Units of Quicksilver Resources Inc., Fort Worth, and Kohlberg Kravis Roberts & Co. LP have formed a midstream partnership to build and operate natural gas midstream services in British Columbia and the Northwest Territories of Canada.
The companies will 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. And Quicksilver has dedicated current and future production from its Horn River acreage to the partnership.
The agreement covers midstream activity over about 30 million potential acres in the Horn River, Liard, and Cordova basins, which would include third-party transportation and processing infrastructure and agreements.
Quicksilver contributed its existing 20-mile, 20-in. gathering and compression and 10-year contracts for gas deliveries. KKR paid $125 million to Quicksilver in exchange for a 50% interest in the partnership.
The new partnership anticipates building a treating plant that will lower Quicksilver’s cost to move its produced natural gas to market by roughly 80¢/Mcf compared with its current alternative. Quicksilver will operate the partnership.
The partnership announcement said this is the second step in “ensuring the lowest cost solution relative to current options” to move Quicksilver’s gas to market. The first step, it said, was TransCanada PipeLine’s extension of its Alberta system to Quicksilver’s lands. The planned treating unit that KKR will fund will be at the terminus of this pipeline.
The announcement also stated that the wells in the Horn River basin of British Columbia are “among the most prolific of shale plays in North America.”
Recoverable reserves from Quicksilver’s acreage alone, said the company, could exceed 10 tcf of natural gas, citing a recent Canadian National Energy Board study that Horn River basin reserves could exceed 75 tcf.