##### 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 March 31, 2009
 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
    
    56-2639586(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)777 West Rosedale, Fort Worth, Texas
    
    76104(Address of principal executive offices)
    
    (Zip Code)
 817-665-8620
 None
  þ o
 o o
  Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer   o
(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
 EBITDA
 LIBOR
 Management
 MMBtu
 MMBtud
 Mcf
 MMcf
 MMcfd
 MMcfe
 MMcfed
 NGL NGLs
 COMMONLY USED TERMS
  FASB
 GAAP
 Gas Gathering and Processing Agreement
 General Partner
 IPO
 KGS Predecessor
 Lake Arlington Gas Gathering Agreement
 Omnibus Agreement
 Partnership Agreement
 Quicksilver
 Quicksilver Counties
 SEC
 SFAS
 2




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Forward-Looking Information
  
    
    changes in general economic conditions;
    
    fluctuations in natural gas prices;
    
    failure or delays in Quicksilver and third parties achieving expected production from
natural gas projects;
    
    competitive conditions in our industry;
    
    actions taken or non-performance by third parties, including suppliers, contractors,
operators, processors, transporters and customers;
    
    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;
    
    the effects of future litigation; and
    
    certain factors discussed elsewhere in this quarterly report.
 8-K.
  3




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##### 



QUICKSILVER GAS SERVICES LP
INDEX TO FORM 10-Q
For the Period Ended March 31, 2009
 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 Statements of Changes in Partners Capital
    
    
    8Notes to Condensed Consolidated Interim Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3. Defaults Upon Senior Securities
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    32Signatures
    
    
    33Certification 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 March 31,2009
    
    
    2008RevenueGathering and transportation revenue  Quicksilver
    
    $
    14,074
    
    
    $
    6,477Gathering and transportation revenue
    
    
    975
    
    
    
    820Gas processing revenue  Quicksilver
    
    
    8,702
    
    
    
    6,820Gas processing revenue
    
    
    738
    
    
    
    843Other revenue  Quicksilver
    
    
    225
    
    
    
    225Total revenue
    
    
    24,714
    
    
    
    15,185ExpensesOperations and maintenance
    
    
    5,411
    
    
    
    4,950General and administrative
    
    
    1,992
    
    
    
    1,817Depreciation and accretion
    
    
    5,041
    
    
    
    3,156Total expenses
    
    
    12,444
    
    
    
    9,923Operating income
    
    
    12,270
    
    
    
    5,262Other income
    
    
    
    
    
    
    5Interest expense
    
    
    2,873
    
    
    
    2,418Income before income taxes
    
    
    9,397
    
    
    
    2,849Income tax provision (benefit)
    
    
    (37
    )
    
    
    (35
    )Net income
    
    $
    9,434
    
    
    $
    2,884General partner interest in net income
    
    $
    273
    
    
    $
    56Common and subordinated unitholders interest in net
income
    
    
    9,161
    
    
    
    2,828Earnings per common and subordinated unit:Basic
    
    $
    0.38
    
    
    $
    0.12Diluted
    
    
    0.34
    
    
    
    0.12Weighted average number of
common and subordinated  units outstanding:Basic
    
    
    23,827
    
    
    
    23,783Diluted
    
    
    28,550
    
    
    
    23,924
  5




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QUICKSILVER GAS SERVICES LP
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 In thousands, except for unit data  Unaudited
 March 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    351
    
    
    $
    303Accounts receivable
    
    
    719
    
    
    
    2,082Accounts receivable from Quicksilver
    
    
    6,018
    
    
    
    Prepaid expenses and other current assets
    
    
    287
    
    
    
    594Total current assets
    
    
    7,375
    
    
    
    2,979Property, plant and equipment, net
    
    
    496,138
    
    
    
    488,120Other assets
    
    
    1,825
    
    
    
    1,916$
    505,338
    
    
    $
    493,015LIABILITIES AND PARTNERS CAPITALCurrent liabilitiesCurrent maturities of debt
    
