SUBORDINATION AGREEMENT
                             -----------------------


      This  Subordination  Agreement  (this  "Agreement")  is entered into as of
November  7, 2002,  by and among  WELLS  FARGO  ENERGY  CAPITAL,  INC.,  a Texas
corporation  (the  "Subordinated  Lender"),  WELLS  FARGO BANK  TEXAS,  N.A.,  a
national   banking   association   ("Administrative   Agent"),   QUEST  RESOURCE
CORPORATION, a Nevada corporation ("Borrower"), and QUEST OIL & GAS CORPORATION,
Kansas corporation,  PONDEROSA GAS PIPELINE COMPANY, INC., a Kansas corporation,
and STP CHEROKEE, INC., an Oklahoma corporation (individually, a "Guarantor" and
a "Credit Party" and collectively with Borrower, the "Credit Parties").

                                    RECITALS
                                    --------

      WHEREAS,  Administrative  Agent,  and the  Banks  named  therein  as party
thereto  (collectively "Senior Lender") and the Credit Parties have entered into
that certain  Credit  Agreement  dated as of even date  herewith (as same may be
hereafter  renewed,  extended,  amended,  or  restated  from time to time not in
violation of the terms of this Agreement, the "Senior Credit Agreement"); and

      WHEREAS,  it is proposed that Borrower and Subordinated  Lender enter into
that certain Credit Agreement dated of even date herewith (as renewed, extended,
amended, or restated from time to time, the "Subordinated Credit Agreement"), to
provide Borrower with up to $20,000,000 subordinated revolving line of credit to
refinance existing debt of the Borrower,  Ponderosa Gas Pipeline Company,  Inc.,
Quest Oil & Gas Corporation and STP Cherokee,  Inc., and to fund development and
acquisition activities of the Borrower and such other entities; and

      WHEREAS, in order to induce Senior Lender to consent to Borrower incurring
subordinated secured  indebtedness,  Subordinated Lender has agreed to limit its
rights to receive  payments from Borrower on the terms and  conditions set forth
herein,  and the  Credit  Parties  have  agreed  to comply  with such  terms and
conditions.

      NOW, THEREFORE, in consideration of the foregoing,  and for other good and
valuable   consideration,   the  receipt   and   adequacy  of  which  is  hereby
acknowledged, the parties hereto hereby agree as follows:

      1.   Definitions.  Capitalized  terms  used  but  not   otherwise  defined
herein  shall have the  meanings  ascribed  to such  terms in the Senior  Credit
Agreement.  The  following  terms in the  Agreement  shall  have  the  following
meanings:

           "Blockage  Period"  means that period of time  commencing on the date
that Subordinated Lender receives notice from Senior Lender of the occurrence of
a Default under the Senior Credit Agreement and ending on the earlier of (i) the
date such Default shall have been cured or waived in writing by Senior Lender in
its sole  discretion,  (ii) the  date  180  days  from the date of  Subordinated
Lender's receipt of such notice, or (iii) the Termination Date.  Notwithstanding
anything to the contrary herein, no more than 180 days in any 365-day period may
fall within one or more Blockage Periods.

           "Consolidated  Interest  Expense" means,  for any fiscal period,  the
aggregate amount of all costs,  fees and expenses,  including  capital expenses,
paid by the Credit Parties on a  consolidated  basis in such fiscal period which
are  classified as interest  expense on the  Borrower's  consolidated  financial
statements.


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<PAGE>


           "Guarantors"  means any person or entity  whether one or more, now or
hereafter  guaranteeing  payment  in full or in part of  Senior  Debt to  Senior
Lender or pledging any collateral as security therefor.

           "Lien  Enforcement  Action"  shall mean any  action,  whether  legal,
equitable,  judicial,  non-judicial,  or otherwise,  to enforce any  assignment,
lien, security interest,  or other encumbrance now or in the future securing all
or  any  Subordinated  Debt,  including,  without  limitation,  exercise  of any
assignments  of production or the right to receive  proceeds  thereof,  division
orders or letters in lieu of division  orders,  any  repossession,  foreclosure,
public sale, private sale, or retention of all or any part of the Collateral for
the Subordinated Debt.

