As filed with the Securities and Exchange Commission on February 10, 2012

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Quicksilver Production Partners LP

(Exact Name of Registrant as Specified in Its Charter)


Delaware	1311	38-3859129
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

801 Cherry Street

Suite 3700, Unit 19

Fort Worth, Texas 76102

(817) 665-5000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Glenn Darden

President and Chief Executive Officer

Quicksilver Resources GP LLC

801 Cherry Street

Suite 3700, Unit 19

Fort Worth, Texas 76102

(817) 665-5000

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Richard D. Truesdell, Jr., Esq.

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

(212) 450-4000

Timothy C. Langenkamp, Esq.
Andrews Kurth LLP

600 Travis, Suite 4200

Houston, Texas 77002

(713) 220-4200

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered	Proposed maximum aggregate offering price⁽¹⁾	Amount of registration fee
Common Units representing limited partner interests	$250,000,000	$28,650

(1)

Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. This price includes amounts attributable to common units the underwriters may purchase to cover over-allotments, if any.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to completion, dated February 10, 2012

Preliminary Prospectus

Common Units

Common Units Representing Limited Partner Interests

This is the initial public offering of common units representing limited partner interests of Quicksilver Production Partners LP. Quicksilver Production Partners is selling common units. The estimated initial public offering price is between $ and $ per common unit.

We intend to apply to list our common units on the New York Stock Exchange under the symbol “QPP.”

Investing in our common units involves risks. Please read “Risk factors” beginning on page 23.

These risks include the following:

•

We may not have sufficient cash to pay the minimum quarterly distribution on our units following the establishment of cash reserves and payment of fees and expenses, including payments to our general partner and its affiliates.

•

Our and Quicksilver’s proved reserve and production estimates depend on many assumptions that may turn out to be inaccurate and any material inaccuracies in these estimates or underlying assumptions may materially affect the quantities and present value of our and Quicksilver’s proved reserves and our forecasted production.

•

Commodity prices fluctuate widely, and low prices could adversely affect our ability to borrow under and comply with our new revolving credit facility and have a material adverse impact on our business, financial condition and results of operations, which could cause us to reduce our distributions or cease paying distributions altogether.

•

Our general partner and its affiliates will own a controlling interest in us and will have conflicts of interest with, and owe limited fiduciary duties to, us, which may permit them to favor their own interests to the detriment of our unitholders.

•

Our unitholders have limited voting rights and are not entitled to elect our general partner or its board of directors. Quicksilver, as the owner of our general partner, has the power to appoint and remove our general partner’s directors.

•

Even if our unitholders are dissatisfied, they cannot remove our general partner without Quicksilver’s consent.

•

Neither we nor our general partner have any employees and we will rely solely on the employees of Quicksilver to manage our business. The employees of Quicksilver who will manage our business will also perform substantially similar services for Quicksilver, and thus will not be solely focused on our business.

•

Because a unitholder will be treated as a partner, a unitholder will be required to pay taxes on its share of our income even if it does not receive any cash distributions from us, and the tax liability the unitholder incurs on the disposition of our common units could be more or less than expected.

•

Our tax treatment depends on our status as a partnership for federal income tax purposes. If the IRS were to treat us as a corporation for federal income tax purposes, our cash available for distribution to our unitholders would be substantially reduced.


	Per common unit	Total

Initial public offering price	$	$

Underwriting discounts and commissions(1)	$	$

Proceeds to Quicksilver Production Partners, before expenses	$	$

(1)

Excludes a structuring fee equal to % of the gross proceeds of this offering payable to J.P. Morgan Securities LLC.

Quicksilver Production Partners has granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to an additional common units.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



J.P. Morgan		Credit Suisse

, 2012

Table of contents


	Page
Summary		1
Overview		1
Our business strategies		3
Our competitive strengths		3
Our relationship with Quicksilver		4
Risk factors		5
Our partnership structure and formation transactions		7
Our ownership and organizational structure		9
Management and operation of the partnership		10
Summary of conflicts of interest and fiduciary duties		11
Principal executive offices and internet address		12
The offering		13
Summary historical financial data		18
Summary reserve and operating data		21
Risk factors		23
Risks related to our business		23
Risks inherent in an investment in us		40
Tax risks to unitholders		56
Use of proceeds		62
Capitalization		63
Dilution		64
Our cash distribution policy and restrictions on distributions		65
General		65
Our minimum quarterly distribution		68
Unaudited pro forma available cash for the year ended December 31, 2011		70
Estimated Adjusted EBITDA for the year ending December 31, 2012		73
Assumptions and considerations		76
Sensitivity analysis		83
Provisions of our partnership agreement relating to cash distributions		88
Distributions of available cash		88
Operating surplus and capital surplus		89
Capital expenditures		91
Subordination period		93
Distributions of available cash from operating surplus during the subordination period		95
Distributions of available cash from operating surplus after the subordination period		96
General partner interest and incentive distribution rights		96
Percentage allocations of available cash from operating surplus		97


	Page
General partner’s right to reset incentive distribution levels		97
Distributions from capital surplus		100
Adjustment to the minimum quarterly distribution and target distribution levels		101
Distributions of cash upon dissolution		102
Adjustments to capital accounts		104
Selected historical financial data		105
Management’s discussion and analysis of financial condition and results of operations		107
Overview		107
Quantitative and qualitative disclosure about market risk		111
Results of operations—nine months ended September 30, 2011 and 2010		114
Results of operations—years ended December 31, 2010, 2009 and 2008		117
Liquidity and capital resources		120
Our and our predecessor’s critical accounting policies		125
Internal controls and procedures		129
Recently issued accounting standards		130
Business and properties		132
Overview		132
Our business strategies		133
Our competitive strengths		134
Our relationship with Quicksilver		136
Partnership Properties		137
Environmental matters		145
Government regulation		147
Employees		147
Offices		147
Legal proceedings		147
Management		148
Management of Quicksilver Production Partners LP		148
Directors and executive officers		150
Biographical information		150
Reimbursement of expenses of our general partner		152
Executive compensation		152
Compensation discussion and analysis		153
2012 Equity Plan		155
Director compensation		158
Relation of compensation policies and practices to risk management		158
Security ownership of certain beneficial owners and management		160
Quicksilver Production Partners LP		160
Quicksilver Resources Inc.		160
Certain relationships and related party transactions		162
Distributions and payments to our general partner and its affiliates		162


	Page
Second Amended and Restated Limited Liability Company Agreement of Quicksilver Resources GP		164
Agreements governing the transactions		164
Review, approval or ratification of transactions with related persons		166
Conflicts of interest and fiduciary duties		168
Conflicts of interest		170
Fiduciary duties		178
Description of the common units		181
The units		181
Transfer agent and registrar		181
Transfer of common units		181
The partnership agreement		183
Organization and duration		183
Purpose		183
Cash distributions		183
Capital contributions		184
Limited voting rights		184
Applicable law; forum, venue and jurisdiction		185
Limited liability		186
Issuance of additional partnership interests		187
Amendment of the partnership agreement		188
Merger, consolidation, conversion, sale or other disposition of assets		190
Termination and dissolution		191
Dissolution and distribution of proceeds		191
Withdrawal or removal of our general partner		192
Transfer of general partner units		193
Transfer of incentive distribution rights, common or subordinated units by our general partner		194
Transfer of ownership interests in our general partner		194
Change of management provisions		194
Limited call right		194
Meetings; voting		195
Status as limited partner		195
Non-citizen assignees; redemption		196
Non-taxpaying assignees; redemption		196
Indemnification		197
Reimbursement of expenses		197
Books and reports		197
Right to inspect our books and records		198
Registration rights		198
Units eligible for future sale		200

iii


	Page
Tax considerations		202
Partnership status		203
Limited partner status		204
Tax consequences of unit ownership		205
Tax treatment of our operations		212
Disposition of common units		217
Uniformity of units		220
Tax-exempt organizations and other investors		220
Administrative matters		221
State, local and other tax considerations		222
Investment in Quicksilver Production Partners LP by employee benefit plans		224
Underwriting		226
Validity of the common units		232
Experts		232
Where you can find more information		232
Forward-looking statements		233
Quicksilver Production Partners LP Predecessor Index to financial statements		F-1
Appendix A Form of First Amended and Restated Agreement of Limited Partnership of Quicksilver Production Partners LP		A-1
Appendix B Glossary of terms		B-1
Appendix C Summary reserve reports		C-1

We have not authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information which others may give you. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this prospectus regardless of the time of delivery of this prospectus or any sale of our common units.

This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. Please read “Risk factors” and “Forward-looking statements.”

Industry and market data

The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications or other published independent sources. Although we believe that these third-party sources are reliable and that the third-party information used in this prospectus is accurate and complete, we have not independently verified the information nor have we ascertained the economic assumptions underlying such information. Some data is also based on our good faith estimates based on our knowledge and experience in the industry in which we operate.

Commonly used defined terms

As used in this prospectus, unless we indicate otherwise, the following terms have the following meanings:

•

“Barnett Shale” refers to a marine basinal shale deposit located in the Fort Worth Basin of North Texas;

•

“Barnett Shale Counties” refers to Wise, Montague, Cook, Denton, Tarrant, Dallas, Ellis, Parker, Jack, Palo Pinto, Hood, Somervell, Johnson, Hill, Bosque and Erath Counties in North Texas;

•

“formation transactions” refers to Quicksilver’s contribution of the Partnership Properties to Quicksilver Resources Partners Operating Ltd., Quicksilver’s subsequent contribution of Quicksilver Resources Partners Operating Ltd. to QPP Holdings LLC, QPP Holdings LLC’s subsequent contribution of Quicksilver Resources Partners Operating Ltd. to us at the closing of this offering and Quicksilver’s novation of certain commodity derivatives to us at the closing of this offering, including each of the transactions related thereto, which are described on page 7;

•

“our general partner” or “Quicksilver Resources GP” refers to Quicksilver Resources GP LLC, our general partner;

•

“our management,” “our employees,” or similar terms refer to the management or other personnel of Quicksilver provided to our general partner or us, as applicable, by Quicksilver under an omnibus agreement among us, our general partner and Quicksilver;

•

“our predecessor” refers to the Partnership Properties and certain commodity derivatives owned by Quicksilver prior to the closing of this offering, which assets are our predecessor for accounting purposes;

•

“Partnership Properties” or “our properties” refers to the properties, producing wells and related oil and gas interests owned by Quicksilver prior to the closing of this offering, which will be contributed to us as part of the formation transactions, which properties are our predecessor for accounting purposes;

•

“proved reserves” refers to the estimated quantities of natural gas, NGLs and crude oil that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic conditions and operating conditions. This definition of proved reserves has been abbreviated from the applicable definition contained in Appendix B of this prospectus;

•

“Quicksilver” refers collectively to Quicksilver Resources Inc. and its consolidated subsidiaries other than our general partner and us and our subsidiaries; and

•

“Quicksilver Production Partners LP,” “the partnership,” “we,” “our,” “us” or like terms, when used in a historical context, refer to our predecessor, which will be contributed to us in connection with this offering. When used in the present tense or prospectively, those terms refer collectively to Quicksilver Production Partners LP, a Delaware limited partnership and its subsidiaries.

Summary

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including “Risk factors” beginning on page 23 and the historical carve out financial statements and the notes to those financial statements. The information presented in this prospectus assumes (i) an initial public offering price of $ per common unit (the midpoint of the price range set forth on the cover of this prospectus) and (ii) that the underwriters do not exercise their option to purchase additional common units, unless otherwise indicated. We include a glossary of some of the oil and gas industry terms used in this prospectus in Appendix B.

The proved reserve information for the Partnership Properties as of December 31, 2010, 2009 and 2008 contained in this prospectus is based on reserve reports relating to our assets in the Barnett Shale prepared by the independent petroleum engineers of Schlumberger Data & Consulting Services, or Schlumberger, summaries of which are included in this prospectus as Appendix C. We refer to these reports as our “reserve report.” The proved reserve information for Quicksilver’s U.S. oil and gas properties as of December 31, 2010 contained in this prospectus is based on a reserve report relating to those properties prepared by Schlumberger.

Quicksilver Production Partners LP

Overview

We are a Delaware limited partnership formed in November 2011 by Quicksilver to own and acquire oil and gas properties in North America that fit our acquisition criteria, which are mature onshore properties with long-lived reserves, predictable production profiles and modest capital requirements. Our primary business objective is to generate stable cash flows, allowing us to make quarterly cash distributions to our unitholders and, over time, to increase those quarterly cash distributions. We believe our properties are well-suited for our partnership because they consist of mature onshore oil and gas properties that fit our acquisition criteria. As of December 31, 2010, our total proved reserves were 430.4 Bcfe, of which approximately 80% were classified as proved developed reserves. All of our oil and gas reserves are in the Barnett Shale. Excluding the effect of commodity derivatives, 39.4%, 57.1% and 3.5% of our revenue for the nine months ended September 30, 2011 was from natural gas, NGLs and oil, respectively. Based on our average net production for the nine months ended September 30, 2011 of 61.6 Mmcfed, our total proved reserves had an annualized reserve-to-production ratio of 19.1 years. We operate all of the properties in which we have interests, and we own an average working interest of 98.8% in the wells and properties included in the Partnership Properties, based on our proved reserves as of December 31, 2010. In addition, we intend to maintain a portfolio of commodity derivatives covering approximately 60% to 85% of our estimated production from total proved developed producing reserves over a three-to-five year period at any given point in time, although we may from time to time hedge more or less than the approximate range or change the range. At the closing of this offering, Quicksilver will novate to us commodity derivatives covering 30 Mmcfd of natural gas production for 2012, 2013, 2014 and 2015 and 3 Mbbld of NGL production for 2012. These commodity derivatives will set a NYMEX price of $6.00 per Mmbtu for approximately 90% of our total anticipated gas production through 2015. For additional information about our commodity derivatives, please read “Management’s discussion and analysis of financial condition and results of operations—Overview—Commodity derivatives.”

The following table presents summary data for the Partnership Properties as of December 31, 2010.


Property type	Proved reserves (Bcfe)		% Natural gas		% NGL		% Oil		Number of locations(1)		Average working interest		Net revenue interest(2)

Proved developed		345.5		55.8%		44.1%		0.1%		247		98.5%		78.7%
Proved undeveloped		84.9		52.7%		46.7%		0.6%		43		100.0%		79.9%

Total Proved		430.4		55.2%		44.6%		0.2%		290		98.8%		78.9%

(1)

In addition to the proved locations, we also have identified 11 unproved locations to drill on acreage that we have under lease within the Partnership Properties.

(2)

Calculated based on proved reserves as of December 31, 2010.

Quicksilver is a Fort Worth-based independent oil and gas company engaged primarily in the acquisition, exploration, development and production of onshore oil and gas in North America. Quicksilver was organized as a Delaware corporation in 1997 and has been a public company since 1999. We believe our business relationship with Quicksilver, which owns our general partner and, indirectly, will own approximately % of our outstanding common units and all of our subordinated units, general partner units and incentive distribution rights, will enhance our ability to maintain or grow our production and expand our proved reserve base over time. Following the contribution of the Partnership Properties to us, Quicksilver will retain over 2.2 Tcfe of its proved reserves in the United States as of December 31, 2010, almost all of which is in the Barnett Shale, that may be suitable for us to acquire in the future.

Quicksilver has been producing from unconventional shale plays since 1999 and established its initial acreage position in the Barnett Shale in 2003. Since then, Quicksilver has grown its leasehold to over 155,000 net acres in the Fort Worth Basin as of December 31, 2010. Quicksilver currently has 1,005 gross (823.0 net) producing wells in the Fort Worth Basin and has produced over 310 Bcfe. Since 2003, Quicksilver has grown its Barnett Shale average net production from no production to over 350 Mmcfed for the nine months ended September 30, 2011.

At the closing of this offering, Quicksilver will contribute all the Partnership Properties and novate certain commodity derivatives to us. Please read “Summary—Our partnership structure and formation transactions” for more information.

Our business strategies

Our primary business objective is to generate stable cash flows through cost-effective growth in production and proved reserves and enhanced operating results, allowing us to make quarterly cash distributions to our unitholders after servicing our debt and, over time, to increase those quarterly cash distributions. We currently focus our strategy in the Barnett Shale. To achieve our objective, we intend to execute the following business strategies:

•

Maintain and grow a stable production profile through low-risk development;

•

Acquire assets from Quicksilver through negotiated transactions;

•

Acquire assets from third parties either independently or jointly with Quicksilver;

•

Leverage Quicksilver’s size and technical understanding of the Barnett Shale to manage our costs and achieve optimum recovery;

•

Reduce exposure to commodity price risk and stabilize cash flows through a disciplined hedging policy; and

•

Maintain a prudent capital structure to ensure financial flexibility for acquisitions and development.

For a more detailed description of our business strategies, please read “Business and properties—Our business strategies.”

Our competitive strengths

We believe that the following competitive strengths will allow us to successfully execute our business strategies and achieve our objective of generating and growing cash available for distribution:

•

Our relationship with Quicksilver:

•

Quicksilver will have a significant retained interest in the Barnett Shale, which we anticipate will give us access to multi-year inventory of drop-down acquisition opportunities;

•

Quicksilver has extensive technical experience and familiarity with developing and operating Barnett Shale properties and other unconventional resources;

•

Quicksilver increases our competitiveness for third-party acquisitions;

•

The executive management team of our general partner includes some of the most senior officers of Quicksilver, each of whom has extensive industry experience, including experience managing a master limited partnership;

•

Our asset base is characterized by low-declining, predictable and long-lived production with a significant NGL component; and

•

Our competitive cost of capital and financial flexibility.

For a more detailed discussion of our competitive strengths, please read “Business and properties—Our competitive strengths.”

Our relationship with Quicksilver

We view our relationship with Quicksilver as a significant competitive strength. We believe this relationship will provide us with potential acquisition opportunities from a portfolio of oil and gas properties that meet our acquisition criteria, as well as access to personnel with extensive technical expertise and industry relationships.

Following the completion of this offering, Quicksilver will indirectly be our largest unitholder, holding common units (approximately % of all outstanding common units) and all of our subordinated units. Through its ownership of our general partner, Quicksilver will also hold all of the incentive distribution rights.

We believe that all of Quicksilver’s reserves in the United States are (or after additional capital is invested will become) suitable for us, based on our acquisition criteria. We also believe the largely contiguous and overlapping nature of Quicksilver’s and our Partnership Properties acreage will provide key operational, logistical and technical benefits, as well as cost savings, derived from our aligned interests.

The following table summarizes information about Quicksilver’s U.S. production as of and for the year ended December 31, 2010, excluding the Partnership Properties.


	Estimated proved reserves(1)								Average Net Production				Average reserve-to- production ratio(2)		Producing wells
	Bcfe		% Natural gas		% Proved developed		% Total proved		Mmcfed		% Total production		Average reserve-to- production ratio(2)		Gross		Net

Barnett Shale		2,188.5		77.8%		62.0%		99.2%		215.9		98.2%		20.7		709		537.5
Other U.S.		17.4		7.3%		100.0%		0.8%		4.0		1.8%		12.9		231		225.9

Total U.S.		2,205.9		77.2%		62.3%		100.0%		219.9		100.0%		20.6		940		763.3

(1)

Quicksilver’s estimated proved reserves are based on a December 31, 2010 reserve report prepared by Schlumberger and exclude the estimated proved reserves of the Partnership Properties.

(2)

The annualized average reserve-to-production ratio is calculated by dividing proved reserves as of December 31, 2010 by the average net production for the nine months ended September 30, 2011.

As a result of its significant ownership interests in us and our general partner, we believe Quicksilver will be motivated to support the successful execution of our primary business objective and will provide us with opportunities to pursue acquisitions that we believe will be accretive to our unitholders. Quicksilver has informed us that it views our relationship as part of its growth strategy, and we believe that Quicksilver has an incentive to sell additional assets to us and to pursue acquisitions jointly with us in the future.

Under the terms of our right of first offer in our omnibus agreement, Quicksilver will commit to offer us the first opportunity to acquire any properties in the Barnett Shale Counties that Quicksilver or any of its controlled subsidiaries may offer for sale. It is difficult to predict whether Quicksilver will seek to sell any of such properties, and, if so, which ones.

Under our omnibus agreement, Quicksilver will also provide general, administrative and operational services to us and our general partner. Under this agreement, we will utilize Quicksilver’s management and staff of engineers, geologists and administrative personnel.

Risk factors

An investment in our common units involves risks. Below is a summary of certain key risk factors that you should consider in evaluating an investment in our common units. This list is not exhaustive. Please read the full discussion of these risks and other risks described under “Risk factors” beginning on page 23.

Risks related to our business

•

The assumptions underlying the forecast of cash available for distribution that we include in “Our cash distribution policy and restrictions on distributions” may prove inaccurate and are subject to significant risks and uncertainties, which could cause actual results to differ materially from our forecasted results.

•

Drilling locations that we decide to drill may not meet our pre-drilling expectations, may not yield oil or natural gas in commercially viable quantities and are susceptible to uncertainties that could materially alter the occurrence, timing or success of drilling.

•

Risks inherent in an investment in us

•

Even if our unitholders are dissatisfied, they cannot remove our general partner without Quicksilver’s consent.

•

Many of the directors and all of the officers who have responsibility for our management have significant duties with, and will spend significant time serving, entities that compete with us in seeking acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.

•

Tax risks to unitholders

•

The IRS may challenge our treatment of each purchaser of our common units as having the same tax benefits without regard to the actual common units purchased, which could adversely affect the value of our common units.

•

Because of the special and potentially adverse tax rules that apply to tax-exempt entities and non-U.S. persons that own our units, our units may not be an appropriate investment for these types of investors.

•

A unitholder whose common units are loaned to a “short seller” to cover a short sale of common units may be considered to have disposed of those common units. If so, the unitholder would no longer be treated for federal income tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss from the disposition.

Our partnership structure and formation transactions

We are a Delaware limited partnership formed by Quicksilver to acquire and own oil and gas properties. In connection with this offering, the following transactions, which we refer to as the formation transactions, will occur:

Prior to the closing of this offering:

•

Quicksilver will have contributed the Partnership Properties to Quicksilver Resources Partners Operating Ltd., a Cayman Island exempted company and a wholly-owned subsidiary of Quicksilver, and Quicksilver will contribute 100% of the equity interests in Quicksilver Resources Partners Operating Ltd. to QPP Holdings LLC, a wholly-owned subsidiary of Quicksilver.

At the closing of this offering:

•

Quicksilver will cause QPP Holdings LLC to contribute to us 100% of the equity interests in Quicksilver Resources Partners Operating Ltd. and will novate directly to us commodity derivatives covering 30 Mmcfd of natural gas production for 2012, 2013, 2014 and 2015 and 3 Mbbld of NGL production for 2012. In exchange, we will issue to QPP Holdings LLC common units and subordinated units, representing an aggregate % limited partner interest in us, together with a right to receive $ million in cash;

•

We will issue to our general partner, in consideration for $ million in cash, general partner units, representing a 0.1% general partner interest in us, and, in consideration for the services our general partner will provide to us after the closing of this offering, all of the incentive distribution rights, which will entitle our general partner to increasing percentages of the cash we distribute in excess of $ per unit per quarter;

•

We expect to receive net proceeds of approximately $ million from the issuance and sale of common units to the public (based on the midpoint of the price range set forth on the cover page of this prospectus), representing a % limited partner interest in us, and we will use the net proceeds as described in “Use of proceeds”;

•

We expect to borrow approximately $150 million under a new $ million revolving credit facility (based upon the midpoint of the price range set forth on the cover of this prospectus), and we will use the proceeds as described in “Use of proceeds” (if the net proceeds from this offering increase or decrease, then our borrowing under our new revolving credit facility would correspondingly decrease or increase, respectively); and

•

We and our general partner will enter into an omnibus agreement with Quicksilver, pursuant to which, among other things, Quicksilver will provide us and our general partner with general, administrative and operational services.

If the underwriters exercise their option to purchase additional common units, we will use the net proceeds from that exercise to redeem from Quicksilver a number of common units equal to the number of common units issued upon such exercise, at a price per common unit equal to the proceeds per common unit before offering costs but after deducting underwriting discounts and commissions. If the underwriters exercise in full their option to purchase additional common units, the public unitholders will own common units, representing an aggregate % limited partner interest in us; our general partner will continue to own the same number of

general partner units, representing a 0.1% general partner interest in us; and Quicksilver’s ownership interest will decrease to common units and subordinated units, representing an aggregate % limited partner interest in us.

We expect to convert Quicksilver Resources Partners Operating Ltd. into a Delaware limited liability company after the completion of this offering.

Our ownership and organizational structure

The table and diagram below illustrate our ownership and organizational structure based on total units outstanding after giving effect to this offering and the related formation transactions and assuming that the underwriters do not exercise their option to purchase additional common units.


	Units	Ownership interest

Common units held by the public			%
Common units held by Quicksilver			%
Subordinated units held by Quicksilver			%
General partner units			0.1%

Total			100.0%

LOGO

Management and operation of the partnership

We are managed and operated by Quicksilver Resources GP, our general partner. Upon the completion of this offering, the board of directors of our general partner will have seven directors, including at least one independent director. Quicksilver will appoint a second independent director within 90 days and a third independent director within one year of this offering. Quicksilver indirectly owns all of the membership interests in and controls our general partner and has the sole right to appoint its entire board of directors. Unlike stockholders in a publicly traded corporation, our unitholders will not be entitled to elect our general partner or the board of directors of our general partner. All of the executive officers and many of the directors of our general partner currently serve as executive officers and directors of Quicksilver. For more information about the directors and officers of our general partner, please read “Management—Directors and executive officers.”

Neither we nor any of our subsidiaries will have any employees. Our general partner has the sole responsibility for providing the personnel necessary to conduct our operations, whether by hiring employees or by obtaining the services of personnel employed by Quicksilver or others. At the closing of this offering, we and our general partner will enter into an omnibus agreement with Quicksilver pursuant to which, among other things, Quicksilver will provide general, administrative and operational services for us and our general partner. Quicksilver will not be liable to us for its performance of, or failure to perform, services under our omnibus agreement unless there has been a final decision determining that Quicksilver acted in bad faith or engaged in fraud, gross negligence or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was unlawful.

We will reimburse our general partner for all expenses it incurs or payments it makes on our behalf, including expenses incurred and payments made under our omnibus agreement, as well as other expenses or payments allocable to us and our subsidiaries as determined by the general partner. We currently expect our general partner to incur general and administrative expenses (including those to be allocated to us by Quicksilver) of approximately $6.2 million for the year ending December 31, 2012. Please read “Certain relationships and related party transactions—Agreements governing the transactions—Omnibus agreement.”

As is common with publicly traded partnerships and in order to maintain operational flexibility, we will conduct our operations through subsidiaries. At the completion of this offering, we will initially have one direct subsidiary, Quicksilver Resources Partners Operating Ltd., which we expect to convert to a Delaware limited liability company after the completion of this offering.

Summary of conflicts of interest and fiduciary duties

Our general partner is entitled to make determinations that affect our ability to generate the cash flows necessary to make cash distributions to our unitholders, including determinations related to:

•

purchases and sales of oil and gas properties and other acquisitions and dispositions, including whether to pursue acquisitions that are also suitable for Quicksilver;

•

the manner in which our business is operated;

•

the level of our borrowings;

•

the amount, nature and timing of our capital expenditures; and

•

the amount of cash reserves necessary or appropriate to satisfy our general and administrative expenses, other expenses and debt service requirements, and to otherwise provide for the proper conduct of our business.

These determinations will have an effect on the amount of cash distributions we expect to make to the holders of our units, which in turn has an effect on whether our general partner receives incentive cash distributions. For a more detailed description of the conflicts of interest and fiduciary duties of our general partner, please read “Risk factors—Risks inherent in an investment in us” and “Conflicts of interest and fiduciary duties.”

Delaware law provides that a Delaware limited partnership may, in its partnership agreement, expand, restrict or eliminate any fiduciary or other duties that might otherwise be applicable (except for the implied contractual covenant of good faith and fair dealing) and limit or eliminate any liability for breach of contract or breach of fiduciary or other duties that otherwise might exist (except for liability for a bad faith violation of the implied contractual covenant).

Our partnership agreement restricts, and in many instances eliminates, the fiduciary and other duties that our general partner, its board of directors (including any committee thereof), its affiliates and the directors and officers of our general partner and its affiliates might otherwise owe to us and our unitholders under Delaware law. Our partnership agreement also limits, or in many instances eliminates, the liability of our general partner, its board of directors (including any committee thereof), its affiliates and the directors, officers, employees and other agents of our general partner and its affiliates, and the remedies available to our unitholders, with respect to actions or omissions that might otherwise have constituted a breach of the partnership or other agreement and the fiduciary or other duties that any such persons or entities might otherwise owe to us or our unitholders.

Notwithstanding any fiduciary or other duty that might otherwise have been applicable under Delaware law, in most instances our general partner (and its board of directors, any committee of the board of directors and any of its directors and officers) only has a duty to act in good faith (which our partnership agreement defines as the actual belief that it is acting in, or not opposed to, our best interest). In some instances, our general partner (and its board of directors, any committee of the board of directors and any of its directors, officers, employees and other agents), and in all instances Quicksilver (which is used in this prospectus to mean Quicksilver and its consolidated subsidiaries, except for our general partner and us) and its directors, officers,

employees and other agents (in their capacities as such) have no fiduciary or other duties to us or our unitholders and can consider whatever interests or factors they desire, including their own interests, in determining whether and how to act, notwithstanding any fiduciary or other duty that any such person or entity might otherwise have had under Delaware law.

Conflicts of interest exist and may arise in the future as a result of the relationships between our general partner and its affiliates (including Quicksilver) on the one hand, and us and our limited partners, on the other hand. For example, the interests of Quicksilver may, in certain circumstances, be different or inconsistent with the interests of the partnership, and there is nothing in the partnership or other agreement that requires Quicksilver to act in our interests or prevents Quicksilver from competing with us. While our general partner has a duty to act in good faith in managing the partnership (which is defined to mean the actual belief that it is acting in, or not opposed to, the best interest of the partnership), the directors and officers of our general partner also have a fiduciary duty to manage our general partner in the best interest of its owner, Quicksilver. Many of the directors and all of the officers of our general partner also serve in similar capacities with Quicksilver and have fiduciary duties to Quicksilver and its stockholders. In addition, these directors and officers will be compensated by Quicksilver and may have interests and other economic incentives in Quicksilver, which may lead to additional conflicts of interest.

By purchasing a common unit, unitholders agree to be bound by the terms of our partnership agreement and, pursuant to the terms of our partnership agreement, are treated as having consented to various actions contemplated in our partnership agreement (including the reduction or elimination of fiduciary and other duties, the reduction or elimination of liability for breaches and the mechanisms for resolving potential conflicts of interests). Please read “Risk factors—Risks inherent in an investment in us” and “Conflicts of interest and fiduciary duties—Fiduciary duties” for a more detailed description of the fiduciary duties that might otherwise have been imposed under Delaware law, the material modifications or elimination of these duties and potential liabilities, including in respect of conflicts of interest, with respect to the general partner and others contained in our partnership agreement and certain legal rights and remedies available to our unitholders.

