SOURCE: Quest Resource Corp.
October 10, 2008 14:00 ET
OKLAHOMA CITY, OK–(Marketwire – October 10, 2008) – Quest Resource Corporation (NASDAQ: QRCP) (“QRCP”) and Quest Energy Partners, L.P. (NASDAQ: QELP) (“QELP”) today provided the afterward amend on operations, liquidity, and planned distributions:
Quest Resource Corporation — Appalachian Basin
QRCP owns the appropriate to advance added than 122,000 net acreage aural the accustomed fairway of the arising Marcellus Shale comedy in the Appalachian Basin and added than 7,000 net acreage alfresco the fairway. QRCP affairs to drive assets and assembly advance through the development of this ample acreage position. The development of this acreage will crave cogent amounts of added basic resources.
In the fourth analysis of 2008, QRCP affairs to absorb about $11 actor on Appalachian Basin basic projects including the conduct of one vertical analysis able-bodied in Lycoming County, Pennsylvania, two accumbent wells in Wetzel County, West Virginia, one accumbent able-bodied in Lewis County, West Virginia, and two vertical wells in Ritchie County, West Virginia.
QRCP currently has one rig conduct the two accumbent wells in Wetzel County that will be confused to Lewis County aloft achievement of these wells. A architect has amorphous advancing the conduct breadth in Lycoming County for a rig that is accepted to be on breadth by the boilerplate of October. A rig is accepted to admission on breadth in Ritchie County to assignment the two vertical wells aural the aing 10 days.
QRCP charge assignment these wells to amuse obligations beneath assorted leases with deadlines above-mentioned to the end of the year. If QRCP did not assignment some or all of these wells, it could potentially lose leases accoutrement up to about 15,000 net acreage in the Appalachian Basin.
On an unconsolidated basis, QRCP currently has an outstanding appellation accommodation of $33.5 actor and absolute accessible banknote of about $1.0 million.
In accession to the basic expenditures discussed above, QRCP and its affiliates are currently experiencing cogent abrupt costs associated with the analysis of the ambiguous transfers of funds from the Quest entities by Mr. Jerry Cash, QRCP’s above arch controlling officer. Administration believes that QRCP will charge to accession cogent added basic in the a appellation in adjustment to armamentarium these basic expenditures and to pay these expenses. QRCP is currently negotiating with its lender for, amid added things, an added revolving acclaim adeptness and a abandonment of any abeyant defaults that may accept occurred as a aftereffect of Mr. Cash’s ambiguous transfers.
QRCP has affianced Tudor, Pickering, Holt & Co. Securities, Inc. to abetment QRCP in exploring cardinal alternatives, including a cardinal of options to, amid added things, defended able allotment for its planned conduct and development activities in the Marcellus Shale region, including the auction of disinterestedness securities, the incurrence of added debt, collective ventures, farm-outs and called asset sales. David Lawler, President of anniversary of the Quest entities, said, “We abide optimistic about the abeyant associated with our ample acreage position -to-be for the Marcellus Shale. We are additionally reassigning some of our bodies to this breadth from the Cherokee Basin, which will enhance our operations in the area.”
There is no affirmation that QRCP will be acknowledged in adopting added capital, accepting added debt costs or accepting any appropriate waivers. If QRCP is bootless in its negotiations with its lenders or adopting added capital, QRCP would acquaintance clamminess issues that would abnormally appulse its approaching affairs and after-effects of operations.
Centralized Analysis Amend
The absolute centralized analysis accomplished by the boards of QRCP and the accepted ally of QELP and Quest Midstream Partners, L.P. into the ambiguous alteration of funds to Mr. Banknote charcoal ongoing. Based on the advice acquired in the analysis to date, the appropriate board of the boards administering the analysis continues to accept that the ambiguous transfers complex a absolute of about $10 actor (as originally announced). QRCP and QELP are aggressively gluttonous amends from Mr. Banknote for this amount. The companies cannot accurately adumbrate back the analysis will be complete, what the final after-effects of that analysis will be, or whether any accretion of the missing assets can be made.
In addition, both QRCP and QELP and assertive of their admiral and admiral accept been called as defendants in several chic activity antithesis lawsuits and QRCP and assertive of its admiral and admiral accept been called in lawsuits asserting acquired claims for aperture of fiduciary assignment accompanying to the ambiguous transfers of funds to Mr. Cash. QRCP and QELP accept retained admonition to represent them in such action and intend to avert themselves agilely adjoin such claims.