           "Senior Debt" means all indebtedness, liabilities, and obligations of
every kind or nature, absolute or contingent, now existing or hereafter arising,
of the Credit  Parties  owed to Senior  Lender  under the Senior  Note and other
Senior Loan  Documents,  including,  without  limitation,  the principal of, and
interest on  (including  any interest  accruing  after the  commencement  of any
bankruptcy,  insolvency,  or similar proceeding with respect to any Credit Party
whether or not allowed as a claim in such  proceeding) all loans, and letters of
credit  reimbursement  obligations,  and all derivative  obligations,  premiums,
fees, charges, expenses, and indemnities arising under or in connection with the
Senior Loan  Documents  as same may be amended,  modified,  extended or restated
from time to time (to the extent any such  amendment or  modification  is not in
violation of the terms of this Agreement).

           "Senior  Lender"  means  the  Administrative   Agent,  the  financial
institutions  party to the Senior Loan Documents,  their affiliates,  successors
and  assigns,  and any person or entity  who  refinances  or refunds  all or any
portion of the Senior Debt.

           "Senior Loan  Documents"  means the Senior  Credit  Agreement and the
Loan  Documents  entered into in connection  therewith as same may be amended or
modified from time to time (to the extent any such amendment or  modification is
not in violation of the terms of this Agreement).

           "Senior Note" means that certain  promissory  note dated of even date
herewith in the original  principal amount of $20,000,000,  executed by Borrower
in favor of Wells Fargo Bank Texas,  N.A., as such note may from time to time be
supplemented,  amended or  modified,  and all other notes given in  substitution
therefor or in modification, renewal or extension thereof in whole or in part.

           "Subordinated  Debt" means all indebtedness and other obligations now
and from time to time  hereafter  owing by the Credit  Parties  to  Subordinated
Lender,  including,   without  limitation,   the  indebtedness  and  obligations
evidenced  by  the  Subordinated   Credit  Agreement,   the  Subordinated  Note,
Subordinated  Security  Agreements,  Warrant  and  Warrant  Purchase  Agreement,
including principal, interest, fees, brokers fees for sale of any Credit Party's
property and charges and all other present or future liabilities,  indebtedness,
or  obligations  of any  Credit  Party  to  Subordinated  Lender  as same may be
amended,  modified,  extended  or  restated  from time to time.  Notwithstanding
anything to the contrary herein, Subordinated Debt shall not include any amounts
received by Subordinated  Lender in repayment of the  Indebtedness  evidenced by
that certain  Promissory  Note in the  principal  face amount of  $15,000,000.00
dated August 30, 2001 executed by STP, Inc. to the order of Subordinated  Lender
or the $600,000  consideration  received by Subordinated  Lender for waiving its
rights to receive a net profits  interest in certain oil and gas  properties  as
set forth in Section 2.11 of that certain Credit Agreement dated August 30, 2001
by and between STP, Inc. and Subordinated Lender.

           "Subordinated  Lender" means  Subordinated  Lender, its successor and
assigns,  including  any person or entity who  refinances  or refunds all or any
portion of the Subordinated Debt.


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<PAGE>


           "Subordinated Loan Documents" means the Subordinated Credit Agreement
and the Loan Documents (as defined in the Subordinated Credit Agreement) entered
into in connection therewith as the same may be amended or modified from time to
time.

           "Subordinated  Note" means that certain promissory note dated of even
date herewith, executed by Borrower in favor of Subordinated Lender.

           "Subordinated   Security  Agreements"  means  any  and  all  security
agreements,  mortgages, assignments, or pledges from the Credit Parties in favor
of Subordinated Lender securing all or any portion of the Subordinated Debt.

