##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
  For the fiscal year ended December 31, 2009
  Commission file number:
    001-34635
 PostRock Energy
    Corporation
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware(State or Other Jurisdiction
    of
    Incorporation or Organization)

27-0981065(I.R.S. Employer
    Identification No.)210 Park Avenue, Suite 2750
    Oklahoma City, Oklahoma(Address of Principal
    Executive Offices)

73102(Zip
    Code)   Registrants telephone number, including area code:
 (405) 600-7704
  Securities Registered Pursuant to Section 12(b) of the
    Exchange Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share

The NASDAQ Stock Market LLC   Securities Registered Pursuant to Section 12(g) of the
    Exchange Act:
 None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ
    DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 





TABLE OF
    CONTENTS
   
 PART IITEM 1.


BUSINESS


1ITEM 1A.


RISK FACTORS


36ITEM 1B.


UNRESOLVED STAFF COMMENTS


60ITEM 2.


PROPERTIES


60ITEM 3.


LEGAL PROCEEDINGS


60PART IIITEM 5.


MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES


65ITEM 6.


SELECTED FINANCIAL DATA (PREDECESSOR)


66ITEM 7.


MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


67ITEM 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


90ITEM 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


91ITEM 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


91ITEM 9A(T).


CONTROLS AND PROCEDURES


91ITEM 9B.


OTHER INFORMATION


94PART IIIITEM 10.


DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT
    AND CORPORATE GOVERNANCE


95ITEM 11.


EXECUTIVE COMPENSATION


95ITEM 12.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


95ITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE


95ITEM 14.


PRINCIPAL ACCOUNTING FEES AND SERVICES


95PART IVITEM 15.


EXHIBITS, FINANCIAL STATEMENT SCHEDULES


95EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2EX-99.1   i




---



##### Table of Contents



PART I  ITEM 1.
    BUSINESS.  General
    (405) 600-7704.
  Form 10-K,
      
    Oil and natural gas production; and
    Natural gas pipelines, including transporting, gathering,
    treating and processing natural gas.  Form 10-K.
    
    Cherokee Basin:  Approximately
    2,849 gross wells, which includes oil, natural gas and
    service wells, the development rights to approximately
    516,184 net acres and approximately 2,173 miles of gas
    gathering pipeline in the Cherokee Basin. Of the
    2,849 wells, there are approximately 189 wells that we
    believe to be capable of producing should gathering
    infrastructure be available. Of these 189 wells,
    approximately 100 wells are in an area where we have
    partially completed this infrastructure. Under Securities
    Exchange Commission (SEC) criteria, the estimated
    net proved reserves associated with these assets as of
    December 31, 2009 were 51.9 Bcfe. Based on NYMEX
    forward pricing as of February 1, 2010 and lower
    transportation costs as described under Oil and Gas
    Data  Sensitivity of Reserves to Prices and
    Costs, the estimated net proved reserves were
    192.2 Bcfe.
    Appalachian Basin:  Approximately
    498 gross gas wells, the development rights to
    approximately 44,507 net acres and approximately
    183 miles of gas gathering pipeline in the Appalachian
    Basin. Under SEC criteria, the estimated net proved reserves
    associated with these assets as of December 31, 2009 were
    18.9 Bcfe. Based on NYMEX forward pricing as of
    February 1, 2010 and lower transportation costs as
    described under Oil and Gas Data  Sensitivity
    of Reserves to Prices and Costs, the estimated net proved
    reserves were 26.3 Bcfe. 1




---



##### Table of Contents




    Central Oklahoma:  Approximately
    65 gross wells, which includes oil, natural gas and service
    wells, and the development rights to approximately
    1,480 net acres in Seminole County, Oklahoma. Under SEC
    criteria, the estimated net proved reserves associated with
    these Oklahoma properties as of December 31, 2009 were
    3.9 Bcfe. Based on NYMEX forward pricing as of
    February 1, 2010 and lower transportation costs as
    described under Oil and Gas Data  Sensitivity
    of Reserves to Prices and Costs, the estimated net proved
    reserves were 4.3 Bcfe.
    Interstate Pipeline:  An 1,120 mile
    interstate natural gas pipeline that transports natural gas from
    northern Oklahoma and western Kansas to the metropolitan Wichita
    and Kansas City markets.  Oil
    and Gas Production
  Cherokee Basin.
      Appalachian Basin.
    
    approximately 44,507 net acres of oil and natural gas
    producing properties with estimated proved reserves of
    18.9 Bcfe, which are approximately 60% proved developed,
    and net production of approximately 2.9 Mmcfe/d; and
    Approximately 498 gross wells. 2




---



##### Table of Contents



Central Oklahoma Oil Properties.
  Natural
    Gas Pipelines
  Cherokee Basin.
  Appalachian Basin.
  Interstate Pipeline System. and/or
  Competitive
    Strengths
  Dominant
    Position in the Cherokee Basin
     3




---



##### Table of Contents



Attractive
    Underlying Economics
    Integrated
    Business Model
      Extensive
    Midstream Infrastructure
   4




---



##### Table of Contents



Stable
    Base Production
    Strong
    Commodity Hedging Position
    Valuable
    Appalachian Acreage Position
    Business
    Strategies
  Improve
    Financial Flexibility
    Continued
    Development of the Cherokee Basin Through Strict and Systematic
    Operational Controls
    Actively
    Manage Price Exposure through Midstream Strategy and
    Hedging
   5




---



##### Table of Contents



Consolidate
    the Cherokee Basin
    Develop
    Appalachian Assets
    Description
    of Our Exploration and Production Properties and
    Projects
  Cherokee
    Basin
       6




