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 (NYS: KWK) are on a roller-coaster ride today, rising 8.7% and then plunging 15%. I'm feeling queasy already.
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.
Interested in more info on Quicksilver Resources? Add it to your watchlist byclicking here.
At the time thisarticle was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.