      2.   Subordination to Senior Debt.  Notwithstanding any other provision of
any note,  document,  or  instrument  executed by any Credit Party in connection
therewith,   or  any  Collateral  now  or  hereafter   securing  the  same,  all
Subordinated Debt is and shall be subordinate and junior in right of payment, to
the extent and in the manner  hereinafter set forth,  to the prior  indefeasible
payment in full of all Senior  Debt.  Except as and to the  extent  provided  in
Section 4 below,  Subordinated  Lender will not ask,  demand,  sue for, take, or
receive  from any Credit  Party,  by set-off or in any other  manner,  direct or
indirect  payment  (whether in cash or property) of the whole or any part of the
Subordinated  Debt, or any transfer of any property in payment of or as security
therefor, unless and until Senior Lender has no further commitment to extend any
credit to Borrower  pursuant to the terms of the Senior Credit Agreement and all
Senior  Debt has been paid in full (or with  respect  solely  to LC  Obligations
shall be cash collateralized on a dollar for dollar basis).

      3.   Distributions in  Liquidation  and  Bankruptcy.  In the  event of any
distribution,  division,  or  application,  partial or  complete,  voluntary  or
involuntary,  by operation of law or otherwise, of all or any part of the assets
of any  Credit  Party or the  proceeds  thereof  (including  any  assets  now or
hereafter  securing any Subordinated  Debt) to creditors of such Credit Party or
upon any  indebtedness  of such Credit  Party,  as a result of the  liquidation,
dissolution,  or other winding up, partial or complete,  or any Credit Party, or
as a result  of any  receivership,  insolvency,  or  bankruptcy  proceeding,  or
assignment for the benefit of creditors or marshaling of assets,  or as a result
of any  proceeding  by or  against  any Credit  Party for any  relief  under any
bankruptcy  or  insolvency  law or  laws  relating  to the  relief  of  debtors,
readjustment of indebtedness,  arrangements,  reorganizations,  compositions, or
extensions, or as a result of the sale of all or substantially all of the assets
of any Credit Party, then and in any such event:

           (a)    Senior Lender shall be  entitled  to  receive  payment in full
of all Senior Debt before  Subordinated  Lender shall be entitled to receive any
payment or other distributions on, or with respect to, the Subordinated Debt;

           (b)    Any payment or distribution of any kind or character,  whether
in cash,  securities,  real,  personal,  mixed or other property,  which but for
these  provisions  would be payable or  deliverable  upon or with respect to the
Subordinated  Debt, shall instead be paid or delivered directly to Senior Lender
for the benefit of the holders of the Senior Debt for  application on the Senior
Debt,  whether then due or not due,  until the Senior Debt shall have first been
fully and  indefeasibly  paid in full and  Senior  Lender  shall have no further
commitment to extend any credit to Borrower;

           (c)    Subordinated Lender  shall duly  and promptly take such action
as may  reasonably be requested by Senior Lender to assist in the  collection of
the  Subordinated  Debt  for the  account  of any  holder  of the  Senior  Debt,
including,  without  limitation,  the filing of appropriate proofs of claim with
respect to the Subordinated Debt and the voting of such claims;


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<PAGE>


           (d)    In the event that Subordinated  Lender  shall not have filed a
claim in any bankruptcy,  insolvency,  or similar proceeding with respect to any
Credit  Party at least  sixty (60) days prior to the  expiration  of the time to
file such claims, then Senior Lender, on behalf of Subordinated Lender, shall be
authorized to file a claim with respect to the Subordinated Debt; and

           (e)    Should any direct or indirect payment be made to  Subordinated
Lender  upon or with  respect to the  Subordinated  Debt prior to the payment in
full of the Senior Debt as provided herein,  Subordinated  Lender will forthwith
deliver the same to Senior Lender in precisely the form received (except for the
endorsement  or  assignment  by   Subordinated   Lender  where   necessary)  for
application on the Senior Debt, whether then due or not due. Until so delivered,
the payment or  distribution  shall be held in trust by  Subordinated  Lender as
property  of the  holders  of the  Senior  Debt.  In the  event  of  failure  of
Subordinated  Lender to make any such  endorsement or assignment,  Senior Lender
and each of its officers and employees are hereby irrevocably authorized to make
the same.

