In the United States Bankruptcy Court for the District of Delaware
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Case 15-10585-LSS Doc 245 Filed 04/21/15 Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) In re: ) Chapter 11 ) Quicksilver Resources Inc., et al.,1 ) Case No. 15-10585 (LSS) ) Debtors. ) Jointly Administered ) )Hearing Date: May 12, 2015 at 10:00 a.m. (EDT) )Obj. Deadline: May 5, 2015 at 4:00 p.m. (EDT) DEBTORS’ APPLICATION FOR ENTRY OF AN ORDER AUTHORIZING THE EMPLOYMENT AND RETENTION OF KPMG LLP AS TAX CONSULTANT NUNC PRO TUNC TO THE PETITION DATE The above-captioned debtors and debtors in possession (collectively, the “Debtors”) seek entry of an order, substantially in the form attached hereto as Exhibit A (the “Proposed Order”), (a) authorizing the Debtors to employ and retain KPMG LLP (“KPMG”) as tax consultant, nunc pro tunc to the Petition Date (as defined herein) pursuant to that certain engagement letter dated February 12, 2015, annexed as Exhibit 1 to Exhibit A (the “Engagement Letter”), by and between KMPG and Quicksilver Resources Inc. (“Quicksilver”); (b) approving the terms of the Engagement Letter; and (c) granting related relief. In support of the Application, the Debtors submit the Declaration of Chuck Thompson (the “Thompson Declaration”), which is attached hereto as Exhibit B. In support of the Application, the Debtors respectfully set forth as follows: 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: Quicksilver Resources Inc. [6163]; Barnett Shale Operating LLC [0257]; Cowtown Drilling, Inc. [8899]; Cowtown Gas Processing L.P. [1404]; Cowtown Pipeline Funding, Inc. [9774]; Cowtown Pipeline L.P. [9769]; Cowtown Pipeline Management, Inc. [9771]; Makarios Resources International Holdings LLC [1765]; Makarios Resources International Inc. [7612]; QPP Holdings LLC [0057]; QPP Parent LLC [8748]; Quicksilver Production Partners GP LLC [2701]; Quicksilver Production Partners LP [9129]; and Silver Stream Pipeline Company LLC [9384]. The Debtors’ address is 801 Cherry Street, Suite 3700, Unit 19, Fort Worth, Texas 76102. Case 15-10585-LSS Doc 245 Filed 04/21/15 Page 2 of 12 JURISDICTION 1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2).2 2. Venue in this Court is proper pursuant to 28 U.S.C. §§ 1408 and 1409. 3. The bases for the relief requested herein are sections 327(a), 328(a) and 330 of title 11 of the United States Code (the “Bankruptcy Code”), Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) and Local Rule 2014-1. BACKGROUND A. General Background 4. On March 17, 2015 (the “Petition Date”), each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in this Court. The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to Bankruptcy Code sections 1107(a) and 1108. No request for the appointment of a trustee or examiner has been made in these chapter 11 cases. On March 25, 2015, the United States Trustee appointed the Official Committee of Unsecured Creditors [Docket No. 119] (the “Committee”). 5. A description of the Debtors’ business and the reasons for filing these chapter 11 cases is set forth in the First Day Declaration filed on the Petition Date and incorporated by reference as if fully set forth herein. 2 Under rule 9013-1(f) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the “Local Rules”), the Debtors hereby confirm their consent to the entry of a final order by this Court in connection with this Motion if it is later determined that this Court, absent consent of the parties, cannot enter final orders or judgments in connection therewith consistent with Article III of the United States Constitution. 2 Case 15-10585-LSS Doc 245 Filed 04/21/15 Page 3 of 12 B. KPMG’s Qualifications 6. KPMG is a firm of independent public accountants as defined under the Code of Professional Conduct of the American Institute of Certified Public Accountants. 7. The Debtors have selected KPMG as their tax consultant because of the firm’s diverse experience and extensive knowledge in the fields of accounting, taxation, and operational controls for large sophisticated companies both in chapter 11 as well as outside of chapter 11. 