Principal executive offices and internet address

Our principal executive offices are located at 801 Cherry Street, Suite 3700, Unit 19, Fort Worth, Texas 76102, and our registered office in the State of Delaware is at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of our registered agent at such address is The Corporation Trust Company. Our telephone number is (817) 665-5000.

Our website address is www.qpplp.com and will be activated in connection with the closing of this offering. We expect to make our periodic reports and other information filed with or furnished to the Securities and Exchange Commission, which we refer to as the SEC, available free of charge through our website as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into, and does not constitute a part of, this prospectus.

The offering

Common units offered hereby

common units (or common units if the underwriters exercise in full their option to purchase additional common units).

Units outstanding after this offering

common units and subordinated units, representing % and %, respectively, limited partner interests in us. Our general partner will own general partner units, representing a 0.1% general partner interest in us.

Use of proceeds

We intend to use the estimated net proceeds of approximately $ million from this offering (based upon the assumed initial public offering price of $ per common unit (the midpoint of the price range set forth on the cover of this prospectus), after deducting underwriting discounts, a structuring fee and offering costs), together with borrowings of approximately $150 million under our new revolving credit facility (based upon the assumed midpoint of the price range set forth on the cover of this prospectus), as partial consideration (together with our issuance to Quicksilver of common units and subordinated units) for the contribution by Quicksilver of the Partnership Properties and the novation by Quicksilver of certain commodity derivatives, and to pay fees and costs associated with such transactions and our new revolving credit facility. Please read “Use of proceeds.”

Cash distributions

We expect to make a minimum quarterly distribution of $ per unit per quarter on all common, subordinated and general partner units ($ per unit on an annualized basis) to the extent we have sufficient cash after establishment of cash reserves and payment of fees and expenses, including payments to our general partner and its affiliates. We refer to this cash as “available cash,” and it is defined in our partnership agreement included in this prospectus as Appendix A. Our ability to pay the minimum quarterly distribution is subject to various restrictions and other factors described in more detail under the caption “Our cash distribution policy and restrictions on distributions.” For the first quarter that we are publicly traded, we expect to pay our unitholders a prorated distribution covering the period from the completion of this offering through the end of that quarter, based on the actual length of that period.

Assuming our general partner maintains its 0.1% general partner interest in us, our partnership agreement requires us to distribute all of our available cash each quarter in the following manner during the subordination period:

first, 99.9% to the holders of common units and 0.1% to our general partner, until each common unit has received the minimum quarterly distribution of $ plus any arrearages from prior quarters;

second, 99.9% to the holders of subordinated units and 0.1% to our general partner, until each subordinated unit has received the minimum quarterly distribution of $ ; and

third, 99.9% to all common and subordinated unitholders, pro rata, and 0.1% to our general partner, until each common and subordinated unit has received a distribution of $ .

If cash distributions to our unitholders exceed $ per common unit and subordinated unit in any quarter, our unitholders and our general partner will receive distributions according to the following percentage allocations:


	Marginal percentage interest in distributions
Total quarterly distribution target amount	Unitholders		General partner

above $ up to $		85.0%		15.0%
above $		75.0%		25.0%

The percentage interests shown for our general partner include its 0.1% general partner interest. We refer to the additional increasing distributions to our general partner in excess of its 0.1% general partner interest as “incentive distributions.” Please read “Provisions of our partnership agreement relating to cash distributions.”

Assuming we completed the formation transactions contemplated in this prospectus and the contribution of the Partnership Properties and novation of certain commodity derivatives on January 1, 2011, our pro forma cash available for distribution generated during the year ended December 31, 2011 would have been approximately $ million, which would have been sufficient to allow us to pay the full minimum quarterly distribution on our common, subordinated and general partner units during that period.

We have not calculated available cash on a pro forma quarter-by-quarter basis for the year ended December 31, 2011 to determine if we would have generated available cash sufficient to pay the minimum quarterly distribution for each quarter during those periods.

For a calculation of our ability to have made distributions to our unitholders based on our pro forma results of operations for the year

ended December 31, 2011, please read “Our cash distribution policy and restrictions on distributions.”

The amount of available cash we need to pay the minimum quarterly distribution for four quarters on the common, subordinated and general partner units to be outstanding immediately after this offering is approximately $ million (or an average of approximately $ million per quarter). Please read “Our cash distribution policy and restrictions on distributions.”

We believe, based on our financial forecast and related assumptions included in “Our cash distribution policy and restrictions on distributions—Estimated Adjusted EBITDA for the year ending December 31, 2012” and “Our cash distribution policy and restrictions on distributions—Assumptions and considerations,” that we will be able to pay cash distributions at the minimum quarterly distribution of $ per unit on all outstanding common, subordinated and general partner units for each full calendar quarter in the year ending December 31, 2012.

However, we do not have a legal obligation to pay distributions at our minimum quarterly distribution rate or at any other rate except as provided in our partnership agreement, and there is no guarantee that we will make quarterly cash distributions to our unitholders. Please read “Our cash distribution policy and restrictions on distributions.”

Subordinated units

QPP Holdings LLC, a wholly-owned subsidiary of Quicksilver, will initially own all of our subordinated units. The principal difference between our common units and subordinated units is that, in any quarter during the subordination period, the subordinated units are entitled to receive distributions only after the common units have received their minimum quarterly distribution plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. Accordingly, holders of subordinated units may receive a smaller distribution than holders of common units or no distribution at all. Subordinated units will not accrue arrearages.

The subordination period will begin on the closing date of this offering and extend until the earlier of:

•

the date on which we have earned and paid distributions from operating surplus at least equal to the minimum quarterly distribution payable on all outstanding common, subordinated and general partner units (and any other partnership interests that are senior or equal in right of distribution to the subordinated units) with respect to a period of 12 consecutive quarters ending on or after , 2015, provided there are no arrearages in the minimum quarterly distribution on our common units; or

•

the date on which we have earned and paid distributions from operating surplus at least equal to $ (125% of the minimum quarterly distribution) on each outstanding common, subordinated and general partner unit (and any other partnership interest that is senior or equal in right of distribution to the subordinated units), plus corresponding distributions on incentive distribution rights, for each of the four consecutive quarters ending on or after , 2013, provided there are no arrearages in the minimum quarterly distribution on our common units.

The subordination period will also end if our general partner is removed other than for cause, and the units held by our general partner and its affiliates are not voted in favor of such removal.

When the subordination period ends, all subordinated units will convert into common units on a one-for-one basis and all common units thereafter will no longer be entitled to arrearages. Please read “Provisions of our partnership agreement relating to cash distributions—Subordination period.”

Issuance of additional units

We can issue an unlimited number of additional units, including units that are senior to the common units in right of distributions, liquidation and voting, on terms and conditions determined by our general partner, without the approval of our unitholders. Please read “Units eligible for future sale” and “The partnership agreement—Issuance of additional partnership interests.”

Limited voting rights

Our general partner will manage us and operate our business. Unlike stockholders of a corporation, our unitholders will have only limited voting rights on matters affecting our business. Our unitholders will have no right to elect our general partner or its directors. Our general partner may not be removed except by a vote of the holders of at least 66²/3% of the outstanding common and subordinated units, including any units owned by our general partner and its affiliates, voting together as a single class. Upon consummation of this offering, Quicksilver will indirectly own an aggregate of approximately % of our outstanding common and subordinated units (or % of our outstanding common and subordinated units if the underwriters exercise their option to purchase additional common units in full) and will therefore be able to prevent the removal of our general partner. Please read “The partnership agreement—Limited voting rights.”

Limited call right

If at any time our general partner and its affiliates own more than 80% of the outstanding common units, our general partner has the right, but not the obligation, to purchase all of the remaining common units at a purchase price not less than the then-current market price of the common units, as calculated pursuant to the terms of our partnership agreement. Upon the consummation of this offering, affiliates of our general partner will own approximately % of our outstanding common units (or % of our outstanding common units if the underwriters exercise their option to purchase additional common units in full) and 100% of our subordinated units. Please read “The partnership agreement—Limited call right.”

Estimated ratio of taxable income to distributions

We estimate that if our unitholders own the common units purchased in this offering through the record date for distributions for the period ending , such unitholders will be allocated, on a cumulative basis, an amount of federal taxable income for that period that will be less than % of the cash distributed to such unitholders with respect to that period. Please read “Tax considerations” for information regarding the bases for this estimate.

Tax considerations

For a discussion of other material federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the United States, please read “Tax considerations.”

Agreement to be bound by the partnership agreement

By purchasing a common unit, you will be admitted as a unitholder of our partnership and will be deemed to have agreed to be bound by all of the terms of our partnership agreement.

Listing and trading symbol

We intend to apply to list our common units on the NYSE under the symbol “QPP.”

Summary historical financial data

We were formed in November 2011 and do not have historical financial operating results. Therefore, in this prospectus, we present the historical carve out financial statements of our predecessor. The following table shows the summary financial data of our predecessor. The summary historical financial data as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 are derived from the audited historical carve out financial statements of our predecessor included elsewhere in this prospectus. The summary historical financial data as of December 31, 2008 are derived from the historical carve out financial statements of our predecessor not included in this prospectus. The summary historical financial data as of September 30, 2011 and for the nine months ended September 30, 2011 and 2010 are derived from the unaudited historical carve out financial statements of our predecessor included elsewhere in this prospectus.

You should read the following table in conjunction with “—Our partnership structure and formation transactions,” “Use of proceeds,” “Management’s discussion and analysis of financial condition and results of operations” and the historical carve out financial statements of our predecessor included elsewhere in this prospectus. Among other things, those historical carve out financial statements include more detailed information regarding the basis of presentation.

The following table presents Adjusted EBITDA, which we use in evaluating the operating risks of our business. This financial measure is not calculated or presented in accordance with generally accepted accounting principles, or GAAP. We explain this measure below and reconcile it to net income, its most directly comparable financial measure calculated and presented in accordance with GAAP.


	Our predecessor
	Nine months ended September 30,				Year ended December 31,
(in thousands)	2011		2010		2010		2009			2008

Income statement data:
Production Revenue:
Natural gas(1)	$	53,900	$	43,775	$	54,995	$	68,664		$	150,148
NGL		56,795		49,689		67,117		65,218			95,532
Oil		3,515		4,425		5,803		8,142			18,463

Total production revenue	$	114,210	$	97,889	$	127,915	$	142,024		$	264,143

Total revenue	$	114,210	$	97,889	$	127,915	$	142,024		$	264,143

Operating expense:
Lease operating	$	16,655	$	15,024	$	20,257	$	19,023		$	17,401
Gathering, processing and transportation		23,438		24,710		32,705		41,891			38,460
Production and ad valorem taxes		3,156		4,189		5,565		6,673			6,204
Depletion and accretion		16,616		16,056		21,050		37,978			41,428
Impairment		—		—		—		60,045			299,422

Net income (loss)	$	45,459	$	26,263	$	35,111	$	(39,804	)	$	(157,291	)

Other financial data:
Adjusted EBITDA(2)	$	62,772	$	43,074	$	56,999	$	58,305		$	182,661

(1)

For the nine months ended September 30, 2011, natural gas revenue includes $14.7 million of realized effects from derivatives.

(2)

An unaudited non-GAAP financial measure. See “—Non-GAAP financial measure.”


	Our predecessor
	As of September 30, 2011		As of December 31,
(in thousands)	As of September 30, 2011		2010		2009		2008

Balance sheet data:
Total assets	$	355,086	$	336,088	$	275,677	$	360,032
Long-term debt	$	—	$	—	$	—	$	—

Non-GAAP financial measure

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies.

We define Adjusted EBITDA as the sum of net income adjusted by the following to the extent included in calculating such net income:

•

Plus:

•

Interest expense;

•

Income tax expense;

•

Depreciation, depletion and accretion;

•

Impairment of goodwill and long-lived assets (including oil and gas properties);

•

Accretion of asset retirement obligations;

•

Unrealized losses on derivatives;

•

Losses on sale of assets and other, net;

•

Equity compensation;

•

Acquisition-related costs;

•

Non-cash expense; and

•

Other non-routine items that we deem appropriate.

•

Less:

•

Interest income;

•

Income tax benefit;

•

Unrealized gain on derivatives;

•

Gains on sale of assets and other, net; and

•

Other non-routine items that we deem appropriate.

Adjusted EBITDA is not a measure of net income or cash flows as determined by GAAP. Management believes Adjusted EBITDA is useful because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the acquisition methodology. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing an entity’s financial performance, such as

an entity’s cost of capital and tax structure, as well as the historical costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. We believe that Adjusted EBITDA is a widely followed measure of operating performance.

The following table presents a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measure of net income.


	Nine months ended September 30,				Year ended December 31,
(in thousands)	2011		2010		2010		2009			2008

Net income (loss)	$	45,459	$	26,263	$	35,111	$	(39,804	)	$	(157,291	)
Interest expense		—		—		—		—			—
Depletion and accretion		16,616		16,056		21,050		37,978			41,428
Impairment of oil and gas properties		—		—		—		60,045			299,422
Income tax expense (benefit)		697		755		838		86			(898	)

Adjusted EBITDA	$	62,772	$	43,074	$	56,999	$	58,305		$	182,661

Summary reserve and operating data

The proved reserve estimates as of December 31, 2010 presented in the table below are based on a report prepared by Schlumberger and were prepared consistent with the rules and regulations of the SEC regarding oil and gas reporting that are currently in effect. The summary historical proved reserve data below are estimates and are subject to inherent uncertainties.

Please read “Management’s discussion and analysis of financial condition and results of operations,” “Business and properties—Partnership Properties—Proved reserves” and the reserve report summaries included in this prospectus in evaluating the material presented below. The reserve report summaries are included as Appendix C of this prospectus.

The following tables present proved reserve and operating data for the Partnership Properties.

Proved reserve data


December 31, 2010	Partnership Properties

Proved reserves(1)
Natural gas (Mmcf)		237,473
NGL (Mbbl)		31,982
Oil (Mbbl)		166
Total (Mmcfe)		430,361
Proved developed (Mmcfe)		345,514
Proved undeveloped (Mmcfe)		84,847
Proved developed reserves as a percentage of total proved reserves		80.3%
Standardized Measure (in thousands)(2)	$	411,340
Commodity prices(3)
Natural gas (per Mcf)	$	4.38
Oil (per Bbl)	$	79.43

(1)

Proved reserves and related future net revenue and Standardized Measure are presented on a gas-equivalent basis using a conversion of six Mcf “equivalent” per barrel of oil or NGL. This conversion is based on energy equivalence and not on price equivalence. Prices were adjusted for transportation fees, geographical differentials, marketing bonuses or deductions and other factors affecting the price received at the wellhead.

(2)

Standardized Measure represents the present value of estimated future net cash inflows from our proved reserves, less estimated future development, production, plugging and abandonment costs and income tax expense (if applicable), discounted at 10% per annum to reflect timing of future cash flows. Future calculations of Standardized Measure will include the effects of income taxes on future net revenue. For further discussion of income taxes, see “Tax considerations.”

(3)

Our estimated proved reserves and related Standardized Measure were determined using index prices for oil and natural gas, without giving effect to commodity derivatives, held constant throughout the life of the properties. These prices were adjusted by lease for quality, transportation fees, geographical differentials, marketing bonuses or deductions and other factors affecting the price received at the wellhead.

Operating data


	Nine months ended September 30,				Year ended December 31,
	2011		2010		2010		2009		2008

Production and operating data:

Net production volumes:
Natural gas (Mmcf)		9,471		9,711		12,727		17,651		16,925
NGL (Mbbl)		1,189		1,382		1,814		2,404		2,039
Oil (Mbbl)		37		61		78		156		195
Total (Mmcfe)		16,827		18,369		24,079		33,011		30,329
Average daily net production (Mmcfed)		61.6		67.3		66.0		90.4		82.9

Total production revenue (excluding derivatives)	$	99,511	$	97,889	$	127,915	$	142,024	$	264,143
Average realized sales prices:
Natural gas (per Mcf)	$	4.14	$	4.51	$	4.32	$	3.89	$	8.87
NGL (per Bbl)	$	47.79	$	35.95	$	37.00	$	27.13	$	46.86
Oil (per Bbl)	$	94.31	$	72.66	$	74.42	$	52.23	$	94.50
Average price (per Mcfe)	$	5.91	$	5.33	$	5.31	$	4.30	$	8.71
Realized derivative effects (per Mcfe)	$	0.87	$	—	$	—	$	—	$	—
Average price (per Mcfe after derivatives)	$	6.78	$	5.33	$	5.31	$	4.30	$	8.71
Average unit cost (per Mcfe):
Lease operating	$	0.99	$	0.82	$	0.84	$	0.58	$	0.57
Gathering, processing and transportation		1.39		1.35		1.36		1.27		1.27
Production and ad valorem taxes		0.19		0.23		0.23		0.20		0.20
General and administrative		0.49		0.59		0.51		0.49		0.64
Depletion and accretion		0.99		0.87		0.87		1.15		1.37

Risk factors

Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a business similar to ours. Prospective unitholders should carefully consider the following risk factors together with all of the other information included in this prospectus in evaluating an investment in our units.

If any of the following risks were actually to occur, our business, financial condition or results of operations could be materially adversely affected. In that case, we might not be able to pay distributions on our common units, the trading price of our common units could decline and our unitholders could lose all or part of their investment.

Risks related to our business

We may not have sufficient available cash each quarter to pay the minimum quarterly distribution of $ per unit (or $ million per quarter in the aggregate) or any other amount. Under the terms of our partnership agreement, the amount of cash available for distribution will be impacted by our operating expenses and the amount of any cash reserves established by our general partner to provide for future operations, future capital expenditures, including acquisitions of additional oil and gas properties, future debt service requirements and future cash distributions to our unitholders.

The amount of cash we distribute on our units principally depends on the cash we generate from operations, which depends on, among other things:

•

our production levels;

•

the prices we receive for our production;

•

the amount and timing of settlements of our commodity derivatives;

•

the level of our operating costs, including maintenance capital expenditures and payments to our general partner and its affiliates; and

•

the level of our interest expense, which depends on the amount of our indebtedness and the interest payable thereon.

For a description of additional restrictions and factors that may affect our ability to make cash distributions to our unitholders, please read “Our cash distribution policy and restrictions on distributions.”

The process of estimating proved reserves and production is complex. In order to prepare these estimates, we, Quicksilver and our independent reserve engineers must project future production rates and the timing and amount of future development expenditures and such projections may

be inaccurate. We, Quicksilver and the engineers must also analyze available geological, geophysical, production and engineering data, and the extent, quality and reliability of this data can vary. In addition to interpreting available technical data, we, Quicksilver and the engineers must also analyze other various assumptions, including assumptions relating to economic factors. Any inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of proved reserves presented in this prospectus.

Actual future production, commodity prices, revenue, taxes, development expenditures, operating expenses and our estimated quantities of recoverable proved reserves most likely will vary from our estimates. Any significant variance could materially affect the estimated quantities and present value of proved reserves and the estimated production presented in this prospectus. In addition, we may adjust estimates of production and estimates of proved reserves to reflect production history, results of exploration and development, prevailing petroleum prices and other factors that may be beyond our control.

At December 31, 2010, 19.7% of our proved reserves were undeveloped. Recovery of undeveloped reserves requires additional capital expenditures and successful drilling and completion operations. Our proved reserve estimates assume that we will make significant capital expenditures to develop our proved reserves. Although we have prepared estimates of our proved reserves using SEC specifications, actual prices and costs may vary from these estimates, the development may not occur as scheduled or actual results of that development may not be as estimated prior to drilling.

The present value of future net cash flows disclosed in “Summary—Summary reserve and operating data” is not necessarily the fair value of our proved reserves. In accordance with SEC requirements, the discounted future net cash flows from proved reserves for 2010 are based upon prices determined on an unweighted average of the preceding 12-month first-day-of-the-month prices adjusted for local differentials and operating and development costs as of period end. Actual future prices and costs may be materially higher or lower than the prices and costs used in our estimate. Any changes in consumption by natural gas, NGL and oil purchasers or in governmental regulations or taxation will also affect actual future net cash flows. The timing of both the production and the costs from the development and production of our oil and gas properties will affect the timing of actual future net cash flows from proved reserves and their present value. In addition, the 10% discount factor, which is specified by the SEC, is not necessarily the most appropriate discount factor. The effective interest rate at various times and the risks associated with our business or the oil and gas industry in general will affect the appropriateness of the 10% discount factor in arriving at the actual fair value of our proved reserves.

The forecast of cash available for distribution set forth in “Our cash distribution policy and restrictions on distributions” includes our forecast of our operating results, Adjusted EBITDA and cash available for distribution for the year ending December 31, 2012. The assumptions underlying the forecast may prove inaccurate and are subject to significant risks and uncertainties that could cause actual results to differ materially from our forecasted results. If our actual results are significantly below forecasted results, or if our expenses are greater than

forecasted, we may have insufficient cash available for distribution to pay the minimum quarterly distribution or any amount on our common, subordinated and general partner units, which may cause the market price of our common units to decline materially.

Our management has identified and scheduled drilling locations on the Partnership Properties. As of December 31, 2010, we had 43 proved undeveloped locations with 84.9 Bcfe of proved undeveloped reserves in the Partnership Properties. These identified drilling locations represent an important part of our strategy. Our ability to execute our drilling program is subject to a number of uncertainties, including the availability of capital, regulatory approvals, commodity prices, costs and drilling results. In addition, the cost and timing of drilling, completing, and operating any well are often uncertain, and new wells may not be productive. We cannot assure you that the analogies we draw from available data from other wells will be applicable to our identified drilling locations. Even if sufficient amounts of oil or natural gas exist, we may damage the potentially productive hydrocarbon-bearing formation or experience mechanical difficulties while drilling or completing the well, resulting in a reduction in production from the well or abandonment of the well. Because of these uncertainties, we do not know if the drilling locations we have identified will ever be drilled or if we will be able to produce oil or natural gas from these or any other potential drilling locations. The failure to drill our identified drilling locations on a timely basis or the failure of our drilling locations to yield oil or natural gas in commercially viable quantities could cause a decline in our proved reserves, adversely affect our results of operations and reduce our cash available for distribution to our unitholders.

Our revenue, profitability, future growth and ability to make distributions to our unitholders depend in part on prevailing commodity prices. These prices also affect the amount of cash flow available to service our debt, fund our capital program and our other liquidity needs, as well as our ability to borrow, raise additional capital and comply with the terms of our new revolving credit facility. Among other things, the amount we can borrow under our new revolving credit facility is subject to periodic redetermination based in part on expected future prices. Lower prices may also reduce the amount of natural gas, NGLs and oil that we can economically produce.

Prices for our production fluctuate widely, particularly as evidenced by price movements between 2008 and 2011. Among the factors that can cause these fluctuations are:

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domestic and foreign demand for oil and natural gas;

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the level and locations of domestic and foreign oil and natural gas supplies;

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the quality, price and availability of alternative fuels;

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the quantity of natural gas in storage;

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weather conditions;

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domestic and foreign governmental regulations, including environmental regulations;

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impact of trade organizations, such as the Organization of Petroleum Exporting Countries, or OPEC;

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political conditions in oil and natural gas producing regions;

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localized supply and demand fundamentals and transportation availability;

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technological advances affecting energy consumption;

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speculation by investors in oil and natural gas; and

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worldwide economic conditions.

Due to the volatility of commodity prices and the inability to control the factors that influence them, we cannot predict future pricing levels. A significant decrease in commodity prices without an offsetting significant increase in production or cash received from our derivative program will cause us to reduce the distributions we pay to our unitholders or to cease paying distributions altogether.

The failure to replace our proved reserves could adversely affect our production, cash flows and our ability to make distributions to our unitholders.

We will be unable to sustain our minimum quarterly distribution without substantial capital expenditures that maintain our asset base. Producing oil and gas reservoirs are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Our future success and our ability to make distributions are highly dependent on our success in efficiently developing our current proved reserves. Our production decline rates may be significantly higher than currently estimated if our wells do not produce as expected. Further, our decline rate may change when we drill additional wells or make acquisitions. Our proved reserves will generally decline as proved reserves are produced, except to the extent that we conduct successful development activities or acquire additional proved reserves. In order to maintain or increase proved reserves and production, we must continue our development drilling or undertake other replacement activities. Our planned development projects or any acquisition activities that we may undertake might not result in meaningful additional proved reserves, and we might not have continuing success drilling productive wells. Even in the event that our development projects do result in meaningful additional commercially viable proved reserves, midstream infrastructure for these proved reserves may not exist or may not be constructed, either of which could adversely impact our ability to benefit from those proved reserves. If our development efforts are unsuccessful, our leases covering acreage that is not already held by production could expire. If they do expire and if we are unable to renew the leases on acceptable terms, we will lose the right to conduct drilling activities and the resulting economic benefits associated therewith. If we are unable to develop or acquire additional proved reserves to replace our current and future production at economically acceptable terms, our business, financial condition, results of operations and cash available for distribution to our unitholders would be adversely affected.

Many of our properties are in areas that may have been partially depleted or drained by offset wells.

Many of our properties are in areas that may have already been partially depleted or drained by earlier offset drilling. The owners of leasehold interests, including Quicksilver, lying contiguous or adjacent to or adjoining any of our properties could take actions, such as drilling additional wells, that could adversely affect our operations. When a new well is completed and produced, the pressure differential in the vicinity of the well causes the migration of reservoir fluids towards the new wellbore (and potentially away from existing wellbores). As a result, the drilling and production of these potential locations could cause a depletion of our proved reserves and may inhibit our ability to further develop our proved reserves.

None of the proceeds of this offering will be used to maintain or grow our asset base or be reserved for future distributions.

The proceeds of this offering, together with borrowings under our new revolving credit facility, will be used as partial consideration for Quicksilver’s contribution of the Partnership Properties and novation of certain commodity derivatives to us at the closing of this offering. Therefore, none of the proceeds of this offering will be used to maintain or grow our asset base, which will be necessary to help fund future distributions to our unitholders, and none of the proceeds will be reserved for future distributions to our unitholders.

Our acquisition and development operations require substantial capital expenditures, which will reduce our cash available for distribution and could materially affect our ability to make distributions to our unitholders.

The development and production of our proved reserves requires substantial capital expenditures, which will reduce the amount of cash otherwise available for distribution to our unitholders. If our cash flow from operations, Adjusted EBITDA or the borrowing base under our new revolving credit facility decrease as a result of lower commodity prices, operating difficulties, declines in proved reserves or for any other reason, we may have limited ability to obtain the capital necessary to sustain our operations at expected levels. If additional capital is needed, we may not be able to obtain debt or equity financing or borrow under our new revolving credit facility. The failure to obtain additional financing could result in a curtailment of our operations relating to development of our prospects, which in turn could lead to a decline in our proved reserves, and could adversely affect our business, financial condition, results of operations and ability to generate the cash sufficient to make distributions to our unitholders.

If the prices we receive for our production decrease, our development efforts are unsuccessful or our costs increase substantially, we may be required to recognize non-cash impairment of our oil and gas properties, which could have a material adverse effect on our results of operations.

We employ the full cost method of accounting for our oil and gas properties which, among other things, imposes limits to the capitalized cost of our assets. The capitalized cost pool cannot exceed the net present value of the underlying oil and gas reserves. Our predecessor recognized impairment to the carrying value of our oil and gas properties in 2008 and 2009 of $299.4 million and $60.0 million, respectively, and could recognize future impairments if the commodity prices utilized in determining proved reserve value cause the value of our proved reserves to decrease. Increased operating and capitalized costs without incremental increases in proved reserve value could also trigger impairment based upon decreased value of our proved reserves. The impairment of our oil and gas properties will cause us to reduce their carrying value and recognize non-cash expense, which could have a material adverse effect on our results of operations.

Certain of our wells may be adversely affected by actions Quicksilver and other operators may take when operating wells that they own.

Our wells are in close proximity to wells operated by Quicksilver and other operators in the Barnett Shale. As a result, operations conducted on adjacent or nearby wells could cause production from our wells to be shut in for indefinite periods of time for completion operations and other activities conducted on those properties, could result in increased lease operating expense and could adversely affect the production from our wells after they re-commence production. We have no control over the operations or activities of offsetting operators, including Quicksilver.

Our hedging policy may not effectively mitigate the impact of commodity price volatility on our cash flows, and our hedging activities could result in losses or limit our ability to benefit from price increases.

To reduce our exposure to hydrocarbon price fluctuations, we have entered and intend to continue to enter into commodity derivatives covering our future production, which may limit the benefit we would receive from increases in hydrocarbon prices. These arrangements also expose us to risk of financial losses in some circumstances, including the following:

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our production could be materially less than expected; or

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the counterparties to the contracts could fail to perform their contractual obligations.

If our actual production and sales for any period are less than the production covered by commodity derivatives (including reduced production due to operational delays) or if we are unable to perform our development activities as planned, we might be required to satisfy a portion of our obligations under those commodity derivatives without the benefit of the cash flow from the sale of that production, which may materially impact our liquidity. Additionally, if market prices for our production exceed dollar ceilings or swap prices, we would be required to make monthly cash payments, which could materially adversely affect our liquidity. If we choose not to enter into such commodity derivatives in the future, we could be more affected by changes in commodity prices than our competitors who engage in hedging arrangements.

A significant increase in the differential between the NYMEX price or other benchmark prices and the price we receive for our production could reduce our cash available for distribution and adversely affect our financial condition.

The prices that we receive for our production often reflect a regional discount, based on the location of production, to the relevant benchmark prices, such as NYMEX, that are used for calculating the fair value of our commodity derivatives. Although there has been a demonstrated and consistent basis spread between NYMEX and where we sell our production, any increase in these differentials, if significant, could reduce our cash available for distribution to our unitholders.

Our business involves many hazards and operational risks.

Our operations are subject to many risks inherent in the oil and gas industry, including operating hazards such as well blowouts, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, formations with abnormal pressures, treatment plant “downtime,” pipeline ruptures or spills, pollution, releases of toxic gas and other environmental hazards and risks, any of which could cause us to experience substantial losses. The occurrence of a significant accident or other

event could curtail our operations and have a material adverse effect on our business, financial condition and results of operations, and as a result, our ability to pay distributions to our unitholders.

All of our producing properties and operations are located in the Barnett Shale, making us vulnerable to risks associated with operating in a limited geographic area.

As of December 31, 2010, all of our proved reserves and all of our production were located in the Barnett Shale. As a result, we may be disproportionately exposed to the impact of delays or interruptions of production from these wells caused by transportation capacity constraints, curtailment of production, availability of equipment, facilities, personnel or services, significant governmental regulation, natural disasters, adverse weather conditions, plant closures for scheduled maintenance or interruption of transportation of oil or natural gas produced from the wells in this area. In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and gas producing areas, which may cause these conditions to occur with greater frequency or magnify the effect of these conditions. Due to the concentrated nature of our Partnership Properties, a number of our properties could experience any of the same conditions at the same time, resulting in a relatively greater impact on our results of operations than they might have on other companies that have a more diversified portfolio of properties. Such delays or interruptions could have a material adverse effect on our business, financial condition and results of operations and could reduce our ability to make distributions to our unitholders.

The operation of our properties is largely dependent on the ability of Quicksilver’s employees.