      4.   Permitted Payments and Borrowing Base Determinations.

           (a)    Subordinated Lender shall not receive or  accept  any  payment
from any Credit Party with respect to the  Subordinated  Debt including  without
limitation  payment of principal,  default interest,  or other fees and expenses
unless  such  payments  are  approved  in writing by the  Administrative  Agent;
provided,  Subordinated Lender may receive from Borrower the Warrant (as defined
in the Subordinated  Credit Agreement) and so long as no Blockage Period exists,
Borrower may pay and Subordinated Lender may accept regularly scheduled interest
payments  equal to (i) all interest  accruing on the principal  evidenced by the
Subordinated  Note,  (ii) all facility fees,  (iii) all commitment fees and (iv)
all fees  related  to an  increase  in the  borrowing  base  established  in the
Subordinated  Credit Agreement pursuant to the terms of the Subordinated  Credit
Agreement.  In  the  event  Subordinated  Lender  receives  any  payment  on the
Subordinated Debt in violation of the foregoing,  Subordinated  Lender will hold
any such payment in trust for Senior Lender and forthwith turn it over to Senior
Lender, in precisely the form received (except for the endorsement or assignment
by  Subordinated  Lender where  necessary),  for application on the Senior Debt,
whether then due or not due. In the event of failure of  Subordinated  Lender to
make any such endorsement or assignment,  Senior Lender and each of its officers
and employees are hereby irrevocably authorized to make the same.

           (b)    Subordinated Lender agrees that it shall not set the Borrowing
Base  under the  Subordinated  Credit  Agreement  above the  Approved  Mezzanine
Borrowing  Base,  and shall not honor any  requests by Borrower for an "Advance"
which, if made,  would cause the sum of all  outstanding  Advances to exceed the
"Commitment  Limit" (as such  capitalized  terms are defined in the Subordinated
Loan Documents).

      5.   Modifications.

           (a)    Subordinated  Lender  covenants  and  agrees  not to modify or
amend, or to permit the  modification  or amendment of, any of the  Subordinated
Loan Documents without the prior written consent of the Administrative Agent, on
behalf of Senior Lender, other than:

           (i)    any and all ratifications,  amendments,  supplements or  other
           modifications  of, or  additions  to, any of the  security  documents
           securing  the  Subordinated  Debt  to  the  extent  that  any  of the
           foregoing   arises  under  the  provisions  of  Section  5.8  of  the
           Subordinated  Credit  Agreement,  and so long as any liens,  security
           interests  or rights with  respect to such  ratification,  amendment,
           supplement, modification or addition are and remain


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<PAGE>


           subordinate  to   the  liens,    security   interest  and  rights  of
           Administrative Agent or the Senior Lenders;

           (ii)   releases of collateral granted by Subordinated Lender;

           (iii)  any  increase  in  the  fee  applicable  to  increases  in the
           Borrowing  Base (as  defined in the  Subordinated  Credit  Agreement)
           provided,  any  increase  in the  commitment  fee to the  extent  the
           corresponding  fee in the Senior Loan Documents has been increased by
           a similar or greater amount; and

           (iv)   any  increase  in  the  Facility   Rate  (as  defined  in  the
           Subordinated  Credit  Agreement)  to the extent  that the  Applicable
           Margin has been increased by a similar or greater amount;

           provided  that  the  Administrative   Agent  shall  not  unreasonably
withhold its consent to any such other  modification  or amendment of any of the
Subordinated Loan Documents if such modification or amendment: (A) would be made
at a time when no "Default" or "Event of Default" has occurred and is continuing
or would be caused thereby (as defined in the Senior Credit Agreement),  and (B)
would not adversely affect the position of Administrative Agent or Senior Lender
with respect to either the subordination  provisions of this Agreement or have a
material adverse effect on the rights or interests of the  Administrative  Agent
or Senior Lender; provided further that this Subsection 5(a) shall not be deemed
to limit the ability of Subordinated Lender to forbear, grant temporary waivers,
to give consents,  to take unilateral  actions  contemplated by the terms of the
Subordinated  Loan  Documents  or to take  other  actions  with  respect  to the
Subordinated  Loan Documents to the extent not in violation of the terms of this
Agreement which do not have the effect of amending or modifying the terms of the
Subordinated Loan Documents.