    $
    1,650
    
    
    $
    1,375Accounts payable to Quicksilver
    
    
    
    
    
    
    10,502Accrued additions to property, plant and equipment
    
    
    8,355
    
    
    
    17,433Accounts payable and other
    
    
    2,392
    
    
    
    1,930Total current liabilities
    
    
    12,397
    
    
    
    31,240Long-term debt
    
    
    196,900
    
    
    
    174,900Note payable to Quicksilver
    
    
    52,591
    
    
    
    52,271Repurchase obligations to Quicksilver
    
    
    128,098
    
    
    
    123,298Asset retirement obligations
    
    
    8,550
    
    
    
    5,234Deferred income tax liability
    
    
    332
    
    
    
    369Commitments and contingent liabilities (Note 8)Partners capitalCommon unitholders (12,313,451 and 12,269,714 units
issued and
outstanding at March 31, 2009 and December 31, 2008,
respectively)
    
    
    108,629
    
    
    
    108,036Subordinated unitholders (11,513,625 units issued and
outstanding at March 31, 2009 and 
December 31, 2008)
    
    
    (2,160
    )
    
    
    (2,328
    )General partner
    
    
    1
    
    
    
    (5
    )Total partners capital
    
    
    106,470
    
    
    
    105,703$
    505,338
    
    
    $
    493,015
  6




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QUICKSILVER GAS SERVICES LP
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 In thousands  Unaudited
 Three Months Ended March 31,2009
    
    
    2008Operating activities:Net income
    
    $
    9,434
    
    
    $
    2,884Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    4,974
    
    
    
    3,115Accretion of asset retirement obligation
    
    
    67
    
    
    
    41Deferred income taxes
    
    
    (37
    )
    
    
    (151
    )Equity-based compensation
    
    
    479
    
    
    
    264Amortization of debt issuance costs
    
    
    85
    
    
    
    52Non-cash interest expense
    
    
    1,977
    
    
    
    2,231Changes in assets and liabilities:Accounts receivable
    
    
    1,363
    
    
    
    (251
    )Prepaid expenses and other assets
    
    
    313
    
    
    
    111Accounts receivable and payable with Quicksilver
    
    
    (8,971
    )
    
    
    4,557Accounts payable and other
    
    
    462
    
    
    
    (10
    )Net cash provided by operating activities
    
    
    10,146
    
    
    
    12,843Investing activities:Capital expenditures
    
    
    (22,952
    )
    
    
    (32,681
    )Net cash used in investing activities
    
    
    (22,952
    )
    
    
    (32,681
    )Financing activities:Proceeds from revolving credit facility borrowings
    
    
    22,000
    
    
    
    26,500Repayment of subordinated note payable to Quicksilver
    
    
    
    
    
    
    (275
    )Distributions to unitholders
    
    
    (9,083
    )
    
    
    (7,275
    )Other
    
    
    (63
    )
    
    
    Net cash provided by financing activities
    
    
    12,854
    
    
    
    18,950Net cash increase (decrease)
    
    
    48
    
    
    
    (888
    )Cash at beginning of period
    
    
    303
    
    
    
    1,125Cash at end of period
    
    $
    351
    
    
    $
    237Cash paid for interest
    
    $
    1,626
    
    
    $
    Cash paid for income taxes
    
    
    
    
    
    
    Non-cash transactions:Working capital related to capital expenditures
    
    
    15,294
    
    
    
    21,915Acquisition of property, plant and equipment under repurchase
obligation
    
    
    (3,417
    )
    
    
    (27,058
    )
  7




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QUICKSILVER GAS SERVICES LP
 
 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS CAPITAL
 In thousands  Unaudited
 Partners CapitalLimited PartnersGeneralCommon
    
    
    Subordinated
    
    
    Partner
    
    
    TotalBalance at December 31, 2008
    
    $
    108,036
    
    
    $
    (2,328
    )
    
