QUEST TO PURCHASE CONSOLIDATED'S CHANUTE FACILITY

By Tabatha Beerbower
Tribune writer
Chanute Tribune

BENEDICT, Kan. August 26, 2004 -
Consolidated Oil Well Services, Inc., a wholly-owned subsidiary of Infinity, Inc., and Quest Cherokee Oilfield Service, LLC, a subsidiary of Quest Resource Corporation, announced Monday that the companies have signed an agreement for the sale of Consolidated’s Chanute facility and substantially all of the related equipment and inventory to Quest for $4.1 million.

Quest Cherokee will purchase the equipment and real estate at the Chanute location. Items in the sale agreement include cementing, acidizing and fracturing equipment and real estate — including 37 trucks, 13 trailers, 14 pickup trucks, an office complex, a service and repair facility, and storage and handling facilities for materials. This purchase will allow Quest to expand its support services for its various field activities.

Quest will utilize the equipment and facilities to support its active methane gas development program on its Cherokee Basin properties, a 1,000-square-mile area covering Southeast Kansas and Northeast Oklahoma. Quest’s primary activity in this region is the exploration, production and transportation of natural gas, served by its 900-mile gas pipeline network.

“The acquisition of these assets will allow us to continue our aggressive development program of area methane gas reserves in a more cost effective and efficient manner,” Douglas L. Lamb, president of Quest, said in a press release.

Consolidated has been providing cementing, acidizing, water hauling and fracturing work for Quest and its predecessors for many years in the development of Cherokee Basin properties. Quest well completion activity accounted for approximately 50 percent of the revenue generated by Consolidated’s Chanute facility during the first seven months of 2004. The remaining revenue is from other area customers that Consolidated expects to continue servicing from Thayer, Eureka and Ottawa and from Bartlesville, Okla.

Quest expects to reduce developmental costs on its properties from direct ownership of the equipment, greater efficiencies in work scheduling and by having manpower and equipment dedicated strictly to Quest’s development and operational activities.

Quest will relocate its operations headquarters from Benedict to Chanute.

Lamb believes the Chanute facility will become the operational hub for Quest’s other facilities in Benedict, Thayer, Howard, two offices in Chanute and the Oklahoma field office in Lenapah.
Stephen D. Stanfield, president of Consolidated, said in a press release that Consolidated is pleased to have signed the agreement with Quest.

“It is a transaction which we believe is a win-win for both companies.” he said.
Stanfield said in the release that Consolidated expects to reduce operating cost and debt. Consolidated also expects to increase the utilization of service equipment located at other facilities and provide approximately $2.4 million in working capital to Consolidated and Infinity for future needs from the proceeds of the transaction with Quest.

Consolidated has begun to relocate its Chanute yard to Thayer, which was acquired along with the Eureka yard in April as part of the $1.2 million Blue Star Acid Services acquisition.

Stanfield said the company anticipates minimal disruption to its ability to serve other area customer needs at the same quality level provided in the past.

Management representatives from both companies believe that the transaction should increase employment levels in the area to allow Consolidated to continue to meet the growing demand from its other customers and to support Quest’s ongoing, long-term development program. “We welcome the Consolidated employees that will be joining Quest and the valuable experience, knowledge and capability that they bring to the Quest team,” Lamb said.

Lamb estimated that an additional 30 employees may be needed from the transaction. Quest currently has approximately 135 employees. The agreement contains terms that protect Consolidated from competition with Quest, or its successors, in Kansas, Oklahoma, Colorado, Missouri, Iowa or Wyoming for a five-year period after closing. The agreement also contains terms that grant Consolidated a “right-of-first refusal” for a three-year period to match any offer to buy certain items of divested assets from Quest or its successors.

“We believe the terms demonstrate the cooperative effort that went into the negotiations in order to give both companies the best opportunity to succeed after the completion of the transaction,” Stanfield said. The companies expect to complete the transaction Sept. 15, 2004.

Quest Resource Corporation is focused primarily on the production and transportation of natural gas in the 500-square-mile region of southeast Kansas that is served by its gas pipeline network. Note:  News releases and other information on Quest Resource Corporation can be accessed at http://www.qrcp.net.

Opinions, forecasts, projections or statements other than statements of historical fact, 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 Company 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. Actual results may differ materially due to a variety of factors, including without limitation: the uncertainty involved in exploring for and developing new oil and gas reserves, the sales price of such reserves, environmental issues, competition, general market conditions, and other risks detailed in the Company's filings with the Securities and Exchange Commission.