           (b)    Administrative Agent and Senior Lender may modify or amend any
of the Senior Loan Documents  without the prior written  consent of Subordinated
Lender, except as specifically set forth below with respect to the Senior Credit
Agreement:

                  (i)    any extension  of the Termination Date to a  date later
      than three years and thirty (30) days following the Closing Date;

                  (ii)   any increase in the Maximum  Loan  Amount  to more than
      $20,000,000;

                  (iii)  any increase in the fee applicable  to increases in the
      Borrowing  Base  to a  percentage  more  than  1% or  increase  in the fee
      applicable  to the  commitment  fee to a percentage  more than 1% when the
      Effective Amount is greater than 50% of the Borrowing Base amount and to a
      percentage  not more than 0.50% when the  Effective  Amount is equal to or
      less than 50% of the Borrowing Base;

                  (iv)   any releases of Mortgaged Properties with an  aggregate
      market value in excess of $250,000 during any Borrowing Base Period;

                  (v)    any increase in the Applicable  Margin by more than 200
      basis points above the amounts set forth on the Pricing Grid;

                  (vi)   any modification to the following financial covenants:


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                         (x)   any change in minimum Consolidated  Tangible  Net
                         Worth that would  result in a  calculated  amount  less
                         than zero (i.e., negative net worth),

                         (y)   any change  in  the  ratio of  Total Consolidated
                         Funded Debt to EBITDA ratio beyond 6.0:1.0, or

                         (z)   any change in the ratio of  Current  Consolidated
                         Assets to Current Consolidated Liabilities to less than
                         0.50; and

                  (vii)  any modification  in  the  definitions  of  Termination
      Date, Maximum Loan Amount, Applicable Margin,  Pricing Grid,  Consolidated
      Tangible Net  Worth,  Effective  Amount,  EBITDA,   Consolidated  Interest
      Expense,  Current Consolidated Assets, Current  Consolidated  Liabilities,
      Consolidated Net Income or  Total Consolidated Funded Debt  (other than as
      expressly permitted under this Subsection 5(b));

provided  that,  the  Subordinated  Lender shall not  unreasonably  withhold its
consent to any such  modification  or amendment of the Senior  Credit  Agreement
above if such  modification  or  amendment:  (A)  would  be made at a time  when
neither an Event of Default (as defined in the Subordinated  Loan Agreement) nor
an Unmatured  Event of Default (as defined in the  Subordinated  Loan Agreement)
has occurred and is  continuing  or would be caused  thereby,  and (B) would not
adversely affect the position of Subordinated  Lender with respect to either the
subordination  provisions of this Agreement or have a material adverse effect on
the rights or interests of the Subordinated  Lender;  provided further that this
Subsection 5(b) shall not be deemed to limit the ability of Administrative Agent
or the Senior Lender to forbear,  grant temporary waivers, to give consents,  to
take unilateral  actions  contemplated by the terms of the Senior Loan Documents
or to take other actions with respect to the Senior Loan Documents to the extent
not in violation of the terms of this Agreement  which do not have the effect of
amending or modifying the terms of the Senior Loan Documents.

      6.   Limitation on Acceleration or Exercise of Remedies.

           (a)    Except as  set  forth  below  in  Subsection 6(b)  during  any

Blockage  Period, Subordinated Lender shall be prohibited from taking any action
towards the  collection  of the  Subordinated  Debt or the payment of  any other
amounts in  respect  of  the Subordinated  Debt,   including  without limitation
(i)  accelerating the maturity of the Subordinated  Debt, (ii) suing for payment
of the  Subordinated Debt  (including, without limitation,  the  commencement or
joining with any other creditors of any Credit Party in the commencement of  any
bankruptcy, reorganization, receivership, or insolvency proceeding of any Credit
Party), except  as provided  in  Section 7 below, (iii) exercising  any right of
set-off for  the collection of  any amounts due in  respect of the  Subordinated
Debt, or  (iv)  commencing  or prosecuting a Lien  Enforcement Action.  Any Lien
Enforcement Action taken by Subordinated  Lender shall be expressly  undertaken,
prosecuted, settled, compromised, or otherwise  effected at all times subject to
the senior and prior rights of the Senior Lender in and to any such  Collateral,
and all such Collateral or proceeds  thereof, or rights  obtained  with  respect
thereto, shall be subject to the senior and prior rights of Senior Lender.