    $
    (5
    )
    
    $
    105,703Equity-based compensation
expense recognized
    
    
    479
    
    
    
    
    
    
    
    
    
    
    
    479Distributions paid to partners
    
    
    (4,556
    )
    
    
    (4,260
    )
    
    
    (267
    )
    
    
    (9,083
    )Net income
    
    
    4,733
    
    
    
    4,428
    
    
    
    273
    
    
    
    9,434Other
    
    
    (63
    )
    
    
    
    
    
    
    
    
    
    
    (63
    )Balance at March 31, 2009
    
    $
    108,629
    
    
    $
    (2,160
    )
    
    $
    1
    
    
    $
    106,470
  8




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QUICKSILVER GAS SERVICES LP
 
 NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 UNAUDITED
 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
 Organization
  PercentageOwnershipCommon unitholders:Public
    
    
    27.2
    %Quicksilver
    
    
    23.5
    %Subordinated unitholders:Quicksilver
    
    
    47.4
    %Total limited partner interest
    
    
    98.1
    %General Partner interest:Quicksilver
    
    
    1.9
    %Total
    
    
    100.0
    %
  Description of Business
  
    
    The Cowtown System, which includes:
 
    
    the Cowtown Pipeline, which consists of a pipeline gathering system and gas
compression facilities in the southern portion of the Fort Worth Basin that gather
natural gas produced by KGS customers and deliver it for processing;
    
    the Cowtown Plant, in Hood County, Texas, which consists of a 125 MMcfd natural
gas processing unit and a 75 MMcfd natural gas processing unit which extract NGLs from
the natural gas stream and deliver customers residue gas to unaffiliated pipelines for
transport and sale downstream; and
    
    the Corvette Plant, in Hood County, Texas, which was placed into service during
the first quarter of 2009 and consists of a 125 MMcfd natural gas processing unit which
extracts NGLs from the natural gas stream and delivers customers residue gas to
unaffiliated pipelines for transport and sale downstream.
 
    
    The Lake Arlington Dry System, in Tarrant County, Texas, which consists of a pipeline
gathering system and a gas compression facility, which we purchased from Quicksilver in the
fourth quarter of 2008. This system delivers customers gas to unaffiliated pipelines for
transport and sale downstream.
  9




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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Use of Estimates 
 Repurchase Obligations to Quicksilver 
  Cowtown Pipeline
 Hill County Dry System
  Repurchase obligation
(1)
    
    
    KGS Repurchase(In millions)Cowtown Pipeline
    
    $
    67.8
    
    
    Optional at construction costHill County Dry System
    
    
    60.3
    
    
    Obligatory at fair value$
    128.1
 
 (1)
    
    Quicksilver expects capital expenditures of approximately $7 million for the
remainder of 2009 for assets subject to the repurchase obligations.  10




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Net Income per Limited Partner Unit
   Three Months Ended March 31,2009
    
    
    2008(In thousands, except per unit data)Common and subordinated unitholders interest in net income
    
    $
    9,161
    
    
    $
    2,828Impact of interest on convertible debt
    
    
    583
    
    
    
    Income available assuming conversion of convertible debt
    
    $
    9,744
    
    
    $
    2,828Weighted average common and subordinated units  basic
    
    
    23,827
    
    
    
    23,783Effect of restricted phantom units
    
    
    487
    
    
    
    141Effect of convertible debt (1)
    
    
    4,236
    
    
    
    Weighted average common and subordinated units  diluted
    
    
    28,550
    
    
    
    23,924Earnings per common and subordinated unit:Basic
    
    $
    0.38
    
    
    $
    0.12Diluted
    
    $
    0.34
    
    
    $
    0.12
 
 (1)
    
