##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 001-33631
 Quicksilver Gas Services LP
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    56-2639586
(I.R.S. Employer Identification No.)
 777 West Rosedale, Fort Worth, Texas
(Address of principal executive offices)
    
    76104
(Zip Code)
 817-665-8620
 None
 þ o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o o þ
 .




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##### Table of Contents



DEFINITIONS
  Bbl Bbls
 Btu
 LIBOR
 Management
 MMBtu
 MMBtud
 Mcf
 MMcf
 MMcfd
 MMcfe
 MMcfed
 NGL NGLs
 COMMONLY USED TERMS
  FASB
 IPO
 Gas Gathering and Processing Agreement
 Omnibus Agreement
 Partnership Agreement
 Quicksilver
 Quicksilver Counties
 SEC
 SFAS
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##### Table of Contents



Explanatory Note
     Forward-Looking Information
  
    
    changes in general economic conditions;
    
    fluctuations in natural gas prices;
    
    failure or delays in the Parent and third parties achieving expected production from
natural gas projects;
    
    competitive conditions in our industry;
    
    actions taken by third-party operators, processors and transporters;
    
    changes in the availability and cost of capital;
    
    operating hazards, natural disasters, weather-related delays, casualty losses and other
matters beyond our control;
    
    construction costs or capital expenditures exceeding estimated or budgeted amounts;
    
    the effects of existing and future laws and governmental regulations; and
    
    the effects of future litigation.
  3




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##### 



QUICKSILVER GAS SERVICES LP
INDEX TO FORM 10-Q
For the Period Ended June 30, 2008
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Statements of Income
    
    
    5Condensed Consolidated Balance Sheets
    
    
    6Condensed Consolidated Statements of Cash Flows
    
    
    7Condensed Consolidated Statement of Partners Capital
    
    
    8Notes to Condensed Consolidated Interim Financial Statements
    
    
    9Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    28Item 1A.
    
    Risk Factors
    
    
    28Item 2.
    
    Unregistered Sales of Securities and Use of Proceeds
    
    
    28Item 3.
    
    Defaults Upon Senior Securities
    
    
    28Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    28Item 5.
    
    Other Information
    
    
    28Item 6.
    
    Exhibits
    
    
    29Signatures
    
    
    
    
    30Certification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906
  4




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements (Unaudited)
 
 QUICKSILVER GAS SERVICES LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In thousands, except for per unit data  Unaudited
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenuesGathering and transportation revenue  parent
    
    $
    7,199
    
    
    $
    3,100
    
    
    $
    13,676
    
    
    $
    5,510Gathering and transportation revenue
    
    
    1,633
    
    
    
    147
    
    
    
    2,453
    
    
    
    338Gas processing revenue  parent
    
    
    7,701
    
    
    
    3,714
    
    
    
    14,521
    
    
    
    6,217Gas processing revenue
    
    
    1,447
    
    
    
    124
    
    
    
    2,290
    
    
    
    391Other revenue  parent
    
    
    225
    
    
    
    33
    
    
    
    450
    
    
    
    33Total revenues
    
    
    18,205
    
    
    
    7,118
    
    
    
    33,390
    
    
    
    12,489ExpensesOperations and maintenance  parent
    
    
    5,312
    
    
    
    2,228
    
    
    
    10,262
    
    
    
    4,945General and administrative  parent
    
    
    1,422
    
    
    
    686
    
    
    
    3,239
    
    
    
    1,182Depreciation and accretion
    
    
    3,407
    
    
    
    1,824
    
    
    
    6,563
    
    
    
    3,119Total expenses
    
    
    10,141
    
    
    
    4,738
    
    
    
    20,064
    
    
    
    9,246Operating income
    
    
    8,064
    
    
    
    2,380
    
    
    
    13,326
    
    
    
    3,243Other income
    
    
    1
    
    
    
    23
    
    
    
    6
    
    
    
    35Interest expense
    
    
    2,421
    
    
    
    211
    
    
    
    4,839
    
    
    
    211Income before income taxes
    
    
    5,644
    
    
    
    2,192
    
    
    
    8,493
    
    
    
    3,067Income tax provision
    
    
    38
    
    
    
    57
    
    
    
    3
    
    
    
    97Net income
    
    $
    5,606
    
    
    $
    2,135
    
    
    $
    8,490
    
    
    $
    2,970General partner interest in net income
    
    $
    126
    
    
    
    
    
    
    $
    182Common and subordinated unitholders interest in
net income
    
    $
    5,480
    
    
    
