Tokyo Gas To Buy 25% Stake in Shale Gas Project

--Deal marks Tokyo Gas's first excursion into U.S. shale development

--Proceeds will allow Quicksilver to pay down part of sizeable debt

--Tokyo Gas to initially sell the gas in North America

Tokyo Gas Co. (TKGSY, 9531.TO) signed a contract to buy a 25% stake in Quicksilver Resources Inc.'s (KWK) shale gas project in Texas for $485 million, the companies said Friday.

The acquisition would give Tokyo Gas its first direct exposure to a U.S. shale gas development project--and the Japanese utility hopes to eventually export natural gas to its energy-strapped home country.

The deal also helps Quicksilver retire some of the $2 billion in debt that it, like other relatively small U.S. energy producers, accumulated to finance its shale-gas production business.

Under the deal, Tokyo Gas will receive a quarter of Quicksilver's daily output of 275 million cubic feet of natural gas and oil from the Barrnett shale formation in central and north Texas. The deal is expected to close at the end of April, the companies said.

The Japanese company will initially market the natural gas in North America, the company said in its statement announcing the deal. However in an interview, Quicksilver Chief Executive Glenn Darden said Tokyo Gas would like to ship at least part of the output to Japan in the future.

"Longer term, they have wishes to do that," Mr. Darden said.

Natural gas demand has grown significantly in Japan after a major March 2011 earthquake caused the government to order most of the country's nuclear power plants closed. Tokyo Electric Power Co. (9501.TO), Mitsubishi Corp. (8058.TO) and other Japanese companies are hoping to import gas from the U.S. However, the U.S. Department of Energy has yet to decide how much, if any, exports to allow.

For Quicksilver, the proceeds--25% higher than the company's market capitalization as of market close Thursday--would be a step in the company's quest to pay down a heavy debt load. Quicksilver and other producers racked up large amounts of debt in the late 2000s to buy acres in shale formations and the equipment to develop gas and oil wells, only to become victims of their own success when dramatic increase in natural gas supply helped cause prices to crash.

Quicksilver has been paying down long-term debt that reached $2.6 billion in 2008, from below $814,000 in 2007.

Quicksilver expects to sell more stakes in its operations in the future, possibly in its oil and gas operations in the Horn River Basin in British Columbia, Canada, Mr. Darden said.

"That's got some attraction from more players," Mr. Darden said.

Mari Iwata contributed to this article.

Write to Ben Lefebvre at [e-mail]

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