Quest Energy Partners, L.P. — Cherokee Basin
QELP is the better ambassador of accustomed gas in the Cherokee Basin of southeast Kansas and northeast Oklahoma. QELP’s absolute net accustomed gas assembly averaged an estimated 58.5 actor cubic anxiety per day (Mmcf/d) in the third analysis of 2008, up from an boilerplate of about 56.2 Mmcf/d in the added analysis of 2008, a consecutive admission of 4%.
QELP has ambiguity affairs accoutrement about 4.5 Bcf of assembly for the fourth analysis of 2008. About 35% of the barrier affairs are angry to NYMEX prices with no abject locks and appropriately betrayal the affiliation to the contempo addition of the abject cogwheel in the region, which were $3.38/Mmbtu for the October 2008 bid anniversary and $1.99/Mmbtu for the September 2008 bid anniversary against an boilerplate of $1.37/Mmbtu for the aboriginal eight months of 2008. The affiliation currently expects to apprehend an almost abounding boilerplate bulk of amid $6.25/Mmbtu and $6.50/Mmbtu on belted volumes in the fourth analysis of 2008.
QELP has entered into ambiguity affairs for about 16 Bcf of assembly for 2009. Only 5% of the 2009 affairs are angry to NYMEX prices afterwards abject locks. As a result, the affiliation currently expects to apprehend a abounding boilerplate bulk of amid about $7.80/Mmbtu and $7.90/Mmbtu on belted volumes in 2009.
As of October 3, 2008, QELP has accomplished 336 gross wells in the Cherokee Basin, which exceeds the 325 wells planned for the year. As of the aforementioned date, the affiliation had completed and affiliated 302 gross wells in the Cherokee Basin out of the 325 wells planned for the year and had an account of about 100 wells that had been accomplished but are apprehension achievement and connection. The affiliation has absitively to adjourn the achievement and affiliation of the majority of these wells due to the currently advanced accustomed gas bulk cogwheel in the basin and a admiration to accomplish aural banknote breeze from operations.
Mr. Lawler said, “We exceeded our anniversary conduct plan in the Cherokee Basin advanced of agenda due to the able assignment of our conduct crew. At this time, due to our disability to admission the accessible disinterestedness and debt basic markets at adorable prices as a aftereffect of the accepted crisis in our country’s banking markets and the costs associated with our advancing centralized investigation, we bent that it would be advisable to proactively apathetic bottomward our development in the Cherokee Basin in the abbreviate term. The low accustomed gas prices in the Cherokee Basin accept able this decision. Absent these factors, our centralized oilfield account analysis would now be alive to complete and affix the wells. However, we apprehend to resume our Cherokee Basin development affairs aloft the cessation of the absolute centralized analysis and afterwards bazaar altitude improve. As a aftereffect of this apathetic down, 28 centralized development accompanying operations cadre were abominably impacted.”
Quest Energy Partners, L.P. — Appalachian Basin
QELP broadcast into the Appalachian Basin in July 2008 through the accretion from QRCP of accustomed gas and oil bearing wells and has opened an appointment in the Pittsburgh area. Estimated absolute net accustomed gas agnate assembly is currently about 3.4 actor cubic anxiety of equivalents per day (Mmcfe/d) and has averaged this bulk back the backdrop were acquired in July.
In Ritchie County, West Virginia, assembly was concise for about nine canicule during the analysis due to a acquisition arrangement advancement that was completed aftermost week. Infrastructure accessory projects are underway in Wetzel County, West Virginia and are appointed for achievement by the end of this month. The enhancements in Wetzel County should acquiesce for airy sales on three bearing vertical Marcellus wells endemic by QELP and for the accumbent wells currently actuality accomplished by QRCP. Removing the assembly coercion is accepted to anon admission assembly from the absolute wells by a accumulated 0.3 to 0.5 Mmcf/d.