The continuing production from a property, and to some extent the marketing of production, is dependent upon the ability of the operators of our properties. Quicksilver will operate all of the Partnership Properties, either directly as operator or, where we are the operator of record, on our behalf. As of December 31, 2010, Quicksilver operated all of the wells and properties in which we have interests. As a result, the success and timing of drilling and development activities on such properties, depend upon a number of factors, including:

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the nature and timing of drilling and operational activities;

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the timing and amount of capital expenditures;

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Quicksilver’s or the operators’ expertise and financial resources;

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the approval of other participants in such properties; and

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the selection and application of suitable technology.

After completion of this offering, Quicksilver will operate on our behalf all of the Partnership Properties, and we may in the future acquire properties operated by third parties. If Quicksilver or the applicable third-party operator is unable to conduct drilling and development activities on our properties on a timely basis, we may be unable to increase our production or offset production declines, or we will be required to write off the proved reserves attributable thereto, any of which may adversely affect our production, revenue and results of operations and our cash available for distribution. Any such write-offs of our proved reserves could reduce our ability to borrow money and could adversely impact our ability to pay distributions on the common units.

Delays in obtaining oil field equipment and increases in drilling and other service costs could adversely affect our ability to pursue our drilling program.

As commodity prices increase, demand and costs for drilling equipment, crews and associated supplies, equipment and services can increase significantly. We cannot be certain that in a higher petroleum price environment we would be able to obtain necessary drilling equipment and supplies in a timely manner, on satisfactory terms or at all, and we could experience difficulty in obtaining, or material increases in the cost of, drilling equipment, crews and associated supplies, equipment and services. In addition, drilling operations may be curtailed, delayed or canceled as a result of unexpected drilling conditions, including urban drilling, and possible title issues. As a result of increased activity levels, we have seen increases and supply limitations for the services we procure. Any such shortages or delays and price increases could adversely affect our ability to execute our drilling program and reduce our cash available for distribution to our unitholders.

Competition in our industry is intense, and we are smaller and have a more limited operating history than many of our competitors.

We compete with major and independent oil and gas companies, including Quicksilver, for property acquisitions and for the equipment and labor required to develop and operate our properties. Many of our competitors have substantially greater financial and other resources than we do, and they may be better able to absorb the burden of drilling and infrastructure costs and any changes in federal, state and local laws and regulations than we can, which would adversely affect our competitive position. In addition, there is substantial competition for investment capital in the oil and gas industry. These competitors may be able to pay more for properties and may be able to define, evaluate, bid for and purchase a greater number of properties than we can. Our ability to acquire additional properties in the future will depend upon our ability to conduct operations, to evaluate and select suitable properties and to complete transactions in this highly competitive environment. Furthermore, the oil and gas industry competes with other industries in supplying the energy and fuel needs of industrial, commercial and other consumers. Our inability to compete effectively with other oil and gas companies could have a material adverse impact on our business activities, financial condition and results of operations and our ability to make distributions to our unitholders.

If we do not make acquisitions on economically acceptable terms, our future growth and ability to pay or increase distributions will be limited.

Our ability to grow and to increase distributions to our unitholders depends in part on our ability to make acquisitions that result in an increase in available cash per unit. We may be unable to make such acquisitions because we are:

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unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with their owners;

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unable to obtain financing for such acquisitions on economically acceptable terms; or

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outbid by competitors.

If we are unable to acquire properties containing proved reserves, our total level of proved reserves will decline as a result of our production, and we will be limited in our ability to increase or possibly even to maintain our level of cash distributions to our unitholders.

Any acquisitions we complete will be subject to substantial risks that could reduce our ability to make distributions to unitholders.

One of our growth strategies is to acquire oil and gas properties that fit our acquisition profile. Even if we do make acquisitions that we believe will increase available cash per unit, these acquisitions may nevertheless result in a decrease in available cash per unit. Any acquisition involves potential risks, including, among other things:

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the validity of our assumptions about our proved reserves, future production, commodity prices, revenue, capital expenditures, operating expenses and costs;

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an inability to successfully integrate the assets we acquire;

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an inability to obtain satisfactory title to the assets we acquire;

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a decrease in our liquidity by using a significant portion of our available cash or borrowing capacity to finance acquisitions;

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a significant increase in our interest expense or financial leverage if we incur additional debt to finance acquisitions;

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the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which any indemnity we receive is inadequate;

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the diversion of management’s attention from other business concerns;

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mistaken assumptions about the overall cost of equity or debt;

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an inability to hire, train or retain qualified personnel to manage and operate our growing business and assets; and

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the occurrence of other significant changes, such as impairment of oil and gas properties, goodwill or other intangible assets, asset devaluation or restructuring charges.

Our decision to acquire a property will depend in part on the evaluation of data obtained from production reports and engineering studies, geophysical and geological analyses and seismic data and other information, the results of which are often inconclusive and subject to various interpretations.

In addition, our reviews of acquired properties are inherently incomplete because it generally is not feasible to perform an in-depth review of the individual properties involved in each acquisition, given time constraints imposed by sellers. Even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the properties to assess fully their deficiencies and potential. Inspections may not always be performed on every well, and environmental problems, such as latent contamination, are not necessarily observable even when an inspection is undertaken.

We may experience a financial loss if Quicksilver is unable to receive payment for a significant portion of our production.

Under our omnibus agreement, Quicksilver will sell our production on our behalf, and its ability to sell will depend upon the demand for natural gas, NGLs and oil from potential purchasers of our production. Quicksilver currently has only two active purchasers of our NGL production. To the extent that either reduces the volume of its NGL purchases from us, or if other purchasers of

a material portion of our production fail to perform their payment obligations to us, we could experience a temporary interruption in sales of, or a lower price for, our NGL production and our revenue and cash available for distribution could decline, which could have a material adverse effect on our results of operation and could adversely affect our ability to make cash distributions to our unitholders. To the extent that purchasers of our production rely on access to the credit or equity markets to fund their operations, there could be an increased risk that those purchasers could default in their contractual obligations to us.

Parties with whom we do business may become unable or unwilling to timely perform their obligations to us.

We enter into contracts and transactions with various third parties, including contractors, suppliers, customers, lenders and counterparties to hedging arrangements, under which such third parties incur performance or payment obligations to us. Any delay or failure on the part of one or more of such third parties to perform their obligations to us could, depending upon the nature and magnitude of such failure or failures, have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our unitholders.

The operations of the third parties on whom we rely for gathering and transportation services are subject to complex and stringent laws and regulations that require obtaining and maintaining numerous permits, approvals and certifications from various federal, state and local government authorities. These third parties may incur substantial costs in order to comply with existing laws and regulations. If existing laws and regulations governing such third-party services are revised or reinterpreted, or if new laws and regulations become applicable to their operations, these changes may affect the costs that we pay for such services. Similarly, a failure to comply with such laws and regulations by the third parties on whom we rely could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our unitholders. Please read “Business and properties—Environmental matters” and “Business and properties—Government regulation.”

We cannot control the operations of gas gathering, processing, liquids fractionation and transportation facilities we do not own or operate.

We deliver our production to market through gathering, fractionation and transportation systems that we do not own. The marketability of our production depends in part on the availability, proximity and capacity of pipeline systems owned by third parties. A portion of our production could be interrupted, or shut in, from time to time for numerous reasons, including as a result of weather conditions, accidents, loss of pipeline or gathering system access, field labor issues or strikes, maintenance of third-party facilities or capital constraints that limit the ability of third parties to construct gathering systems, processing facilities or interstate pipelines to transport our production. Disruption of our production could negatively impact our ability to market, fractionate and deliver our production. Since we do not own or operate these assets, their continuing operation is not within our control. If any of these pipelines and other facilities becomes unavailable or capacity constrained, or if further planned development of such assets is delayed or abandoned, it could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our unitholders.

Our prior and continuing relationship with Quicksilver exposes us to risks attributable to the businesses and retained liabilities of Quicksilver.

In connection with the closing of this offering, we intend to enter into an exchange agreement with Quicksilver pursuant to which Quicksilver will transfer to us all of the equity interests in Quicksilver Resources Partners Operating Ltd. (which will own all of the Partnership Properties) and certain derivative contracts. In connection with such exchange, we will agree to indemnify Quicksilver for all liabilities and obligations of Quicksilver Resources Partners Operating Ltd. (whether arising before or after the closing of this offering) except for certain limited liabilities for which Quicksilver will agree to provide limited indemnities to us. Please read “Certain relationships and related party transactions—Agreements governing the transactions—Exchange agreement.” Immediately following the closing of this offering, any claims made against us that are properly attributable to Quicksilver in accordance with these arrangements would require us to exercise our rights under the exchange agreement to obtain payment from Quicksilver. We are exposed to the risk that, in these circumstances, Quicksilver cannot, or will not, make the required payment.

Our new revolving credit facility will have restrictions and financial covenants that may restrict our business and financing activities and our ability to pay distributions to our unitholders.

We expect that our new revolving credit facility will restrict, among other things, our ability to incur debt and pay distributions in certain circumstances, and will require us to comply with customary financial covenants and specified financial ratios. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we violate any provisions of our new revolving credit facility that are not cured or waived within the specified time periods, a significant portion of our indebtedness may become immediately due and payable, and we will be prohibited from making distributions to our unitholders. We might not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, our obligations under our new revolving credit facility will be secured by substantially all of our assets, and if we are unable to repay our indebtedness under our new revolving credit facility, the lenders could seek to foreclose on our assets. Please read “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources—Liquidity and borrowing capacity” for additional detail regarding the covenants and restrictive provisions to be included in our new revolving credit facility.

Our new revolving credit facility will allow us to borrow up to the borrowing base, which is primarily based on the estimated present value of our proved reserves, discounted at 9%, and our commodity derivatives as determined semi-annually by our lenders in their sole discretion and consistent with normal oil and gas lending criteria as it exists at the determination time. The borrowing base will be redetermined by our lenders twice each year based on an engineering report with respect to our proved reserves, based on lenders’ expected future commodity prices, as adjusted for the impact of our commodity derivatives. A future decline in commodity prices could result in a redetermination that lowers our borrowing base in the future and, in such case, we could be required to repay any indebtedness in excess of the borrowing base. If we are unable to repay any borrowings in excess of a decreased borrowing base, we would be in default and no longer able to make any distributions to our unitholders.

The risks associated with our debt could adversely affect our business, financial condition, results of operations, our ability to make distributions to our unitholders and could cause our unitholders to experience a partial or total loss of their investment in us.

Subject to the limits contained in our new revolving credit facility that we expect to enter into upon the closing of this offering, we may incur additional debt. Our ability to incur additional debt and to comply with the terms of our new revolving credit facility is affected by a variety of factors, including commodity prices and their effects on our proved reserves, financial condition, results of operations and cash flows. In addition, we expect our ability to borrow under our new revolving credit facility will depend on our borrowing base, which will be redetermined twice each year based on our reserve report and such other information deemed appropriate by the administrative agent and the lenders under our new revolving credit facility. If we incur additional debt or fail to increase the quantity and value of our proved reserves, the risks that we expect to face as a result of our indebtedness could intensify.

We have demands on our cash resources, including operating expense, funding of our capital expenditures and the interest expense we expect to have on our outstanding debt. Our level of debt, the value of our oil and gas properties and other assets, the demands on our cash resources, and the provisions of our outstanding debt could have important effects on our business and our ability to make distributions to our unitholders. For example, the provisions of our outstanding debt could:

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make it more difficult for us to satisfy our obligations with respect to our debt;

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require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the amount of our cash flow available for working capital, capital expenditures, acquisitions, other general partnership purposes and distributions to our unitholders;

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require us to make principal payments if the quantity and value of our proved reserves are insufficient to support our level of borrowings;

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limit our flexibility in planning for, or reacting to, changes in the oil and gas industry;

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place us at a competitive disadvantage compared to our competitors who may have lower debt service obligations and greater financing flexibility than we do;

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limit our financial flexibility, including our ability to borrow additional funds;

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increase our interest expense on our variable rate borrowings if interest rates increase;

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limit our ability to make capital expenditures to develop our properties;

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increase our vulnerability to general adverse economic and industry conditions; and

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result in a default or event of default under our outstanding debt, which, if not cured or waived, could adversely affect our financial condition, results of operations and cash flows.

Our ability to pay principal and interest on our debt, to otherwise comply with the provisions of our outstanding debt and to refinance our debt may be affected by economic and capital markets conditions and other factors that may be beyond our control. If we are unable to service our debt and fund our other liquidity needs, we will be forced to adopt alternative strategies that may include:

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reducing or delaying capital expenditures;

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seeking additional debt financing or equity capital;

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selling assets;

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restructuring or refinancing debt; or

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reorganizing our capital structure.

We cannot assure you that we would be able to implement any of these strategies on satisfactory terms, if at all, and our inability to do so could adversely affect our ability to make distributions to our unitholders, and could cause our unitholders to experience a partial or total loss of their investment in us.

We may incur additional debt to enable us to pay our quarterly distributions, which may negatively affect our ability to pay future distributions or execute our business strategy.

We may be unable to pay the minimum quarterly distribution or the then-current distribution rate without borrowing under our new revolving credit facility or otherwise. If we use borrowings to pay distributions to our unitholders for an extended period of time rather than to fund capital expenditures and other activities relating to our operations, we may be unable to maintain or grow our business. Such a curtailment of our business activities, combined with our payment of principal and interest on our future indebtedness incurred to pay these distributions, will reduce our cash available for distribution on our units and will have a material adverse effect on our business, financial condition and results of operations. If we borrow to pay distributions to our unitholders during periods of low commodity prices and commodity prices remain low, we may have to reduce our distribution to our unitholders to avoid excessive leverage.

Increases in interest rates could adversely impact our unit price and our ability to issue additional equity and incur debt.

Interest rates on future credit facilities and debt offerings could be higher than current levels, causing our financing costs to increase accordingly. We expect that borrowings under our new revolving credit facility will be subject to a variable interest rate, and as a result, increases in interest rates will increase the cost of borrowing under our new revolving credit facility. Also, as with other yield-oriented securities, our unit price is impacted by the level of our cash distributions to our unitholders and the implied distribution yield. The distribution yield is often used by investors to compare and rank similar yield-oriented securities for investment decision-making purposes. Therefore, changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our common units, and a rising interest rate environment could have an adverse impact on our unit price, our ability to issue additional equity or incur debt, and the cost to us of any such issuance or incurrence.

Liabilities and expenses not covered by our insurance could have a material adverse effect on our business, financial condition, results of operations, and as a result, our ability to pay distributions to our unitholders.

As a result of operating hazards, regulatory risks and other uninsured risks, we could incur substantial liabilities to third parties or governmental entities. We maintain insurance against some, but not all, of such risks and losses in accordance with customary industry practice. We are not insured against all incidents, claims or damages that might occur, and pollution and environmental risks generally are not fully insurable. Any significant accident or event that is not adequately insured could adversely affect our business, financial condition and results of operations. In addition, we may be unable to economically obtain or maintain the insurance that we desire, or may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented. As a result of market conditions, premiums and deductibles for certain of our insurance policies could escalate further. In some instances, certain insurance could become unavailable or available only at reduced coverage levels. Any type of catastrophic event that is not covered by insurance could have a material adverse effect on our business, financial condition and results of operations, and as a result, our ability to pay distributions to our unitholders.

Our activities are regulated by complex laws and regulations that can adversely affect the cost, manner or feasibility of doing business.

Our operations are subject to various federal, state, and local government laws and regulations that could change in response to economic or political conditions. Matters that are typically regulated include:

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discharge permits for drilling operations;

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water obtained for drilling purposes;

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drilling permits and bonds;

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reports concerning operations;

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spacing of wells;

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disposal wells;

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unitization and pooling of properties; and

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taxation.

From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of natural gas and oil wells below actual production capacity to conserve supplies of natural gas and oil. We may incur substantial costs in order to maintain compliance with these existing laws and regulations.

In addition, laws, regulations and tax requirements frequently are changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.

We cannot assure you that existing laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations, will not materially adversely affect our business, results of operations and financial condition.

We are subject to environmental laws, regulations and permits, including greenhouse gas requirements, that may expose us to significant costs, liabilities and obligations.

We are subject to stringent and complex federal, state and local environmental laws, regulations and permits relating to, among other things, the generation, storage, handling, use, disposal, gathering, transmission and remediation of natural gas, NGLs, oil and other hazardous materials; the emission and discharge of such materials to the ground, air and water; wildlife, habitat, water and wetlands protection; the storage, use, treatment and disposal of water, including process water; the placement, operation and reclamation of wells; and the health and safety of our employees. These requirements may impose operational restrictions and remediation obligations, including requirements to close pits. In particular, many of these requirements are intended to help preserve water resources and regulate those aspects of our operations that could potentially impact surface water or groundwater. Failure to comply with these laws, regulations and permits may result in our being subject to litigation, fines or other sanctions, including the revocation of permits and suspension of operations, and could otherwise delay or impede the issuance or renewal of permits. We expect to continue to incur significant capital and other compliance costs related to such requirements.

We could be subject to joint and several strict liability for any environmental contamination at our or our predecessors’ currently or formerly owned, leased or operated properties or third-party waste disposal sites. In addition to potentially significant investigation and remediation costs, such matters can give rise to claims from governmental authorities and other third parties for fines or penalties, natural resource damages, personal injury and property damage.

These laws, regulations and permits, and the enforcement and interpretation thereof, change frequently and generally have become more stringent over time. For example, federal and state regulators are becoming increasingly focused on air emissions from our industry, including volatile organic compound emissions, which increased scrutiny could lead to heightened enforcement of existing regulations as well as the imposition of new air emission measures. With respect to greenhouse gas (“GHG”) emissions, we are currently required to report annual GHG emissions from certain of our operations, and additional GHG emission related requirements have been implemented or are in various stages of development. Any current or future GHG or other air emission requirements could curtail our operations or otherwise result in operational delays, liabilities and increased compliance costs. In addition, to the extent climate change results in more severe weather, our or our customers’ operations may be disrupted, which could curtail our exploration and production activity, increase operating costs and reduce product demand.

Our costs, liabilities and obligations relating to environmental matters could have a material adverse effect on our business, reputation, results of operations and financial condition.

Our hydraulic fracturing operations are subject to laws and regulations that could expose us to increased costs and additional operating restrictions and delays, and adversely affect production.

We rely and expect to continue to rely upon hydraulic fracturing, a practice that involves the pressurized injection of water, chemicals and other substances into rock formations to stimulate hydrocarbon production. Various federal, state and local initiatives have been implemented or are under development to regulate or further investigate the environmental impacts of hydraulic fracturing. In particular, the U.S. Environmental Protection Agency (the “EPA”) has commenced a study to determine the environmental and health impacts of hydraulic fracturing and announced

that it will propose standards for the treatment or disposal of wastewater from certain gas production operations. In July 2011, the EPA also proposed new air standards that would require measures to reduce volatile organic compound emissions at new hydraulically fractured natural gas wells and existing wells that are re-fractured. In addition, certain states and municipalities have adopted, or are considering adopting, regulations that have imposed, or could impose, more stringent permitting, transparency, disposal and well construction requirements on hydraulic fracturing operations. For example, in December 2011, the Railroad Commission of Texas finalized regulations requiring public disclosure of chemicals in fluids used in the hydraulic fracturing process. Local ordinances or other regulations also may regulate or prohibit the performance of well drilling in general and hydraulic fracturing in particular. Such laws and regulations may result in increased scrutiny or third-party claims, or otherwise result in operational delays, liabilities and increased costs.

Hydraulic fracturing requires significant quantities of water. Recently, Texas has been experiencing a drought. Any diminished access to water for use in hydraulic fracturing, whether due to usage restrictions or drought or other weather conditions, could curtail our operations or otherwise result in operations delays or increased costs.

Any current or future federal, state or local hydraulic fracturing requirements applicable to our operations, or diminished access to water for use in hydraulic fracturing, could have a material adverse effect on our business, results of operations and financial condition.

The recent adoption of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, could have an adverse effect on our ability to use derivatives to reduce the effect of commodity price risk, interest rate and other risks associated with our business.

We use commodity derivatives to manage our commodity price risk. The U.S. Congress recently adopted comprehensive financial reform legislation that, among other things, establishes comprehensive federal oversight and regulation of over-the-counter derivatives and many of the entities that participate in that market. Although the Dodd-Frank Act was enacted on July 21, 2010, the Commodity Futures Trading Commission (the “CFTC”) and the SEC, along with certain other regulators, must promulgate final rules and regulations to implement many of its provisions relating to over-the-counter derivatives. While some of these rules have been finalized, many have not and, as a result, the final form and timing of the implementation of the new regulatory regime affecting commodity derivatives remains uncertain.

In particular, on October 18, 2011, the CFTC adopted final rules under the Dodd-Frank Act establishing position limits for certain, energy commodity futures and options contracts and economically equivalent swaps, futures and options. The position limit levels set the maximum amount of a contract that a trader may own or control separately or in combination, net long or short. The final rules also contain limited exemptions from position limits for certain bona fide hedging transactions and positions that were established in good faith before the initial limits become effective. The final rules became effective on January 17, 2012, but position limits will be phased in over time according to a specified schedule and the implementation of certain position limits is dependent on finalization of certain other rules to be jointly promulgated by the CFTC and the SEC. In addition, on December 2, 2011, the International Swaps and Derivatives Association, Inc. and the Securities Industry and Financial Markets Association filed a legal challenge to the final rules, claiming, among other things, that the rules may adversely impact commodities markets and market participants, including end-users, by reducing liquidity and increasing price volatility.

While the timing of implementation of the final rules on position limits, their applicability to, and impact on, us and the success of any legal challenge to their validity remain uncertain, there can be no assurance that they will not have a material adverse impact on us by affecting the prices of or market for commodities relevant to our operations and/or by reducing the availability to us of commodity derivatives.

The Dodd-Frank Act will also impose a number of other new requirements on certain over-the-counter derivatives that may have a material adverse effect on us. The Dodd-Frank Act will also subject certain swap dealers and major swap participants to significant new regulatory requirements which in certain cases may cause them to conduct their activities through new entities that may not be as creditworthy as our current counterparties. The impact of this new regulatory regime on the availability, pricing and terms and conditions of commodity derivatives remains uncertain, but there can be no assurance that it will not have a materially adverse effect on our ability to hedge our exposure to commodity prices.

In addition, under Dodd-Frank swap dealers and major swap participants will be required to collect initial and variation margin from certain end-users of over-the-counter derivatives. While rules implementing many of these requirements have been proposed by relevant regulators, not all have been finalized and therefore the timing of their implementation and their applicability to us remains uncertain. Depending on the final rules and definitions ultimately adopted, we might in the future be required to post collateral for some or all of our derivative transactions. Posting of collateral could cause liquidity issues for us by reducing our ability to use our cash or other assets for capital expenditures or other partnership purposes and could therefore reduce our ability to execute strategic hedges to reduce commodity price uncertainty and thus protect cash flows.

If we reduce our use of derivatives as a result of the Dodd-Frank Act, the regulations promulgated under it and the changes to the nature of the derivatives markets, our results of operations may become more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures and fund unitholder distributions. In addition, the Dodd-Frank Act was intended, in part, to reduce the volatility of commodity prices, which some legislators attributed to speculative trading in derivatives and commodity contracts related to natural gas, NGLs and oil. Our revenue could, therefore, be adversely affected if commodity prices were to decrease.

Lastly, the Dodd-Frank Act requires, no later than 270 days after the enactment of the Act, the SEC to promulgate rules requiring SEC reporting companies that engage in the commercial development of oil, natural gas or minerals, to include in their annual reports filed with the SEC disclosure about all payments (including taxes, royalties, fees and other amounts) made by the issuer or an entity controlled by the issuer to the United States or to any non-U.S. government for the purpose of commercial development of oil, natural gas or minerals. As these rules are not yet effective, we are unable to predict what form these rules may take and whether we will be able to comply with them without adversely impacting our business, or at all. Any of these consequences could have a material adverse effect on our business, financial condition and results of operations.

Risks inherent in an investment in us

Our general partner will have control over all decisions related to our operations. Upon consummation of this offering, Quicksilver will indirectly own an aggregate % of our outstanding common units, all of our subordinated units and all of the voting membership interests in our general partner. The directors and officers of our general partner have fiduciary and other duties to our general partner and its owner, Quicksilver, with respect to managing the business of our general partner. In addition, certain directors and officers of our general partner are directors and/or officers of Quicksilver and its affiliates, and certain of our general partner’s executive officers and directors will be compensated by Quicksilver and may have interests and other economic incentives in Quicksilver. As a result, conflicts of interest may arise in the future between our general partner and its affiliates (including Quicksilver or any of their respective directors, officers, employees or agents), on the one hand, and us and our unitholders on the other. Our partnership agreement contains provisions that reduce the standards to which our general partner, its board of directors (including any committee thereof) and its affiliates (including Quicksilver) and the directors and officers of our general partner and its affiliates might otherwise be held under the state law fiduciary duties that would otherwise be applicable. Please read “Conflicts of interest and fiduciary duties—Conflicts of interest.” These potential conflicts include, among others, the following situations:

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neither our partnership agreement nor any other agreement requires Quicksilver or its affiliates to pursue a business strategy that favors us. The directors and officers of Quicksilver have fiduciary and other duties with respect to managing the business of our general partner, Quicksilver and its affiliates, which may be contrary to our interests;

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our general partner is allowed to take into account the interests of parties other than us, such as its owner, in resolving or authorizing courses of action in respect of conflicts of interest;

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Quicksilver and its affiliates, other than our general partner, are not limited in their ability to compete with us, including with respect to future acquisition opportunities, and, except with respect to the properties in the Barnett Shale Counties over which we have a right of first offer as provided in our omnibus agreement, are under no obligation to offer assets to us. Please read “Conflicts of interest and fiduciary duties—Conflicts of interest—There is nothing in the partnership or any other agreement that limits the ability of Quicksilver and its affiliates (other than our general partner) to compete with us, which could cause conflicts of interest and limit our ability to develop and grow our business”;

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except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval;

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many of the officers and directors of our general partner who will provide services to us will devote time to Quicksilver and its affiliates, and may be compensated for services rendered to Quicksilver;

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our general partner has limited, and in some instances, eliminated its liability and reduced and, in some instances, eliminated its fiduciary and other duties, and has also restricted the remedies available to our unitholders for actions that, without such limitations, reductions, and restrictions, might have constituted breaches of fiduciary and other duties under applicable

law. By purchasing common units, unitholders are consenting to some actions, conflicts of interests and mechanisms for resolving potential conflicts of interest that might otherwise have constituted a breach of fiduciary or other duties under applicable law;

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our general partner determines the amount and timing of our drilling program and related capital expenditures, asset purchases and sales, borrowings, issuance of additional partnership interests, other investments, including investment capital expenditures in other partnerships with which our general partner is or may become affiliated, and the creation, reduction or increase of cash reserves, each of which can affect the amount of cash that is distributed to unitholders;

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our general partner, with the concurrence of the conflicts committee of the board of directors of our general partner, or the conflicts committee, determines whether a cash expenditure is classified as a growth capital expenditure, which does not reduce operating surplus. This determination can affect the amount of cash that is distributed to our unitholders and to our general partner, the amount of adjusted operating surplus in any given period and the ability of the subordinated units to convert into common units;

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we and our general partner will enter into an omnibus agreement with Quicksilver in connection with this offering, pursuant to which, among other things, Quicksilver will operate our assets and perform other general, administrative and operational services for us and our general partner;

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our general partner is entitled to determine which costs incurred by it and its affiliates, including Quicksilver, are reimbursable by us. Such costs may include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf, and expenses allocated to our general partner by its affiliates;

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our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a distribution on the subordinated units, to make incentive distributions or to accelerate the expiration of the subordination period;

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our partnership agreement permits us to classify up to $40 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on our subordinated units or to our general partner in respect of the general partner interest or the incentive distribution rights;

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our general partner decides whether to retain separate counsel, accountants, or others to perform services for us;

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our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our general partner’s incentive distribution rights without the approval of the conflicts committee or our unitholders. This election may result in lower distributions to our common unitholders in certain situations;

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our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf;

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our general partner intends to limit its liability regarding our contractual and other obligations and, in some circumstances, is entitled to be indemnified by us;

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our general partner may exercise its limited right to call and purchase common units if it and its affiliates own more than 80% of the common units; and

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our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates, including Quicksilver.

Please read “Certain relationships and related party transactions” and “Conflicts of interest and fiduciary duties.”

Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. Unitholders will not elect our general partner or its board of directors on an annual or other continuing basis. The board of directors of our general partner will be appointed by Quicksilver. Furthermore, if the unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. As a result of these limitations, the price at which the common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price.

Our general partner has control over all decisions related to our operations. Since, upon consummation of this offering, Quicksilver will own our general partner and will own approximately % of our outstanding common units and all of our subordinated units, the other unitholders will not have an ability to influence any operating decisions and will not be able to prevent us from entering into any transactions. Our partnership agreement generally may not be amended during the subordination period without the approval of our public common unitholders. However, our partnership agreement can be amended with the consent of our general partner and the approval of the holders of a majority of our outstanding common units (including common units held by Quicksilver and its affiliates) after the subordination period has ended. Assuming we do not issue any additional common units and Quicksilver does not transfer its common units, Quicksilver will have the ability to amend our partnership agreement, including our policy to distribute all of our available cash to our unitholders, without the approval of any other unitholder once the subordination period ends. Furthermore, the goals and objectives of Quicksilver and its affiliates that hold our common units relating to us may not be consistent with those of a majority of the other unitholders. Please read “—Our general partner and its affiliates will own a controlling interest in us and will have conflicts of interest with, and owe limited fiduciary duties to, us, which may permit them to favor their own interests to the detriment of our unitholders.”

Even if our unitholders are dissatisfied, they cannot remove our general partner without Quicksilver’s consent.

The public unitholders will be unable initially to remove our general partner without Quicksilver’s consent because Quicksilver will own sufficient units upon completion of this offering to be able to prevent our general partner’s removal. The vote of the holders of at least 66²/3% of all outstanding units voting together as a single class is required to remove our general partner. Upon consummation of this offering, Quicksilver will own approximately % of our outstanding common units (approximately % if the underwriters exercise their option to purchase additional common units in full), and all of our subordinated units.

Also, if our general partner is removed without cause during the subordination period and units held by Quicksilver and its affiliates are not voted in favor of that removal, all remaining subordinated units will automatically convert into common units and any existing arrearages on our common units will be extinguished. A removal of our general partner under these circumstances would adversely affect our common units by prematurely eliminating their distribution and liquidation preference over our subordinated units, which would otherwise have continued until we had met certain distribution and performance tests. Cause is narrowly defined to mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding the general partner liable for actual fraud or willful or wanton misconduct in its capacity as our general partner. Cause does not include most cases of charges of poor business management, so the removal of the general partner because of the unitholder’s dissatisfaction with our general partner’s performance in managing our partnership will most likely result in the termination of the subordination period and conversion of all subordinated units to common units.

