksilver’s Canadian assets is scheduled to be held independent of the Chapter 11 auction as the cash-strapped company seeks to raise money to pay off creditors.

As of earlier this month, no company had emerged as a “stalking horse” bidder to set a floor price for Quicksilver’s assets., according to a person familiar with the auction process who is not authorized to comment publicly.

Steve Pezanosky, a bankruptcy attorney in Haynes & Boone’s Fort Worth office, said it is somewhat unusual that no lead bidder had emerged, but he added that each auction has its own set of rules and circumstances. Pezanosky is not involved in the Quicksilver case.

“I think it is the price,” Pezanoky said. “There’s a lot of disequilibrium in the market. It’s hard to come up with a price that the seller will sell at or that the creditors will accept.”

Quicksilver President Glenn Darden and others have been trying for months to develop a restructuring plan with creditors; ultimately, they could not come up with plan that could gain enough support, court records say.

Quicksilver Resources Canada has executed an agreement in which its first lien-secured lenders are refraining from exercising their rights to collect on their debts, according to Oil and Gas Investor.

The auction will be held at the Dallas offices of Akin Gump Strauss & Feld, and only bidders that have been preapproved can participate. A hearing to approve a sale of all or part of the assets will be held in a U.S. Bankruptcy Court in Delaware on Jan. 27.

Big gamble on the Barnett

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 in the Barnett and in South Texas, Indiana, Michigan, Montana, Wyoming 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.

Eventually, Quicksilver concentrated on the Barnett Shale and Canada. It sold its properties in Indiana, Kentucky and Michigan for $750 million to reduce debt.

But soon the price of natural gas began to tumble and in 2009 Quicksilver sold 27.5 percent of its holdings near Alliance Airport to Italian oil giant Eni for $280 million. It then sold an additional 25 percent to Tokyo Gas for $485 million in 2013.

Now, Quicksilver’s four development and exploration areas include 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 makes it hard for investors with cash to step in.

Not everyone is happy that there is an auction being held. Tokyo Gas is among the entities that have filed objections. The company, operating under the name of TG Barnett Resources, has accused Quicksilver of overcharges of about $570,000, court records show.

Local taxing entities in Tarrant County and across Texas also have filed objections to protect their interests. The authorities have identified about $5.5 million in ad valorem taxes that will be owed on Quicksilver’s real and personal property in 2016.

Attorneys familiar with bankruptcy auctions said it is not unusual for creditors to do what they can to protect their position. “That is not unusual in a bankruptcy. They (taxing entities) will file those at the beginning of each tax year,” said Chris Mosley, a Fort Worth assistant city attorney.

New leadership

Exactly how Quicksilver will look at the end of the auction will depend on how it is sold. The company could be sold to one bidder, or in pieces and parts. But one thing that is for sure, the Darden family will no longer run the company when it is over.

Founded by the late Frank Darden, the company has long been controlled by the well-known 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 the vice president of human resources.

For years, the company was a stalwart resident of the city’s south side, first operating out of four Victorian homes in the Medical District, then in the Central Bank & Trust Building on Rosedale Street. In 2010, the company moved its employees into the top four floors of Burnett Plaza.

Now, 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.

This story was originally published January 19, 2016 at 4:24 PM with the headline "Quicksilver Resources goes on the auction block."