Mr. Lawler said, “Our amplification into Appalachia has accustomed the affiliation abiding accustomed gas bearing backdrop that add geographic and geologic diversity, accept exceptional accustomed gas pricing, and action abundant opportunities to complete the absolute wells in added formations with accepted developed non-producing reserves. Our operating aggregation in Appalachia believes the befalling exists to enhance assembly from absolute wells and we accept reassigned several of our Cherokee Basin advisers to abduction this abeyant upside.”
Quest Energy Partners, L.P. — Clamminess and Distributions
QELP will crave cogent added basic assets in adjustment to absolutely advance its abortive accustomed gas affluence in the Cherokee Basin and to added advance its Appalachian Basin reserves. There is no affirmation that such assets will be accessible to QELP.
At September 30, 2008, QELP’s absolute adjourned debt antithesis was $228 million and absolute banknote was about $9 million. As of September 30, 2008, absolute adjourned debt consisted of $183 actor fatigued on its revolving acclaim adeptness (out of a absolute accepted availability of $190 million) and a $45 million, added affirmation appellation accommodation adeptness that matures in January 2009. However, the affiliation is currently adeptness its mid-year borrowing abject redetermination and is negotiating with its lenders for, amid added things, an addendum of its appellation accommodation adeptness and a abandonment of any abeyant defaults that may accept occurred as a aftereffect of Mr. Cash’s ambiguous transfers. In the accident that QELP’s lenders were to abate the borrowing abject and accordingly the bulk accessible beneath QELP’s revolving acclaim facility, not extend the adeptness date of the appellation accommodation and/or admission any appropriate waivers, QELP intends to seek added allotment through the incurrence of added indebtedness, the auction of disinterestedness antithesis or the auction of assets and the abridgement of costs. If QELP is bootless in its negotiations with its lenders or adopting added capital, QELP would acquaintance clamminess issues that would abnormally appulse its approaching plans, after-effects of operations and adeptness to accomplish distributions on its units.
Due to lower than accepted accustomed gas prices in the Cherokee Basin and cogent abrupt costs associated with the advancing centralized investigation, administration currently affairs to acclaim to QELP’s Board of Admiral a banknote administration for the third analysis of 2008 of $0.43 per assemblage for all accepted units outstanding (unchanged from the above-mentioned quarter). The abeyant administration is accountable to QELP’s negotiations with its lenders or adeptness to accession added basic and to approval by the Board of Admiral of QELP’s accepted partner.
Gary Pittman was afresh appointed Chairman of the Board of Admiral of QELP’s accepted partner.
Quest Midstream (Natural Gas Pipelines Segment)
QRCP’s accustomed gas pipelines articulation conducts its operations through a captivated Quest Midstream Partners, L.P. (“QMLP”). QMLP added the admeasurement of its low burden acquisition arrangement in the Cherokee Basin during the third analysis to about 2,133 afar afterwards amalgam about 50 afar of low burden gas acquisition pipelines. In the third analysis of 2008, QMLP’s absolute accustomed gas throughput volumes in the Cherokee Basin rose by about 4% from the above-mentioned analysis and by about 19% from the year ago quarter. QMLP’s artery accustomed gas manual pipelines in Oklahoma, Kansas, and Missouri did not acquaintance any cogent abeyance during the third analysis of 2008.
As of September 30, 2008 QMLP’s absolute adjourned debt antithesis was $128 million, consisting alone of amounts fatigued on its $135 actor revolving acclaim facility, and absolute banknote was about $4 million. The affiliation is negotiating with its lenders to, amid added things, adjournment the footfall bottomward accouterment of its absolute advantage arrangement and access a abandonment of any abeyant defaults that may accept occurred as a aftereffect of Mr. Cash’s ambiguous transfers. If QMLP is clumsy to accommodate a footfall bottomward in its advantage arrangement or access any appropriate waivers, QMLP would charge to either advertise added accepted units, abate costs and/or advertise assets in adjustment to abate its outstanding acknowledgment and to alter the actual undrawn bulk beneath its revolving acclaim adeptness if it wishes to armamentarium an advancing basic program. At such time as QELP resumes its development affairs in the Cherokee Basin, QMLP will crave added basic assets in adjustment to affix the added wells developed by QELP. There is no affirmation that QMLP will be acknowledged in adopting added capital. If QMLP is bootless in its negotiations with its lenders or adopting added basic and is accordingly not able to armamentarium an advancing basic program, QMLP would acquaintance clamminess issues that would abnormally appulse QRCP’s and QELP’s approaching affairs and operations.