To maintain and increase our levels of production, we will need to acquire oil and gas properties. All of the officers of our general partner hold similar positions with Quicksilver, and many of the directors of our general partner, who are responsible for managing our general partner’s direction of our operations and acquisition activities, hold positions of responsibility with other entities, including Quicksilver, that are in the business of identifying and acquiring oil and gas properties. After the closing of this offering, officers of our general partner will continue to devote significant time to the business of Quicksilver. We cannot assure you that any conflicts that may arise between us and our unitholders, on the one hand, and Quicksilver, on the other hand, will be resolved in our favor. The positions held by these directors and officers with other entities, including Quicksilver, may give rise to fiduciary or other duties that are in conflict with the fiduciary or other duties they owe to us. For example, we will need to acquire oil and gas properties to maintain and increase our levels of production. Our officers and directors may become aware of business opportunities that may be appropriate for presentation to us as well as to the other entities with which they are or may become affiliated. Due to these existing and potential future affiliations, they may present potential business opportunities to other entities prior to presenting them to us, which could cause additional conflicts of interest. They may also decide that certain opportunities are more appropriate for other entities with which they are affiliated, and as a result, they may elect not to present them to us. These conflicts may not be resolved in our favor. For additional discussion of our management’s business affiliations and the potential conflicts of interest of which our unitholders should be aware, please read “Business and properties—Our relationship with Quicksilver” and “Conflicts of interest and fiduciary duties.”

Neither we nor our general partner have any employees and we will rely solely on Quicksilver to operate our assets. Upon consummation of this offering, we and our general partner will enter

into an omnibus agreement with Quicksilver, pursuant to which, among other things, Quicksilver will agree to operate our assets and perform other general, administrative and operational services for us and our general partner.

Quicksilver will provide substantially similar activities with respect to its own assets and operations. Because Quicksilver will be providing services to us that are substantially similar to those performed for itself, Quicksilver may not have sufficient human, technical and other resources to provide those services at a level that Quicksilver would be able to provide to us, if it were solely focused on our business and operations. Quicksilver may make internal decisions regarding the allocation of its available resources and expertise that may prioritize Quicksilver’s interests over ours and may not be in our best interest. There is no requirement that Quicksilver favor us over itself in providing its services. If the employees of Quicksilver and its affiliates do not devote sufficient attention to the management and operation of our business, our financial results may suffer and our ability to make distributions to our unitholders may be reduced.

Quicksilver and its affiliates, other than our general partner, will not be limited in their ability to compete with us, which could cause conflicts of interest and limit our ability to develop and grow our business.

Neither our partnership agreement nor our omnibus agreement will prohibit Quicksilver and its affiliates, other than our general partner, from owning assets or engaging in businesses that compete directly or indirectly with us. In addition, Quicksilver and its affiliates, other than our general partner, may acquire or develop additional oil and gas properties or other assets in the future, without any obligation to offer us the opportunity to acquire or develop any of those assets.

Quicksilver is an established participant in the oil and gas industry, and has resources greater than ours, which may make it more difficult for us to compete with it with respect to commercial activities as well as for potential acquisitions. As a result, competition from Quicksilver could adversely impact our results of operations and cash available for distribution to our unitholders. Please read “Conflicts of interest and fiduciary duties.”

Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow our proved reserves and production.

Our partnership agreement provides that we will distribute all of our available cash each quarter. As a result, we may be dependent on the issuance of additional common units and other partnership securities and borrowings to finance our growth. A number of factors will affect our ability to issue securities and borrow money to finance growth, as well as the costs of such financings, including:

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general economic and market conditions, including interest rates, prevailing at the time we desire to issue securities or borrow funds;

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conditions in the oil and gas industry;

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the market price of, and demand for, our common units;

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our results of operations and financial condition; and

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commodity prices.

Cost reimbursements due to Quicksilver and our general partner for services provided to us or on our behalf will be substantial and will reduce our cash available for distribution to our unitholders.

Prior to making distributions on our common units, we will reimburse our general partner and its affiliates for all direct and indirect expenses they incur on our behalf. These expenses include amounts paid to third parties and an allocation of expenses incurred by our general partner in providing services on our behalf. Our partnership agreement does not set a limit on the amount of expenses for which our general partner may be reimbursed. The reimbursements to Quicksilver and our general partner will reduce the amount of cash otherwise available for distribution to our unitholders.

At the closing of this offering, we will enter into agreements with Quicksilver and our general partner pursuant to which, among other things, we will make payments to Quicksilver. These payments will be substantial and will reduce the amount of cash available for distribution to unitholders. These include the following:

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an omnibus agreement pursuant to which, among other things, Quicksilver will provide general, administrative and operational services for us and our general partner; and

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a tax sharing agreement pursuant to which we will pay Quicksilver (or its affiliates) our share of state and local income and other taxes for which our results are included in a combined or consolidated tax return filed by Quicksilver or its affiliates. It is possible that Quicksilver or its affiliates may use its tax attributes to cause its combined or consolidated group, of which we may be a member for this purpose, to owe less or no tax. In this situation, we would nevertheless pay Quicksilver or its affiliates the tax we would have owed had we filed our own separate tax return, without the benefit of any tax attributes of Quicksilver or its affiliates, even if the actual cash tax expense of Quicksilver or its affiliates is less than the amount we pay to Quicksilver or its affiliates. Currently, the Texas franchise tax (which has a maximum effective tax rate of 0.7% of federal gross income apportioned to Texas) is the only tax that will be included in a combined or consolidated tax return with Quicksilver or its affiliates.

Our general partner will be required to deduct estimated maintenance capital expenditures from our operating surplus, which may result in less cash available for distribution to unitholders from operating surplus than if actual maintenance capital expenditures were deducted.

Maintenance capital expenditures are capital expenditures that are intended to maintain our asset base over the long term and may include expenditures to replace our reserves (including undeveloped leasehold acreage), whether through the development and production of an existing leasehold or the acquisition or development of a new oil or natural gas property. Our partnership agreement requires our general partner to deduct estimated, rather than actual, maintenance capital expenditures from operating surplus in determining cash available for distribution from operating surplus. The amount of estimated maintenance capital expenditures deducted from operating surplus will be subject to review and change by our conflicts committee at least once a year. Our partnership agreement does not cap the amount of maintenance capital expenditures that our general partner may estimate. In years when our estimated maintenance capital expenditures are higher than actual maintenance capital expenditures, the amount of cash available for distribution to unitholders from operating surplus will be lower than if actual maintenance capital expenditures had been deducted from operating surplus. On the other

hand, if our general partner underestimates the appropriate level of estimated maintenance capital expenditures, we will have more cash available for distribution from operating surplus in the short term but will have less cash available for distribution from operating surplus in future periods when we have to increase our estimated maintenance capital expenditures to account for the previous underestimation.

If we distribute cash from capital surplus, which is analogous to a return of capital, our minimum quarterly distribution and the distribution thresholds after which the incentive distribution rights entitle our general partner to an increased percentage of distributions will be proportionately decreased.

Our cash distributions will be characterized as coming from either operating surplus or capital surplus. Operating surplus is defined in our partnership agreement, and generally means amounts we receive from operating sources, such as sales of our production, less operating expenditures, such as production costs and taxes, and less estimated maintenance capital expenditures, which are generally amounts we estimate we will need to spend in the future to maintain our asset base over the long term. Capital surplus is defined in our partnership agreement included in this prospectus as Appendix A, and generally would result from cash received from non-operating sources such as sales of properties and issuances of debt and equity interests. Cash representing capital surplus, therefore, is analogous to a return of capital. Distributions of capital surplus are made to our unitholders and our general partner in proportion to their percentage interests in us, or 99.9% to our unitholders and 0.1% to our general partner, and will result in a decrease in our minimum quarterly distribution and the target distribution thresholds. For a more detailed description of operating surplus, capital surplus and the effect of distributions from capital surplus, please read “Provisions of our partnership agreement relating to cash distributions.”

Our partnership agreement allows us to add $ million to operating surplus. As a result, a portion of this amount, which is analogous to a return of capital, may be distributed to the general partner and its affiliates, as holders of incentive distribution rights, rather than to holders of common units as a return of capital.

We have the right to borrow to make distributions. Repayment of these borrowings will decrease cash available for future distributions, and covenants in our new revolving credit facility may restrict our ability to make distributions.

Our partnership agreement allows us to borrow to make distributions. We may make short-term borrowings under our new revolving credit facility to make distributions. The primary purpose of these borrowings would be to mitigate the effects of short-term fluctuation in our working capital that would otherwise cause volatility in our quarter-to-quarter distributions.

The terms of our new revolving credit facility will restrict our ability to pay distributions if we do not satisfy the financial and other covenants in the facility.

We may not make cash distributions during periods when we record net income.

The amount of cash we have available for distribution to our unitholders depends primarily on our cash flow, including cash from reserves established by our general partner, working capital or other borrowings, and not solely on profitability, which will be affected by non-cash items. As a result, we may make cash distributions to our unitholders during periods when we record net losses and may not make cash distributions to our unitholders during periods when we record net income.

Control of our general partner and its incentive distribution rights may be transferred to a third party without unitholder consent.

Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of the unitholders. Furthermore, our partnership agreement does not restrict the ability of Quicksilver from transferring all or a portion of its ownership interest in our general partner to a third party. The new owner of our general partner would then be in a position to replace the board of directors and officers of our general partner with their own choices and thereby influence the decisions made by the board of directors and officers in a manner that may not be aligned with the interests of our unitholders.

In addition, our general partner may transfer its incentive distribution rights to a third party at any time without the consent of our unitholders. If our general partner transfers its incentive distribution rights to a third party but retains its general partner interest, our general partner may not have the same incentive to grow our partnership and increase quarterly distributions to unitholders over time as it would if it had retained ownership of its incentive distribution rights.

Our partnership agreement restricts the limited voting rights of unitholders, other than our general partner and its affiliates, including Quicksilver, owning 20% or more of our common units, which may limit the ability of significant unitholders to influence the manner or direction of management.

Our partnership agreement restricts unitholders’ limited voting rights by providing that any common units held by a person, entity or group that owns 20% or more of any class of common units then outstanding (other than our general partner, its affiliates, their transferees and persons who acquired such common units with the prior approval of the board of directors of our general partner) cannot vote on any matter. Our partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting unitholders’ ability to influence the manner or direction of management.

Our partnership agreement limits our general partner’s fiduciary duties to unitholders and restricts the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.

Our partnership agreement contains provisions that reduce or eliminate the fiduciary and other duties that our general partner (and its board of directors and any committee of the board of directors, its affiliates and any of the directors and officers of our general partner or any of its affiliates) might have otherwise owed to us and our unitholders under Delaware law. For example, our partnership agreement:

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provides that except as otherwise expressly provided in any other agreement entered into by Quicksilver (which is used in this prospectus to mean Quicksilver and its consolidated subsidiaries other than our general partner and us) and our general partner or us, Quicksilver and the directors, officers, employees and other agents of Quicksilver (in their capacities as such) will have no fiduciary or other duties to us or our unitholders and may consider any interests or factors that they desire, including their own interests, to the exclusion of all others. As a result, for example, Quicksilver will have no fiduciary or other duty to us or our unitholders in exercising its rights to vote or transfer its units and may exercise such rights in their sole discretion;

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provides that except as described in the fifth bullet point below, our general partner, its board of directors (and any committee thereof) and its directors and officers, when acting on behalf of our general partner or us, will not be subject to any fiduciary or other duty to us or our unitholders other than the obligation to act in good faith (which is defined in the partnership agreement to mean acting with the actual belief that it is in, or not opposed to, the best interest of the partnership);

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provides that in taking any action or making any decision on behalf of the general partner or us (including decisions with respect to potential conflicts of interests), our general partner, its board of directors (and any committee thereof) and its directors and officers will be presumed to have acted in good faith (as defined in the partnership agreement), and such action or decision will be conclusively deemed approved by and binding on all of our unitholders and not a breach of the partnership agreement or any other agreement contemplated to be entered into in connection with this offering or any fiduciary or other duty owed to us or our unitholders, and that in any proceeding brought by or on behalf of any unitholder or us, the person bringing such proceeding will have the burden of overcoming such presumption;

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provides that in taking any action or making any decision on behalf of the general partner or us, our general partner, its board of directors (and any committee thereof) and its directors and officers are not required under the partnership agreement or otherwise to consider the interests of any person other than the partnership and in no event are they under any duty to consider the separate interests of our unitholders (including, without limitation, the tax consequences to unitholders) or of any particular unitholder in granting (or not granting) any approvals or making any decisions, including deciding whether to cause the partnership to take (or decline to take) any actions;

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provides that in making certain decisions, our general partner, its board of directors (and any committee thereof) and its directors and officers will not be subject to any fiduciary or other duty (including any duty to act in good faith) and may consider any interests or factors that it desires, including its own interests, to the exclusion of all others. Examples of such decisions include our general partner’s exercise of its right to vote or transfer its general partner or other units or the incentive distribution rights, its registration rights, its limited call rights, its right to reset the amount of the minimum quarterly distribution and target distribution levels and receive common units in exchange therefor, any other rights to sell or convert its general partner units or incentive distribution rights or its determination whether or not to consent to a merger, consolidation or sale of substantially all of our assets or any amendment to the partnership agreement;

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provides that any resolution or course of action with respect to a conflict of interest between our general partner or any of its affiliates (or any of their respective directors, officers, employees or other agents), on the one hand, and us or our unitholders, on the other hand, shall be conclusively deemed to be approved by and binding on all of our unitholders and not a breach of the partnership agreement or any other agreement contemplated to be entered into in connection with this offering or any fiduciary or other duty owed to us or our unitholders if it is:

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approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner or any of its affiliates;

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approved by a majority of the conflicts committee acting in good faith;

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on terms no less favorable to us than those generally being provided to or available from unrelated third parties, as determined by a majority of the board of directors of our general partner acting in good faith; or

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fair and reasonable to us, as determined by a majority of the board of directors of our general partner acting in good faith.

The conflicts committee (in granting approval under the second bullet point) and the board of directors (in determining the “fair and reasonable” nature to us under the fourth bullet point) shall each be authorized to consider (i) the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest, (ii) the totality of the relationships among the parties involved (including other transactions that may be particularly favorable or advantageous to us), (iii) any customary or accepted industry practices and any customary or historical dealings with a particular person, (iv) any applicable generally accepted accounting practices or principles and (v) such additional factors as the conflicts committee or the board of directors determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. If the conflicts committee grants approval pursuant to the second bullet point or the board of directors determines that the resolution or course of action taken with respect to a conflict of interest satisfies the third or fourth bullet points, then it shall be presumed that they acted in good faith, and in any proceeding brought by or on behalf of any unitholder or us challenging such decision, the person bringing such proceeding will have the burden of overcoming such presumption; and

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provides that our general partner, its board of directors (and any committee thereof), its affiliates and the directors, officers, employees and other agents of our general partner and its affiliates will not be liable for monetary damages to us or our limited partners for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that such person acted in bad faith or engaged in fraud or willful misconduct, or, in the case of a criminal matter, acted with knowledge that the conduct was criminal.

By purchasing a common unit, a unitholder will become bound by the provisions in the partnership agreement, including the provisions discussed above.

Our right of first offer to acquire certain of Quicksilver’s or Quicksilver’s controlled subsidiaries’ producing properties and right to participate in acquisition opportunities with Quicksilver are subject to risks and uncertainty, and thus may not enhance our ability to grow our business.

The consummation and timing of any future transactions pursuant to such right will depend upon, among other things, our ability to negotiate definitive agreements with respect to such opportunities and our ability to obtain financing on acceptable terms. We can offer no assurance that we will be able to successfully consummate any future transactions pursuant to this right. Additionally, Quicksilver is under no obligation to accept any offer made by us to acquire properties in the Barnett Shale Counties that it or its controlled subsidiaries may offer for sale. Furthermore, for a variety of reasons, we may decide not to exercise this right when it becomes available, and our decision will not be subject to unitholder approval. The initial term of our

omnibus agreement will be five years, and our omnibus agreement will automatically renew for additional one-year terms thereafter, unless either party provides 180 days written notice of its intent not to renew. Please read “Certain relationships and related party transactions—Agreements governing the transactions—Omnibus agreement.”

We may issue an unlimited number of additional units, including units that are senior to the common units, without unitholder approval, which would dilute unitholders’ ownership interests.

Our partnership agreement does not limit the number of additional common units that we may issue at any time without the approval of our unitholders. In addition, we may issue an unlimited number of units that are senior to the common units in right of distribution, liquidation and voting. The issuance by us of additional common units or other equity interests of equal or senior rank will have the following effects:

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our unitholders’ proportionate ownership interest in us will decrease;

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the amount of cash available for distribution on each unit may decrease;

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because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;

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the ratio of taxable income to distributions may increase;

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the relative voting strength of each previously outstanding unit may be diminished; and

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the market price of our common units may decline.

Once our common units are publicly traded, Quicksilver may sell common units in the public markets, which sales could have an adverse impact on the trading price of the common units.

After the sale of the common units offered hereby, Quicksilver will own an aggregate of of our outstanding common units and all of our subordinated units, which convert into common units at the end of the subordination period. Once our common units are publicly traded, the sale of these units, including common units issued upon the conversion of the subordinated units, in the public markets could have an adverse impact on the price of the common units or on any trading market that may develop.

Our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our general partner’s incentive distribution rights without the approval of the conflicts committee or our unitholders. This election may result in lower distributions to our common unitholders in certain situations.

Our general partner has the right (but not the obligation), at any time when there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (25%) for each of the prior four consecutive fiscal quarters, to reset the initial target distribution levels at higher levels based on our cash distribution at the time of the exercise of the reset election. Following any reset election by our general partner, the minimum quarterly distribution will be reset to an amount equal to the average cash contribution per common unit for the two fiscal quarters immediately preceding the reset election (such amount is referred to as the “reset minimum quarterly distribution”) and the target distribution levels will be reset to correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution.

If our general partner elects to reset the target distribution levels, it will be entitled to receive a number of common units and general partner units. The number of common units to be issued to our general partner will be equal to that number of common units which would have entitled their holder to an average aggregate quarterly cash distribution in the prior two quarters equal to the average of the distributions to our general partner on the incentive distribution rights in the prior two quarters. Our general partner will be issued the number of general partner units necessary to maintain our general partner’s interest in us that existed immediately prior to the reset election. We anticipate that our general partner would exercise this reset right (if at all) only to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such conversion. However, it is possible that our general partner could exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions it receives related to its incentive distribution rights and may, therefore, desire to be issued common units rather than retain the right to receive incentive distributions based on the initial target distribution levels. As a result, a reset election may cause our common unitholders to experience a reduction in the amount of cash distributions that our common unitholders would have otherwise received had we not issued new common units and general partner units to our general partner in connection with resetting the target distribution levels. Please read “Provisions of our partnership agreement relating to cash distributions—General partner’s right to reset incentive distribution levels.”

Units held by persons who our general partner determines are not eligible holders will be subject to redemption.

To comply with U.S. laws with respect to the ownership of interests in oil and gas leases on federal lands, we have adopted certain requirements regarding those investors who may own our common units. As used herein, an Eligible Holder means a person or entity qualified to hold an interest in oil and gas leases on federal lands. As of the date hereof, Eligible Holder means:

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a citizen of the United States;

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a corporation organized under the laws of the United States or of any state thereof;

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a public body, including a municipality; or

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an association of U.S. citizens, such as a partnership or limited liability company, organized under the laws of the United States or of any state thereof, but only if such association does not have any direct or indirect foreign ownership, other than foreign ownership of stock in a parent corporation organized under the laws of the United States or of any state thereof.

Onshore mineral leases or any direct or indirect interest therein may be acquired and held by aliens only through stock ownership, holding or control in a corporation organized under the laws of the United States or of any state thereof. Unitholders who are not persons or entities who meet the requirements to be an Eligible Holder run the risk of having their common units redeemed by us at the then-current market price. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our general partner. Please read “The partnership agreement—Non-citizen assignees; redemption.”

Common units held by persons who are non-taxpaying assignees will be subject to the possibility of redemption.

If our general partner determines that our not being treated as an association taxable as a corporation or otherwise taxable as an entity for U.S. federal income tax purposes, coupled with the tax status (or lack of proof thereof) of one or more of our limited partners, has, or is reasonably likely to have, a material adverse effect on the maximum applicable rate that can be charged to customers by our subsidiaries, then our general partner may adopt such amendments to our partnership agreement as it determines are necessary or advisable to obtain proof of the U.S. federal income tax status of our limited partners (and their owners, to the extent relevant) and permit us to redeem the units held by any person whose tax status has or is reasonably likely to have a material adverse effect on the maximum applicable rate that can be charged to customers by our subsidiaries or who fails to comply with the procedures instituted by our general partner to obtain proof of the U.S. federal income tax status. Please read “The partnership agreement—Non-taxpaying assignees; redemption.”

Our general partner has a call right that may require common unitholders to sell their common units at an undesirable time or price.

If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price that is the greater of (i) the highest cash price paid by our general partner or any of its affiliates for any common units purchased within the 90 days preceding the date on which our general partner first mails notice of its election to purchase those common units; and (ii) the average daily closing prices of our common units over the 20 days preceding the date three days before the date the notice is mailed. As a result, our unitholders may be required to sell their common units at an undesirable time or price and may not receive any return on their investment. Our unitholders also may incur a tax liability upon a sale of their common units. Upon consummation of this offering, our general partner will own approximately % of our outstanding common units and all of our subordinated units. For additional information about this call right, please read “The partnership agreement—Limited call right.”

Our unitholders’ liability may not be limited if a court finds that unitholder action constitutes control of our business.

A general partner of a partnership generally has unlimited liability for the obligations of the partnership, except for those contractual obligations of the partnership that are expressly made without recourse to the general partner. Our partnership is organized under Delaware law and we conduct business in a number of other states. The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in some of the other states in which we do business. A unitholder could be liable for our obligations as if it was a general partner if:

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a court or government agency determined that we were conducting business in a state but had not complied with that particular state’s partnership or limited partnership statute; or

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a unitholder’s right to act with other unitholders to remove or replace the general partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constitute “control” of our business.

Please read “The partnership agreement—Limited liability” for a discussion of the implications of the limitations of liability on a unitholder.

Our unitholders may have liability to repay distributions.

Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, we may not make distributions to unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to us are not counted for purposes of determining whether a distribution is permitted. Delaware law provides that for a period of three years from the date of an impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. A purchaser of common units who becomes a limited partner is liable for the obligations of the transferring limited partner to make contributions to us that are known to such purchaser of common units at the time it became a limited partner and for unknown obligations if the liabilities could be determined from our partnership agreement.

Our unitholders may have limited liquidity for their common units, a trading market may not develop for the common units and our unitholders may be unable to resell their common units at the initial public offering price.

Prior to this offering, there has been no public market for the common units. After this offering, there will be publicly traded common units. We do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market might be. Our unitholders may not be able to resell their common units at or above the initial public offering price. Additionally, a lack of liquidity would likely result in wide bid-ask spreads, contribute to significant fluctuations in the market price of the common units and limit the number of investors who are able to buy the common units. All of the common units that are issued to affiliates of our general partner, or % of our outstanding common units, will be subject to resale restrictions under a 180-day lock-up agreement with the underwriters. Each of the lock-up agreements with the underwriters may be waived in the discretion of certain of the underwriters. Sales by affiliates of our general partner of a substantial number of our common units in the public markets following this offering, or the perception that such sales might occur, could have a material adverse effect on the price of our common units or could impair our ability to obtain capital through an offering of equity securities. In addition, we have agreed to provide registration rights to our general partner and its affiliates. Under our partnership agreement, our general partner and its affiliates have registration rights relating to the offer and sale of any units that they hold, subject to certain limitations.

If our common unit price declines after the initial public offering, our unitholders could lose a significant part of their investment.

The initial public offering price for the common units will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of the market price of the common units that will prevail in the trading market. The market price of our common units could be subject to wide fluctuations in response to a number of factors, most of which we cannot control, including:

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changes in commodity prices;

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changes in securities analysts’ recommendations and their estimates of our financial performance;

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public reaction to our press releases, announcements and filings with the SEC;

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fluctuations in broader securities market prices and volumes, particularly among securities of oil and gas companies and securities of publicly traded limited partnerships and limited liability companies;

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changes in market valuations of similar companies;

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departures of key personnel;

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commencement of or involvement in litigation;

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variations in our quarterly results of operations or those of other oil and gas companies;

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variations in the amount of our quarterly cash distributions to our unitholders;

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future issuances and sales of our common units; and

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changes in general conditions in the U.S. economy, financial markets or the oil and gas industry.

In recent years, the securities market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to the operating performance of these companies. Future market fluctuations may result in a lower price of our common units.

Our unitholders will experience immediate and substantial dilution of $ per unit.

The assumed initial offering price of $ per common unit (the midpoint of the price range set forth on the cover of this prospectus) exceeds our net tangible book value after this offering of $ per common unit. Based on the assumed initial offering price of $ per common unit, our unitholders will incur immediate and substantial dilution of $ per common unit. This dilution will occur primarily because the assets contributed by Quicksilver and its affiliates are recorded in accordance with GAAP at their historical cost and not at their fair value. The impact of such dilution would be magnified upon any conversion of the incentive distribution rights into common units. Please read “Dilution.”

Our predecessor has a material weakness in its internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential unitholders could lose confidence in our financial reporting, which would harm our business and the trading price of our units.

Effective internal control is necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. If we cannot provide reliable financial reports, our reputation and operating results will be harmed.

Prior to the completion of this offering, the Partnership Properties and commodity derivatives that comprise our predecessor were owned by Quicksilver and were not held in a separate legal entity or operated independently. As a result, there were no dedicated accounting personnel to develop accounting processes and establish internal control over financial reporting for our predecessor. In connection with their audit of the historical carve out financial statements of our predecessor, our independent registered accounting firm identified a number of internal control deficiencies that in the aggregate constituted a material weakness. The internal control deficiencies related to the completeness and precision of the review procedures used in preparing certain information included in the historical carve out financial statements of our predecessor. A “material weakness” is a deficiency, or combination of deficiencies, in internal controls such that there is a reasonable possibility that a material misstatement of our predecessor’s financial statements will not be prevented or detected in a timely basis.

We have commenced the remediation process for the material weakness by dedicating existing personnel and hiring new personnel who are charged with the responsibility of developing and maintaining an appropriate accounting process and system of internal controls, including an augmented review process. Although we believe we are addressing the internal control deficiencies that led to the material weakness, the measures we have taken and will take may not be effective. Consequently, if this or another material weakness or significant deficiencies occur in the future, it could affect the financial results that we report or create a perception that our reported financial condition or results of operations are not fairly presented. Either of those events could have an adverse effect on the value of our units.

We are not currently required to comply with the SEC’s rules regarding Section 404 of the Sarbanes-Oxley Act of 2002, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a publicly traded partnership, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act of 2002, which will require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. Though we will be required to disclose changes made to our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC, which we believe will be as of December 31, 2012. To comply with the requirements of being a publicly traded partnership, we may need to implement or augment internal controls, reporting systems and procedures and hire additional accounting and finance staff.

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting until we make our first annual

assessment of our internal control over financial reporting. If so warranted, our independent registered public accounting firm may issue a report that has an adverse opinion if it is not satisfied with the level at which our controls are documented, designed or maintained. Our remediation efforts may not enable us to remedy or avoid material weaknesses or significant deficiencies in the future.

We cannot be certain that our efforts to develop and maintain our internal controls will be determined to be sufficient, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to develop or maintain effective internal controls, or difficulties encountered in implementing or improving our internal controls, could be financially costly or cause us to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our units.

NYSE does not require a publicly traded limited partnership like us to comply with certain of its corporate governance requirements.

We intend to apply to list our common units on NYSE. Because we will be a publicly traded limited partnership, NYSE does not require us to have a majority of independent directors on our general partner’s board of directors or to establish a compensation committee or a nominating and corporate governance committee. Accordingly, unitholders will not have the same protections afforded to certain corporations that are subject to all of NYSE’s corporate governance requirements. Please read “Management—Management of Quicksilver Production Partners LP.”

Tax risks to unitholders

In addition to reading the following risk factors, a prospective unitholder should read “Tax considerations” for a more complete discussion of the expected material federal income tax consequences of owning and disposing of our common units.

A unitholder will be treated as a partner, and a unitholder will be required to pay taxes on the income that we allocate to the unitholder for each year, which will likely be different in amount from, and may be greater than, the amount of cash the unitholder receives from us as distributions on the common units in such year. A unitholder will be required to pay any federal income taxes and, in some cases, state and local income taxes on the unitholder’s allocable share of our taxable income even if the cash distributions the unitholder receives from us on the common units are less than the unitholder’s share of such taxable income, or if the unitholder receives no cash distributions from us.

In addition, because a unitholder will be treated as a partner, when a unitholder sells common units, the tax liability that the unitholder incurs may be more or less than expected. On a sale of our common units, a unitholder will recognize for tax purposes a gain or loss equal to the difference between the amount realized and the unitholder’s tax basis in those common units.

Because distributions in excess of a unitholder’s allocable share of our total net taxable income decrease the unitholder’s tax basis in the common units, the amount, if any, of such prior excess distributions with respect to the common units sold will, in effect, become taxable income to the unitholder if the common units are sold at a price greater than the unitholder’s tax basis in those common units, even if the price the unitholder receives is less than the original cost of those common units. Furthermore, a substantial portion of the amount realized, whether or not representing gain, may be taxed as ordinary income because of potential recapture items, including depreciation, depletion and intangible drilling and development costs, or “IDCs,” recapture. In addition, because the amount realized for purposes of calculating taxable gain or loss upon a sale of common units may include a unitholder’s share of our nonrecourse liabilities, the unitholder may incur a tax liability that is in excess of the amount of cash the unitholder receives from a sale of the common units. Please read “Tax considerations—Disposition of common units—Recognition of gain or loss.”

The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the Internal Revenue Service, or “IRS,” on this or any other tax matter affecting us. Despite the fact that we are a limited partnership under Delaware law, it is possible in certain circumstances for a partnership such as ours to be treated as a corporation for federal income tax purposes. A change in current law, or a change in our business, could cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to federal income taxation as an entity.

If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate, which is currently a maximum of 35%. We would also likely pay state income tax at varying rates. Distributions to a unitholder would generally be taxed again as corporate distributions, and no income, gains, losses or deductions would flow through to the unitholder. This obligation to pay federal and state income taxes, if it arose, would substantially reduce our cash available for distribution to our unitholders, and therefore would likely result in a substantial reduction in both the anticipated cash flow and after-tax return to our unitholders, and a substantial reduction in the value of our common units.

Because, among other reasons, we cannot match transferors and transferees of our common units, we will adopt depreciation, depletion and amortization positions that may not conform with all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could both adversely affect the amount and timing of tax benefits available to a unitholder, as well as the amount of gain or loss from a sale of our common units, and have a negative impact on the value of our common units or result in audit adjustments to a unitholder’s tax returns. Please read “Tax considerations—Tax consequences of unit ownership—Section 754 election” for a further discussion of the effect of the depreciation, depletion and amortization positions we will adopt.

Special, and potentially adverse, tax consequences will apply to tax-exempt entities, such as employee benefit plans and individual retirement accounts, or “IRAs,” and non-U.S. persons that own our common units. For example, substantially all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file U.S. federal income tax returns and pay tax on their share of our taxable income. A prospective unitholder who or which is a tax-exempt entity or a non-U.S. person should consult a tax adviser before investing in our common units.

A unitholder whose common units are loaned to a “short seller” to cover a short sale of common units may be considered as having disposed of the loaned common units for federal income tax purposes. If the unitholder were treated as having disposed of the loaned common units, the unitholder may recognize gain or loss from such disposition, and may not be treated for federal income tax purposes as a partner with respect to those common units, with the result that any of our income, gain, loss or deduction with respect to those common units would not be reportable by the unitholder and any cash distributions received by the unitholder as to those common units could be fully taxable as ordinary income. A unitholder may wish to consult its tax adviser to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit the unitholder’s broker from borrowing our common units.