    
    
    
    $
    8,308Earnings per common and subordinated
unit  basic
    
    $
    0.23
    
    
    
    
    
    
    $
    0.35Earnings per common and subordinated unit 
diluted
    
    $
    0.23
    
    
    
    
    
    
    $
    0.35Weighted average number of common and
subordinated units outstanding:Basic
    
    
    23,783
    
    
    
    
    
    
    
    23,783Diluted
    
    
    23,924
    
    
    
    
    
    
    
    23,924
  5




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QUICKSILVER GAS SERVICES LP
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except for unit data  Unaudited
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    607
    
    
    $
    1,125Trade accounts receivable
    
    
    2,317
    
    
    
    882Accounts receivable from parent
    
    
    
    
    
    
    800Prepaid expenses and other current assets
    
    
    972
    
    
    
    690Total current assets
    
    
    3,896
    
    
    
    3,497Property, plant and equipment, net
    
    
    372,633
    
    
    
    273,948Other assets
    
    
    1,140
    
    
    
    965$
    377,669
    
    
    $
    278,410LIABILITIES AND PARTNERS CAPITALCurrent liabilitiesCurrent maturities of debt
    
    $
    1,100
    
    
    $
    1,100Accounts payable to parent
    
    
    4,446
    
    
    
    Accrued additions to property, plant and equipment
    
    
    22,236
    
    
    
    23,624Accounts payable and other
    
    
    3,586
    
    
    
    2,700Total current liabilities
    
    
    31,368
    
    
    
    27,424Long-term debt
    
    
    55,300
    
    
    
    5,000Note payable to parent
    
    
    51,508
    
    
    
    50,569Repurchase obligations to parent
    
    
    131,911
    
    
    
    82,251Asset retirement obligations
    
    
    3,187
    
    
    
    2,793Deferred income tax liability
    
    
    118
    
    
    
    173Commitments and contingent liabilities (Note 8)Partners CapitalCommon unitholders (12,269,714 and 12,263,625 units issued and
outstanding at June 30, 2008 and December 31, 2007, respectively)
    
    
    107,072
    
    
    
    109,830Subordinated unitholders (11,513,625 units issued and outstanding
at June 30, 2008 and December 31, 2007)
    
    
    (2,703
    )
    
    
    356General Partner
    
    
    (92
    )
    
    
    14Total partners capital
    
    
    104,277
    
    
    
    110,200$
    377,669
    
    
    $
    278,410
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QUICKSILVER GAS SERVICES LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands  Unaudited
 Six Months Ended June 30,2008
    
    
    2007Operating activities:Net income
    
    $
    8,490
    
    
    $
    2,970Items included in net income not affecting cashDepreciation
    
    
    6,478
    
    
    
    3,088Accretion of asset retirement obligation
    
    
    85
    
    
    
    31Deferred income taxes
    
    
    (55
    )
    
    
    Equity-based compensation
    
    
    501
    
    
    
    Amortization of debt issuance costs
    
    
    105
    
    
    
    Non-cash interest expense on repurchase obligations to parent
    
    
    2,928
    
    
    
    211Non-cash interest expense on note payable to parent
    
    
    1,489
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (1,435
    )
    
    
    (104
    )Prepaid expenses and other assets
    
    
    (562
    )
    
    
    (246
    )Accounts receivable from parent
    
    
    5,170
    
    
    
    Accounts payable and other
    
    
    886
    
    
    
    108Net cash provided by operating activities
    
    
    24,080
    
    
    
    6,058Investing activities:Capital expenditures
    
    
    (59,434
    )
    
    
    (45,040
    )Net cash used in investing activities
    
    
    (59,434
    )
    
    
    (45,040
    )Financing activities:Proceeds from revolving credit facility borrowings
    
    
    50,300
    
    
    
    Repayment of subordinated note to parent
    
    
    (550
    )
    
    
    Contributions by parent
    
    
    
    
    
    
    39,017Contributions by other partners
    
    
    
    
    
    
    167Distributions to unitholders
    
    
    (14,914
    )
    
    
    Net cash provided by financing activities
    
    
    34,836
    
    
    
    39,184Net (decrease) increase in cash
    
    
    (518
    )
    
    
    202Cash at beginning of period
    
    
    1,125
    
    
    
    2,797Cash at end of period
    
    $
    607
    
    
    $
    2,999Cash paid for interest
    
    $
    739
    
    
    $
    Non-cash transactions:Changes in working capital related to capital expenditures
    
