John L. S.

Quest Resource Corporation ( NASDAQ : QRCP ) Pins Hopes On Merger

by John L. S. July 7, 2009
quest.jpgQuest Resource Corporation ( NASDAQ : QRCP ), after stating last month that they would likely run out of cash by the end of August and would soon be facing bankruptcy, have announced a definitive agreement of merger with Quest Energy Partners LP and Quest Midstream Partners LP - the three energy companies to form a single new, yet-to-be-named, publicly traded company, which would then wholly-own all three entities.


Last month Quest Resource's independent auditor detailed the company's concerns over lack of cash, a possible future chapter 11 filing, and the doubt about their ability to continue in the future as a ''going concern''. While previously Quest Resources depended on both Quest Energy and Quest Midstream for payments, distribution had been discontinued from the beginning of 2009. The falling energy prices, as well as scandal surrounding the Quest companies former executives, ( former CEO Jerry Cash was accused of embezzling around $10 million from the companies ) have been major contributing factors in the need for a re-combining of the companies.

They state that the merger is a move to shore up embattled operations, and that the new company's strategy will be to create increased shareholder value through the ''efficient development of unconventional resource plays, including coal-bed methane in the Cherokee Basin of southeast Kansas and northeast Oklahoma and the Marcellus Shale in the Appalachian Basin.''

CEO of the Quest Companies, David C. Lawler, stated that "While much work must still be completed, we believe the proposed recombination makes the Quest entities more competitive in today’s market environment by allowing us to further reduce costs, increase operational efficiency, and simplify our organizational structure.” There are still a number of conditions to be met though, including - the arrangement of satisfactory credit facilities for the new company, consent from each companies existing lenders, and approval from all shareholders; but the companies state they expect the merger to be completed before the end of the year.

REFERENCES:

Quest Energy Partners Complete Borrowing Base Redetermination

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