The sale or exchange of 50% or more of our capital and profits interests during any 12-month period will result in the termination of our partnership for federal income tax purposes, which could result in adverse tax consequences for a unitholder and additional costs for us.

If there is a sale or exchange of 50% or more of the total interests in our capital and profits within a 12-month period, we will be considered, solely for federal income tax purposes, to have technically terminated our existence as a partnership and to have been re-formed as a new partnership. For this purpose, multiple sales of the same unit will be counted only once. Our technical termination, among other things, could result in a significant deferral of depreciation deductions allowable in computing our taxable income. In addition, our technical termination would result in the closing of our taxable year for all unitholders, which would require us to prepare and file two tax returns (and a unitholder could receive two Schedules K-1 if relief was not available from the IRS) for one fiscal year. In the case of a unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may also result in more than 12 months of our taxable income or loss being includible in the unitholder’s taxable income for the year of the technical termination. In addition, as a new partnership, we would be required to make new tax elections and could be subject to penalties if we are unable to determine that a technical termination occurred. Please read “Tax considerations—Disposition of common units—Technical termination” for a discussion of the consequences of a technical termination for federal income tax purposes.

Compliance with and changes in tax laws could adversely affect our performance.

We are currently subject to extensive tax laws and regulations, including laws and regulations relating to federal and foreign income taxes, Texas franchise tax and other transactional taxes, such as excise, sales/use, payroll and ad valorem taxes, and we may become subject to laws and regulations relating to additional taxes in the future. New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted that could result in increased tax expenditures in the future. Many of these tax liabilities are subject to audits by the respective taxing authority. These audits may result in additional taxes as well as penalties and interest.

The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.

The current federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial interpretation at any time. For example, the Obama Administration and members of Congress have recently considered substantive changes to the existing federal income tax laws that would adversely affect the tax treatment of certain publicly traded partnerships. Any modification to the federal income tax laws and interpretations thereof may or may not be applied retroactively. We are unable to predict whether any of these changes, or other proposals, will ultimately be enacted. Any such changes could negatively impact the value of an investment in our common units.

Our partnership agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for federal income tax purposes, the minimum quarterly distribution and the target distribution levels may be adjusted to reflect the impact of that law on us.

The IRS may challenge certain tax accounting conventions that we will adopt, which could change the allocation of items of income, gain, loss and deduction to a unitholder and adversely affect the value of our common units.

For purposes of determining the amount and allocation of items of income, gain, loss and deduction for federal income tax purposes, we will adopt certain tax accounting conventions that, while consistent with the tax accounting conventions adopted by other similarly-situated publicly traded partnerships, may be challenged by the IRS.

We will prorate our items of income, gain, loss and deduction for federal income tax purposes between a transferor and a transferee of our common units each month based upon the ownership of our common units on the first day of each month, rather than on the basis of the date a particular unit is transferred. The use of this proration method may not be permitted under existing Treasury Regulations. Recently, however, the U.S. Treasury Department issued proposed Treasury Regulations that provide a safe harbor pursuant to which publicly traded partnerships may use a similar monthly simplifying convention to allocate tax items among a transferor and a transferee of our common units. Nonetheless, the proposed regulations do not specifically authorize the use of the proration method we have adopted. If the IRS were to challenge our proration method or new Treasury Regulations were issued, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders. Please read “Tax considerations—Disposition of common units—Allocations between transferors and transferees.”

In addition, when we issue additional common units or engage in certain other transactions, we will determine the fair market value of our assets and allocate any unrealized gain or loss attributable to our assets to the capital accounts of our unitholders and our general partner. Our methodology may be viewed as understating the value of our assets. In that case, there may be a shift of income, gain, loss and deduction, as determined for federal income tax purposes, between certain unitholders and the general partner, which may be unfavorable to those unitholders. Moreover, under our current valuation methods, a subsequent purchaser of common units may have a greater portion of the special adjustment to the tax basis of our assets that we are permitted to make under the federal income tax laws with respect to that purchaser (which we refer to as the “Section 743(b) adjustment”) allocated to our tangible assets and a lesser portion allocated to our intangible assets. The IRS may challenge our valuation methods, or our allocation of the Section 743(b) adjustment attributable to our tangible and intangible assets, and allocations of taxable income, gain, loss and deduction between the general partner and certain of our unitholders. A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss that is allocated to our unitholders. It also could affect the amount of taxable gain from a unitholder’s sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to a unitholder’s tax return without the benefit of additional deductions. Please read “Tax considerations—Tax consequences of unit ownership—Section 754 election.”

Certain federal income tax deductions currently available with respect to oil and gas exploration and production may be eliminated as a result of future legislation.

President Obama’s Proposed Fiscal Year 2012 Budget and other recently introduced legislation include proposals that would, if enacted into law, eliminate certain significant U.S. federal income tax incentives currently available with respect to oil and gas exploration and production. These changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and gas properties, (ii) the elimination of current deductions for IDCs, (iii) the elimination of the deduction for certain domestic production activities, and (iv) an extension of the amortization period for certain geological and geophysical expenditures. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes would become effective. The passage of any legislation as a result of these proposals or any other similar changes in U.S. federal income tax laws could eliminate or postpone certain tax deductions that are currently available with respect to oil and gas exploration and development, which could result in an increase in the taxable income allocable to our unitholders and negatively impact the value of an investment in our common units.

If we were subjected to a material amount of additional entity-level taxation by Texas, or entity-level taxation in any other state in which we may do business in the future, our cash available for distribution to our unitholders would be reduced.

Because we operate in Texas, we will be required to pay Texas franchise tax each year at a maximum effective rate of 0.7% of our gross income apportioned to Texas in the prior year. If in the future Texas increases its franchise tax rate applicable to us, or we begin to operate in other states that impose income or franchise taxes on us, our cash flow available for distribution to our unitholders could be substantially reduced, and could result in a reduction in the value of our common units. Our partnership agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that subjects us to additional amounts of entity-level taxation for state or local income tax purposes, the minimum quarterly distribution amount and the target distribution levels may be adjusted to reflect the impact of that law on us.

As a result of investing in our common units, a unitholder may become subject to state and local taxes and return filing requirements in jurisdictions where we operate or own or acquire property.

In addition to federal income taxes, a unitholder may become subject to other taxes, including foreign, state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we conduct business or own property now or in the future, even if the unitholder does not live in any of those jurisdictions. A unitholder may be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions, and may be subject to penalties for failure to comply with those requirements. We initially will own property and conduct business in Texas, which imposes an income tax on corporations and other entities. As we make acquisitions or expand our business, we may own assets or conduct business in additional states that impose income, margin or other taxes, along with a requirement to file tax returns, on a unitholder. It is a unitholder’s responsibility to file all U.S. federal, state and local tax returns.

Use of proceeds

We intend to use the estimated net proceeds of approximately $ million from this offering, based upon the assumed initial public offering price of $ per common unit (the midpoint of the price range set forth on the cover of this prospectus), after deducting underwriting discounts and commissions, offering costs and a structuring fee, together with borrowings of approximately $150 million (based upon the assumed midpoint of the price range set forth on the cover of this prospectus) under our new revolving credit facility, as partial consideration (together with our issuance to Quicksilver of common units and subordinated units) for the contribution by Quicksilver of the Partnership Properties and the novation by Quicksilver of certain commodity derivatives, and to pay costs related to the formation transactions and our new revolving credit facility. Quicksilver has advised us that it intends to use the cash consideration received for the Partnership Properties to retire a portion of its existing debt.

The following table illustrates our use of the proceeds of this offering and our borrowings under our new revolving credit facility.


Sources of cash (in millions)			Uses of cash (in millions)


Gross proceeds from this offering	$		Cash consideration paid to Quicksilver	$
Borrowings under new revolving credit facility		150	Underwriting discounts and commissions, offering costs, a structuring fee, costs related to the formation transactions and costs related to our new revolving credit facility


Total	$		Total	$

Our estimates assume an initial public offering price of $ per common unit (the midpoint of the price range set forth on the cover of this prospectus) and no exercise of the underwriters’ option to purchase additional common units. An increase or decrease in the initial public offering price of $1.00 per common unit would cause the net proceeds from this offering, after deducting underwriting discounts, offering costs and a structuring fee to increase or decrease by $ million, and would result in a corresponding decrease or increase, respectively, in the amount borrowed under our new revolving credit facility.

Capitalization

The following table shows:

•

the historical capitalization of our predecessor as of September 30, 2011; and

•

our pro forma capitalization as of September 30, 2011, adjusted to reflect the formation transactions and the issuance and sale of common units in this offering and the application of the net proceeds from this offering as described under “Use of proceeds.”

We derived this table from, and it should be read in conjunction with and is qualified in its entirety by reference to, the historical carve out financial statements and the accompanying notes of our predecessor included elsewhere in this prospectus. You should also read this table in conjunction with “Summary—Our partnership structure and formation transactions,” “Use of proceeds” and “Management’s discussion and analysis of financial condition and results of operations.”


September 30, 2011 (in thousands)	Our predecessor
September 30, 2011 (in thousands)	Historical		Pro forma

Long-term debt(1)	$	—

Partners’ capital/net equity:
Owner’s capital of our predecessor		281,578
Common units held by purchasers in this offering		—
Common units held by Quicksilver		—
Subordinated units held by Quicksilver		—
General partner interest		—

Total partners’ capital/net equity(2)		281,578

Total capitalization	$	281,578	$

(1)

We intend to enter into a $ million revolving credit facility, approximately $ million of which will be available for borrowing upon the completion of the formation transactions described under “Summary—Our partnership structure and formation transactions.” After giving effect to the formation transactions described under “Summary—Our partnership structure and formation transactions,” including our expected borrowing of $150 million under our new revolving credit facility (based upon the assumed midpoint of the price range set forth on the cover of this prospectus), we will have approximately $ million of borrowing capacity. For additional information on our new revolving credit facility, please read “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources—Liquidity and borrowing capacity.”

(2)

A $1.00 increase or decrease in the assumed initial public offering price per common unit would increase or decrease, respectively, the net proceeds by approximately $ million, would result in a corresponding decrease or increase in the amount borrowed under our new revolving credit facility and would change our total partners’ capital by approximately $ million.

Dilution

Dilution is the amount by which the offering price paid by the purchasers of common units sold in this offering will exceed the as adjusted net tangible book value per unit after this offering. Net tangible book value is our total tangible assets less total liabilities. Assuming an initial offering price of $ per common unit (the midpoint of the price range set forth on the cover of this prospectus), on an adjusted basis as of September 30, 2011, after giving effect to the formation transactions described under “Summary—Our partnership structure and formation transactions,” including this offering of common units and the application of the related net proceeds, our as adjusted net tangible book value was $ million, or $ per unit. Purchasers of common units in this offering will experience substantial and immediate dilution in net tangible book value per common unit for accounting purposes, as illustrated in the following table:


Assumed initial offering price per common unit		$
As adjusted net tangible book value per unit before this offering(1)	$
Increase in net tangible book value per unit attributable to purchasers in this offering

Less: As adjusted net tangible book value per unit after this offering(2)

Immediate dilution in net tangible book value per unit to purchasers in this offering(3)		$

(1)

Determined by dividing the net tangible book value of our net assets immediately prior to the offering by the number of units ( common units and subordinated units) to be issued to Quicksilver as partial consideration for its contribution of the Partnership Properties and novation of certain commodity derivatives to us and the general partner units to be issued to our general partner.

(2)

Determined by dividing our as adjusted net tangible book value, after giving effect to the application of the expected net proceeds of this offering, by the total number of units to be outstanding after this offering ( common units, subordinated units, and general partner units).

(3)

If the assumed initial offering price were to increase or decrease by $1.00 per common unit, then dilution in as adjusted net tangible book value per unit would equal $ or $ , respectively. The information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

The following table sets forth the number of units that we will issue and the total consideration contributed to us by our general partner and its affiliates (including Quicksilver) in respect of their units and by the purchasers of common units in this offering upon consummation of the transactions contemplated by this prospectus:


	Units acquired			Total consideration
(in millions, except percentage amounts)	Number	Percent		Amount	Percent

General partner and its affiliates(1)(2)			%	$		%
Purchasers in the offering(3)			%			%

Total			100.0%	$		100.0%

(1)

Upon the consummation of the transactions contemplated by this prospectus, and assuming the underwriters do not exercise their option to purchase additional common units, our general partner and its affiliates (including Quicksilver) will own common units, subordinated units and general partner units.

(2)

The assets contributed by our general partner were recorded at historical cost in accordance with GAAP. Total consideration provided by affiliates of our general partner is equal to the net tangible book value of such assets as of September 30, 2011.

(3)

Total consideration is after deducting underwriting discounts, a structuring fee and offering costs.

Our cash distribution policy and restrictions on distributions

You should read the following discussion of our cash distribution policy in conjunction with specific assumptions included in this section. For more detailed information regarding the factors and assumptions upon which our cash distribution policy is based, please read “—Assumptions and considerations” below. In addition, you should read “Forward-looking statements” and “Risk factors” for information regarding statements that do not relate strictly to historical or current facts and certain risks inherent in our business.

For additional information regarding our predecessor’s historical operating results, you should refer to the audited historical carve out financial statements of our predecessor as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 and the unaudited historical carve out financial statements of our predecessor as of September 30, 2011 and for the nine months ended September 30, 2011 and 2010, all included elsewhere in this prospectus.

General

Rationale for our cash distribution policy

Our partnership agreement requires us to distribute on a quarterly basis all of our available cash. Please read “Provisions of our partnership agreement relating to cash distributions—Distributions of available cash” for a definition of available cash. We generally intend to fund any acquisitions and growth capital expenditures with borrowings or issuances of additional units. We may also borrow to make distributions to unitholders, for example, in circumstances where we believe that the distribution level is sustainable over the long term, but short-term factors have caused available cash from operations to be insufficient to pay the distribution at the current level. Our cash distribution policy reflects a basic judgment that our unitholders will be better served by us distributing our available cash, after expenses and reserves, rather than our retaining it. Also, because we are not subject to an entity-level federal income tax, we expect to have more cash to distribute to our unitholders than would be the case if we were subject to federal income tax.

Restrictions and limitations on cash distributions and our ability to change our cash distribution policy

There is no guarantee that unitholders will receive quarterly distributions from us. We do not have a legal obligation to pay the minimum quarterly distribution or distributions at any other rate except as provided in our partnership agreement. Our cash distribution policy is subject to certain restrictions and may be changed at any time, including:

•

Our cash distribution policy may be subject to restrictions on distributions under our new revolving credit facility or other debt agreements that we may enter into in the future. Specifically, we anticipate that the agreement related to our new revolving credit facility will contain financial tests and covenants that we must satisfy. These financial and other covenants are described under the caption “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources—Liquidity and borrowing capacity.” Should we be unable to satisfy these restrictions, or if a default otherwise occurs under our new revolving credit facility, we would be unable to make cash distributions to our unitholders notwithstanding our stated cash distribution policy. Any future indebtedness may contain similar or more stringent restrictions.

•

Our general partner will have the authority to establish reserves for the prudent conduct of our business and for future cash distributions to our unitholders, and the establishment of or increase in those reserves could result in reduced cash distributions from the anticipated levels in our stated cash distribution policy. Our partnership agreement does not set a limit on the amount of cash reserves that our general partner may establish, other than with respect to reserves for future cash distributions. Any determination to establish or increase reserves made by our general partner in good faith will be binding on the unitholders. We intend to reserve a portion of our cash generated from operations to fund our estimated maintenance capital expenditures. Over a longer period of time, if our general partner does not set aside sufficient cash reserves or make sufficient cash expenditures to maintain our asset base, we will be unable to pay the minimum quarterly distribution from cash generated from operations and would likely reduce our distributions. We are unlikely to be able to sustain our current level of distributions without making capital expenditures to maintain the current production levels of our oil and natural gas properties. Decreases in commodity prices from current levels will adversely affect our ability to pay distributions. If our asset base decreases and we do not reduce our distributions, a portion of the distributions may be considered a return of part of our unitholders’ investment in us as opposed to a return on our unitholders’ investment.

•

Prior to making any distribution on our common units, we will reimburse our general partner and its affiliates for all direct and indirect expenses they incur on our behalf. These expenses include amounts paid to third parties and an allocation of expenses incurred by our general partner and its affiliates in providing services on our behalf. Our partnership agreement does not set a limit on the amount of expenses for which our general partner and its affiliates may be reimbursed. Our partnership agreement provides that our general partner will determine in good faith the expenses that are allocable to us (taking into consideration the goods, services or other benefits provided to us in respect of such expenses). Under our omnibus agreement, Quicksilver will be entitled to be reimbursed for expenses incurred and payments made in connection with the services it provides to our general partner on our behalf. The reimbursement of expenses and payment of fees, if any, to our general partner and its affiliates will reduce the amount of cash available to pay cash distributions to our unitholders.

•

Our partnership agreement, including the provisions requiring us to make cash distributions, may be amended. In general, our partnership agreement may not be amended during the subordination period without the approval of a majority of our public common unitholders, other than in certain limited circumstances where no unitholder approval is required. After the subordination period has ended, our partnership agreement may generally be amended with the consent of our general partner and the approval of the holders of a majority of our outstanding common units (including common units that are held by our general partner and its affiliates). See “The partnership agreement—Limited voting rights” for a description of matters requiring unitholder vote. Upon consummation of this offering, Quicksilver will own our general partner and will control the voting of an aggregate of approximately % of our outstanding common units and all of our subordinated units. Assuming we do not issue any additional common units and Quicksilver does not transfer its common units, Quicksilver will have the ability to amend certain provisions of our partnership agreement without the approval of any other unitholder once the subordination period ends.

•

Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement, our new revolving credit facility and any other agreements we may enter into in the future.

•

Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our assets.

•

We may lack sufficient cash to pay distributions to our unitholders due to a number of factors, including reductions in commodity prices, reductions in our production, increases in our general and administrative expenses, principal and interest payments on our outstanding debt, tax expenses, working capital requirements and other cash needs. For a discussion of additional factors that may affect our ability to pay distributions, please read “Risk factors.”

•

If our cash available for distribution materially declines, we may reduce or eliminate our quarterly distribution in order to meet our operational and other cash requirements.

•

All available cash distributed by us will be treated as distributed from operating surplus until operating surplus is reduced to zero. Please read “Provisions of our partnership agreement relating to cash distributions—Operating surplus and capital surplus” for a definition of operating surplus. We anticipate that distributions from operating surplus will generally not represent a return of capital. However, operating surplus, as defined in our partnership agreement, includes certain components that represent non-operating sources of cash, including a cash basket equal to $40 million and working capital borrowings. Consequently, it is possible that distributions from operating surplus may represent a return of capital. For example, the $40 million cash basket would allow us to distribute as operating surplus cash proceeds we receive in the future from non-operating sources such as asset sales, issuances of equity interests and long-term borrowings, which would ordinarily represent a return of capital. Distributions representing a return of capital could result in a corresponding decrease in our asset base. Additionally, any cash distributed by us in excess of operating surplus will be deemed to be made out of capital surplus. Our partnership agreement treats a distribution made out of capital surplus as the repayment of the initial unit public offering price from this offering, which is similar to a return of capital. Distributions from capital surplus could result in a corresponding decrease in our asset base. We do not anticipate that we will make any distributions from capital surplus. Please read “Provisions of our partnership agreement relating to cash distributions—Distributions from capital surplus—Effect of a distribution from capital surplus.”

•

Our ability to make distributions to our unitholders depends on the performance of our operating subsidiary and its ability to distribute cash to us. The ability of our operating subsidiary to make distributions to us may be restricted by, among other things, the provisions of existing and future indebtedness, applicable state partnership and limited liability company laws and other laws and regulations.

Our ability to grow depends on our ability to access external growth capital

Our partnership agreement requires us to distribute all of our available cash to unitholders on a quarterly basis. As a result, we expect to fund our growth capital expenditures and any acquisitions primarily using external financing sources, including commercial bank borrowings and the issuance of debt and equity interests, rather than cash reserves established by our general partner. To the extent we are unable to finance our growth externally, our cash distribution policy will significantly impair our ability to grow. In addition, because we will distribute all of our available cash, our growth may not be as fast as that of businesses that reinvest their available cash to expand their ongoing operations. To the extent we issue

additional units in connection with any capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our quarterly per unit distribution level. There are no limitations in our partnership agreement, nor do we expect any limitations, on our new revolving credit facility on our ability to issue additional units, including units ranking senior to the common units. The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which in turn may impact the available cash that we have to distribute to our unitholders.

Our minimum quarterly distribution

Upon completion of this offering, the board of directors of our general partner will establish a minimum quarterly distribution of $ per unit per whole quarter, or $ per unit per year on an annualized basis, to be paid no later than 45 days after the end of each fiscal quarter beginning with the quarter ending . This equates to an aggregate cash distribution of approximately $ million per quarter or $ million per year, in each case based on the number of common, subordinated and general partner units outstanding immediately after completion of this offering, but excluding any common units that may be issued under our 2012 Equity Plan that our general partner is expected to adopt prior to the closing of this offering.

To the extent the underwriters exercise their option to purchase additional common units, we will use the net proceeds from that exercise to redeem from Quicksilver a number of common units equal to the number of common units issued upon such exercise, at a price per common unit equal to the proceeds per common unit before offering costs but after deducting underwriting discounts and commissions. Accordingly, the exercise of the underwriters’ option will not affect the total number of common, subordinated and general partner units outstanding or the amount of cash needed to pay the minimum quarterly distribution on all units. Please read “Use of proceeds.”

Our ability to make cash distributions at the minimum quarterly distribution will be subject to the factors described above under the caption “—General—Restrictions and limitations on cash distributions and our ability to change our cash distribution policy.”

As of the date of this offering, our general partner will be entitled to 0.1% of all distributions of available cash that we make prior to our dissolution. Our general partner’s initial 0.1% interest in these distributions may be reduced if we issue additional units in the future (other than the issuance of common units in connection with a reset of the incentive distribution target levels relating to our general partner’s incentive distribution rights) and our general partner does not contribute a proportionate amount of capital to us to maintain its initial 0.1% general partner interest. Our general partner is not obligated to contribute a proportionate amount of capital to us to maintain its current general partner interest. Our general partner will also hold the incentive distribution rights, which entitle the holder to additional increasing percentages, up to a maximum of 24.9%, of the cash we distribute in excess of $ per common unit per quarter.

The table below sets forth the assumed number of outstanding common (assuming no exercise and full exercise of the underwriters’ option to purchase additional common units), subordinated and general partner units upon the closing of this offering and the aggregate distribution amounts payable on such units during the year following the closing of this offering at our minimum quarterly distribution of $ per unit per quarter, or $ per unit on an annualized basis.

No exercise of the
underwriters’ option

Full exercise of the
underwriters’ option

Distributions

Number
of units

One
quarter

Four
quarters

Number
of units

One
quarter

Four
quarters

Common units held by purchasers in this offering(1)

Common units held by Quicksilver(1)

Subordinated units held by Quicksilver

General partner units

Total

(1)

Does not include any common units that may be issued under our 2012 Equity Plan that our general partner is expected to adopt prior to the closing of this offering.

If the minimum quarterly distribution on our common units is not paid with respect to any quarter, the common unitholders will not be entitled to receive such payments in the future except that, during the subordination period, to the extent we distribute cash in any future quarter in excess of the amount necessary to make cash distributions at the minimum quarterly distribution to holders of our common units, we will use this excess cash to pay any of these arrearages related to prior quarters before any cash distribution is made to holders of subordinated units. Please read “Provisions of our partnership agreement relating to cash distributions—Subordination period.”

We do not have a legal obligation to pay the minimum quarterly distribution or distributions at any other rate except as provided in our partnership agreement. Our partnership agreement requires that we distribute all of our available cash quarterly. Please read “Provisions of our partnership agreement relating to cash distributions—Distributions of available cash—Definition of available cash.”

Our partnership agreement provides that any determination made by our general partner in its capacity as our general partner must be made in good faith and that any such determination will not be subject to any other standard imposed by our partnership agreement, the Delaware limited partnership statute or any other law, rule or regulation or imposed at equity. Our partnership agreement provides that our general partner is entitled to make the determinations described above without regard to any standard other than the requirement to act in good faith. Our partnership agreement provides that, in order for a determination by our general partner to be made in “good faith,” our general partner must have the actual belief that the determination is in, or not opposed to, our best interest. Please read “Conflicts of interest and fiduciary duties.”

Our cash distribution policy, as expressed in our partnership agreement, may not be modified or repealed without amending our partnership agreement. The actual amount of our cash distributions for any quarter is subject to fluctuation based on the amount of cash we generate from our business after payment of cash obligations and the amount of reserves our general

partner establishes in accordance with our partnership agreement as described above. During the subordination period, our partnership agreement may be amended by a vote of the holders of a majority of our common units (excluding those common units held by our general partner and its affiliates) and a majority of the subordinated units, each voting as a separate class. Upon consummation of this offering, Quicksilver will own approximately % of our outstanding common units and all of our subordinated units. Assuming we do not issue any additional common units and Quicksilver does not transfer a controlling interest in our general partner or the common units it owns, Quicksilver will have the ability to amend our partnership agreement, including provisions contained therein requiring us to make cash distributions, without the approval of any other unitholders once the subordination period ends.

We will pay our distributions on or about the 15th of each of February, May, August and November to holders of record on or about the first day of each such month. If the distribution date does not fall on a business day, we will make the distribution on the business day immediately preceding the indicated distribution date. For our initial quarterly distribution, we will adjust the quarterly distribution for the period from the closing of this offering through , 2012 based on the actual length of the period. We expect to pay this initial quarterly cash distribution on or before , 2012.

In the sections that follow, we present in detail the basis for our belief that we expect to be able to fully fund our minimum quarterly distribution of $ per unit each quarter for the four quarters ending December 31, 2012. In those sections, we present two tables, consisting of:

•

“Unaudited pro forma available cash for the year ended December 31, 2011,” in which we present the amount of cash we would have had available for distribution to our unitholders and our general partner for the year ended December 31, 2011, based on our unaudited pro forma historical financial statements. Our calculation of unaudited pro forma available cash in this table should only be viewed as a general indication of the amount of available cash that we might have generated had the transactions contemplated in this prospectus occurred in an earlier period.

•

“Estimated Adjusted EBITDA for the year ending December 31, 2012,” in which we demonstrate our ability to generate the minimum Adjusted EBITDA necessary for us to have sufficient cash available for distribution to pay the full minimum quarterly distribution on all the outstanding units, including our general partner units, for the year ending December 31, 2012.

Unaudited pro forma available cash for the year ended December 31, 2011

If we had completed the formation transactions and the offering contemplated in this prospectus (including the acquisition of the Partnership Properties) on January 1, 2011, our unaudited pro forma available cash generated during the year ended December 31, 2011 would have been approximately $ million. The amount of available cash we need to pay the minimum quarterly distribution for four quarters on our common, subordinated and general partner units that will be outstanding upon the closing of this offering is approximately $ million (or $ million per quarter). As a result, for the year ended December 31, 2011, we would have generated aggregate available cash sufficient to pay the aggregate minimum quarterly distribution on all of our common, subordinated and general partner units.

The exercise by the underwriters of their option to purchase additional common units will not affect the number of units outstanding at the consummation of this offering. Please read “—Our minimum quarterly distribution.”

The number of outstanding common and subordinated units on which we have based such belief does not include any common units that may be issued under our 2012 Equity Plan that our general partner is expected to adopt prior to the closing of this offering. We have not calculated available cash on a pro forma quarter-by-quarter basis for the year ended December 31, 2011 to determine if we would have generated available cash sufficient to pay the minimum quarterly distribution for each quarter during that period.

Unaudited pro forma available cash also includes general and administrative expenses. These general and administrative expenses are expected to total $6.2 million for the year ended December 31, 2012, including $3.9 million of direct expenses we expect to incur, for items such as annual and quarterly reporting; tax return and Schedule K-1 preparation and distribution expenses; expenses associated with listing on the NYSE; independent auditor fees; legal fees; investor relations expenses; and registrar and transfer agent fees. These expenses are not reflected in the historical carve out financial statements of our predecessor. For the year ended December 31, 2011, Quicksilver allocated to us $ of general and administrative expenses. Quicksilver is entitled to reimbursement of such expenses under our omnibus agreement. Please read “Certain relationships and related party transactions—Agreements governing the transactions—Omnibus agreement.”

We based the pro forma disclosures upon currently available information and specific estimates and assumptions. The pro forma amounts below do not purport to present our results of operations had the formation transactions contemplated in this prospectus actually been completed as of January 1, 2011. In addition, cash available to pay distributions is primarily a cash accounting concept, while our pro forma available cash for the year ended December 31, 2011 has been prepared on an accrual basis. As a result, you should view the amount of unaudited pro forma available cash only as a general indication of the amount of cash available to pay distributions that we might have generated had we been formed in an earlier period.

The following table illustrates, on an unaudited pro forma basis, for the year ended December 31, 2011, the amount of available cash that would have been available for distribution to our unitholders, assuming that the formation transactions and this offering had been consummated on January 1, 2011. Each of the pro forma adjustments presented below is explained in the footnotes to such adjustments.

Quicksilver Production Partners LP

Unaudited pro forma cash available for distribution


Year ended December 31, 2011 (in thousands, except per unit data)		Pro forma

Net income		$
Interest expense(1)
Income tax expense
Depletion
Accretion of asset retirement obligations
Unrealized (gains) losses on derivative instruments

Adjusted EBITDA(2)		$
Less:
Estimated maintenance capital expenditures(3)

Pro forma available cash(4)		$

Pro forma annualized distributions per unit		$
Pro forma estimated annual cash distributions:
Distributions on common units held by purchasers in this offering(5)		$
Distributions on common units held by Quicksilver and its affiliates(5)
Distributions on subordinated units
Distributions on general partner units
Total estimated annual cash distributions

Excess (Shortfall)		$

Percent of minimum quarterly distributions payable to common unitholders		$

Percent of minimum quarterly distributions payable to subordinated unitholders		$

(1)

At the completion of this offering, we intend to enter into a new $ million revolving credit facility under which we intend to borrow approximately $150 million (based upon the assumed midpoint of the price range set forth on the cover of this prospectus) at that time and use the net proceeds from the borrowing as partial consideration for the contribution of the Partnership Properties and the novation of certain commodity derivatives by Quicksilver to us, the balance of which will be paid by the net proceeds of this offering. If the net proceeds of this offering increase or decrease, then our borrowing under our new revolving credit facility would correspondingly decrease or increase. The pro forma interest expense is based on borrowings of $150 million at an assumed rate of 3.3%. If the interest rate used to calculate this interest were 1% higher or lower, our annual interest expense would increase or decrease, respectively, by approximately $1.4 million. Likewise, a $1.00 increase or decrease in the assumed initial public offering price per common unit would result in a $ million decrease or increase in borrowings, respectively, and a $ million decrease or increase in interest expense, respectively.

(2)

Adjusted EBITDA is defined in “Summary—Summary historical financial data—Non-GAAP financial measure.”

