Quicksilver Resources (KWK) and Kohlberg Kravis Roberts (NYSE:KKR) said today they have formed a partnership to construct and operate natural gas midstream services to support producer customers in British Columbia and the Northwest Territories of Canada.
Under the terms of the transaction, Quicksilver contributed its existing 20-mile, 20-inch gathering line and compression facilities, as well as 10-year contracts for gas deliveries into the facilities.
KKR paid $125 million to Quicksilver in exchange for a 50% interest in the partnership, and will carry Quicksilver on its portion of future development costs in exchange for preferential distributions.
A planned treating facility will lower Quicksilver's cost to get its producer natural gas to market by $0.80 per million cubic feet.
The companies plan to jointly build and operate natural gas gathering, transportation and processing infrastructure to maximize the value of the production stream from Quicksilver's development in the Horn River Basin.
In addition to keeping an eye on Quicksilver stock, investors may want to watch nat gas ETFs to see if the merger news spurs the sector.
The First Trust ISE-Revere Natural Gas Index Fund (NYSE:FCG) is trading up over .1% Tuesday.
The Daily Natural Gas Related Bull 2x Shares (FCGL) is trading down over 7.7% Tuesday, and the SPDR S&P Oil & Gas Exploration & Production ETF (NYSE:XOP) is trading up about .6%.
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