    Assumes that convertible debt is converted at a price of $12.80 per unit, using the
average closing price per unit for the quarter ended March 31, 2009. Comprehensive Income
 Recently Issued Accounting Standards Affecting KGS
 Pronouncements Implemented
 Business Combinations Business Combinations
 Noncontrolling Interests in Consolidated Financial Statements  an amendment of
ARB No. 51
 Effective Date of FASB Statement No. 157
 11




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Disclosures about Derivative Instruments and Hedging Activities,
 Emerging Issues Task Force Application of the Two-Class Method
under FASB Statement No. 128, Earnings per Share, to Master Limited Partnerships, EITF 07-4, Earnings per Share
  Determining Whether Instruments Granted in Share-Based
Payments Transactions Are Participating Securities
 Pronouncements Not Yet Implemented
  3. PARTNERS CAPITAL AND DISTRIBUTIONS
   Attributable to the
    
    Per Unit
    
    Total CashPayment Date
    
    quarter ended
    
    Distribution (1)
    
    Distribution(In millions)Pending DistributionsMay 15, 2009 (2)
    
    March 31, 2009
    
    $
    0.370
    
    
    $
    9.1Completed DistributionsFebruary 13, 2009 (2)
    
    December 31, 2008
    
    $
    0.370
    
    
    $
    9.1November 14, 2008 (3)
    
    September 30, 2008
    
    $
    0.350
    
    
    $
    8.5August 14, 2008 (3)
    
    June 30, 2008
    
    $
    0.350
    
    
    $
    8.5May 15, 2008
    
    March 31, 2008
    
    $
    0.315
    
    
    $
    7.6
 
 (1)
    
    Represents common and subordinated unitholders(2)
    
    Total cash distribution includes an Incentive Distribution Rights amount of
approximately $90,000 to the general partner(3)
    
    Total cash distribution includes an Incentive Distribution Rights amount of
approximately $20,000 to the general partner 12




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4. PROPERTY, PLANT AND EQUIPMENT
  March 31,
    
    
    December 31,2009
    
    
    2008(In thousands)Gathering and transportation systems
    
    $
    197,328
    
    
    $
    179,594Processing plants
    
    
    268,445
    
    
    
    157,353Construction in progress  plant
    
    
    
    
    
    
    106,563Construction in progress  pipeline
    
    
    16,440
    
    
    
    27,994Rights-of-way and easements
    
    
    41,581
    
    
    
    39,473Land
    
    
    1,239
    
    
    
    1,239Buildings and other
    
    
    2,011
    
    
    
    1,836527,044
    
    
    
    514,052Accumulated depreciation
    
    
    (30,906
    )
    
    
    (25,932
    )Net property, plant and equipment
    
    $
    496,138
    
    
    $
    488,120
 5. RELATED-PARTY TRANSACTIONS
   6. LONG-TERM DEBT
  March 31,
    
    
    December 31,2009
    
    
    2008(In thousands)Credit Agreement
    
    $
    196,900
    
    
    $
    174,900Subordinated Note to Quicksilver
    
    
    54,241
    
    
    
    53,646251,141
    
    
    
    228,546Current maturities of debt
    
    
    (1,650
    )
    
    
    (1,375
    )Long-term debt
    
    $
    249,491
    
    
    $
    227,171
  Long-Term Debt
 13




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7. ASSET RETIREMENT OBLIGATIONS
  March 31,2009(In thousands)Beginning asset retirement obligations
    
    $
    5,234Additional liability incurred
    
    
    3,249Accretion expense
    
    
    67Ending asset retirement obligations
    
    $
    8,550
  8. COMMITMENTS AND CONTINGENT LIABILITIES
  9. INCOME TAXES
  Income Taxes
 10. EQUITY-BASED COMPENSATION
  Payable in cash
    
    Payable in unitsWeighted
    
    
    
    
    
    WeightedAverage Grant
    
    
    
    
    
    Average GrantDate Fair
    
    
    
    
    
    Date FairUnits
    
    Value
    
    Units
    
    ValueUnvested phantom units  January 1, 2009
    
    
    60,319
    
    
    $
    21.63
    
    
    