    $
    1,312
    
    
    $
    (10,156
    )Repurchase obligations to parent:Receivable from parent for sale of pipeline and gathering assets
    
    $
    
    
    
    $
    (29,509
    )Acquisition of property, plant and equipment by parent
    
    $
    (46,732
    )
    
    $
    (8,559
    )$
    (46,732
    )
    
    $
    (38,068
    )
  7




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QUICKSILVER GAS SERVICES LP
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
In thousands  Unaudited
 Partners CapitalLimited PartnersCommon
    
    
    Subordinated
    
    
    General Partner
    
    
    TotalBalance at December 31, 2007
    
    $
    109,830
    
    
    $
    356
    
    
    $
    14
    
    
    $
    110,200Equity-based compensation
    
    
    501
    
    
    
    
    
    
    
    
    
    
    
    501Distributions paid to partners
    
    
    (7,545
    )
    
    
    (7,081
    )
    
    
    (288
    )
    
    
    (14,914
    )Net income
    
    
    4,286
    
    
    
    4,022
    
    
    
    182
    
    
    
    8,490Balance at June 30, 2008
    
    $
    107,072
    
    
    $
    (2,703
    )
    
    $
    (92
    )
    
    $
    104,277
  8




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QUICKSILVER GAS SERVICES LP
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
UNAUDITED
 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
 Organization
  Initial Public Offering
  PercentageOwnershipCommon unitholders:Public
    
    
    27.1
    %Quicksilver
    
    
    23.5
    %Subordinated unitholders:Quicksilver
    
    
    47.5
    %Total limited partner interest
    
    
    98.1
    %General Partner interest:Quicksilver
    
    
    1.9
    %Total
    
    
    100.0
    %
  Description of Business
  9




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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
   Use of Estimates 
 Repurchase Obligations to Parent 
 
    
    gathering lines that are part of the Cowtown Pipeline (Cowtown Pipeline Assets);
    
    a gathering system in the Lake Arlington area of Tarrant County (Lake Arlington Dry
System); and
    
    a gathering system in Hill County (Hill County Dry System).
  Cowtown Pipeline Assets Repurchase:
 Lake Arlington Dry System and Hill County Dry System Repurchases:
 10




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Estimate of
    
    
    Construction CostsJune 5, 2007
    
    
    Construction Costs as
    
    
    Recognized throughSales Price
    
    
    of June 30, 2008(1)
    
    
    June 30, 2008
    
    
    KGS RepurchaseCowtown Pipeline Assets
    
    $
    22.9
    
    
    $
    64.3
    
    
    $
    62.1
    
    
    Optional at CostLake Arlington Dry System
    
    
    3.6
    
    
    
    78.0
    
    
    
    31.8
    
    
    Obligatory at Fair ValueHill County Dry System
    
    
    3.0
    
    
    
    60.4
    
    
    
    32.5
    
    
    Obligatory at Fair ValueInterest cost included
in liability
    
    
    
    
    
    
    
    
    
    
    5.5$
    29.5
    
    
    $
    202.7
    
    
    $
    131.9
 
 (1)
    
    The estimates of total construction cost are subject to change based on
changes in the producers drilling progress, material and labor costs, easement costs and other factors.  Net Income per Limited Partner Unit
  Three Months Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2008(In thousands, except per unit data)Common and subordinated unitholders interest in net
income
    
    $
    5,480
    
    
    $
    8,308Weighted average common and subordinated units  basic
    
    
    23,783
    
    
    
    23,783Effect of restricted phantom units
    
    
    141
    
    
    
    141Weighted average common and subordinated units 
diluted
    
    
    23,924
    
    
    
    23,924Earnings per common and subordinated unit  basic
    
    $
    0.23
    
    
    $
    0.35Earnings per common and subordinated unit  diluted
    
    $
    0.23
    
    
    $
    0.35
 Other Comprehensive Income
 11




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Recently Issued Accounting Standards
 Pronouncements Implemented
 Fair Value Measurements,
 The Fair Value Option for Financial Assets
and Financial Liabilities  Including an amendment of FASB Statement No. 115
 Amendment of FASB
Interpretation No. 39 Accounting for Derivative Instruments and Hedging Activities
 Pronouncements Not Yet Implemented
 Business Combinations Business Combinations
 Noncontrolling Interests in Consolidated Financial Statements  an amendment of
ARB No. 51
 Disclosures about Derivative Instruments and Hedging Activities,
 The Hierarchy of Generally Accepted Accounting
Principles
 12