(3)

Historically, our predecessor did not make a distinction between maintenance and growth capital expenditures. For purposes of the presentation of “Unaudited pro forma cash available for distribution,” we have estimated that all of our predecessor’s capital expenditures during the year ended December 31, 2011 were maintenance capital expenditures.

(4)

Includes $ million of general and administrative expenses that we do not expect to incur prospectively. Please read “—Assumptions and considerations—Capital expenditures and expenses.”

(5)

The table above reflects the number of common, subordinated and general partner units outstanding immediately following the closing of this offering, but excluding any common units that may be issued under our 2012 Equity Plan that our general partner is expected to adopt prior to the closing of this offering. The exercise by the underwriters of their option to purchase additional common units will not affect the number of units outstanding at the consummation of this offering. Please read “—Our minimum quarterly distribution.”

Estimated Adjusted EBITDA for the year ending December 31, 2012

The forecast has been prepared by and is the responsibility of our management. Our forecast reflects our judgment as of the date of this prospectus of conditions we expect to exist and the course of action we expect to take during the year ending December 31, 2012. While the assumptions disclosed in this prospectus are not all-inclusive, the assumptions listed below are those that we believe are material to our forecasted results of operations and any assumptions not discussed below were not deemed to be material. We believe we have a reasonable objective basis for these assumptions; however, there will likely be differences between our forecast and the actual results and those differences could be material. If the forecast is not achieved, we may not be able to pay cash distributions on our common units at the minimum quarterly distribution rate or at all.

The cumulative amount that we would distribute for the year ending December 31, 2012, if we made distributions on all our common, subordinated and general partner units at the minimum quarterly distribution rate of $ per unit during that period, would be $ million. Based upon the assumptions and considerations set forth in “—Assumptions and considerations,” in order to fund distributions on all our common, subordinated and general partner units at the minimum quarterly distribution rate for the year ending December 31, 2012, we estimate that our minimum Adjusted EBITDA for that period must be at least $ million. The number of outstanding common, subordinated and general partner units on which we have based such estimates does not include any common units that may be issued under our 2012 Equity Plan that our general partner is expected to adopt prior to the closing of this offering. The exercise by the underwriters of their option to purchase additional common units will not affect the number of units outstanding at the consummation of this offering. Please read “—Our minimum quarterly distribution.”

Based on the assumptions set forth in “—Assumptions and considerations,” and as set forth in the table below, we believe that we will be able to generate approximately $100.8 million in Adjusted EBITDA during the year ending December 31, 2012, which amount we refer to as our “estimated Adjusted EBITDA.” We can give you no assurance, however, that we will generate this amount of Adjusted EBITDA during that period. There will likely be differences between our estimated Adjusted EBITDA and our actual results for the year ending December 31, 2012 and those differences could be material. In addition, Adjusted EBITDA may not represent actual cash generated during an applicable period because of, among other things, timing differences between the incurrence and actual payment of accounts payable and accounts receivable. If the amount of Adjusted EBITDA that we actually generate during the year ending December 31, 2012 is less than our estimated Adjusted EBITDA, we may not be able to pay the minimum quarterly distribution on all of our units.

Our management has prepared the prospective financial information that is the basis of our estimated Adjusted EBITDA below to substantiate our belief that we will have sufficient cash to pay the minimum quarterly distribution on all outstanding common, subordinated and general partner units for the year ending December 31, 2012. This prospective financial information is a forward-looking statement and should be read together with the historical carve out financial statements and the accompanying notes included elsewhere in this prospectus and “Management’s discussion and analysis of financial condition and results of operations.” This prospective financial information was not prepared with a view toward complying with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of our

management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of our management’s knowledge and belief, the assumptions and considerations on which we base our belief that we can generate sufficient Adjusted EBITDA to pay the minimum quarterly distribution to all of our common and subordinated unitholders, as well as in respect of our general partner units, for the year ending December 31, 2012. However, this prospective financial information is not fact and may not be necessarily indicative of our actual results of operations, and readers of this prospectus are cautioned not to place undue reliance on this prospective financial information. Please read “—Assumptions and considerations.”

The prospective financial information included in this prospectus has been prepared by, and is the responsibility of, our management. Neither our independent auditors nor any other independent accountants have compiled, examined or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion on or any other form of assurance of such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.

When considering this prospective financial information, you should keep in mind the risk factors and other cautionary statements described under “Risk factors” and “Forward-looking statements.” Any of the risks discussed in this prospectus, to the extent they are realized, could cause our actual results of operations to vary significantly from those that would enable us to generate the estimated Adjusted EBITDA sufficient to pay the minimum quarterly distribution to holders of our common, subordinated and general partner units for the year ending December 31, 2012.

We do not undertake any obligation to release publicly the results of any future revisions we may make to this prospective financial information or to update this prospective financial information to reflect events or circumstances after the date of this prospectus. Therefore, you are cautioned not to place undue reliance on this information.

As a result of the factors described in “—Our estimated Adjusted EBITDA” and “—Assumptions and considerations,” we believe we will be able to pay cash distributions at the minimum quarterly distribution of $ per unit on all outstanding common, subordinated and general partner units for each full calendar quarter in the year ending December 31, 2012. The number of outstanding common units on which we have based such belief does not include any common units that may be issued under our 2012 Equity Plan that our general partner is expected to adopt prior to the closing of this offering.

Our estimated Adjusted EBITDA

Adjusted EBITDA is a significant financial metric that will be used by our management to indicate (prior to the establishment of any reserves by the board of directors of our general partner) the cash distributions we expect to pay to our unitholders. Specifically, we intend to use this financial measure to assist us in determining whether we are generating operating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Adjusted EBITDA is defined in “Summary—Summary historical financial data—Non-GAAP financial measure.”

Quicksilver Production Partners LP

Estimated Adjusted EBITDA


Forecasted year ending December 31, 2012 (in millions, except per unit amounts)

Production revenue including realized derivative gains and losses:(1)	$	154.7
Less:
Lease operating expense		13.9
Gathering, processing and transportation expense		31.7
Production and ad valorem taxes		4.1
General and administrative expense		6.2
Depletion and accretion		30.6
Interest expense		4.6
Income tax expense		0.3

Net income		63.3
Adjustments to reconcile net income to estimated Adjusted EBITDA:
Add:
Depletion and accretion	$	30.6
Equity compensation		2.0
Interest expense		4.6
Income tax expense(3)		0.3

Estimated Adjusted EBITDA		100.8
Adjustments to reconcile estimated Adjusted EBITDA to cash available for distribution:
Less:
Interest expense(2)		4.6
Cash paid for income taxes(3)		0.3
Estimated average maintenance capital expenditures(4)		30.5

Estimated cash available for distribution	$	65.4
Annualized minimum quarterly distribution per unit:
Estimated annual cash distributions:
Distributions on common units held by purchasers in this offering(5)
Distributions on common units held by Quicksilver Resources GP and its affiliates(5)
Distributions on subordinated units
Distributions on general partner units

Total estimated annual cash distributions

Excess cash available for distribution

Minimum estimated Adjusted EBITDA:
Estimated Adjusted EBITDA	$	100.8
Less:
Excess cash available for distribution(6)

Minimum estimated Adjusted EBITDA

(1)

Includes the forecasted effect of cash settlements of natural gas and NGL derivatives.

(2)

(3)

Income tax expense is solely comprised of taxes due under the Texas franchise tax.

(4)

In calculating the estimated cash available for distribution, we have included our estimated maintenance capital expenditures for the year ending December 31, 2012. Based on our reserve report as of December 31, 2010, we expect to incur approximately $30.5 million of average annual capital expenditures to maintain a targeted 61 Mmcfed average net production from our assets through 2016 (although production will vary from period to period).

(5)

(6)

We intend to retain any excess cash to repay indebtedness or for other general partnership purposes.

Assumptions and considerations

Based upon the specific assumptions outlined below with respect to the year ending December 31, 2012, we expect to generate estimated Adjusted EBITDA sufficient to establish reserves for capital expenditures and to pay the minimum quarterly distribution on all common, subordinated and general partner units for the year ending December 31, 2012.

While we believe that these assumptions are reasonable in light of management’s current expectations concerning future events, the estimates underlying these assumptions are inherently uncertain and are subject to significant business, economic, regulatory, environmental and competitive risks and uncertainties that could cause actual results to differ materially from those we anticipate. If our assumptions do not materialize, the amount of actual cash available to pay distributions could be substantially less than the amount we currently estimate and could, therefore, be insufficient to permit us to pay quarterly cash distributions equal to our minimum quarterly distribution (absent borrowings under our new revolving credit facility), or any amount, on all common, subordinated and general partner units, in which event the market price of our common units may decline substantially. We are unlikely to be able to sustain our minimum quarterly distribution without making capital expenditures that maintain our asset base. Over a longer period of time, if we do not set aside sufficient cash reserves or make sufficient cash expenditures to maintain our asset base, we will be unable to pay distributions at the then-current level from cash generated from operations and would therefore expect to reduce our distributions. We intend to pay for maintenance capital expenditures from operating cash flow, and we expect to primarily rely upon external financing sources, including commercial bank borrowings and the issuance of debt and equity interests, rather than cash reserves established by our general partner, to fund our growth capital expenditures and any acquisitions. In addition, decreases in commodity prices from current levels will adversely affect our ability to pay distributions. When reading this section, you should keep in mind the risk factors and other cautionary statements described under “Risk factors” and “Forward-looking statements.” Any of the risks discussed in this prospectus could cause our actual results to vary significantly from our estimates.

Operations and revenue

Production. The following table sets forth information regarding our predecessor’s production on an actual basis for the year ended December 31, 2010 and the nine months ended September 30, 2011, and our production on a forecasted basis for the year ending December 31, 2012:


	Forecasted year ending December 31, 2012		Nine months ended September 30, 2011		Year ended December 31, 2010

Annual production:
Natural Gas (Mmcf)		12,764		9,471		12,727
NGL (Mbbl)		1,745		1,189		1,814
Oil (Mbbl)		50		37		78
Total (Mmcfe)		23,535		16,827		24,079
Average daily production:
Natural Gas (Mmcfd)		34.9		34.7		34.9
NGL (Mbbld)		4.8		4.4		5.0
Oil (Mbbld)		0.1		0.1		0.2
Total (Mmcfed)		64.3		61.6		66.0

The forecasted production for the year ending December 31, 2012 reflects $30.6 million of capital expenditures to be made during that period, based on our reserve report prepared by Schlumberger as of December 31, 2010. This increase in average daily production for the forecast period reflects the addition of production from new wells brought on line before the end of 2011 as well as the accelerated timing of the 2012 development program resulting in more contribution from new wells in the forecast period.

Prices. The table below illustrates our predecessor’s average realized sales prices on an actual basis for the year ended December 31, 2010 and the nine months ended September 30, 2011 and our average realized sales prices on a forecasted basis for the year ending December 31, 2012:


	Forecasted year ending December 31, 2012		Nine months ended September 30, 2011		Year ended December 31, 2010

Average natural gas sales prices:
NYMEX-Henry Hub natural gas price (per Mmbtu)(1)	$	2.85	$	4.21	$	4.39
Realized natural gas sales price per Mcf (excluding cash settlements of derivatives)(4)	$	2.69	$	4.14	$	4.32
Realized natural gas sales price per Mcf (including cash settlements of derivatives)(3)(4)	$	5.40	$	5.69	$	4.32
Average NGL sales prices:
NYMEX-WTI oil price (per Bbl)(1)(2)	$	99.64	$	95.48	$	79.53
Realized NGL sales price per Bbl (excluding cash settlements of derivatives)(4)	$	46.90	$	47.79	$	37.00
Realized NGL sales price per Bbl (including cash settlements of derivatives)(3)(4)	$	46.43	$	47.79	$	37.00
Average oil sales prices:
NYMEX-WTI oil price (per Bbl)(1)	$	99.64	$	95.48	$	79.53
Realized oil sales price per Bbl (excluding cash settlements of derivatives)(4)	$	94.46	$	94.31	$	74.42
Realized oil sales price per Bbl (including cash settlements of derivatives)(3)(4)	$	94.46	$	94.31	$	74.42
Total combined price (per Mcfe, excluding cash settlements of derivatives)	$	5.14	$	5.91	$	5.31
Total combined price (per Mcfe, including cash settlements of derivatives)(3)	$	6.57	$	6.78	$	5.31

(1)

Based on average closing spot prices of Henry Hub natural gas and WTI crude oil for January 2012 and average NYMEX futures prices for the remainder of 2012, as reported on January 31, 2012.

(2)

There is not a NYMEX forward curve for NGLs. As NGL prices have recently been more highly correlated to oil prices than to natural gas prices, we have used a percentage of NYMEX-WTI oil prices as a proxy for NGL prices.

(3)

We have given effect to the commodity derivatives covering 30 Mmcfd of natural gas production for 2012 and 3 Mbbld of NGL production for 2012. No derivatives cover our oil production. For a description of the effect of lower spot prices on cash available for distribution, please read “—Sensitivity analysis—Commodity price changes.”

(4)

The difference between NYMEX prices and realized prices (excluding derivatives) is due to the basis and sales differentials at the different locations where the production is sold. With respect to realized NGL prices, the difference between such prices and NYMEX-WTI oil prices results primarily from the differences in oil and NGL prices.

Operating revenue and realized derivative gains. The following table illustrates the primary components of operating revenue and realized derivative gains on an actual basis for our predecessor for the year ended December 31, 2010 and the nine months ended September 30, 2011 and for us on a forecasted basis for the year ending December 31, 2012:


(in millions)	Forecasted year ending December 31, 2012			Nine months ended September 30, 2011		Year ended December 31, 2010

Natural gas:
Natural gas revenue	$	34.3		$	39.2	$	55.0
Realized gain on natural gas derivatives(1)		34.6			14.7		—

Total	$	68.9		$	53.9	$	55.0
NGL:
NGL revenue	$	81.8		$	56.8	$	67.1
Realized loss on NGL derivatives(1)		(0.8	)		—		—

Total	$	81.0		$	56.8	$	67.1
Oil:
Oil revenue	$	4.8		$	3.5	$	5.8
Realized gain on oil derivatives(1)		—			—		—

Total	$	4.8		$	3.5	$	5.8
Total:
Total production (excluding effect of derivatives)	$	120.9		$	99.5	$	127.9
Realized gain on derivatives(1)		33.8			14.7		—

Total production revenue and realized derivative effects	$	154.7		$	114.2	$	127.9

(1)

We have given effect to the commodity derivatives covering 30 Mmcfd of natural gas production for 2012 and 3 Mbbld of NGL production for 2012 that will be novated to us at the closing of this offering. No derivatives cover our oil production. Our predecessor did not have derivatives covering its natural gas production before 2011 or covering its NGL production before 2012.

Capital expenditures and expenses

Capital expenditures. Our estimated maintenance capital expenditures for the year ending December 31, 2012 of $30.5 million represents our estimate of average annual maintenance capital expenditures necessary to maintain our targeted average net production of 61 Mmcfed through 2016. We anticipate replacing declining production and proved reserves through the drilling and completion of wells on our undeveloped properties and growing production and proved reserves through the acquisition of producing and non-producing oil and gas properties from Quicksilver and third parties. As part of our maintenance capital expenditures, we estimate that, during 2012, we will drill 8 gross (8 net) wells and conduct other completion or recompletion activities that total in the aggregate $30.6 million.

Our forecast for the year ending December 31, 2012 does not reflect any material growth capital expenditures or acquisitions. We anticipate growing production above our targeted production rate over the next five years by spending growth capital expenditures primarily on acquisition opportunities. While we anticipate making these growth capital expenditures over the next five years and believe we will be able to access external funding sources, we cannot forecast the timing of such expenditures. Although we may make acquisitions during the year ending

December 31, 2012, our forecast does not reflect any acquisitions, as we can provide no assurance that we will be able to identify attractive properties or, if identified, that we will be able to negotiate acceptable purchase agreements and, as such, any acquisitions. Please read “Risk factors—Risks related to our business—If we do not make acquisitions on economically acceptable terms, our future growth and ability to pay or increase distributions will be limited.”

Lease operating expense. The following table summarizes our predecessor’s lease operating expense on an aggregate basis and on a per Mcfe basis for the year ended December 31, 2010 and the nine months ended September 30, 2011 and our forecasted lease operating expense on an aggregate basis and on a per Mcfe basis for the year ending December 31, 2012:


	Forecasted year ending December 31, 2012				Nine months ended September 30, 2011				Year ended December 31, 2010
(in millions, except per unit amounts)			Per Mcfe				Per Mcfe				Per Mcfe

Lease operating expense	$	13.9	$	0.59	$	16.7	$	0.99	$	20.3	$	0.84

The decrease in forecasted lease operating expense is primarily a result of non-routine workover costs associated with production enhancements on our properties and differences between historical allocated expenses and forecasted amounts under our omnibus agreement. A majority of these workover costs were initiated in 2011 and are not expected to continue in future periods.

Gathering, processing and transportation expense. The following table summarizes our predecessor’s gathering, processing and transportation expense on an aggregate basis and on a per Mcfe basis for the year ended December 31, 2010 and the nine months ended September 30, 2011 and our forecasted gathering, processing and transportation expense on an aggregate basis and on a per Mcfe basis for the year ending December 31, 2012:


	Forecasted year ending December 31, 2012				Nine months ended September 30, 2011				Year ended December 31, 2010
(in millions, except per unit amounts)			Per Mcfe				Per Mcfe				Per Mcfe

Gathering, processing and transportation expense	$	31.7	$	1.35	$	23.4	$	1.39	$	32.7	$	1.36

Production and other taxes. The following table summarizes production taxes for our predecessor for the year ended December 31, 2010 and the nine months ended September 30, 2011 and for us on a forecasted basis for the year ending December 31, 2012 and ad valorem taxes for the same periods:


(in millions, except percentage amounts)	Forecasted year ending December 31, 2012		Nine months ended September 30, 2011		Year ended December 31, 2010

Production revenue, excluding the effect of derivatives	$	120.9	$	99.5	$	127.9
Production taxes		2.5		1.4		1.8
Production taxes as a percentage of revenue, excluding the effect of derivatives		2.04%		1.41%		1.41%

Ad valorem taxes		1.6		1.8		3.8
Ad valorem taxes as a percentage of revenue, excluding the effect of derivatives		1.35%		1.81%		2.97%
Production and ad valorem taxes	$	4.1	$	3.2	$	5.6

Our production taxes are generally based on revenue, excluding the effects of commodity derivatives. In general, as prices and volumes increase, production taxes increase. As prices and volumes decrease, production taxes decrease. Ad valorem taxes are generally tied to the valuation of the oil and gas properties. However, these valuations are reasonably correlated to revenue, excluding the effects of our commodity derivatives. As a result, we are forecasting our ad valorem taxes as a percent of revenue, excluding the effects of our commodity derivatives.

General and administrative expenses. We estimate that general and administrative expense for the year ending December 31, 2012 will be $6.2 million as compared to $12.4 million and $8.2 million for the year ended December 31, 2010 and the nine months ended September 30, 2011, respectively, as a result of differences between historical allocated expenses and forecasted amounts under our omnibus agreement. We expect that we will incur $3.9 million of direct expenses and $2.3 million of expenses that will be allocated to us by Quicksilver pursuant to our omnibus agreement. Quicksilver currently intends to allocate its expected general and administrative costs based on the time spent on managing the affairs of the partnership.

Depletion and accretion expense. We estimate that our depletion and accretion expense for the year ending December 31, 2012 will be approximately $30.6 million, as compared to $21.1 million and $16.6 million for the year ended December 31, 2010 and the nine months ended September 30, 2011, respectively. The forecasted depletion of our oil and gas properties is based on the estimated proved reserves and future development costs in our reserve report. Our capitalized costs are calculated using the full cost accounting method. For a detailed description of the full cost method of accounting, please read “Management’s discussion and analysis of financial condition and results of operations—Our and our predecessor’s critical accounting policies.”

Interest expense. We estimate that at the closing of this offering we will borrow approximately $150 million (based upon the assumed midpoint of the price range set forth on the cover of this prospectus) in revolving debt under our new revolving credit facility. We estimate that the borrowings will bear interest at an assumed rate of approximately 3.3%. Based on these

assumptions, we estimate that our interest expense for the year ending December 31, 2012 will be $4.6 million. If the net proceeds of this offering increase or decrease, then our borrowing under our new revolving credit facility would correspondingly decrease or increase, respectively. If the interest rate used to calculate this interest were 1% higher or lower, our annual interest expense would increase or decrease, respectively, by approximately $1.4 million. Likewise, a $1.00 increase or decrease in the assumed initial public offering price per common unit would result in a $ million decrease or increase in borrowings, respectively, and a $ million decrease or increase in interest expense, respectively. Our predecessor had no debt prior to 2012.

We expect that our new revolving credit facility will contain financial covenants that require us to maintain a leverage ratio of not more than to 1.0x and a current ratio of not less than 1.0 to 1.0x. Please see “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources—Liquidity and borrowing capacity” for additional detail regarding the covenants and restrictive provisions to be included in our new revolving credit facility. We expect that our new revolving credit facility will not require any cash expenditures on our part other than interest expense that would affect our cash available for distribution. As a result, based on the assumptions used in preparing the estimates set forth above, our new revolving credit facility will not have any effect, other than interest expense, upon our ability to pay the estimated distributions to our unitholders during the forecast period.

Regulatory, industry and economic factors

Our forecast for the year ending December 31, 2012 is based on the following significant assumptions related to regulatory, industry and economic factors:

•

There will not be any new federal, state or local regulation of portions of the energy industry in which we operate, or an interpretation of existing regulation, that will be material to our business;

•

There will not be any major change in commodity prices or the energy industry in general;

•

Market, insurance and overall economic conditions will not change substantially; and

•

We will not undertake any extraordinary transactions that would materially affect our cash flow.

Forecasted distributions

We expect that aggregate quarterly distributions of available cash on our common, subordinated and general partner units for the year ending December 31, 2012 will be approximately $ million. Quarterly distributions of available cash will be paid within 45 days after the close of each calendar quarter.

While we believe that the assumptions we have used in preparing the estimates set forth above are reasonable based upon management’s current expectations concerning future events, they are inherently uncertain and are subject to significant business, economic, regulatory and competitive risks and uncertainties, including those described in “Risk factors,” that could cause actual results to differ materially from those we anticipate. If our assumptions are not realized, the actual available cash that we generate could be substantially less than the amount we currently estimate and could, therefore, be insufficient to permit us to pay the full minimum quarterly distribution or any amount on all our outstanding common, subordinated and general partner units in respect of the four calendar quarters ending December 31, 2012 or thereafter, in which event the market price of the common units may decline materially.

Sensitivity analysis

Our ability to generate sufficient cash from operations to pay distributions to our unitholders is a function of two primary variables: (i) production volumes and (ii) commodity prices. In the paragraphs below, we discuss the impact that changes in either of these variables, while holding all other variables constant, would have on our ability to generate sufficient cash from our operations to pay the minimum quarterly distributions on our outstanding common, subordinated and general partner units for the year ending December 31, 2012.

Production volume changes

The following table shows estimated Adjusted EBITDA under production levels of 90%, 100% and 110% of the production level we have forecasted for the year ending December 31, 2012. The estimated Adjusted EBITDA amounts shown below are based on the assumptions used in our forecast.


	Percentage of forecasted net production
	90%		100%		110%


Forecasted net production:
Annual production:
Natural gas (Mmcf)		11,488		12,764		14,041
NGL (Mbbl)		1,570		1,745		1,919
Oil (Mbbl)		45		50		55
Total (Mmcfe)		21,181		23,535		25,888

Average daily production:
Natural gas (Mcfd)		31,387		34,875		38,362
NGL (Bbld)		4,290		4,767		5,244
Oil (Bbld)		124		137		151
Total (Mcfed)		57,872		64,302		70,733


	Percentage of forecasted net production
(in millions, except per unit amounts)	90%			100%			110%


Forecasted prices:
Average natural gas prices:
NYMEX-Henry Hub natural gas price (per Mmbtu)(1)	$	2.85		$	2.85		$	2.85
Realized natural gas price (per Mcf) (excluding derivatives)	$	2.69		$	2.69		$	2.69
Realized natural gas price (per Mcf) (including derivatives)	$	5.70		$	5.40		$	5.15
Average NGL prices:
NYMEX-WTI oil price (per Bbl)(1)(2)	$	99.64		$	99.64		$	99.64
Realized NGL price (per Bbl) (excluding derivatives)	$	46.90		$	46.90		$	46.90
Realized NGL price (per Bbl) (including derivatives)	$	46.38		$	46.43		$	46.47
Average oil prices:
NYMEX-WTI oil price (per Bbl)(1)	$	99.64		$	99.64		$	99.64
Realized oil price (per Bbl) (excluding derivatives)	$	94.46		$	94.46		$	94.46
Realized oil price (per Bbl) (including derivatives)	$	94.46		$	94.46		$	94.46
Forecasted Adjusted EBITDA projection:
Natural gas, NGL and oil revenue	$	108.8		$	120.9		$	133.0
Realized gains (losses) on derivatives		33.8			33.8			33.8

Total production revenue	$	142.6		$	154.7		$	166.8
Lease operating expense		(12.5	)		(13.9	)		(15.2	)
Gathering, processing and transportation expense		(28.5	)		(31.7	)		(34.9	)
Production and ad valorem taxes		(3.7	)		(4.1	)		(4.5	)
General and administrative expenses		(6.2	)		(6.2	)		(6.2	)
Equity-based compensation (included in general and administrative)		2.0			2.0			2.0

Estimated Adjusted EBITDA	$	93.7		$	100.8		$	108.0
Minimum estimated Adjusted EBITDA
Excess cash available for distribution

(1)

Based on average closing spot prices of Henry Hub natural gas and WTI crude oil for January 2012 and average NYMEX futures prices for the remainder of 2012, as reported on January 31, 2012.

(2)

Commodity price changes

For purposes of this prospectus, we have assumed that, at the closing of this offering, Quicksilver will novate to us commodity derivatives covering 30 Mmcfd of natural gas production with a weighted average floor of $6.00 for 2012, 2013, 2014 and 2015 and 3 Mbbld of NGL production with a weighted average floor of $46.16 for 2012. In addition, the estimated Adjusted EBITDA amounts shown below are based on forecasted realized commodity prices that take into account our average NYMEX commodity price differential assumptions. We have assumed no changes in our production based on changes in prices. The following table shows estimated Adjusted EBITDA under various assumed NYMEX commodity prices for the year ending December 31, 2012.


Year ending December 31, 2012 (in millions, except per unit amounts)

NYMEX-Henry Hub natural gas price (per Mmbtu):	$	2.00		$	2.50		$	3.00		$	3.50
NYMEX-WTI oil price (per Bbl):	$	85.00		$	95.00		$	105.00		$	115.00
Forecasted net production:
Annual production:
Natural gas (Mmcf)		12,764			12,764			12,764			12,764
NGL (Mbbl)		1,745			1,745			1,745			1,745
Oil (Mbbl)		50			50			50			50
Total (Mmcfe)		23,535			23,535			23,535			23,535
Average daily production:
Natural gas (Mcfd)		34,875			34,875			34,875			34,875
NGL (Bbld)		4,767			4,767			4,767			4,767
Oil (Bbld)		137			137			137			137
Total (Mcfed)		64,302			64,302			64,302			64,302
Forecasted prices:
Realized natural gas price (per Mcf) (excluding derivatives)	$	1.89		$	2.36		$	2.83		$	3.30
Realized natural gas price (per Mcf) (including derivatives)	$	5.33		$	5.37		$	5.41		$	5.45
Realized NGL price (per Bbl) (excluding derivatives)	$	40.02		$	44.73		$	49.43		$	54.14
Realized NGL price (per Bbl) (including derivatives)	$	43.88		$	45.63		$	47.37		$	49.12
Realized oil price (per Bbl) (excluding derivatives)	$	80.66		$	90.15		$	99.63		$	109.12
Realized oil price (per Bbl) (including derivatives)	$	80.66		$	90.15		$	99.63		$	109.12
Forecasted Adjusted EBITDA projection:
Operating revenue	$	98.0		$	112.7		$	127.4		$	142.1
Realized derivative gains (losses)		50.7			40.0			29.3			18.7

Total revenue and realized derivative gains (losses)	$	148.7		$	152.7		$	156.7		$	160.8
Lease operating expense		(13.9	)		(13.9	)		(13.9	)		(13.9	)
Gathering, processing and transportation expense		(31.7	)		(31.7	)		(31.7	)		(31.7	)
Production and ad valorem taxes		(3.3	)		(3.8	)		(4.3	)		(4.8	)
General and administrative expenses		(6.2	)		(6.2	)		(6.2	)		(6.2	)
Equity-based compensation (included in general and administrative)		2.0			2.0			2.0			2.0

Estimated Adjusted EBITDA	$	95.6		$	99.1		$	102.6		$	106.2
Minimum estimated Adjusted EBITDA
Excess cash available for distribution

The following table shows estimated Adjusted EBITDA under various assumed NYMEX-Henry Hub natural gas prices and NYMEX-WTI oil prices for the year ending December 31, 2012.

Estimated Adjusted EBITDA


	NYMEX-Henry Hub natural gas price (per Mmbtu):
NYMEX-WTI oil price (per Bbl):	$1.50		$2.00		$2.50		$3.00		$3.50		$4.00

$75.00	$	92.0	$	92.3	$	92.7	$	93.0	$	93.3	$	93.7
$85.00		95.2		95.6		95.9		96.2		96.6		96.9
$95.00		98.5		98.8		99.1		99.5		99.8		100.1
$105.00		101.7		102.0		102.3		102.6		103.0		103.3
$115.00		104.9		105.2		105.6		105.9		106.2		106.6
$125.00		108.1		108.5		108.8		109.1		109.5		109.8

The amount of available cash we need to pay the minimum quarterly distribution for four quarters on our common, subordinated and general partner units that will be outstanding after this offering is approximately $ million. The minimum estimated Adjusted EBITDA for the twelve months ending December 31, 2012 necessary to pay the aggregate annualized minimum quarterly distributions for such period is approximately $ million, resulting in an excess of cash available for distribution over the minimum quarterly cash distributions of $ million, based on an estimated Adjusted EBITDA of $ million for such period. Please see “—Estimated Adjusted EBITDA for the year ending December 31, 2012.”

Our estimated Adjusted EBITDA for the twelve months ending December 31, 2012 is based on a price of $2.85 per Mmbtu of natural gas and a price of $99.64 per barrel of oil for the twelve months ending December 31, 2012. The natural gas price is based on the average closing spot price of Henry Hub natural gas for January 2012 and NYMEX-Henry Hub futures prices for the remainder of 2012 as reported on January 31, 2012. The oil price is based on the average closing spot price of WTI crude oil for January 2012 and NYMEX-WTI futures prices for the remainder of 2012 as reported on January 31, 2012. Based on such prices, and assuming the effect of the commodity derivatives that will be novated to us at the closing of this offering, if either natural gas prices were to decline by % to $ (assuming oil prices are held constant at $98.95 per Bbl), or if oil prices were to decline by % to $ (assuming natural gas prices are held constant at $3.82 per Mcf), then we would not have any excess cash available for distribution. If oil and natural gas prices were to decline further, we would be unable to generate sufficient Adjusted EBITDA to pay the minimum quarterly distribution to all of our unitholders. Please see “—Assumptions and considerations—Operations and revenue—Prices.”