    139,918
    
    
    $
    25.15Vested
    
    
    
    
    
    
    
    
    
    
    (49,789
    )
    
    
    25.25Issued
    
    
    
    
    
    
    
    
    
    
    405,428
    
    
    
    10.06Cancelled
    
    
    (3,640
    )
    
    
    21.36
    
    
    
    (8,284
    )
    
    
    17.03Unvested phantom units  March 31, 2009
    
    
    56,679
    
    
    $
    21.65
    
    
    
    487,273
    
    
    $
    12.72
  14




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Equity Plan,
 15




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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 where our systems are
located;
    
    our ability to compete with other midstream companies for production volumes; and
    
    our pursuit of new opportunities where a limited number of midstream companies conduct
business.
  Adjusted Gross Margin
 Operating Expenses
 EBITDA
 16




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##### Table of Contents




    
    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
industry without regard to financing methods, capital structure or historical cost basis;
and
    
    the viability of acquisitions and capital expenditure projects and the rates of return on
investment opportunities.
 Current Quarter Highlights
 
    
    The Corvette Plant was placed into service, providing enhanced compression assets and
allowing more gathered volumes to be subject to the compression fee.
    
    Gathering and processing volumes decreased 3% and 5%, respectively, from the previous
quarter as many producers in the Fort Worth Basin slowed their development activities in
response to lower petroleum prices.
 17




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RESULTS OF OPERATIONS
 Three Months Ended March 31, 2009 Compared with Three Months Ended March 31, 2008
  Three Months Ended March 31,2009
    
    
    2008(In thousands, except volume data)Total revenues
    
    $
    24,714
    
    
    $
    15,185Operations and maintenance expense
    
    
    5,411
    
    
    
    4,950General and administrative expense
    
    
    1,992
    
    
    
    1,817Adjusted gross margin
    
    
    17,311
    
    
    
    8,418Other income
    
    
    
    
    
    
    5EBITDA
    
    
    17,311
    
    
    
    8,423Depreciation and accretion expense
    
    
    5,041
    
    
    
    3,156Interest expense
    
    
    2,873
    
    
    
    2,418Income tax provision (benefit)
    
    
    (37
    )
    
    
    (35
    )Net income
    
    $
    9,434
    
    
    $
    2,884Volume Data:Volumes gathered (MMcf)
    
    
    23,785
    
    
    
    14,551Volumes processed (MMcf)
    
    
    14,653
    
    
    
    12,156
  Gathering
    
    Processing2009
    
    2008
    
    2009
    
    2008(MMcf)Cowtown System
    
    
    15,107
    
    
    
    12,565
    
    
    
    14,653
    
    
    
    12,156Lake Arlington Dry System
    
    
    6,278
    
    
    
    1,324
    
    
    
    
    
    
    
    Hill County Dry System
    
    
    2,400
    
    
    
    662
    
    
    
    
    
    
    
    Total
    
    
    23,785
    
    
    
    14,551
    
    
    
    14,653
    
    
    
    12,156
  Gathering
    
    
    Processing
    
    
    Other
    
    
    Total(In thousands)Revenue for the three
months ended March 31,
2008
    
    $
    7,297
    
    
    $
    7,663
    
    
    $
    225
    
    
    $
    15,185Volume changes
    
    
    4,630
    
    
    
    1,574
    
    
    
    
    
    
    
    6,204Price changes
    
    
    3,122
    
    
    
    203
    
    
    
    
    
    
    
    3,325Revenue for the three
months ended March 31,
2009
    
    $
    15,049
    
    
    $
    9,440
    
    
    $
    225
    
    
    $
    24,714
 18




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Total Revenues Volumes 
 Operations and Maintenance Expense 
 General and Administrative Expense 
 Adjusted Gross Margin EBITDA 
 Depreciation and Accretion Expense 
 Interest Expense
  Three Months Ended March 31,2009
    
