Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Quicksilver Resources
So what: The news of the day is that Quicksilver plans to form a master limited partnership, or MLP, to hold some of the company's Barnett Shale assets. The partnership is expected to raise $400 million, which will be used to reduce debt, according to management. Quicksilver will still control a majority of the partnership.
Now what: An MLP structure isn't new to the energy business and is often used because of its advantageous tax structure. According to Lazard Capital, $400 million is a little more than it thinks Quicksilver can expect from an IPO. The market seems to agree, hitting shares hard after the initial announcement.
Quicksilver has been through a lot in the last year after a management buyout was on the table and then scrapped because financing wasn't available. The MLP may be worth looking at when it hits the market, but for now I would avoid shares of Quicksilver due to its poor balance sheet.
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