           (b)    Notwithstanding anything in Subsection  6(a) to the  contrary,
during any Blockage Period, the Subordinated  Lender may (i) declare any default
pursuant to the terms of the Subordinated Credit Agreement, (ii) accrue interest
at the default  rate of  interest as set forth and  pursuant to the terms of the
Subordinated  Credit  Agreement,  and (iii)  file  proofs of claim to the extent
necessary to protect that status of the Subordinated Lender's claims.


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<PAGE>


      7.   Bankruptcy.   Until Senior Lender  has no further commitments to lend
to Borrower  and  the  Senior Debt shall  have been indefeasibly  paid  in full,
during any Blockage  Period  Subordinated Lender  may  not,  without  the  prior
written consent  of Senior Lender,  commence,  or join with any  other person or
entity in commencing, any proceeding against any person or entity  with  respect
to the Subordinated Debt under any bankruptcy   reorganization,  readjustment of
debt, dissolution,  receivership, liquidation, or insolvency law  or statute now
or  hereafter   in   effect   in   any   jurisdiction.     Subordinated   Lender
authorizes   Senior  Lender  as  its   attorney-in-fact to vote  and  prove  the
Subordinated Debt in any of the above-described proceedings or in any meeting of
creditors of any Credit Party related thereto.

      8.   Continuing  Subordination.   The  subordination   effected  by  these
provisions is a continuing  subordination  and may not be modified or terminated
by Subordinated Lender or any other holder of any Subordinated Debt until Senior
Lender has no further commitments to lend to Borrower and all of the Senior Debt
shall have been  indefeasibly  paid in full.  At any time and from time to time,
without  consent  of or notice  to  Subordinated  Lender or any other  holder of
Subordinated  Debt, and without impairing or affecting the obligations of any of
them hereunder:

           (a)    Senior Lender  may  exercise or  refrain from   exercising any
rights under the Senior Loan Documents, or any other agreement,  instrument,  or
document relating to the Senior Debt;

           (b)    The maturity of the  Senior Debt may be  accelerated,  and any
Collateral  security  therefor  or any  other  rights or  Senior  Lender  may be
exchanged,  sold, surrendered,  released, or otherwise dealt with, in accordance
with the terms of any present or future  agreement with any Credit Party and any
other  agreement  of  subordination  (and  the  debt  covered  thereby)  may  be
surrendered, released, or discharged; and

           (c)    Any person or entity liable in any  manner for  payment of any
Senior Debt may be released by holders of Senior Debt.

      9.   Waivers.  Subordinated Lender  hereby  waives,   and  agrees  not  to
assert:  (a) any right, now or hereafter  existing,  to require Senior Lender to
proceed  against or exhaust any Collateral at any time securing the Senior Debt,
or to marshal any assets in favor of Subordinated  Lender or any other holder of
Subordinated Debt; and (b) any notice of the incurrence of Senior Debt, it being
understood  that  Senior  Lender  may,  in  reliance  upon  these  subordination
provisions,  make  advances  under  the  Senior  Loan  Documents,  or any  other
agreement, document, or instrument now or hereafter relating to the Senior Debt,
without notice to or authorization of Subordinated Lender.