    
    2008(In thousands)Interest cost:Revolving credit facility
    
    $
    1,205
    
    
    $
    317Repurchase obligation
    
    
    1,383
    
    
    
    1,433Subordinated note to Quicksilver
    
    
    595
    
    
    
    798Total cost
    
    
    3,183
    
    
    
    2,548Less interest capitalized
    
    
    (310
    )
    
    
    (130
    )Interest expense
    
    $
    2,873
    
    
    $
    2,418
 19




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Liquidity and Capital Resources
  
    
    cash generated from operations;
    
    borrowings under our revolving credit agreement; and
    
    future capital market transactions.
  Cash Flows
 Three Months Ended March 31,2009
    
    2008(In thousands)Net cash provided by operating activities
    
    $
    10,146
    
    
    $
    12,843Net cash used in investing activities
    
    
    (22,952
    )
    
    
    (32,681
    )Net cash provided by financing activities
    
    
    12,854
    
    
    
    18,950
  Cash Flows Provided by Operating Activities 
 Cash Flows Used in Investing Activities 
 Cash Flows Provided by Financing Activities 
  Capital Expenditures
  
    
    expansion capital expenditures, which are made to construct additional assets, expand
and upgrade existing systems, acquire additional assets; or
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
    
    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
 Credit Agreement
  
    
    incur further indebtedness;
    
    grant liens;
    
    pay distributions; and
    
    engage in transactions with affiliates.
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Subordinated Note
 Long-Term Debt
 Repurchase Obligations to Quicksilver
 Recently Issued Accounting Standards
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Critical Accounting Estimates
  
    
    Depreciation expense and capitalization limits for property, plant and equipment;
    
    Repurchase obligations to Quicksilver;
    
    Asset retirement obligations; and
    
    Equity-based compensation.
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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
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
 th th
 
 Item 1A. Risk Factors
  We are dependent on a single natural gas producer, Quicksilver, for a majority of our volumes. The
loss of this customer would result in a material decline in our volumes, revenues and cash
available for distribution.
    We may not have sufficient available cash to enable us to make cash distributions to holders of our
common units and subordinated units at the current distribution rate under our cash distribution
policy.
  
    
    the fees we charge and the margins we realize for our services;
    
    the level of production of, and the price of natural gas, NGLs, and condensate;
    
    the volume of natural gas and NGLs we gather and process;
    
    the level of competition from other midstream energy companies;
    
    the level of our operating cost structure; and
    
    prevailing economic conditions.
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
    
    the level of capital expenditures we make;
    
    our ability to make borrowings under our revolving credit agreement;
    
    the cost of acquisitions;
    
    our debt service requirements;
    
    fluctuations in our working capital needs;
    
    our ability to access capital markets;
    
    compliance with our debt agreements; and
    
    the amount of cash reserves established by our general partner.
 The amount of cash we have available for distribution to holders of our common units and
subordinated units depends primarily on our cash flow and not solely on profitability.
   Estimates of oil and gas reserves depend on many assumptions that may be inaccurate and any
material inaccuracies could materially reduce the production that we gather and process and
consequently could adversely affect our financial performance and our ability to make cash
distributions.
  
    
    historical production from the area compared with production from other comparable
producing areas;
    
    the assumed effects of regulations by governmental agencies;
    
    assumptions concerning future oil and gas prices; and
    
    assumptions concerning future operating costs, severance and excise taxes,
development costs and workover and remedial costs.
  Because of the natural decline in production from existing wells in our area of operations, our
success depends on our ability to obtain new sources of supplies of natural gas. Any decrease in
supplies of natural gas could result in a material decline in the volumes we gather and process.
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Our construction of new assets may not result in revenue increases and is subject to regulatory,
environmental, political, legal and economic risks, which could adversely affect our cash flows,
results of operations and financial condition.
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If we do not make acquisitions on economically acceptable terms, our future growth will be limited.
   