We expect to adopt a hedging policy designed to reduce the impact to our cash flows from commodity price volatility. Under this policy, we intend to enter into commodity derivatives covering approximately 60% to 85% of our estimated production from total proved developed producing reserves over a three-to-five year period at any given point in time. We may, however, from time to time hedge more or less than this approximate range or change this range. As opposed to entering into commodity derivatives at predetermined times or on prescribed terms, we intend to enter into commodity derivatives in connection with material increases in our estimated proved reserves and at times when we believe market conditions or other circumstances suggest that it is prudent to do so. By removing a significant portion of price

volatility associated with production, we believe we will mitigate, but not eliminate, the potential negative effects of reductions in commodity prices on our cash flow from operations for those periods. However, our commodity derivatives program may also reduce our ability to benefit from increases in commodity prices. Additionally, we intend to individually identify our commodity derivatives as “designated hedges” for U.S. federal income tax and accounting purposes as we enter into them.

As commodity prices decline, our estimated Adjusted EBITDA does not decline proportionately for two reasons: (1) the effects of our commodity derivatives and (2) the effects of our general and administrative expenses, which are not expected to correlate with commodity prices. Furthermore, we have assumed no changes in estimated production or operating costs during the year ending December 31, 2012. However, over the long term, a sustained decline in commodity prices would likely lead to a decline in production and operating costs, as well as a reduction in our realized commodity prices. Therefore, the foregoing table is not illustrative of all of the potential effects of changes in commodity prices for periods subsequent to December 31, 2012.

Provisions of our partnership agreement relating to cash distributions

Set forth below is a summary of the significant provisions of our partnership agreement that relate to cash distributions.

Distributions of available cash

General

Our partnership agreement requires that, within 45 days after the end of each quarter, beginning with the quarter ending , 2012, we distribute all of our available cash to unitholders of record on the applicable record date.

Definition of available cash

Available cash, for any quarter, consists of all cash and cash equivalents on hand at the end of that quarter:

•

less, the amount of cash reserves established by our general partner at the date of determination of available cash for the quarter:

•

to provide for the proper conduct of our business (which could include reserves for operating expenses, working capital and capital expenditures);

•

to comply with our debt instruments or other agreements and applicable law; or

•

to provide funds for distributions to our unitholders (including our general partner) for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for future distributions if it would prevent us from distributing the minimum quarterly distribution and any cumulative arrearages on all common units for such quarter);

•

plus, if our general partner so determines, all or a portion of working capital borrowings made or available to be made after the end of the quarter but on or before the date of the determination of available cash for the quarter.

Working capital borrowings are borrowings incurred under a credit facility, commercial paper facility or similar financing arrangement that are used solely for working capital purposes or to pay distributions to partners and were incurred with the intent of repaying such borrowings within 12 months from sources other than additional working capital borrowings.

Intent to distribute the minimum quarterly distribution

We intend to distribute to the holders of common, subordinated and general partner units on a quarterly basis at least the minimum quarterly distribution of $ per unit, or $ per unit on an annualized basis, to the extent we have sufficient available cash. However, there is no guarantee that we will pay the minimum quarterly distribution on our units in any quarter. Even if our cash distribution policy is not modified or revoked, the amount of distributions paid under our policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement and other relevant factors. Please read “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources—Liquidity and borrowing capacity” for a discussion of the restrictions to be included in our credit facility that may restrict our ability to make distributions.

We will adjust the minimum quarterly distribution payable in respect of the quarter ending , 2012 for the period from the closing of the offering through , 2012.

General partner interest and incentive distribution rights

Initially, our general partner will be entitled to 0.1% of all quarterly distributions that we make prior to our dissolution. At the consummation of this offering, our general partner’s 0.1% interest in us will be represented by general partner units. Our general partner has the right, but not the obligation, to maintain its 0.1% interest in us in connection with future issuances of limited partner interests. If we issue additional limited partner units in the future (other than the issuance of common units upon exercise by the underwriters of their option to purchase additional common units, the issuance of common units upon conversion of outstanding subordinated units or the issuance of common units in connection with the reset of the minimum quarterly distribution and target distributions in respect of the incentive distribution rights) and our general partner does not contribute a proportionate amount of capital to us in exchange for additional general partner units, its 0.1% interest in our distributions will be reduced.

Our general partner also holds incentive distribution rights that entitle it to receive increasing percentages, up to a maximum of 24.9%, of the cash we distribute from operating surplus (as defined below) in excess of $ per unit per quarter. The maximum distribution of 24.9% does not include any distributions that our general partner may receive on its general partner units or affiliates of our general partner may receive on common units or subordinated units owned by them.

Operating surplus and capital surplus

General

All cash distributed to unitholders will be characterized under our partnership agreement as being paid from either “operating surplus” or “capital surplus.” Our partnership agreement requires that we distribute available cash from operating surplus differently than available cash from capital surplus.

Operating surplus

Operating surplus is determined as of the end of a period and consists of:

(i) the sum of:

•

$40 million;

•

all of our cash receipts after the closing of this offering;

•

excluding cash proceeds of interim capital transactions prior to dissolution, which includes borrowings (including sales of debt securities) other than working capital borrowings, sales of equity interests and sales or other dispositions of assets outside the ordinary course of business;

•

excluding cash realized on disposition of an investment capital expenditure other than the amount of any gains;

•

provided that cash receipts from an early termination of a commodity derivative or interest rate derivative shall be amortized in equal quarterly installments over the remaining original scheduled life of such derivative;

•

working capital borrowings made after the end of the period but on or before the date of the determination of available cash for the period and any available working capital borrowings that our general partner has determined shall be included in available cash with respect to such period;

•

cash distributions paid on equity issued to finance all or a portion of maintenance or growth capital expenditures for the period from the date that we enter into a binding obligation with respect to such capital asset to the earlier to occur of the date such asset begins producing in paying quantities or is placed into service, as applicable, and the date that it is abandoned or disposed of; and

•

cash distributions paid on equity issued to pay the construction period interest on debt incurred or to pay construction period distributions on equity issued to finance the capital expenditure referred to above;

(ii) less the sum of:

•

all of our operating expenditures (as described below) after the closing of this offering;

•

the amount of cash reserves established by our general partner to provide funds for future operating expenditures;

•

all working capital borrowings not repaid within 12 months after having been incurred, or repaid within such 12-month period with the proceeds of additional working capital borrowings; and

•

any cash loss realized on disposition of an investment capital expenditure.

Operating expenditures are defined in our partnership agreement generally to mean all of our cash expenditures, including taxes, reimbursement for expenses of our general partner and its affiliates (including expenses incurred under our omnibus agreement), payments made in the ordinary course of business under interest rate and commodity derivatives (provided that payments in connection with the initial purchase of a derivative will be amortized in equal quarterly installments over the life of the applicable derivative, and payments in connection with an early termination of a derivative will be amortized in equal quarterly installments over the remaining original scheduled life of such derivative), officer compensation, payments of interest on indebtedness (except as otherwise provided in our partnership agreement) and plugging and abandonment costs, provided that operating expenditures:

(i) will include estimated maintenance capital expenditures but not actual maintenance capital expenditures, growth capital expenditures or investment capital expenditures (as described in fuller detail below);

(ii) will include repayment of working capital borrowings but not other borrowings; and

(iii) will not include:

•

repayment of working capital borrowings previously deducted from operating surplus pursuant to the provision described in the penultimate bullet point of the description of operating surplus above when such repayment actually occurs;

•

payment of transaction expenses relating to interim capital transactions;

•

repurchases of equity interests except to satisfy obligations under employee benefit plans;

•

distributions to our partners; or

•

any other payments made in connection with this offering described in “Use of proceeds.”

As described above, operating surplus does not reflect actual cash on hand that is available for distribution to our unitholders and is not limited to cash generated by our operations. For example, it includes a basket of $40 million that will enable us, if we choose, to distribute as operating surplus $40 million cash we receive in the future from non-operating sources such as asset sales, issuances of equity interests and long-term borrowings that would otherwise be distributed as capital surplus.

The proceeds of working capital borrowings increase operating surplus and repayments of working capital borrowings are generally operating expenditures (as described above) and thus reduce operating surplus when repayments are made. However, if a working capital borrowing is not repaid during the 12-month period following the borrowing, it will be deemed repaid at the end of such period, thus decreasing operating surplus at such time. When such working capital borrowing is in fact repaid, it will be excluded from operating expenditures because operating surplus will have been previously reduced by the deemed repayment.

Capital surplus

Capital surplus is defined in our partnership agreement as any distribution of available cash in excess of our cumulative operating surplus. Accordingly, capital surplus would generally be generated by:

•

borrowings (including sales of debt securities) other than working capital borrowings;

•

sales of our equity interests; and

•

sales or other dispositions of assets outside the ordinary course of business.

Characterization of cash distributions

Our partnership agreement requires that we treat all available cash distributed as coming from operating surplus until the sum of all available cash distributed since the closing of this offering equals the operating surplus from the closing of this offering through the end of the quarter immediately preceding that distribution. Our partnership agreement requires that we treat any amount distributed in excess of operating surplus, regardless of its source, as capital surplus. We do not anticipate that we will make any distributions from capital surplus.

Capital expenditures

All capital expenditures are either maintenance capital expenditures, growth capital expenditures or investment capital expenditures. Estimated maintenance capital expenditures reduce operating surplus, but actual maintenance capital expenditures, growth capital expenditures and investment capital expenditures do not.

Maintenance capital expenditures are capital expenditures that are intended to maintain our asset base over the long term. We expect that a primary component of maintenance capital expenditures will be capital expenditures associated with the replacement of equipment and oil and natural gas reserves (including undeveloped leasehold acreage), whether through the development and production of an existing leasehold or the acquisition or development of a new oil or natural gas property. Capital expenditures made solely for investment purposes will not be considered maintenance capital expenditures.

Our maintenance capital expenditures can vary from period to period, which could cause similar fluctuations in the amounts of operating surplus and adjusted operating surplus if we subtracted actual maintenance capital expenditures from operating surplus. To address this issue, our partnership agreement will require that an estimate of the average quarterly maintenance capital expenditures be subtracted from operating surplus each quarter as opposed to the actual amounts spent. The amount of estimated maintenance capital expenditures deducted from operating surplus is subject to review and change by our general partner’s board of directors at least once a year, provided that any change is approved by the conflicts committee. The estimate will be made at least annually and whenever an event occurs that is likely to result in a material adjustment to the amount of our maintenance capital expenditures, such as a major acquisition or the introduction of new governmental regulations that will impact our business. For purposes of calculating operating surplus, any adjustment to this estimate will be prospective only. For a discussion of the amounts we have allocated toward estimated maintenance capital expenditures, please read “Our cash distribution policy and restrictions on distributions.”

The use of estimated maintenance capital expenditures in calculating operating surplus will have the following effects:

•

it will reduce the risk that maintenance capital expenditures in any one quarter will be large enough to render operating surplus less than the minimum quarterly distribution on outstanding units for such quarter;

•

it will increase our ability to distribute as operating surplus cash we receive from non-operating sources;

•

in quarters where estimated maintenance capital expenditures exceed actual maintenance capital expenditures, it will reduce the amount available for distribution as operating surplus; conversely, in quarters in which actual maintenance capital expenditures exceed estimated maintenance capital expenditures, it will increase the amount available for distribution as operating surplus; and

•

it will reduce the likelihood that a large maintenance capital expenditure during a particular quarter will prevent our general partner’s affiliates from being able to convert some or all of their subordinated units to common units since the effect of an estimate is to spread the expected expense over several periods, thereby mitigating the effect of the actual payment of the expenditure on any single period.

Growth capital expenditures are capital expenditures that are intended to increase our asset base over the long term. Examples of growth capital expenditures include the acquisition of reserves or equipment, the acquisition of new leasehold interests, or the development and production of an existing leasehold interest, to the extent such expenditures are incurred to increase our asset base over the long term. Capital expenditures made solely for investment purposes will not be considered growth capital expenditures.

Investment capital expenditures are those capital expenditures that are neither maintenance capital expenditures nor growth capital expenditures. Investment capital expenditures will consist largely of capital expenditures made for investment purposes. Examples of investment capital expenditures include traditional capital expenditures for investment purposes, such as purchases of securities, as well as other capital expenditures that might be made in lieu of such traditional investment capital expenditures, such as the acquisition of a capital asset for investment purposes or development of our undeveloped properties in excess of the

maintenance of our asset base, but which are not expected to expand our asset base for more than the short term. Cash gains or losses on disposition of an investment capital expenditure will increase or decrease operating surplus when realized.

Maintenance and growth capital expenditures will each include construction period interest paid on debt incurred to finance the related capital asset. In addition, maintenance capital expenditures will include construction period distributions paid on equity to finance the related capital asset.

As described above, neither growth capital expenditures nor investment capital expenditures will be included in operating expenditures, and thus will not reduce operating surplus. Because growth capital expenditures include construction period interest paid on debt incurred to finance all or a portion of the related capital asset, such interest payments also do not reduce operating surplus.

Capital expenditures that are made in part for maintenance capital purposes and in part for growth capital or investment capital purposes will be allocated as maintenance capital expenditures, growth capital expenditures or investment capital expenditures by our general partner’s board of directors, based upon its good faith determination, subject to approval by the conflicts committee.

Subordination period

General

During the subordination period (which we describe below), the common units will have the right to receive distributions of available cash from operating surplus each quarter in an amount equal to $ per common unit (which amount is defined in our partnership agreement as the minimum quarterly distribution) plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. These units are deemed “subordinated” because for a period of time, referred to as the subordination period, the subordinated units will not be entitled to receive any distributions from operating surplus until the common units have received the minimum quarterly distribution plus any arrearages from prior quarters. Furthermore, no arrearages will be paid on the subordinated units. The practical effect of the subordinated units is to increase the likelihood that during the subordination period there will be available cash from operating surplus to be distributed on the common units.

Expiration of the subordination period

The subordination period will extend from the closing of this offering until the earlier of:

(i) the first business day after the payment of the distribution to unitholders in respect of any quarter ending on or after , 2015 if each of the following tests are met:

•

aggregate distributions of available cash from operating surplus on all outstanding common, subordinated and general partner units (and any other partnership interests that are senior or equal in right of distribution to the subordinated units) for a period of 12 consecutive quarters ending on the last day of such quarter equaled or exceeded the aggregate minimum quarterly distributions on all such units outstanding during such period;

•

the “adjusted operating surplus” (as defined below) for such 12-quarter period equaled or exceeded the aggregate minimum quarterly distributions on all common, subordinated and

general partner units (and any other partnership interests that are senior or equal in right of distribution to the subordinated units) outstanding during such period on a fully diluted weighted average basis; and

•

there are no arrearages in payment of the minimum quarterly distribution on the common units.

(ii) the first business day after the payment of the distribution to unitholders in respect of any quarter ending on or after , 2013, if each of the following tests are met:

•

distributions of available cash from operating surplus on each outstanding common, subordinated and general partner unit (and any other partnership interest that is senior or equal in right of distribution to the subordinated units) for each quarter in a four-quarter period ending on the last day of such quarter equaled or exceeded $ (125% of the minimum quarterly distribution) and the corresponding distribution on the incentive distribution rights were made;

•

the “adjusted operating surplus” for such four-quarter period equaled or exceeded the sum of (i) an aggregate amount equal to $ (125% of the minimum quarterly distribution) per quarter on each common, subordinated and general partner unit (and any other partnership interests that are senior or equal in right of distribution to the subordinated units) outstanding during such period on a fully diluted weighted average basis and (ii) the corresponding distributions that would be made on the incentive distribution rights; and

•

there are no arrearages in payment of the minimum quarterly distribution on the common units.

In determining whether the requirements of (i) or (ii) above have been satisfied with respect to the first partial quarter after the closing of this offering, the prorated amount of the minimum quarterly distribution shall be used.

Effect of the expiration of the subordination period

When the subordination period ends, each outstanding subordinated unit will convert into one common unit and will then participate pro rata with the other common units in distributions of available cash. Common units will then no longer be entitled to arrearages.

Effect of the expiration of the subordination period following removal of our general partner

If the unitholders remove our general partner other than for cause and the units held by our general partner and its affiliates are not voted in favor of such removal:

•

the subordination period will end, and each subordinated unit will immediately convert into one common unit;

•

any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and

•

our general partner will have the right to convert its general partner units and incentive distribution rights into common units or to receive cash in exchange for such interests at the equivalent common unit fair market value.

Adjusted operating surplus

Adjusted operating surplus is intended to reflect the cash generated from operations during a particular period and therefore excludes net increases in working capital borrowings and net drawdowns of reserves of cash generated in prior periods.

Adjusted operating surplus for any period consists of operating surplus for such period (excluding the $ million basket otherwise included in operating surplus);

(i) less

•

any net increase in working capital borrowings with respect to that period; and

•

any net decrease in cash reserves for operating expenditures with respect to that period not relating to an operating expenditure made with respect to that period;

(ii) plus

•

any net decrease in working capital borrowings with respect to that period;

•

any net increase in cash reserves for operating expenditures with respect to that period required by any debt instrument for the repayment of principal, interest or premium; and

•

any net decrease made in subsequent periods in cash reserves for operating expenditures initially established with respect to such period to the extent such decrease results in a reduction of adjusted operating surplus in subsequent periods pursuant to the second bullet point under (i) above.

Distributions of available cash from operating surplus during the subordination period

Our partnership agreement requires that we make distributions of available cash from operating surplus for any quarter during the subordination period in the following manner:

•

first, 99.9% to the common unitholders, pro rata, and 0.1% to our general partner, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter;

•

second, 99.9% to the common unitholders, pro rata, and 0.1% to our general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period;

•

third, 99.9% to the subordinated unitholders, pro rata, and 0.1% to our general partner, until we distribute for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and

•

thereafter, in the manner described in “—General partner interest and incentive distribution rights” below.

The preceding discussion is based on the assumptions that our general partner maintains its 0.1% general partner interest and that we do not issue additional classes of equity securities.

Distributions of available cash from operating surplus after the subordination period

Our partnership agreement requires that we make distributions of available cash from operating surplus for any quarter after the subordination period in the following manner:

•

first, 99.9% to all unitholders, pro rata, and 0.1% to our general partner, until we distribute for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; and

•

thereafter, in the manner described in “—General partner interest and incentive distribution rights” below.

The preceding discussion is based on the assumptions that our general partner maintains its 0.1% general partner interest and that we do not issue additional classes of equity securities.

General partner interest and incentive distribution rights

Our partnership agreement provides that our general partner initially will be entitled to 0.1% of all distributions that we make prior to our dissolution. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its 0.1% general partner interest if we issue additional units. Our general partner’s 0.1% interest, and the percentage of our cash distributions to which it is entitled, will be proportionately reduced if we issue additional units in the future (other than the issuance of common units in connection with the reset of the minimum quarterly distribution and the target distribution levels relating to the incentive distribution rights) and our general partner does not contribute a proportionate amount of capital to us to maintain its 0.1% general partner interest. Our general partner will be entitled to make a capital contribution in order to maintain its 0.1% general partner interest in the form of cash or common units based on the current market value of the contributed common units.

Incentive distribution rights represent the right to receive an increasing percentage (14.9% and 24.9%, in each case not including distributions paid to the general partner on its 0.1% general partner interest) of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. Our general partner currently holds the incentive distribution rights, but may transfer these rights separately from its general partner interest, subject to restrictions in the partnership agreement.

The following discussion assumes that our general partner maintains its 0.1% general partner interest and that our general partner continues to own the incentive distribution rights.

If for any quarter:

•

we have distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly distribution; and

•

we have distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution;

then, our partnership agreement requires that we distribute any additional available cash from operating surplus for that quarter among the unitholders and the general partner in the following manner:

•

first, 99.9% to all unitholders, pro rata, and 0.1% to our general partner, until each unitholder receives a total of $ per unit for that quarter (the “first target distribution”);

•

second, 85.0% to all unitholders, pro rata, and 0.1% in respect of its general partner interest and 14.9% in respect of its incentive distribution rights to our general partner, until each unitholder receives a total of $ per unit for that quarter (the “second target distribution”); and

•

thereafter, 75.0% to all unitholders, pro rata, and 0.1% in respect of its general partner interest and 24.9% in respect of its incentive distribution rights to our general partner.

Percentage allocations of available cash from operating surplus

The following table illustrates the percentage allocations of available cash from operating surplus between the unitholders and our general partner based on the specified target distribution levels. The amounts set forth under “Marginal percentage interest in distributions” are the percentage interests of our general partner and the unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column “Total quarterly distribution per unit.” The percentage interests shown for our unitholders and our general partner for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for our general partner include its 0.1% general partner interest and assume our general partner has contributed any additional capital to maintain its 0.1% general partner interest and has not transferred its incentive distribution rights and there are no arrearages on common units.

Total quarterly
distribution per
unit

Marginal percentage
interest in distributions

Unitholders

General
partner

Minimum Quarterly Distribution

up to $

99.9%

0.1%

First Target Distribution

above $

up to $

99.9%

0.1%

Second Target Distribution

above $

up to $

85.0%

15.0%

Thereafter

above $

75.0%

25.0%

General partner’s right to reset incentive distribution levels

Our general partner, as the holder of the incentive distribution rights, has the right under our partnership agreement to elect to relinquish the right to receive incentive distribution payments based on the initial target distribution levels and to reset, at higher levels, the minimum quarterly distribution amount and target distribution levels upon which the incentive distribution payments to our general partner would be set. If our general partner transfers all or a portion of the incentive distribution rights in the future, then the holder or holders of a majority of our

incentive distribution rights will be entitled to exercise this right. The following discussion assumes that our general partner holds all of the incentive distribution rights at the time that a reset election is made.

Our general partner’s right to reset the minimum quarterly distribution amount and the target distribution levels may be exercised, without approval of our unitholders or the conflicts committee, at any time when there are no subordinated units outstanding and we have made cash distributions to the holders of the incentive distribution rights at the highest level of incentive distribution for each of the prior four consecutive fiscal quarters. The reset minimum quarterly distribution amount and target distribution levels will be higher than the minimum quarterly distribution amount and the target distribution levels prior to the reset such that our general partner will not receive any incentive distributions under the reset target distribution levels until cash distributions per unit following this event increase as described below. We anticipate that our general partner would exercise this reset right (if at all) only to facilitate acquisitions or internal growth projects that would otherwise not be sufficiently accretive to cash distributions per common unit, taking into account the existing levels of incentive distribution payments being made to our general partner.

In connection with the resetting of the minimum quarterly distribution amount and the target distribution levels and the corresponding relinquishment by our general partner of incentive distribution payments based on the target cash distributions prior to the reset, our general partner will be entitled to receive a number of newly issued common units based on a predetermined formula described below that takes into account the “cash parity” value of the average cash distributions received in respect of the incentive distribution rights for the two quarters prior to the reset event as compared to the average cash distributions per common unit during such period. In addition, our general partner will be issued the number of general partner units necessary to maintain its general partner interest in us at the same level as existed immediately prior to the reset election.

The number of common units that our general partner would be entitled to receive from us in connection with a resetting of the minimum quarterly distribution amount and the target distribution levels would be equal to the quotient determined by dividing (x) the average amount of cash distributions received by our general partner in respect of its incentive distribution rights during the two consecutive fiscal quarters ended immediately prior to the date of such reset election by (y) the average amount of cash distributions per common unit during each of these two quarters.

Following any reset election by our general partner, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per unit for the two fiscal quarters immediately preceding the reset election (which amount we refer to as the “reset minimum quarterly distribution”) and the target distribution levels will be reset to be correspondingly higher such that we would distribute all of our available cash from operating surplus for each quarter thereafter as follows:

•

first, 99.9% to all unitholders, pro rata, and 0.1% to our general partner, until each unitholder receives an amount equal to 115% of the reset minimum quarterly distribution for that quarter;

•

second, 85.0% to all unitholders, pro rata, and 0.1% in respect of its general partner interest and 14.9% in respect of its incentive distribution rights to our general partner, until each

unitholder receives an amount per unit equal to 125% of the reset minimum quarterly distribution for the quarter; and

•

thereafter, 75.0% to all unitholders, pro rata, and 0.1% in respect of its general partner interest and 24.9% in respect of its incentive distribution rights to our general partner.

The following table illustrates the percentage allocation of available cash from operating surplus between the unitholders and our general partner at various cash distribution levels (i) pursuant to the cash distribution provisions of our partnership agreement in effect at the closing of this offering, and (ii) following a hypothetical reset of the minimum quarterly distribution and target distribution levels based on the assumption that the average quarterly cash distribution amount per common unit during the two fiscal quarters immediately preceding the reset election was $ .


	Quarterly distribution per unit prior to reset		Marginal percentage interest in distribution				Quarterly distribution per unit following hypothetical reset
	Quarterly distribution per unit prior to reset		Unitholders		General partner

Minimum quarterly distribution		up to $		99.9%		0.1%		$
First target distribution		above $ up to $		99.9%		0.1%		up to $	(1)
Second target distribution		above $ up to $		85.0%		15.0%		above $ up to $	(1) (2)
Thereafter		above $		75.0%		25.0%		above $	(2)

(1)

This amount is 115% of the hypothetical reset minimum quarterly distribution.

(2)

This amount is 125% of the hypothetical reset minimum quarterly distribution.

Cash distributions prior to reset

The following table illustrates the total amount of available cash from operating surplus that would be distributed to the unitholders and our general partner, including in respect of incentive distribution rights based on an average of the amounts distributed for a quarter for the two quarters immediately prior to the reset. The table assumes that immediately prior to the reset there would be common units outstanding, our general partner has maintained its 0.1% general partner interest, and the average distribution to each common unit would be $ for the two quarters prior to the reset.

Quarterly
distributions
per unit
prior to reset

Cash
distributions
to common
unitholders
prior to
reset

Cash distributions to
general partner prior to reset

Total
distributions

Common
units

0.1%
General
partner
interest

Incentive
distribution
rights

Total

Minimum quarterly distribution

up to $

$—

First target distribution

up to $

—

Second target distribution

above $

up to $

—

Thereafter

above $

—

$—

Cash distributions after reset

The following table illustrates the total amount of available cash from operating surplus that would be distributed to the unitholders and our general partner, including in respect of incentive distribution rights, with respect to the quarter in which the reset occurs. The table reflects that as a result of the reset there would be common units outstanding, our general partner’s 0.1% interest has been maintained, and the average distribution to each common unit would be $ . The number of common units to be issued to our general partner upon the reset was calculated by dividing (i) the average of the amounts received by our general partner in respect of its incentive distribution rights for the two quarters prior to the reset as shown in the table above, or $ , by (ii) the average available cash distributed on each common unit for the two quarters prior to the reset as shown in the table above, or $ .

Quarterly
distributions
per unit after
reset

Cash
distributions
to common
unitholders
after reset

Cash distributions to
general partner after reset

Total
distributions

Common
units

0.1%
General
partner
interest

Incentive
distribution
rights

Total

Minimum quarterly distribution

up to $

$ —

First target distribution

up to $

—

Second target distribution

above $

up to $

—

Thereafter

above $

—

Our general partner will be entitled to cause the minimum quarterly distribution amount and the target distribution levels to be reset on more than one occasion, provided that it may not make a reset election except at a time when it has received incentive distributions for the prior four consecutive fiscal quarters based on the highest level of incentive distributions that it is entitled to receive under our partnership agreement.

Distributions from capital surplus

How distributions from capital surplus will be made

We will make distributions of available cash from capital surplus, if any, in the following manner:

•

first, 99.9% to all unitholders, pro rata, and 0.1% to our general partner, until the unrecovered initial unit price, as defined below, has been reduced to zero;

•

second, 99.9% to the common unitholders, pro rata, and 0.1% to our general partner, until we distribute for each common unit an amount of available cash from capital surplus equal to any unpaid arrearages in payment of the minimum quarterly distribution on the common units; and

•

thereafter, we will make all distributions of available cash from capital surplus as if they were from operating surplus.

The preceding discussion is based on the assumption that our general partner maintains its 0.1% general partner interest and that we do not issue additional classes of equity securities.

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Effect of a distribution from capital surplus

Our partnership agreement treats a distribution of capital surplus as the repayment of the initial public offering price per unit in this offering, which is similar to a return of capital. The initial public offering price less any distributions of capital surplus per unit is referred to as the “unrecovered initial unit price.” Each time a distribution of capital surplus is made, the minimum quarterly distribution and the target distribution levels will be reduced in the same proportion as the corresponding reduction in the unrecovered initial unit price. When the unrecovered initial unit price has been reduced to zero, the minimum quarterly distribution and target distribution levels will also be zero. Because distributions of capital surplus will reduce the minimum quarterly distribution and the target distribution levels, it may be easier for our general partner to receive incentive distributions and for the subordinated units to convert into common units. However, until the unrecovered initial unit price is reduced to zero, distributions of capital surplus will be applied to reduce the unrecovered initial unit price and not to the payment of the minimum quarterly distribution or any arrearages.

After the unrecovered initial unit price has been reduced to zero and all arrearages on the common units have been paid, our partnership agreement specifies that we then make all future distributions as distributions from operating surplus, with 75.0% being paid to the holders of units and 25.0% to our general partner. The percentage interests shown for our general partner include its 0.1% general partner interest and assume our general partner has maintained its 0.1% general partner interest and has not transferred the incentive distribution rights.

Adjustment to the minimum quarterly distribution and target distribution levels

In addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus, if we combine our units into fewer units or subdivide our units into a greater number of units, our partnership agreement specifies that the number of outstanding common, subordinated and general partner units will all be adjusted on the same basis and that the following items will be proportionately adjusted:

•

the minimum quarterly distribution;

•

target distribution levels;

•

the unrecovered initial unit price; and

•

the per unit amount of any outstanding arrearages in payment of the minimum quarterly distribution.

For example, if a two-for-one split of the common units should occur, the subordinated and general partner units will be similarly adjusted, and the minimum quarterly distribution, target distribution levels and unrecovered initial unit price would each be reduced to 50% of its initial level. Our partnership agreement provides that we do not make any adjustment by reason of the issuance of additional units for cash or property.

In addition, if as a result of a change in law or interpretation thereof, we or any of our subsidiaries is treated as an association taxable as a corporation or is otherwise subject to additional taxation as an entity for U.S. federal, state, local or non-U.S. income or withholding tax purposes, our general partner may, in its sole discretion, reduce the minimum quarterly distribution and the target distribution levels by multiplying each by a fraction, the numerator of

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which is available cash for that quarter (after deducting our general partner’s estimate of our aggregate liability for the quarter for such income and withholding taxes payable by reason of such change in laws or interpretation) and the denominator of which is the sum of available cash for that quarter (after deducting our general partner’s estimate of our aggregate liability for the quarter for such income and withholding taxes payable by reason of such change in laws or interpretation) plus our general partner’s estimate of our aggregate liability for the quarter for such income and withholding taxes payable by reason of such change in laws or interpretation. To the extent that the actual tax liability differs from the estimated tax liability for any quarter, the difference will be accounted for in subsequent quarters.

Distributions of cash upon dissolution

General

If we dissolve in accordance with the partnership agreement, we will sell or otherwise dispose of our assets in a process called liquidation. We will first apply the proceeds of liquidation to the payment of our creditors. We will distribute any remaining proceeds to the unitholders and the general partner, in accordance with their capital account balances, as adjusted to reflect any gain or loss upon the sale or other disposition of our assets in liquidation.

