OKLAHOMA CITY, OK ("QRCP" or "Quest") today announced that it
has completed the purchase of privately held PetroEdge Resources
(WV) LLC ("PetroEdge") for approximately $142 million, subject to
post-closing adjustment. PetroEdge owns approximately 78,000 net
acres of natural gas and oil producing properties in the
Appalachian Basin with estimated proved reserves of 99.6 billion
cubic feet of natural gas equivalent (Bcfe) and current net
production of approximately 3.2 million cubic feet of natural gas
equivalent production per day (Mmcfed).
Simultaneous with the close, QRCP sold natural gas and oil
producing wells with estimated proved developed reserves of 32.9
Bcfe and all of the current net production to Quest Energy
Partners, L.P. (NASDAQ: QELP) ("QELP" or the "Partnership") for
cash consideration of approximately $72 million, subject to
post-closing adjustment. The acquisition of low-risk, producing
wells with predictable production profiles that are immediately
accretive to distributable cash flow is consistent with the
Partnership's strategy of providing sustainable distribution growth
to its unitholders. Quest owns 100% of the general partner and a
57% limited partner interest in QELP.
Approximately 70,600 of PetroEdge's acres are located within the
recognized fairway of the Marcellus Shale play including
approximately 41,200 net acres in Ritchie, Wetzel, and Lewis
Counties of West Virginia and approximately 22,200 net acres in
Lycoming County, Pennsylvania. Together with its existing acreage
and development rights, after this acquisition Quest will own the
right to develop approximately 122,600 net acres within the
recognized fairway of this emerging shale play and approximately
7,300 net acres outside the fairway.
Since the beginning of 2005, PetroEdge has drilled and completed
over 100 wells on its properties, all of which have been
productive. In connection with the acquisition, Quest has entered
into a twelve-month transition services agreement with PetroEdge,
during which time PetroEdge will advise Quest on operations and
development of the properties. Tom Lopus, Quest's recently
appointed Executive Vice President of Quest Eastern Resource based
in Pittsburgh, Pennsylvania, will work with PetroEdge personnel
under the transition services agreement while building an operating
team to ensure execution of near-term development plans while
prioritizing future development to generate maximum value for Quest
shareholders.
Jerry Cash, Chairman, President, and Chief Executive Officer of
Quest, said, "We are pleased to announce the completion of this
acquisition on attractive terms that we expect to create value for
the shareholders of each of the Quest entities. QRCP plans to drive
reserve and production growth through the development of a large
acreage position in the emerging Marcellus Shale play. We plan to
use the distributions we expect to receive from QELP and Quest
Midstream Partners L.P. (Quest Midstream) and existing cash
balances to fund the drilling of at least six wells on the
PetroEdge acreage in the second half of 2008, including three
horizontal and three vertical wells.
Quest Energy is acquiring long-lived natural gas producing wells
that are immediately accretive to distributable cash flow per unit,
will add geographic and geologic diversity, and will offer numerous
low-risk development and optimization opportunities. Subject to
final approval from its Board of Directors, QELP anticipates that
this acquisition and organic growth from its operations in the
Cherokee Basin will allow the Partnership to increase its
distribution rate for the second and third quarters of 2008 by a
total of between 22% and 34% to an annual rate of $2.00 to $2.20,
up from $1.64 currently.
Privately held Quest Midstream has the right of first offer on
gathering and processing of Quest's and Quest Energy's production,
and this acquisition provides Quest Midstream the opportunity to
build a significant presence in Appalachia. Quest owns 85% of the
general partner and a 36% limited partner interest in Quest
Midstream.
We believe the future for Quest is bright as we build a new core
area of operations in the Appalachian Basin. We look forward to
developing our sizeable acreage position in the basin and further
illustrating the benefits of our unique structure."
QRCP funded its portion of the acquisition with proceeds from
its follow-on public offering of 8,800,000 shares of its common
stock at a price of $10.25 per share that closed on July 8,
2008.
