Quest Resource buying Devon's Cherokee coalbed methane project

Quest Resource Corp., Benedict, Kan., has agreed to buy Devon Energy Corp.'s Cherokee coalbed methane project in southeastern Kansas and northeastern Oklahoma for $126 million.

Dec. 18, 2003

OGJ editors
HOUSTON, Dec. 18 -- Quest Resource Corp., Benedict, Kan., has agreed to buy Devon Energy Corp.'s Cherokee coalbed methane project in southeastern Kansas and northeastern Oklahoma for $126 million.

The sales price equals Devon's net investment in the assets, the Oklahoma City-based company said. Closing is expected on Dec. 22.

The transaction is subject to regulatory approvals. If the transaction were to fail to close after all closing conditions are satisfied, Devon said it is entitled to retain a $5 million earnest money deposit.

Quest Resource will receive 330 producing wells, some 200 miles of gathering pipelines, and interests in 375,000 leasehold acres. The company previously had 120,000 acres under lease in the Cherokee basin, of which it has developed fewer than 50,000 acres (OGJ, Oct. 27, 2003, p. 40).

As of Dec. 31, 2002, Devon's Cherokee CBM operations included estimated proved reserves of 109 bcf of gas, of which 58% was classified as proved producing. The wells currently produce 20 MMcfd. Devon owns a 100% working interest in these properties.

Devon will continue to own and operate 41,000 acres in the Arkoma basin in central Oklahoma. This acreage produces from a conventional formation and also holds potential for CBM production, Devon said.