      10.  Lien  Subordination  and  Standby.   Any  lien,   security  interest,
encumbrance,  charge, or claim of Subordinated  Lender on any assets or property
of any Credit party or any  proceeds or revenues  therefrom  which  Subordinated
Lender may have at any time as security for any Subordinated  Debt shall be, and
hereby is, subordinated to all liens, security interests, or encumbrances now or
hereafter   granted  to  Senior   Lender  by  such  Credit   Party  or  by  law,
notwithstanding  the date or order of attachment or perfection of any such lien,
security  interest,  encumbrance,  or claim or  charge or the  provision  of any
applicable law. During any Blockage  Period,  whether one or more,  Subordinated
Lender  agrees  that  Subordinated  Lender  will not  assert or seek to  enforce
against  any Credit  Party any  interest of  Subordinated  Lender in any and all
Collateral for the  Subordinated  Debt and that Senior Lender may dispose of any
or all of the  Collateral  for the  Senior  Debt  free  of any and all  security
interests and liens, including, but not limited to, security interests and liens
created  in  favor  of  Subordinated  Lender  through  judicial  or  nonjudicial
proceedings,  in accordance with applicable law,  including taking title,  after
notice to Subordinated Lender.  Subordinated Lender agrees that any such sale or
other disposition by Senior


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<PAGE>


Lender of so much of the  Collateral  for the  Senior  Debt as is  necessary  to
satisfy in full all of the principal  of,  interest on and  reasonable  costs of
collection  of the  Senior  Debt  shall be made free and  clear of any  security
interest  and liens  granted  to holder  provided  the  entire  proceeds  (after
deducting  reasonable  expenses of sale) are applied in  reduction of the Senior
Debt. Consistent with the foregoing, upon Senior Lender's request,  Subordinated
Lender shall execute and deliver any releases or other  documents and agreements
that Senior Lender, in its reasonable discretion,  deems necessary to dispose of
the Collateral  for the Senior Debt free of  Subordinated  Lender's  interest in
same. Subordinated Lender retains all of its rights as a junior secured creditor
with respect to the surplus,  if any,  arising from any such  disposition of the
Collateral for the Senior Debt.

      11.  Subrogation.  Until  Senior  Lender  has  no  further  commitments to
extend credit to Borrower and the Senior Debt shall have been  indefeasibly paid
in full,  Subordinated  Lender  hereby  waives  all rights of  subrogation  with
respect to the rights of Senior Lender to receive payments or distributions  and
with respect to any rights to any Collateral  for the Senior Debt.  Upon payment
in full of the Senior  Debt,  Subordinated  Lender  shall be  subrogated  to the
extent permitted by law, to all rights of the holders of Senior Debt.

      12.  Subordination  Not  Impaired by  Borrower.  No right of any holder of
Senior  Debt to enforce  the  subordination  of the  Subordinated  Debt shall be
impaired  by any act or  failure to act by any  Credit  Party or by such  Credit
Party's failure to comply with these provisions.

      13.  No Third Party  Beneficiaries.  This  Agreement  is  not  intended to
give or confer  any rights to any  person  other than the  holders of the Senior
Debt.  No other party,  including  any Credit  Party,  is intended to be a third
party beneficiary of this Agreement.

      14.  Representations  and  Warranties.     Subordinated    Lender   hereby
represents  and warrants  that: (a) the execution and delivery of this Agreement
and the  performance by Subordinated  Lender of its  obligations  hereunder have
received all necessary  approvals,  corporate or otherwise,  and do not and will
not  contravene  or conflict  with any  provision of law or any provision of any
indenture,  instrument,  or other  agreement to which  Subordinated  Lender is a
party or by which it or its property may be bound or affected;  (b) Subordinated
Lender has full  power,  authority,  and legal  right to make and  perform  this
Agreement;   (c)  Subordinated  Lender  has  not  assigned  or  transferred  any
indebtedness  owing  by  any  Credit  Party  or any  of  the  Collateral  of the
Subordinated  Debt and  Subordinated  Lender  will not assign or  transfer  same
without at least ten (10) days' prior written notice to Senior  Lender;  and (d)
this  Agreement is the legal,  valid,  and binding  obligation  of  Subordinated
Lender, enforceable against Subordinated Lender in accordance with its terms.