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The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting Principles.
 Emerging Issues Task Force (EITF) Issue No. 07-4, Application of the Two-Class Method under
FASB Statement No. 128, Earnings per Share, to Master Limited Partnerships (EITF 07-4), Earnings per Share
 3. PARTNERS CAPITAL AND DISTRIBUTIONS
     4. PROPERTY, PLANT AND EQUIPMENT
  June 30,
    
    
    December 31,Depreciable Life
    
    
    2008
    
    
    2007(in thousands)Gathering and transportation systems
    
    20 years
    
    $
    145,782
    
    
    $
    106,478Processing plants
    
    20-25 years
    
    
    135,358
    
    
    
    117,571Construction in progress  plant
    
    
    
    
    
    
    44,281
    
    
    
    12,636Construction in progress  pipeline
    
    
    
    
    
    
    27,984
    
    
    
    20,046Rights-of-way and easements
    
    20 years
    
    
    34,476
    
    
    
    26,905Land
    
    
    
    
    
    
    952
    
    
    
    952Buildings and other
    
    20-40 years
    
    
    1,828
    
    
    
    910390,661
    
    
    
    285,498Accumulated Depreciation
    
    
    
    
    
    
    (18,028
    )
    
    
    (11,550
    )Net property, plant and equipment
    
    
    
    
    
    $
    372,633
    
    
    $
    273,948
 13




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5. RELATED-PARTY TRANSACTIONS
 Transactions With Related Parties
   Six Months Ended June 30,2008
    
    
    2007(in thousands)General and administrative expense  parentAllocation of general and administrative overhead
    
    $
    1,126
    
    
    $
    850Audit and tax services
    
    
    476
    
    
    
    166Equity-based compensation expense
    
    
    684
    
    
    
    Legal services
    
    
    325
    
    
    
    Insurance expense
    
    
    170
    
    
    
    46Management fee
    
    
    
    
    
    
    120Salary and benefits
    
    
    235
    
    
    
    Other
    
    
    223
    
    
    
    Total general and administrative expense  parent
    
    $
    3,239
    
    
    $
    1,182
  6. LONG-TERM DEBT
  June 30,
    
    
    December 31,2008
    
    
    2007(In thousands)Credit agreement
    
    $
    55,300
    
    
    $
    5,000Subordinated note to Parent
    
    
    52,608
    
    
    
    51,669107,908
    
    
    
    56,669Current maturities of debt
    
    
    (1,100
    )
    
    
    (1,100
    )Long-term debt
    
    $
    106,808
    
    
    $
    55,569
   14




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7. ASSET RETIREMENT OBLIGATIONS
  Six Months EndedJune 30, 2008(in thousands)Beginning asset retirement obligations
    
    $
    2,793Incremental liability incurred
    
    
    309Accretion expense
    
    
    85Ending asset retirement obligations
    
    $
    3,187
  8. COMMITMENTS AND CONTINGENT LIABILITIES
   9. INCOME TAXES
    15




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10. EQUITY-BASED COMPENSATION
  Payable in cash
    
    Payable in unitsWeighted Average
    
    
    
    
    
    Weighted AverageGrant Date Fair
    
    
    
    
    
    Grant Date FairUnits
    
    Value
    
    Units
    
    ValueUnvested Phantom Units  December 31,
2007
    
    
    84,961
    
    
    $
    21.36
    
    
    
    9,833
    
    
    $
    21.36Vested
    
    
    
    
    
    
    
    
    
    
    (6,089
    )
    
    
    21.36Issued
    
    
    6,200
    
    
    
    24.27
    
    
    
    137,148
    
    
    
    25.25Cancelled
    
    
    (3,000
    )
    
    
    21.36
    
    
    
    
    
    
    
    Unvested Phantom Units  June 30, 2008
    
    
    88,161
    
    
    $
    21.56
    
    
    
    140,892
    
    
    $
    25.15
  16




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
  Our Operations
  Operational Measurement
  Volume
 
    
    the level of successful drilling and production activity in areas currently dedicated to
our systems,
 
    
    our ability to compete with other gas gathering and processing companies for volumes from
successful new wells in other areas, and
 
    
    our pursuit of new opportunities where a limited number of gas gathering and processing
companies conduct business.
  Adjusted Gross Margin
 Operating Expenses
 EBITDA
 17




