Appalachia purchase significant for Quest

Jun 27, 2008 (The Oklahoman - McClatchy-Tribune Information Services via COMTEX) -- QRCP | Quote | Chart | News | PowerRating -- Quest Resource Corp. is stepping into the Appalachia natural gas field in West Virginia and Pennsylvania.

Company officials call the move significant for several reasons. First, it establishes the company outside its traditional operational area of the Cherokee Basin, located in northeast Oklahoma and southeast Kansas.

Second, it gets Quest into a significant position within the Marcellus Shale, a source of natural gas in the field, because it is buying out a company that established itself there early.

Jack Collins, Quest's executive vice president for investor relations, said PetroEdge Resources, the company being bought by Quest, had leased about 121,000 acres in the field.

They were able to build a sizable position at a reasonable price," Collins said. "Our buy of PetroEdge give us a high level of exposure to the play."

Collins said PetroEdge had drilled more than 100 wells in the field so far, and that it has permits to drill another 40.

"So, we are going to get started on the plan they have in place," he said, "and we will adjust as we see how well the early wells are doing."

Finally, Quest Resource Corp. is buying PetroEdge through its master limited partnership. Quest Resource Corp. will own half the company -- primarily, it's unproved reserves -- and is offering stock to raise cash for various purposes, including its $70 million share of the $140 million cost for buying the company. Quest Energy Partners, part of the master limited partnership, is buying the other half of the company for the same amount of money, including its on-the-ground assets and proved reserves.

"This is the first acquisition we are doing where we have split apart the asset," Collins said.

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