Saturday, April 4, 2009

Quicksilver Gas Services - KGS

Quicksilver Gas Services (KGS) is in the business of gathering and transporting natural gas and liquid natural gas through its pipeline assets and processing facilities in Texas. These services are provided under fee-based contracts, whereby the Company receives fixed fees for performing the gathering and processing services. Quicksilver Gas Services (KGS) does not take title to the natural gas or associated natural gas liquids that it gathers and processes and thus avoids direct commodity price exposure. This is what sets Quicksilver Gas Services (KGS) apart from similar pipeline companies.

Quicksilver Gas Services (KGS) currently trades at a trailing P/E of 13.81, and pays a dividend of 11%. The company has demonstrated good levels of earnings and revenue growth, depsite the economic slowdown, and I anticipate a 12-month price target of $18-20 as the economic outlook improves in the second half of the year. My major concern about the company is the increasing level of debt that the company is taking on.

Disclosure: At the time of writing the author did not hold shares in Quicksilver Gas Services (KGS).

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