    
    mistaken assumptions about volumes, revenues and costs, including synergies;
    
    an inability to integrate successfully the businesses we acquire;
    
    the assumption of unknown liabilities;
    
    limitations on rights to indemnity from the seller;
    
    mistaken assumptions about the overall costs of equity or debt;
    
    the diversion of managements and employees attention from other business matters;
    
    unforeseen difficulties operating in new product areas, with new customers, or new
geographic areas; and
    
    customer or key employee losses at the acquired businesses.
 We depend on our midstream assets to generate our revenues, and if the utilization of these assets
were reduced significantly, there could be a material adverse effect on our revenues, earnings, and
ability to make distributions to our unitholders.
  
    
    operational problems, labor difficulties or environmental proceedings or other
litigation that compel curtailing of all or a portion of the operations;
    
    catastrophic events at our facilities or at downstream facilities owned by others;
    
    an inability to obtain sufficient quantities of natural gas; or
    
    prolonged reductions in exploration or production activity by producers in the areas
in which we operate.
   Pipelines and facilities interconnected to our natural gas and NGL pipelines and facilities could
become unavailable to transport natural gas and NGLs, and our revenues and cash available for
distribution could be adversely affected.
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A change in the jurisdictional characterization of some of our assets by federal, state or local
regulatory agencies or a change in policy by those agencies may result in increased regulation of
our assets, which may cause our revenues to decline and operating expenses to increase.
   We are subject to environmental laws and regulations that may expose us to significant costs and
liabilities.
   We may incur significant costs and liabilities as a result of pipeline integrity management program
testing and any related pipeline repair or preventative or remedial measures.
  
    
    perform ongoing assessments of pipeline integrity;
    
    identify and characterize applicable threats to pipeline segments that could impact
a high consequence area;
    
    maintain processes for data collection, integration and analysis;
    
    repair and remediate pipelines as necessary; and
    
    implement preventive and mitigating actions.
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We will be required to make substantial capital expenditures to increase our asset base. If we are
unable to obtain needed capital or financing on satisfactory terms, our ability to make cash
distributions may be diminished or our financial leverage could increase.
  We do not own all of the land on which our pipelines and facilities are located, which could
disrupt our operations.
  Our business involves many hazards and operational risks, some of which may not be fully covered by
insurance. The occurrence of a significant accident or other event that is not fully insured could
curtail our operations and have a material adverse effect on our cash flows and, accordingly, the
market price for our common units.
  
    
    damage to pipelines and plants, related equipment and surrounding properties caused
by natural disasters and acts of terrorism;
    
    inadvertent damage from construction, farm and utility equipment;
    
    leaks or losses of natural gas or NGLs as a result of the malfunction of equipment
or facilities;
    
    fires and explosions; and
    
    other hazards that could also result in personal injury, loss of life, pollution or
suspension of operations.
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The provisions of our revolving credit agreement and the risks associated with our debt could
adversely affect our business, financial condition, results of operations, ability to make
distributions to unitholders and value of our units.
  
    
    incur additional debt;
    
    make distributions on or redeem or repurchase units;
    
    make certain investments and acquisitions;
    
    incur or permit certain liens to exist;
    
    enter into certain types of transactions with affiliates;
    
    merge, consolidate or amalgamate with another company; and
    
    transfer or otherwise dispose of assets.
  We are exposed to the credit risks of Quicksilver, and any material nonpayment by Quicksilver could
reduce our ability to make distributions to our unitholders.
  The loss of key personnel could adversely affect our ability to operate.
  
 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
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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 32




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SIGNATURES
   QUICKSILVER GAS SERVICES LPBy: QUICKSILVER GAS SERVICES GP LLC, itsGeneral PartnerBy:
    
    /s/ Thomas F. Darden

Thomas F. DardenPresident and Chief Executive OfficerBy:
    
    /s/ Philip Cook

Philip CookSenior Vice President  Chief Financial Officer
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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