8. The Debtors have employed KPMG to provide various tax-related service since 2006. By virtue of its prior engagements, KPMG is familiar with the books, records, financial information and other data maintained by the Debtors and is qualified to continue to provide tax consulting to the Debtors. As such, retaining KPMG is an efficient and cost effective manner in which the Debtors may obtain the requisite services. C. Services to be Rendered 9. Subject to further order of the Court, pursuant to the Engagement Letter, KPMG will provide tax consulting services as KPMG and the Debtors shall deem appropriate and feasible to advise the Debtors in the course of these chapter 11 cases, including, but not limited to the following: (a) analysis of any Section 382 issues including: roll-forward of historical section 382 matters and section 382 issues arising in connection with restructuring; analysis of net unrealized built-in gain/net unrealized built- in loss (“NUBIG/NUBIL”) including under Notice 2003-65; analysis under sections 382(l)(5) and (l)(6); analysis of section 382 state tax jurisdictions; (b) Analysis of Debtors’ tax attributes including net operating losses, credits, and tax basis in the stock of its subsidiaries; (c) Analysis of the tax implications of various reorganization structures; (d) Analysis of the deductibility of post-petition interest on unsecured debt obligations; (e) Analysis of the liabilities subject to compromise which could yield a tax deduction or cancellation of indebtedness income; 3 Case 15-10585-LSS Doc 245 Filed 04/21/15 Page 4 of 12 (f) Determination of the amount and location of any cancellation of indebtedness income resulting from a restructuring; (g) Determination of the amount of any cancellation of indebtedness by entity that is attributable to liabilities that would have resulted in a deduction when paid; (h) Analysis of Section 108(b)(5) and 1017(b)(3)(D) elections; (i) Analysis of the tax implications of any internal management reorganizations and proposal of restructuring alternatives; (j) Analysis of any bad debt and worthless stock deductions; (k) Analysis of the tax implications related to the modification or settlement of any third party or intercompany debt; (l) Analysis of the tax implications of any reorganization/bankruptcy plan of reorganization; (m) Track and analyze the bankruptcy schedule of tax liabilities and proof of claims, including those submitted by tax authorities; (n) Analysis of tax impact of any potential dispositions of assets in bankruptcy; (o) Analysis of the transaction costs associated with any potential transactions, including implications of such costs in bankruptcy; (p) Analysis of tax implications of any potential merger/acquisition with third parties; (q) Analysis of the state and local tax implications of the foregoing; and (r) Analysis of the Canadian tax implications associated with any transaction effectuated or contemplated by the Debtors with respect to its current distressed debt position.3 10. In addition to the foregoing, KPMG will provide such other consulting, advice, research, planning, and analysis regarding tax consulting services as may be necessary, desirable or requested from time to time.4 3 For the avoidance of doubt, KPMG will provide services solely to the Debtors and not to any of the Debtors’ non-debtor Canadian affiliates, and KPMG will not be paid by the Debtors to perform services for any of the Debtors’ non-debtor Canadian affiliates. 4 Although, by this Application, the Debtors are seeking to retain KPMG to provide such other consulting, advice, research, planning, analysis regarding tax consulting services as may be necessary, desirable or requested from time to time, internal KPMG procedures require that KPMG enter into additional engagement letters for additional work under certain circumstances. To the extent the Debtors request additional services not covered by 4 Case 15-10585-LSS Doc 245 Filed 04/21/15 Page 5 of 12 11. Subject to this Court’s approval of the Application, KPMG is willing to serve as the Debtors’ tax consultant and to perform the services described above. D. Professional Compensation 12. KPMG’s requested compensation for professional services rendered to the Debtors will be based upon the hours actually expended by each assigned staff member at each staff member’s hourly billing rate. The Debtors have agreed to compensate KPMG for professional services rendered at its normal and customary hourly rates, subject to the reductions discussed below. 13. The majority of fees to be charged in this engagement reflect a reduction of approximately 27% - 44% from KPMG’s normal and customary rates, depending on the types of services to be rendered.5 In the normal course of KPMG’s business, the hourly rates are subject to periodic increase. To the extent such hourly rates are increased, KPMG requests that, with respect to the work to be performed after such increase, the rates listed below be amended to reflect the increase. The hourly rates for tax consulting services to be rendered by KPMG and applicable herein are as follows: Discounted Tax Consulting Services Hourly Rate Partners/Managing Directors/Directors $660 the Engagement Letter, KPMG and the Debtors may enter into additional engagement letters, as is necessary, and file, for disclosure purposes, such additional engagement letters with the Court.