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
    
    financial performance of our assets without regard to financing methods, capital
structure or historical cost basis;
    
    our operating performance as compared to those of other companies in the midstream energy
industry without regard to financing methods, capital structure or historical cost basis;
and
    
    the viability of acquisitions and capital expenditure projects and the overall rates of
return on alternative investment opportunities.
 18




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RESULTS OF OPERATIONS
 Three Months Ended June 30, 2008 Compared with Three Months Ended June 30, 2007 .
  Three Months Ended June 30,2008
    
    
    2007(In thousands, except volume data)Total revenues
    
    $
    18,205
    
    
    $
    7,118Operations and
maintenance expense
    
    
    5,312
    
    
    
    2,228General and
administrative expense
    
    
    1,422
    
    
    
    686Adjusted gross margin
    
    
    11,471
    
    
    
    4,204Other income
    
    
    1
    
    
    
    23EBITDA
    
    
    11,472
    
    
    
    4,227Depreciation and
accretion expense
    
    
    3,407
    
    
    
    1,824Interest expense
    
    
    2,421
    
    
    
    211Income tax provision
    
    
    38
    
    
    
    57Net income
    
    $
    5,606
    
    
    $
    2,135Volume Data:Volumes gathered (MMcf)
    
    
    17,127
    
    
    
    6,613Volumes processed (MMcf)
    
    
    14,593
    
    
    
    6,154
  Gathering
    
    
    Processing2008
    
    
    2007
    
    
    2008
    
    
    2007(MMcf)Cowtown Pipeline
Assets
    
    
    14,764
    
    
    
    6,613
    
    
    
    14,593
    
    
    
    6,154Lake Arlington Dry
System
    
    
    1,700
    
    
    
    
    
    
    
    
    
    
    
    Hill County Dry System
    
    
    663
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    17,127
    
    
    
    6,613
    
    
    
    14,593
    
    
    
    6,154
  Gathering
    
    
    Processing
    
    
    Other
    
    
    Total(in thousands)Revenue for the quarter ended June 30, 2007
    
    $
    3,247
    
    
    $
    3,838
    
    
    $
    33
    
    
    $
    7,118Volume changes
    
    
    5,422
    
    
    
    5,291
    
    
    
    
    
    
    
    10,713Price changes
    
    
    163
    
    
    
    19
    
    
    
    192
    
    
    
    374Revenue for the quarter ended June 30, 2008
    
    $
    8,832
    
    
    $
    9,148
    
    
    $
    225
    
    
    $
    18,205
 19




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Total Revenues 
 Operations and Maintenance Expense 
 General and Administrative Expense 
 Adjusted Gross Margin 
 Depreciation and Accretion Expense 
 Interest Expense
 20




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Six Months Ended June 30, 2008 Compared with Six Months Ended June 30, 2007 .
  Six Months Ended June 30,2008
    
    
    2007(In thousands, except volume data)Total revenues
    
    $
    33,390
    
    
    $
    12,489Operations and
maintenance expense
    
    
    10,262
    
    
    
    4,945General and
administrative expense
    
    
    3,239
    
    
    
    1,182Adjusted gross margin
    
    
    19,889
    
    
    
    6,362Other income
    
    
    6
    
    
    
    35EBITDA
    
    
    19,895
    
    
    
    6,397Depreciation and
accretion expense
    
    
    6,563
    
    
    
    3,119Interest expense
    
    
    4,839
    
    
    
    211Income tax provision
    
    
    3
    
    
    
    97Net income
    
    $
    8,490
    
    
    $
    2,970Volume Data:Volumes gathered (MMcf)
    
    
    31,678
    
    
    
    12,130Volumes processed (MMcf)
    
    
    26,749
    
    
    
    10,983
  Gathering
    
    
    Processing2008
    
    
    2007
    
    
    2008
    
    
    2007(MMcf)Cowtown Pipeline
Assets
    
    
    27,329
    
    
    
    12,130
    
    
    
    26,749
    
    
    
    10,983Lake Arlington Dry
System
    
    
    3,024
    
    
    
    
    
    
    
    
    
    
    
    Hill County Dry System
    
    
    1,325
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    31,678
    
    
    
    12,130
    
    
    
    26,749
    
    
    
    10,983
  Gathering
    
    
    Processing
    
    
    Other
    
    
    Total(in thousands)Revenue for the six
months ended June
30, 2007
    
    $
    5,848
    
    
    $
    6,608
    
    
    $
    33
    
    
    $
    12,489Volume changes
    
    
    9,953
    
    
    
    9,908
    
    
    
    
    
    
    