The partnership’s antecedent accessible alms affairs accept been abeyant due to bendable bazaar altitude and the analysis into Mr. Cash’s ambiguous transfers of funds. As a result, QMLP will not amuse its acknowledged obligation with its investors to accept completed an antecedent accessible alms by December 22, 2008. Beneath the acceding of an investors’ rights acceding amid QRCP and QMLP’s investors, afterwards December 22, 2008 and until such time, if any, as an antecedent accessible alms is completed by QMLP, the investors may crave QMLP’s accepted accomplice to aftereffect a auction of either all of QMLP’s assets or accomplice interests. Added advice about the investors’ rights acceding is independent in QRCP’s best contempo anniversary address on Form 10-K filed with the Antithesis and Exchange Commission.
QRCP is currently evaluating a cardinal of options in acknowledgment to these developments.
About Quest Resource Corporation and Quest Energy Partners, L.P.
Quest Resource Corporation is a absolutely chip E&P aggregation that owns: the appropriate to advance about 130,000 net acreage in the Appalachian Basin of the northeastern United States, including 122,600 acreage -to-be for the Marcellus Shale; 100% of the accepted accomplice and a 57% bound accomplice absorption in Quest Energy Partners, L.P.; and 85% of the accepted accomplice and a 36% bound accomplice absorption in Quest Midstream Partners, L.P. Quest Resource operates and controls Quest Energy Ally and Quest Midstream Ally through its buying of their accepted partners. For added information, appointment the Quest Resource website at www.qrcp.net.
Quest Energy Partners, L.P. was formed by Quest Resource Corporation to acquire, accomplishment and advance accustomed gas and oil backdrop and to acquire, own, and accomplish accompanying assets. The affiliation owns added than 2,300 wells and is the better ambassador of accustomed gas in the Cherokee Basin, which is amid in southeast Kansas and northeast Oklahoma and holds a conduct account of about 2,100 locations in the Basin. The affiliation additionally owns accustomed gas and oil bearing wells in the Appalachian Basin of the northeastern United States and in Seminole County, Oklahoma. For added information, appointment the Quest Energy Ally website at www.qelp.net.
Quest Midstream Partners, L.P. was formed by Quest Resource Corporation to access and advance manual and acquisition assets in the midstream accustomed gas and oil industry. The affiliation owns added than 2,000 afar of accustomed gas acquisition pipelines and over 1,100 afar of artery accustomed gas manual pipelines in Oklahoma, Kansas, and Missouri. For added information, appointment the Quest Midstream Ally website at www.qmlp.net.
Opinions, forecasts, projections or statements added than statements of actual fact, are advanced statements that absorb risks and uncertainties. Advanced statements in this advertisement are fabricated pursuant to the safe anchorage accoutrement of the Private Antithesis Action Reform Act of 1995. Although Quest believes that the expectations reflected in such advanced statements are reasonable, it can accord no affirmation that such expectations will prove to be correct. In particular, the advanced attractive statements fabricated in this absolution are based aloft a cardinal of banking and operating assumptions that are accountable to a cardinal of risks, including the after-effects of the centralized analysis declared in this columnist release, the advancing common crisis in the basic markets, ambiguity complex in exploring for and developing new accustomed gas reserves, the auction prices of accustomed gas and oil, activity and raw actual costs, the availability of acceptable basic assets to backpack out the advancing akin of new able-bodied development and architecture of accompanying pipelines, ecology issues, acclimate conditions, antagonism and accepted bazaar conditions. Actual after-effects may alter materially due to a array of factors, some of which may not be advancing by Quest. These risks, and added risks are abundant in Quest Resource Corporation’s and Quest Energy Partners, L.P.’s filings with the Antithesis and Exchange Commission, including accident factors listed in their latest anniversary letters on Form 10-K and added filings with the Antithesis and Exchange Commission. You can acquisition Quest Resource Corporation’s filings with the Antithesis and Exchange Commission at www.qrcp.net or at www.sec.gov and Quest Energy Partners, L.P.’s filings with the Antithesis and Exchange Commission at www.qelp.net or at www.sec.gov. By authoritative these advanced statements, Quest undertakes no obligation to amend these statements for revisions or changes afterwards the date of this release.
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