Quest Resource Corporation

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Quest Resource Corporation (NASDAQ: QRCP), an Oklahoma-based exploration and production company, was reported as of September, 2008 owning 122,600 net acres in the Appalachian Basin prospective for Marcellus shale. This acreage was dramatically scaled back at the end of October, 2008.

In July, 2008 Quest had purchased PetroEdge for $140 million and through it acquired 78,000 net acres of prospective natural gas drilling rights in West Virginia, Pennsylvania and New York. 67,000 acres of this acreage was in the Marcellus shale fairway. PetroEdge's Marcellus leases bought by Quest consisted of: 41,000 acres in Lewis, Ritchie, and Wetzel, Counties in WV; 22,000 acres in Lycoming County, PA; and 3,000 net acres in Steuben County, NY. Along with these leases, Quest acquired 112 completed and producing wells. All had been drilled since 2005.

In early October, 2008, Quest announced it has budgeted $11 million to cover the following drilling plans it had for the forth quarter of the year:

• Lycoming County, Pennsylvania - One vertical test well
• Lewis County, West Virginia - One horizontal well
• Ritchie County, West Virginia - Two vertical wells
• Wetzel County, West Virginia - Two horizontal wells

Quest was then reported selling its undeveloped Marcellus leases by the end of October, 2009 to various undisclosed parties. These included:

• Somerset Count, PA - 22,600 net undeveloped acres and one well for $6.8 million.
• Potter County, PA - 28,700 acres fir $3.2 million
• Lycoming County, PA - 23,076 net undeveloped acres and one well.

In November, Quest announced a joint venture in Wetzel County with an unnamed company. It sold 4,500 undeveloped Marcellus acres in Wetzel County for $6.1 million while still maintaining its basic position there. Three wells, in various stages of completion, were sold along with gas pipelines. In the future all drilling expenses were to be shared on a 50-50 basis between Quest and its venture partner.

According to its 2008 Annual Report on Form 10-K, issued in June, 2009, Quest had experienced a number of financial setbacks since its purchase of PetroEdge in July 2008. As of nearly one year after the acquisition, in June 2009, Quest's CapEx budget for developing its Appalachian acreage had greatly diminished from what had been announced the previous fall. It dropped from $11 million alone for the 4th quarter of 2008 to a mere $1.4 million for the entire year of 2009. These funds were to be used for artificial lift equipment, salt water disposal facilities, and vehicle replacement and purchases--essentially a maintenance level of expenditure with no new drilling. In fact, the 10-K report added the proviso that Quest's CapEx budget was only to be spent assuming that available cash was available to service the company's debt.

David Lawler is President of Quest Resource Corp.