The allocations of gain and loss upon liquidation are intended, to the extent possible, to entitle the holders of outstanding common units to a preference over the holders of outstanding subordinated units upon our dissolution, to the extent required to permit common unitholders to receive their unrecovered initial unit price plus the minimum quarterly distribution for the quarter during which liquidation occurs plus any unpaid arrearages in payment of the minimum quarterly distribution on the common units. However, there may not be sufficient gain upon our liquidation to enable the holders of common units to fully recover all of these amounts, even though there may be cash available for distribution. Any further net gain recognized upon liquidation will be allocated in a manner that takes into account the incentive distribution rights of our general partner.

Manner of adjustments for gain

The manner of the adjustment for gain is set forth in the partnership agreement. If our dissolution occurs before the end of the subordination period, we will allocate any gain to the partners in the following manner:

•

first, to our general partner and the holders of units who have negative balances in their capital accounts to the extent of and in proportion to those negative balances;

•

second, 99.9% to the common unitholders, pro rata, and 0.1% to our general partner, until the capital account for each common unit is equal to the sum of: (1) the unrecovered initial unit price; (2) the amount of the minimum quarterly distribution for the quarter during which our dissolution occurs; and (3) any unpaid arrearages in payment of the minimum quarterly distribution;

•

third, 99.9% to the subordinated unitholders, pro rata, and 0.1% to our general partner, until the capital account for each subordinated unit is equal to the sum of: (1) the unrecovered initial unit price; and (2) the amount of the minimum quarterly distribution for the quarter during which our dissolution occurs;

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•

fourth, 99.9% to all unitholders, pro rata, and 0.1% to our general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the first target distribution per unit over the minimum quarterly distribution per unit for each quarter of our existence less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that we distributed 99.9% to the unitholders, pro rata, and 0.1% to our general partner, for each quarter of our existence;

•

fifth, 85.0% to all unitholders, pro rata, and 0.1% in respect of its general partner interest and 14.9% in respect of its incentive distribution rights to our general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the second target distribution per unit over the first target distribution per unit for each quarter of our existence less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that we distributed 85.0% to the unitholders, pro rata, and 15.0% to our general partner for each quarter of our existence; and

•

thereafter, 75.0% to all unitholders, pro rata, and 0.1% in respect of its general partner interest and 24.9% in respect of its incentive distribution rights to our general partner.

The percentage interests set forth above for our general partner include its 0.1% general partner interest and assume our general partner has not transferred the incentive distribution rights.

If the dissolution occurs after the end of the subordination period, the distinction between common and subordinated units will disappear so that the third bullet point above will no longer be applicable, and references to common unitholders and common units in the second bullet will be changed to unitholders and units.

We may make special allocations of gain among the partners in a manner to create economic uniformity among the common units into which the subordinated units convert and the common units held by public unitholders.

Manner of adjustments for losses

If our dissolution occurs before the end of the subordination period, we will generally allocate any loss to our general partner and the unitholders in the following manner:

•

first, 99.9% to holders of subordinated units in proportion to the positive balances in their capital accounts and 0.1% to our general partner, until the capital accounts of the subordinated unitholders have been reduced to zero;

•

second, 99.9% to the holders of common units in proportion to the positive balances in their capital accounts and 0.1% to our general partner, until the capital accounts of the common unitholders have been reduced to zero; and

•

thereafter, 100.0% to our general partner.

If the dissolution occurs after the end of the subordination period, the distinction between common and subordinated units will disappear, so that the first bullet point above will no longer be applicable, and references to common unitholders and common units in the second bullet will be changed to unitholders and units.

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Adjustments to capital accounts

Our partnership agreement requires that we make adjustments to capital accounts upon the issuance of additional units. In this regard, our partnership agreement specifies that we allocate any unrealized and, for U.S. federal income tax purposes, unrecognized gain or loss resulting from the adjustments to the unitholders and the general partner in the same manner as we allocate gain or loss upon liquidation. In the event that we make positive adjustments to the capital accounts upon the issuance of additional units, our partnership agreement requires that we allocate any later negative adjustments to the capital accounts resulting from the issuance of additional units or upon our liquidation in a manner which results, to the extent possible, in the general partner’s capital account balance equaling the amount which it would have been if no earlier positive adjustments to the capital accounts had been made.

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Selected historical financial data

We were formed in November 2011 and do not have historical financial operating results. Therefore, the selected historical financial data below and presented elsewhere in this prospectus is that of our predecessor, which is derived, as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008, from the historical carve out financial statements of our predecessor included elsewhere in this prospectus. The selected historical financial data of our predecessor as of December 31, 2008, 2007 and 2006 and for the years ended December 31, 2007 and 2006 are derived from the historical carve out financial statements of our predecessor not included in this prospectus. The summary historical financial data of our predecessor, as of September 30, 2011 and for the nine months ended September 30, 2011 and 2010, are derived from the condensed historical carve out financial statements of our predecessor included elsewhere in this prospectus. Due to the factors described in “Management’s discussion and analysis of financial condition and results of operations—Overview,” our future results of operations will not be comparable to the historical results of our predecessor.

You should read the following table in conjunction with “Summary—Our partnership structure and formation transactions,” “Use of proceeds,” “Management’s discussion and analysis of financial condition and results of operations” and the historical carve out financial statements of our predecessor included elsewhere in this prospectus. Among other things, those historical carve out financial statements include more detailed information regarding the basis of presentation for the following information.


	Our predecessor

	Nine months ended September 30,				Year ended December 31,
(in thousands, except per unit amounts)	2011		2010		2010		2009			2008			2007		2006


Income statement data:
Production revenue:
Natural gas(1)	$	53,900	$	43,775	$	54,995	$	68,664		$	150,148		$	54,453	$	24,139
NGL		56,795		49,689		67,117		65,218			95,532			48,321		9,565
Oil		3,515		4,425		5,803		8,142			18,463			5,379		1,771

Total production revenue		114,210		97,889		127,915		142,024			264,143			108,153		35,475
Total revenue		114,210		97,889		127,915		142,024			264,143			108,153		35,475

Operating expense:
Lease operating		16,655		15,024		20,257		19,023			17,401			12,113		3,235
Gathering, processing and transportation		23,438		24,710		32,705		41,891			38,460			16,168		6,263
Production and ad valorem taxes		3,156		4,189		5,565		6,673			6,204			1,397		503
Depletion and accretion		16,616		16,056		21,050		37,978			41,428			20,595		5,410
Impairment		—		—		—		60,045			299,422			—		—
Net income (loss)	$	45,459	$	26,263	$	35,111	$	(39,804	)	$	(157,291	)	$	57,880	$	20,064
Cash dividends declared per unit		—		—		—		—			—			—		—
Earnings per unit(2)		—		—		—		—			—			—		—

(1)

For the nine months ended September 30, 2011, natural gas revenue includes $14.7 million of realized effects from derivatives.

(2)

Earnings per unit have not been presented because no units were outstanding.

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	Our predecessor

	As of September 30, 2011		As of December 31,

(in thousands)			2010		2009		2008		2007		2006


Balance sheet data:
Total assets	$	355,086	$	336,088	$	275,677	$	360,032	$	433,586	$	148,174
Long-term debt	$	—	$	—	$	—	$	—	$	—	$	—

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Management’s discussion and analysis of financial condition and results of operations

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in “Risk factors,” “Forward-looking statements” and the other matters set forth in this prospectus. Except to the extent required by law, we undertake no obligation to publicly update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited interim financial statements of our predecessor and the notes thereto for the nine months ended September 30, 2011 and 2010 and the audited financial statements of our predecessor and notes thereto for the years ended December 31, 2010, 2009 and 2008 contained elsewhere in this prospectus.

Overview

Our properties

Following the contribution of the Partnership Properties to us, we will own oil and gas properties located in the Barnett Shale. As of December 31, 2010, our total proved reserves were 430.4 Bcfe, of which approximately 80% were classified as proved developed reserves, including 20.4 Bcfe classified as proved developed non-producing. Excluding the effect of commodity derivatives, 39.4%, 57.1% and 3.5% of our revenue for the nine months ended September 30, 2011 was from natural gas, NGLs and oil, respectively, while 55.2%, 44.6% and 0.2% of our total proved reserves as of December 31, 2010 were from natural gas, NGLs and oil by volume, respectively. Based on our average net production for the nine months ended September 30, 2011 of 61.6 Mmcfed, our total proved reserves had an annualized reserve-to-production ratio of 19.1 years. Based on our anticipated average net production for 2012 of 64.3 Mmcfed, our reserve-to-production ratio would be 18.3 years. We operate all of the properties in which we have interests, and we own an average working interest of 98.8% in the wells and properties included in the Partnership Properties, with a weighted average net revenue interest of 78.9%, based on our proved reserves as of December 31, 2010. All of our oil and gas reserves are in the Barnett Shale.

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How we conduct our business and evaluate our operations

We use a variety of financial and operational metrics to assess the performance of our oil and gas operations, including:

•

production volumes;

•

wellhead and realized prices on our production, including the effect of our commodity derivatives;

•

lease operating expense;

•

production and ad valorem taxes; and

•

Adjusted EBITDA.

Production volumes

Production volumes directly impact our results of operations. For more information about our predecessor’s production volumes, please read “—Results of operations—years ended December 31, 2010, 2009 and 2008.”

Wellhead and realized prices on the sale of our production

Factors affecting the sales price of our production. Quicksilver sells our production to a variety of purchasers based on regional pricing. The relative prices we receive are determined by the factors impacting global and regional supply and demand dynamics, such as economic conditions, production levels, weather cycles and other events. In addition, relative prices are heavily influenced by product quality and location relative to consuming and refining markets.

Natural gas. The NYMEX-Henry Hub price of natural gas is a widely used benchmark for the pricing of natural gas in the United States. The dry natural gas residue from our properties is transported and generally sold on index prices in the region. Location differentials to NYMEX-Henry Hub prices result from variances in transportation costs based on the natural gas’ proximity to the major consuming markets to which it is ultimately delivered and individual supply and demand dynamics at each location. We sell our natural gas production into major market points, which minimizes the discount from NYMEX-Henry Hub that would exist if we sold our production at the wellhead. However, since we sell our natural gas production into major market points, we are required to pay the transportation expense for our natural gas to reach those sales points.

Natural gas with a high energy content is referred to as “wet gas.” Certain of our properties produce wet gas, which has a higher value at the wellhead than natural gas with a lower energy content. When comparing prices received from production among producers in a region, it is important to compare wellhead prices as all producers have unique natural gas streams as well as unique contracts that take their natural gas to the sales markets. Because of our high energy content natural gas and Quicksilver’s downstream contracts from which we expect to benefit under our omnibus agreement, we believe that our wellhead prices compare favorably with other natural gas producers with a lower energy content. Although we do not sell our production at the wellhead, wellhead prices on a per Mcfe basis can be calculated by dividing the revenue we receive for our natural gas and NGL production by the volume of natural gas produced at the wellhead.

NGLs. Wet gas can be sold at the wellhead or, as is the case with our production, transported to a gas processing plant where the NGLs are separated from the wet gas leaving an NGL product called Y-Grade and dry gas residue. After processing, both the Y-Grade and dry gas residue are

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transported from or sold at a gas processing plant’s “tailgate.” The Y-Grade recovered from the processing of our wet gas is transported to Mont Belvieu where it is fractionated into its five primary NGL components and sold based on posted prices.

The wellhead Btu for our natural gas from Hood and Somervell Counties has an average energy content of approximately 1,225 Btu, minimal sulfur and CO₂ content and generally receives a premium valuation. For all of the properties that we operate that produce wet gas, Quicksilver has agreements in place with third parties to process this natural gas in order to receive the revenue benefit of the NGLs that are generated from processing.

Oil. The NYMEX-WTI futures price is a widely used benchmark in the pricing of domestic and imported oil in the United States. The actual prices realized from the sale of oil differ from the quoted NYMEX-WTI price as a result of quality and location differentials.

Oil makes up a minor amount of our production (approximately 1% for the nine months ended September 30, 2011). The oil produced from our properties generally has a low sulfur content. We sell our oil at the NYMEX-WTI price, adjusted by a quality and transportation differential that varies by location and purchaser. Our oil normally sells at a discount to the NYMEX-WTI price.

Commodity derivatives. Our hedging philosophy is to stabilize a significant portion of our incoming cash flow by reducing our exposure to commodity price volatility. We intend to enter into commodity derivatives covering approximately 60% to 85% of our estimated production from total proved developed producing reserves over a three-to-five year period. We may, however, from time to time hedge more or less than this approximate range or change this range. Additionally, we intend to treat the commodity derivatives as hedges for accounting purposes, which will require us to have elevated documentation and regression measurement efforts, but which we believe will eliminate volatility in our earnings arising from changes in the value of our commodity derivatives attributable to future production periods.

At the closing of this offering, Quicksilver will novate to us commodity derivatives covering 30 Mmcfd of natural gas production with a weighted average floor of $6.00 for 2012, 2013, 2014 and 2015 and 3 Mbbld of NGL production with a weighted average floor of $46.16 for 2012.

Lease operating expense. Lease operating expense is the cost incurred in the operation of producing properties, including workover costs, as appropriate. Expenses for utilities, direct labor, water disposal and materials and supplies comprise the most significant portion of our lease operating expense. Lease operating expense does not include general and administrative expenses, production and other taxes or midstream expenses. Certain items, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on activities performed during a specific period. For instance, repairs to our pumping equipment or surface facilities result in increased lease operating expense in periods during which they are performed.

The most significant variable lease operating expense that we incur is for the handling and disposal of produced water. Over the life of our production, the amount of water produced relative to the net production sold generally increases. Thus, when combined with allocated fixed costs, the production of a given volume of natural gas gets more expensive each year throughout the life of a well until, at some point, continued production becomes uneconomic. We believe that Quicksilver, which will operate our properties pursuant to our omnibus agreement, has a demonstrated track record of containing lease operating expense, which we believe will help extend the economic life of our fields and improve the cash margin of producing our natural gas.

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We monitor our production expenses and operating costs to determine if any wells or properties should be shut in, recompleted or potentially sold. We typically evaluate our lease operating expense on a per Mcfe basis, which allows us to monitor our lease operating expense against other producers.

Production and ad valorem taxes. Texas regulates the development, production, gathering and sale of natural gas, NGLs and oil, including imposing production taxes and requirements for obtaining drilling permits. Specifically, Texas currently imposes a production tax at 4.6% of the market value of the oil produced, 3/16 of one cent per Bbl of oil produced and a production tax of 7.5% of the market value of the natural gas produced. However, a significant portion of our wells are either currently exempt from production tax due to high cost natural gas abatement or given a reduced rate for post-production cost recoupment. Ad valorem taxes are generally tied to the valuation of the oil and gas properties; however, these valuations are reasonably correlated to revenue, excluding the effects of any commodity derivatives.

Adjusted EBITDA

Adjusted EBITDA is used as a supplemental financial measure by our management and by external users of our financial statements to assess our operating performance as compared to that of other companies and partnerships in our industry, without regard to financing methods, capital structure or historical cost basis. Adjusted EBITDA should not be considered an alternative to net income, operating income, cash flow from operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. Our Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA in the same manner. Adjusted EBITDA is defined in “Summary—Summary historical financial data—Non-GAAP financial measure.”

Outlook

Beginning in the second half of 2008, the United States and other industrialized countries experienced a significant economic slowdown, which led to a substantial decline in worldwide energy demand. During this same period, the North American natural gas supply was increasing as a result of the rise in domestic unconventional natural gas production. The combination of lower energy demand due to the economic slowdown and higher North American natural gas supply resulted in significant declines in commodity prices. While oil and NGL prices have increased since the second quarter of 2009, natural gas prices remained volatile throughout 2010 and 2011 due to a continued increase in natural gas supply despite weaker offsetting demand growth. The outlook for a worldwide economic recovery remains uncertain for the foreseeable future, and the timing of a recovery in worldwide demand for energy is difficult to predict. As a result, it is likely that commodity prices will continue to be volatile in 2012. Sustained periods of low commodity prices could materially and adversely affect our financial position, our results of operations, the quantities of oil and gas that we can economically produce and our access to capital.

Significant factors that may impact future commodity prices include the political and economic developments currently impacting North Africa and the Middle East in general; the extent to which members of the Organization of Petroleum Exporting Countries and other oil exporting nations are able to continue to manage oil supply through export quotas; and the overall North American oil and natural gas supply and demand fundamentals. Although we cannot predict the

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occurrence of events that will affect future commodity prices or the degree to which these prices will be affected, the prices we receive for our production will generally approximate market prices in the geographic region of the production.

We also face the challenge of natural production declines. As reservoir pressures decline, production from a given well or formation decreases. Our future growth will depend on our ability to continue to add proved reserves in excess of our production. Accordingly, we plan to maintain our focus on adding reserves through acquisitions, including from properties we may acquire from Quicksilver, development projects and improving the economics of our properties. We expect that acquisition opportunities may come from Quicksilver and its affiliates, as well as from unrelated third parties. Our ability to add reserves through acquisitions and development projects is dependent on many factors, including our ability to raise capital, obtain regulatory approvals, procure contract drilling rigs and personnel and successfully identify and consummate acquisitions. Please read “Risk factors—Risks related to our business” for a discussion of these and other risks affecting our proved reserves and production.

Quantitative and qualitative disclosure about market risk

We are exposed to market risk, including the effects of adverse changes in commodity prices and interest rates as described below.

Commodity price risk

Quicksilver Production Partners

Our major market risk exposure is the price that we receive for our production. Realized pricing is primarily driven by the spot market prices applicable to where we sell our production. The prices we receive for our production depend on many factors outside of our control, such as the strength of the global economy.

In order to reduce the impact of fluctuations in commodity prices on our revenue, or to protect the economics of property acquisitions, we intend to maintain a commodity derivative position covering a significant portion of our estimated production through various transactions that reduce the volatility of the future prices received. These transactions may include price swaps whereby we will receive a fixed price for our production and pay a variable market price to the contract counterparty. Additionally, we may enter into fixed price physical sales, commodity derivatives, such as collars, whereby we receive the excess, if any, of the fixed floor over the floating rate or we pay the excess, if any, of the floating rate over the fixed ceiling price, or put options, whereby we receive the excess, if any, of the contract floor price over the reference price based on NYMEX quoted prices. These hedging activities are intended to manage our exposure to commodity price fluctuations. We do not expect to enter into commodity derivatives for speculative trading purposes.

Predecessor

Our predecessor’s major market risk exposure was the price that it received for its production. Realized pricing was primarily driven by the spot market prices applicable to where it sold its production. The prices our predecessor received for its production depended on many factors outside of its control, such as the strength of the global economy.

111

In order to reduce the impact of fluctuations in commodity prices on our predecessor’s revenue, our predecessor periodically entered into commodity derivatives covering a significant portion of its estimated production that fixed the future prices received. Under the price swaps entered into by our predecessor, it received a fixed price for its production and paid a variable market price to the contract counterparty. These activities were intended to manage our predecessor’s exposure to commodity price fluctuations. Our predecessor did not enter into commodity derivatives for speculative trading purposes.

The following table summarizes our predecessor’s open commodity derivative positions as of December 31, 2010, which positions will be novated to us at the closing of this offering:


Product	Type		Remaining contract period		Volume		Weighted average price per Mcf		Fair value
									Total		2011		2012		2013		2014		2015

									(in thousands, except per unit amounts)
Gas		Swap		Jan. 2011 – Dec. 2015		10 Mmcfd	$	6.00	$	13,743	$	5,083	$	3,246	$	2,349	$	1,788	$	1,277
Gas		Swap		Jan. 2011 – Dec. 2015		20 Mmcfd		6.00		27,486		10,166		6,492		4,698		3,576		2,554

During 2011, our predecessor entered into the following additional commodity derivative positions, which positions will be novated to us at the closing of this offering:

Product

Type

Contract period

Volume

Weighted
average
price per
Bbl

NGL

Swap

Jan. 2012 – Dec. 2012

1,000 Bbld

46.55

NGL

Swap

Jan. 2012 – Dec. 2012

1,000 Bbld

47.99

NGL

Swap

Jan. 2012 – Dec. 2012

1,000 Bbld

43.94

The commodity derivative program resulted in our predecessor receiving different prices for its production than prevailing market prices. As a result of settlements of commodity derivatives, our predecessor’s production revenue was greater by $14.7 million for the nine months ended September 30, 2011, but production revenue for 2010, 2009 and 2008 was not impacted.

Interest rate risk

Quicksilver Production Partners

At the closing of this offering, we expect to borrow $150 million under our new revolving credit facility (based upon the assumed midpoint of the price range set forth on the cover of this prospectus), which we believe will have an assumed interest rate of LIBOR plus %. Assuming no change in the amount outstanding, the impact on interest expense of a 10% increase or decrease in the average interest rate would be approximately $ million. In the future, we may enter into interest rate derivative contracts on a portion of our outstanding debt to mitigate the risk of fluctuations in LIBOR.

Predecessor

Our predecessor had no indebtedness and, as a result, had no interest rate risk.

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Counterparty and customer credit risk

Quicksilver Production Partners

Joint interest risk arises in circumstances where other entities own partial interests in the wells we operate. We expect risk related to our joint interest partners to be minimal because we have few instances where third parties own working interests in wells we operate or will drill.

We are also subject to credit risk due to the concentration of the receivables for our production with several significant customers. Please read “Business and properties—Partnership Properties—Marketing, delivery commitments and purchasers of our production” and “Risk factors—Risks related to our business—We may experience a financial loss if Quicksilver is unable to receive payment for a significant portion of our production” for further detail about our significant customers. The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. In addition, our commodity derivatives expose us to credit risk in the event of nonperformance by counterparties.

While we have the ability to require the counterparties to our commodity derivatives to post collateral, in certain circumstances, we may not require that such collateral be posted. We intend to have a formal process in place to evaluate and assess the credit standing of the counterparties to our commodity derivatives or our significant customers. We will evaluate the credit standing of such counterparties and our customers as we deem appropriate under the circumstances. This evaluation may include reviewing a counterparty’s credit rating and latest financial information or, in the case of a customer with which we have receivables, reviewing their historical payment record, the financial ability of the customer’s parent company to make payment if the customer cannot and performing the due diligence to set credit terms and credit limits. The counterparties to the commodity derivatives that will be novated to us at the closing of this offering carried investment grade ratings and were lenders under Quicksilver’s credit facility at the time our predecessor entered into such commodity derivatives. We are likely to enter into future commodity derivatives with these or other counterparties that also carry investment grade ratings and lenders under our new revolving credit facility. Several of our significant customers have a below investment grade credit rating or do not have rated debt securities. In these circumstances, we will consider the lack of investment grade credit rating in addition to the other factors described above to set credit terms and credit limits.

After the closing of this offering, we will be dependent on Quicksilver to operate our assets and to perform other general, administrative and operational services for us and our general partner and are consequently subject to the risk of non-performance of such services under our omnibus agreement with Quicksilver. Quicksilver’s credit ratings are below investment grade, and we expect its credit ratings to remain below investment grade for the foreseeable future. Accordingly, the risk of non-performance under our omnibus agreement will be higher than it would be with a more creditworthy contract counterparty or with a more diversified group of operators or service providers. We expect to continue to be subject to significant and non-diversified risk of non-performance of such services.

Predecessor

Joint interest risk arose in circumstances where other entities owned partial interests in the wells our predecessor operated. Risk related to our predecessor’s joint interest partners was minimal because our predecessor had few instances where third parties owned working interests in wells our predecessor operated or drilled.

113

Our predecessor was also subject to credit risk due to the concentration of the receivables for its production with several significant customers. Please read “Business and properties—Partnership Properties—Marketing, delivery commitments and purchasers of our production” for further detail about our predecessor’s significant customers. Our predecessor’s commodity derivatives exposed our predecessor to credit risk in the event of nonperformance by counterparties.

While Quicksilver had the ability to require the counterparties to our predecessor’s commodity derivatives to post collateral, in certain circumstances, it did not require that such collateral be posted. Quicksilver had a formal process in place to evaluate and assess the credit standing of the counterparties to our predecessor’s commodity derivatives or its significant customers. Quicksilver evaluated the credit standing of such counterparties and its customers as it deemed appropriate under the circumstances. This evaluation included reviewing a counterparty’s credit rating and latest financial information or, in the case of a customer with which our predecessor had receivables, reviewing their historical payment record, the financial ability of the customer’s parent company to make payment if the customer could not and undertaking the due diligence necessary to determine credit terms and credit limits. The counterparties to our predecessor’s commodity derivatives carried investment grade ratings and were lenders under Quicksilver’s credit facility at the time our predecessor entered into such commodity derivatives. Several of our predecessor’s significant customers had a below investment grade credit rating or did not have rated debt securities. In these circumstances, our predecessor considered the lack of investment grade credit rating in addition to the other factors described above.

Results of operations—nine months ended September 30, 2011 and 2010

The following discussion compares the results of our predecessor’s operations for the nine months ended September 30, 2011 and 2010, which we refer to as the 2011 period and the 2010 period, respectively.

Revenue

Production revenue:


Nine months ended September 30, (in thousands)	Natural gas				NGL				Oil				Total
Nine months ended September 30, (in thousands)	2011		2010		2011		2010		2011		2010		2011		2010

Total before derivatives	$	39,201	$	43,775	$	56,795	$	49,689	$	3,515	$	4,425	$	99,511	$	97,889
Realized gain on derivatives		14,699		—		—		—		—		—		14,699		—

Total including realized gain on derivatives	$	53,900	$	43,775	$	56,795	$	49,689	$	3,515	$	4,425	$	114,210	$	97,889

Average daily production volume:

Nine months ended September 30,

Natural gas

NGL

Oil

Total

2011

2010

2011

2010

2011

2010

2011

2010

(Mmcfd)

(Mbbld)

(Mmcfed)

Total

34.7

35.6

4.4

5.1

0.1

0.2

61.6

67.3

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Average realized price:


Nine months ended September 30,	Natural gas				NGL				Oil				Total
	2011		2010		2011		2010		2011		2010		2011		2010

	(per Mcf)				(per Bbl)				(per Bbl)				(per Mcfe)
Total before derivatives	$	4.14	$	4.51	$	47.79	$	35.95	$	94.31	$	72.66	$	5.91	$	5.33
Realized gain on derivatives		1.55		—		—		—		—		—		0.87		—

Total including realized gain on derivatives	$	5.69	$	4.51	$	47.79	$	35.95	$	94.31	$	72.66	$	6.78	$	5.33

The following table summarizes the changes in our predecessor’s production revenue:


(in thousands)	Natural gas			NGL			Oil			Total

Total for the 2010 period	$	43,775		$	49,689		$	4,425		$	97,889
Volume variances		(1,082	)		(6,961	)		(1,717	)		(9,760	)
Price variances		(3,492	)		14,067			807			11,382
Change in realized gain on derivatives		14,699			—			—			14,699

Total for the 2011 period	$	53,900		$	56,795		$	3,515		$	114,210

The increase in our predecessor’s production revenue during the 2011 period compared with the 2010 period is due to the significant price increases associated with NGLs and due to the impact of realized gains from natural gas derivatives. None of the commodity derivatives held by our predecessor, including those entered into during 2010, covered production months prior to January 2011. The decrease in production is primarily due to natural production declines as the wells aged.

Operating expense

Lease operating


Nine months ended September 30, (in thousands, except per unit amounts)	2011		Per Mcfe		2010		Per Mcfe

Total	$	16,655	$	0.99	$	15,024	$	0.82

Lease operating expense increased in the 2011 period due to increased pumping and overhead costs attributable to higher well counts and higher repair and workover costs as the assets aged. Lease operating expense increased on a per Mcfe basis during the 2011 period due to the same factors and the impact of lower production.

Gathering, processing and transportation


Nine months ended September 30,
(in thousands, except per unit amounts)	2011		Per Mcfe		2010		Per Mcfe

Total	$	23,438	$	1.39	$	24,710	$	1.35

115

Production and ad valorem taxes


Nine months ended September 30,
(in thousands, except per unit amounts)	2011		Per Mcfe		2010		Per Mcfe

Production taxes	$	1,358	$	0.08	$	1,347	$	0.07
Ad valorem taxes		1,798		0.11		2,842		0.16

Total	$	3,156	$	0.19	$	4,189	$	0.23

Ad valorem taxes and per Mcfe amounts decreased in the 2011 period due to decreases in the assessed value of our predecessor’s properties, which was primarily caused by decreases in prices attributable to our predecessor’s proved reserves.

Depletion and accretion


Nine months ended September 30,
(in thousands, except per unit amounts)	2011		Per Mcfe		2010		Per Mcfe

Depletion	$	16,453	$	0.98	$	15,927	$	0.86
Accretion		163		0.01		129		0.01

Total	$	16,616	$	0.99	$	16,056	$	0.87

Depletion expense increased in the 2011 period primarily due to an increase in the depletion rate, partially offset by lower production. The increase in the depletion rate is primarily attributable to a 21% increase in our predecessor’s depletable cost centers driven by an increase of $50 million in future development costs compared with a 7% increase in proved reserves when compared to the 2010 period. The increased future development costs relate to an increase in the number of proved undeveloped locations and to an increase in the estimated per well costs of drilling and completion.

General and administrative


Nine months ended September 30,
(in thousands, except per unit amounts)	2011		Per Mcfe		2010		Per Mcfe

Total	$	8,189	$	0.49	$	10,892	$	0.59

General and administrative expense decreased during the 2011 period from the 2010 period due to the decrease in production.

Income taxes


Nine months ended September 30,
(in thousands, except percentage amounts)	2011		2010


Income tax expense	$	697	$	755
Effective tax rate		1.5%		2.8%

Income tax expense is solely comprised of taxes due under the Texas franchise tax.

116

Results of operations—years ended December 31, 2010, 2009 and 2008

The following discussion compares the results of operations for our predecessor for 2010, 2009 and 2008.

Revenue

Production revenue:


Year ended December 31, (in millions)	Natural gas						NGL						Oil						Total
Year ended December 31, (in millions)	2010		2009		2008		2010		2009		2008		2010		2009		2008		2010		2009		2008

Total before derivatives	$	55.0	$	68.7	$	150.1	$	67.1	$	65.2	$	95.5	$	5.8	$	8.1	$	18.5	$	127.9	$	142.0	$	264.1
Realized gain on derivatives		—		—		—		—		—		—		—		—		—		—		—		—

Total including realized gain on derivatives	$	55.0	$	68.7	$	150.1	$	67.1	$	65.2	$	95.5	$	5.8	$	8.1	$	18.5	$	127.9	$	142.0	$	264.1

Average daily production volume:

Year ended December 31,

Natural gas

NGL

Oil

Total

2010

2009

2008

2010

2009

2008

2010

2009

2008

2010

2009

2008

(Mmcfd)

(Mbbld)

(Mmcfed)

Total

34.9

48.4

46.2

5.0

6.6

5.6

0.2

0.4

0.5

66.0

90.4

82.9

Average realized price:

Year ended December 31,

Natural gas

NGL

Oil

Total

2010

2009

2008

2010

2009

2008

2010

2009

2008

2010

2009

2008

(per Mcf)

(per Bbl)

(per Mcfe)

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

(Do not check if a smaller reporting company)

Smaller reporting company ¨

Quicksilver Production Partners LP S-1