OKLAHOMA CITY, OK , ("QELP" or the "Partnership") announced
today that it has completed the purchase of natural gas and oil
producing wells with estimated proved developed reserves of 32.9
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) in the Appalachian Basin
from Quest Resource Corporation (NASDAQ: QRCP) ("QRCP") in exchange
for cash consideration of approximately $72 million, subject to
post-closing adjustments. QRCP acquired the wells as part of its
purchase of privately held PetroEdge Resources (WV) LLC and
simultaneously sold the proved developed reserves to QELP.
Jerry Cash, Chairman and Chief Executive Officer of the general
partner of QELP, said, "We are pleased to announce the completion
of this acquisition on attractive terms illustrating our ability to
grow QELP through joint acquisitions with QRCP. QELP is acquiring
long-lived natural gas producing properties that are immediately
accretive to distributable cash flow per unit, add geographic and
geologic diversity, receive premium natural gas pricing, and offer
numerous low-risk development opportunities.
QELP is able to drive organic growth through development of its
large acreage position in the Cherokee Basin while QRCP plans to
drive reserve and production growth through the development of the
130,000 net acres it now owns the right to develop in Appalachia,
including 122,600 acres in the emerging Marcellus Shale play.
QRCP's development in Appalachia should provide a steady stream of
acquisition opportunities for QELP over the long-term.
Subject to final approval from QELP's Board of Directors, we
anticipate this acquisition and organic growth from our operations
in the Cherokee Basin will allow the Partnership to increase its
distributions paid in August and November 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."
QELP funded the purchase with borrowings under its existing
revolving credit facility and a $45 million, six-month, bridge
facility. In connection with the acquisition, QELP's lenders
increased the borrowing base of its revolving credit facility to
$190 million from $160 million.
The oil and natural gas wells and production acquired by QELP
have the following characteristics:
- Proved developed reserves of 32.9 Bcfe, 96% natural gas, 48%
proved developed producing
- Proved developed non-producing reserves mostly associated with
more than 100 behind pipe completion opportunities in the Marcellus
Shale and Devonian Silt formations mostly in Ritchie County, West
Virginia
- Current net production of approximately 3.2 Mmcfed, 100%
operated, and 92 percent natural gas. Approximately 74 percent of
current production and 76 percent of the wellbores are located in
Ritchie County, West Virginia.
- Estimated first year production of approximately 4.5
Mmcfed
- First year capital expenditures of approximately $8 million
including $4 million of sustaining capital expenditures
- Proved reserves to estimated first year production ratio of
approximately 20 years
- 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
- Physical sales contracts covering approximately 60% of
estimated first year and 22% of estimated second year production at
prices between $8.40/MMBtu and $8.75/MMBtu
In connection with the acquisition, the Partnership entered into
costless collars from 2009 through 2011 covering 1.8 MMcf/day of
natural gas production with an average floor of $10.25/MMBtu and an
average ceiling price of $13.67/MMBtu.
The Board of Directors of the Partnership's general partner
approved the transaction based on a recommendation from its
Conflicts Committee, which consists entirely of independent
directors.
Stifel, Nicolaus & Company, Incorporated acted as financial
advisor to QELP's Conflicts Committee and delivered a fairness
opinion in connection with the transaction.
About Quest Energy Partners L.P.
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 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 Midstream Partners, L.P. was formed by Quest Resource
Corp. 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
Opinions, forecasts, projections or statements other than
statements of historical fact, including estimates of future
distributions and future production, 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
the Partnership 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 without limitation: 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 Partnership's anticipated level of new well development and
Quest Midstream's construction of related pipelines, environmental
issues, weather conditions, competition, 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 the Partnership's filings with the Securities
and Exchange Commission. You can find the Partnership's filings
with the Securities and Exchange Commission at www.qelp.net or at
www.sec.gov. By making these forward-looking statements, the
Partnership undertakes no obligation to update these statements for
revisions or changes after the date of this release.
Company Contact: Jack Collins Investor Relations Phone: (405)
702-7460 Website: www.qelp.net
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