    19,861Price changes
    
    
    328
    
    
    
    295
    
    
    
    417
    
    
    
    1,040Revenue for the six
months ended June
30, 2008
    
    $
    16,129
    
    
    $
    16,811
    
    
    $
    450
    
    
    $
    33,390
 21




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##### Table of Contents



Total Revenues 
 Operations and Maintenance Expense 
 General and Administrative Expense 
 Adjusted Gross Margin 
 Depreciation and Accretion Expense 
 Interest Expense
 Liquidity and Capital Resources
  
    
    cash generated from operations;
    
    borrowings under our credit agreement; and
    
    future debt and equity offerings.
  22




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##### Table of Contents



Cash Flows
 For the Six Months EndedJune 30,2008
    
    2007(In thousands)Net cash provided by operating activities
    
    $
    24,080
    
    
    $
    6,058Net cash used in investing activities
    
    
    (59,434
    )
    
    
    (45,040
    )Net cash provided by financing activities
    
    
    34,836
    
    
    
    39,184
  Cash Flows Provided by Operating Activities 
 Cash Flows Used in Investing Activities 
 Cash Flows Provided by Financing Activities 
  Attributable to the
    
    Per Unit
    
    Total CashPayment Date
    
    quarter ended
    
    Distribution
    
    Distribution(in millions)Pending DistributionsAugust 14, 2008
    
    June 30, 2008
    
    $
    0.350
    
    
    $
    8.5Completed DistributionsMay 15, 2008
    
    March 31, 2008
    
    $
    0.315
    
    
    $
    7.6February 14, 2008
    
    December 31, 2007
    
    $
    0.300
    
    
    $
    7.3November 14, 2007
    
    September 30, 2007
    
    $
    0.168
    
    
    $
    4.1
 Working Capital (Deficit) 
  23




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##### Table of Contents



Capital Expenditures
  
    
    expansion capital expenditures, which are made to construct additional assets, to expand and
upgrade existing systems, including compression, and facilities or to acquire additional
assets; or
 
    
    maintenance capital expenditures, which are made to replace partially or fully depreciated
assets, to maintain the existing operating capacity of our assets and extend their useful
lives or to maintain existing system volumes and related cash flows.
  Debt
  Revolving
Credit Facility 
 
    
    incur further indebtedness;
    
    grant liens;
    
    pay distributions; and
    
    engage in transactions with affiliates.
   Subordinated Note 
 Repurchase
Obligations to Parent 
 24




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##### Table of Contents



Cowtown Pipeline Assets Repurchase:
 Lake Arlington Dry System and Hill County Dry System Repurchases:
  Estimate of
    
    
    Construction CostsJune 5, 2007
    
    
    Construction Costs
    
    
    Recognized throughSales Price
    
    
    as of June 30, 2008(1)
    
    
    June 30, 2008
    
    
    KGS RepurchaseCowtown Pipeline Assets
    
    $
    22.9
    
    
    $
    64.3
    
    
    $
    62.1
    
    
    Optional at CostLake Arlington Dry System
    
    
    3.6
    
    
    
    78.0
    
    
    
    31.8
    
    
    Obligatory at Fair ValueHill County Dry System
    
    
    3.0
    
    
    
    60.4
    
    
    
    32.5
    
    
    Obligatory at Fair ValueInterest cost included
in liability
    
    
    
    
    
    
    
    
    
    
    5.5$
    29.5
    
    
    $
    202.7
    
    
    $
    131.9
 
 (1)
    
    The estimates of total construction cost are subject to change based on
changes in the producers drilling progress, material and labor costs, easement costs and other
factors. Recently Issued Accounting Standards
  25




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##### Table of Contents



Critical Accounting Estimates
  
    
    Depreciation expense and capitalization limits for property, plant and equipment;
 
    
    Repurchase obligations to Parent;
 
    
    Asset retirement obligations; and
 
    
    Equity-based compensation
  26




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Credit Risk
  Interest Rate Risk
   
 Item 4. Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  27




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  28




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##### Table of Contents



Item 6. Exhibits:
 Exhibit No.
    
    Description*31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith 29




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##### Table of Contents



SIGNATURES
   QUICKSILVER GAS SERVICES LPBy:
    QUICKSILVER GAS SERVICES GP LLC, its
General Partner By:
    /s/ Thomas F. DardenThomas F. DardenPresident and Chief Executive Officer By:
    /s/ Philip CookPhilip CookSenior Vice President  Chief Financial Officer 30




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description*31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith