Quest Resource Corp., Benedict, Kan., concentrates on coalbed methane (CBM) covering a 10-county region in the Cherokee basin in southeastern Kansas and northeastern Oklahoma.
The company has 120,000 acres under lease in the Cherokee basin, of which it has developed fewer than 50,000 acres. Quest also owns and operates a 600-mile gas gathering pipeline system. Recently, the company announced plans to expand its CBM operations into Kentucky.
Quest is directed by co-CEOs Douglas Lamb and Jerry Cash. Cash is the chairman and chief financial officer, while Lamb is the president and chief operating officer. The predecessor company to Quest was a privately held Lamb family business.
The co-CEO structure evolved from Quest's 2002 acquisition of STP Cherokee Inc. in a merger of equal companies, Lamb said.
"The merger of STP into Quest Resource was the primary driving factor behind the extraordinary growth that we've achieved in the past 12 months. In conjunction with this merger, we were able to refinanceUwhich provided the working capital to fuel a more aggressive development program," he said.
The company's goals are to continue its growth in the Cherokee basin through drilling existing undeveloped acreage and to determine the potential value of a CBM lease with Alcoa Fuels Inc. covering more than 63,000 acres in western Kentucky.
"We have been operating in the Cherokee basin my entire 25-year career, and we know the area extremely well. Our extensive gas gathering pipeline network provides a significant advantage in developing the additional acreage," Lamb said.
Kentucky
"The coalbed methane lease with Alcoa Fuels is very important, as it represents a tremendous growth opportunity," Lamb said. Quest is conducting a technical study and expects to begin test drilling by Dec. 31.
The 1-year lease resulted in about a 50% increase in the total number of acres leased by Quest and an expansion of its geographic operating area beyond Kansas and Oklahoma. At the end of the initial year, Quest has the option of extending the lease. It is entitled to continue leasing the property as long as it develops at least 25 wells/year, until the property is fully developed with about 400 wells (OGJ, Aug. 18, 2003, p. 39).
"This is the first time that Alcoa has permitted an exploration and production company to drill for coalbed methane gas on its coal mining properties," Cash said.
Lamb noted that the distance from Quest's current operations presents a logistical challenge. "We believe our technical team's experience and dedication will provide us with the necessary resources to successfully expand our operations," he said.
Financial milestones
Quest's fiscal year 2003 ended May 31. The company's total revenue more than doubled to $11.7 million, and its net income increased more than twelvefold to $1.7 million vs. FY 2002. Stockholder equity nearly tripled to $13.3 million.
The biggest challenges for Quest in the coming year will be "to allocate our employee and financial resources in the most effective manner to maximize our ability to capitalize on the opportunities before us," Lamb said.