      15.  No Waiver.  No failure on the part of Senior Lender to  exercise,  no
delay in  exercising,  and no course of  dealing  with  respect  to any right or
remedy  hereunder  will  operate  as a waiver  thereof;  nor will any  single or
partial exercise of any right or remedy hereunder  preclude any other or further
exercise  thereof or the exercise of any other right or remedy.  This  Agreement
may not be amended or modified  except by written  agreement  of Senior  Lender,
Subordinated Lender, Borrower and Guarantors, and no consent or waiver hereunder
shall be valid unless in writing and signed by Senior Lender.

      16.  Successor and Assigns.  This  Agreement,  and  the terms,  covenants,
and  conditions  hereof,  shall be binding upon and inure to the benefit of the
parties  hereto,   and  their  respective  heirs,   personal   representatives,
successors, and assigns.


                                       8





<PAGE>


      17.  Arbitration.   The  Parties  hereto  incorporate  by  reference   the
Arbitration  provisions  set  forth  in  Section  11.19  of the  Senior  Credit
Agreement.  Any and all Disputes shall be resolved by the terms thereof.

      18.  GOVERNING LAW.  THIS  AGREEMENT WILL BE CONSTRUED IN ACCORDANCE  WITH
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.


      IN WITNESS  WHEREOF,  this  Agreement has been duly executed as of the day
and year first above written.


                               ADMINISTRATIVE AGENT AND SENIOR LENDER:
                               --------------------------------------


                               WELLS FARGO BANK TEXAS, N.A.,
                               a national banking association



                               By:        /s/ J. Alan Alexander, Jr.
                                    --------------------------------------
                                    J. Alan Alexander, Jr.
                                    Vice President





                               SUBORDINATED LENDER:
                               -------------------


                               WELLS FARGO ENERGY CAPITAL, INC.,
                               a Texas corporation



                               By:        /s/ Clayton Taylor
                                    --------------------------------------
                                    Clayton Taylor
                                    Assistant Vice President


                                       9




<PAGE>



      The  undersigned,  being the Credit  Parties  referred to in the foregoing
Subordination Agreement, hereby (i) acknowledges receipt of a copy thereof, (ii)
agrees to all of the terms and provisions thereof,  (iii) agrees to and with the
Senior Lender that is shall make no payments on the  Subordinated  Debt that the
Subordinated Lender would not be entitled to receive under the provisions of the
Subordination  Agreement,  (iv) agrees that any such payment  will  constitute a
default  under  the  Senior  Loan  Documents,  and (v)  agrees to mark its books
conspicuously to evidence the  subordination  of the Subordinated  Debt affected
hereby.



                               QUEST RESOURCE CORPORATION,
                               a Nevada corporation



                               By:  /s/ Douglas L. Lamb
                                   ---------------------------------------
                                    Douglas L. Lamb
                                    President



                               By:  /s/ Jerry D. Cash
                                   ---------------------------------------
                                    Jerry D. Cash
                                    Treasurer and Chief Financial Officer






                               QUEST OIL & GAS CORPORATION,
                               a Kansas Corporation



                               By:  /s/ Douglas L. Lamb
                                   ---------------------------------------
                                    Douglas L. Lamb
                                    President



                               By:  /s/ Jerry D. Cash
                                   ---------------------------------------
                                    Jerry D. Cash
                                    Treasurer and Chief Financial Officer





<PAGE>


                               PONDEROSA GAS PIPELINE COMPANY, INC.,
                               a Kansas Corporation



                               By:  /s/ Douglas L. Lamb
                                   ---------------------------------------
                                    Douglas L. Lamb
                                    President



                               By:  /s/ Jerry D. Cash
                                   ---------------------------------------
                                    Jerry D. Cash
                                    Treasurer and Chief Financial Officer






                               STP CHEROKEE, INC.,
                               an Oklahoma Corporation



                               By:  /s/ Douglas L. Lamb
                                   ---------------------------------------
                                    Douglas L. Lamb
                                    President



                               By:  /s/ Jerry D. Cash
                                   ---------------------------------------
                                    Jerry D. Cash
                                    Treasurer and Chief Financial Officer