Highlights of the acquired properties include:
- Estimated proved undeveloped reserves of 66.7 Bcfe
- Estimated unrisked probable reserves of approximately 50 Bcfe
and possible reserves of approximately 500 Bcfe to 525 Bcfe
- Approximately 740 potential drilling locations assuming
development with vertical wells on 80 acre spacing
- First two horizontal Marcellus wells currently being drilled
in Wetzel County, West Virginia with completion expected by late
third quarter or early fourth quarter 2008
- Permitting initial drilling locations in Lycoming County,
Pennsylvania with two vertical wells planned before year end
- 100% operated with an average net revenue interest of 81%
- Approximately 95% of total reserves are natural gas
- Natural gas BTU content ranging from 1,160 to 1,406
- Average basis premium in Appalachia of approximately $0.30 per
Mcfe over the past three years.
About Quest Resource Corporation
Quest Resource Corporation is a fully integrated E&P company
that owns: the right to develop approximately 130,000 net acres in
the Appalachian Basin of the northeastern United States, including
122,600 acres prospective for the Marcellus Shale; 100% of the
general partner and a 57% limited partner interest in Quest Energy
Partners, L.P.; and 85% of the general partner and a 36% limited
partner interest in Quest Midstream Partners, L.P. Quest Resource
operates and controls Quest Energy Partners and Quest Midstream
Partners through its ownership of their general partners. For more
information, visit the Quest Resource website at www.qrcp.net.
Quest Energy Partners, L.P. was formed by Quest Resource
Corporation to acquire, exploit and develop natural gas and oil
properties and to acquire, own, and operate related assets. The
partnership owns more than 2,300 wells and is the largest producer
of natural gas in the Cherokee Basin, which is located in southeast
Kansas and northeast Oklahoma and holds a drilling inventory of
nearly 2,100 locations in the Basin. The partnership also owns
producing natural gas and oil wells in the Appalachian Basin of the
northeastern United States. For more information, visit the Quest
Energy Partners website at www.qelp.net.
Quest Midstream Partners, L.P. was formed by Quest Resource
Corporation to acquire and develop transmission and gathering
assets in the midstream natural gas and oil industry. The
partnership owns approximately 2,000 miles of natural gas gathering
pipelines and over 1,100 miles of interstate natural gas
transmission pipelines in Oklahoma, Kansas, and Missouri. For more
information, visit the Quest Midstream Partners website at
www.qmlp.net.
Forward-Looking Statements and Disclaimer
Opinions, forecasts, projections or statements other than
statements of historical fact, are forward-looking statements that
involve risks and uncertainties. Forward-looking statements in this
announcement are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Although Quest
believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to be correct. In particular, the forward
looking statements made in this release are based upon a number of
financial and operating assumptions that are subject to a number of
risks, including the uncertainty involved in exploring for and
developing new natural gas reserves, the sale prices of natural gas
and oil, labor and raw material costs, the availability of
sufficient capital resources to carry out the anticipated level of
new well development and construction of related pipelines,
environmental issues, weather conditions, competition and general
market conditions. Actual results may differ materially due to a
variety of factors, some of which may not be foreseen by Quest.
These risks, and other risks are detailed in Quest's filings with
the Securities and Exchange Commission, including risk factors
listed in Quest's latest annual report on Form 10-K and other
filings with the Securities and Exchange Commission. You can find
Quest's filings with the Securities and Exchange Commission at
www.qrcp.net or at www.sec.gov. By making these forward-looking
statements, Quest undertakes no obligation to update these
statements for revisions or changes after the date of this
release.
The United States Securities and Exchange Commissioner permits
oil and gas companies, in their filings with the SEC, to disclose
only Proved Reserves that a company has demonstrated by actual
production or conclusive formation tests to be economically and
legally producible under existing economic and operation
conditions. Quest Resource Corporation may use certain terms in
this news release and other communications relating to Reserves and
production that the SEC's guidelines strictly prohibit the Company
from including in filings with the SEC. It is recommended that U.S.
investors closely consider the Company's disclosures in Quest
Resource Corporation's public filings available from Company
headquarters at 210 Park Avenue, Suite 2750, Oklahoma City,
Oklahoma, 73120. You can find Quest's filings with the Securities
and Exchange Commission at www.qrcp.net or at www.sec.gov.
Company Contact: Jack Collins Investor Relations Phone: (405)
702-7460 Website: www.qrcp.net
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