---



##### Table of Contents



Cherokee
    Basin Projects
  160-acre 80-acre
  50-55 Mcf/d
    Appalachian
    Basin
   7




---



##### Table of Contents



Appalachian
    Basin Projects
     8




---



##### Table of Contents



Central
    Oklahoma Oil Properties
  on-site,
  Oil and
    Gas Data
  Reserves
    categories
    Estimated
    Reserves
  12-month
  Natural Gas (Bcf)

Oil (MMbbl)

Total (Bcfe)(1)Proved reservesDeveloped


62.1



0.78



66.8Undeveloped


7.7



0.05



8.0Total proved reserves


69.8



0.83



74.8Total probable reserves


4.5







4.5Total possible reserves


9.1







9.1     (1)
    
    Natural gas equivalents are determined using the ratio of
    6 Mcf of natural gas to 1 Bbl of crude oil. 9




---



##### Table of Contents



Proved
    Undeveloped Reserves
    Sensitivity
    of Reserves to Prices and Costs
    Sensitivity of Reserves to Prices and CostsAs of December 31, 2009SEC





RecombinedModernization


Recombined


NYMEXMethodology(1)


Methodology(2)


Methodology(3)Gas


Oil


Total


Gas


Oil


Total


Gas


Oil


Total(Bcf)


(MMbbl)


(Bcfe)


(Bcf)


(MMbbl)


(Bcfe)


(Bcf)


(MMbbl)


(Bcfe)Proved reservesDeveloped


62.1



0.78



66.8



96.5



0.78



101.2



158.9



0.87



164.1Undeveloped


7.7



0.05



8.0



8.8



0.05



9.1



58.4



0.05



58.7Total proved reserves


69.8



0.83



74.8



105.3



0.83



110.3



217.3



0.92



222.8Total probable reserves


4.5







4.5



31.7



0.33



33.7



57.4



0.33



59.4Total possible reserves


9.1







9.1



9.1







9.1



94.8



0.06



95.2SEC





RecombinedModernization


Recombined


NYMEXMethodology(1)


Methodology(2)


Methodology(3)(in thousands)PV-10
    value(4):Proved reserves





$
50,559










$
99,901










$
431,901Probable reserves






435











2,120











63,437Possible reserves






139











139











75,996     (1)
    
    Amounts determined based on the recently adopted SEC final rule
    Modernization of Gas and Oil Accounting. The prices
    used in this calculation equal the
    12-month
    average price as of December 31, 2009 used in the table
    above under  Estimated Reserves. The
    transportation cost on our Cherokee Basin production was $1.70
    per Mcf, which is based on the gathering rate charged under the
    midstream services and gas dedication agreement between Bluestem
    Pipeline, LLC and QELP in effect during 2009.(2)
    
    The prices used in this calculation are the same as those
    described in footnote 1. This scenario assumes that the
    midstream services and gas dedication agreement, which after the
    recombination is an intercompany agreement, is no longer in
    effect and therefore utilizes our current estimate of direct
    pipeline operating expense for our natural gas gathering
    pipeline system of $0.80 per Mcf.(3)
    
    Amounts determined based on the publicly traded NYMEX 2010 to
    2015 natural gas and oil forward curve as of February 1,
    2010. The average 5 year forward price for natural gas was $6.38
    per Mmbtu and the average 5 year forward price for crude oil was
    $82.75 per barrel. This scenario assumes that the midstream
    services and gas dedication agreement is no longer in effect and
    therefore utilizes our current estimate of direct pipeline
    operating expense for our natural gas gathering pipeline system
    of $0.80 per Mcf. 10




---



##### Table of Contents



(4)
    
    The PV-10
    value of our reserves is a non-GAAP financial measure.
    PV-10 value
    is derived from the standardized measure of discounted future
    net cash flows, which is the most directly comparable financial
    measure under generally accepted accounting principles.
    PV-10 value
    is a computation of the standardized measure of discounted
    future net cash flows on a pre-tax basis.
    PV-10 value
    is equal to the standardized measure of discounted future net
    cash flows at a specified date before deducting future income
    taxes, discounted at 10%. Discounted future net cash flows are
    based on assumptions of future prices, future production costs
    and future development costs. However, as a result of our
    significant net operating loss carryfowards, we do not expect to
    incur future income tax liabilities for the foreseeable future
    and therefore have an effective future income tax rate of zero.
    As such, there is no difference between the standardized measure
    and the
    PV-10 value
    of our reserves under the different methodologies. We believe
    that the presentation of the
    PV-10 value
    is relevant and useful to investors because it presents the
    discounted future net cash flows attributable to our reserves,
    and it is a useful measure of evaluating the relative monetary
    significance of our oil and natural gas properties. Further,
    investors may utilize the measure as a basis for comparison of
    the relative size and value of our reserves to other companies.
    We use this measure when assessing the potential return on
    investment related to our oil and natural gas properties.
    However,
    PV-10 value
    is not a substitute for the standardized measure of discounted
    future net cash flows. Our
    PV-10 value
    measure and the standardized measure of discounted future net
    cash flows do not purport to present the fair value of our oil
    and natural gas reserves as of the specified dates.      Internal
    Controls
     11




---



##### Table of Contents



Production
    Volumes, Sales Prices and Production Costs
    Year Ended December 31,2009


2008


2007Net Production:Gas (Bcf)


21.24



21.33



16.98Oil (Bbls)


83,015



69,812



7,070Gas equivalent (Bcfe)


21.73



21.75



17.02Oil and Gas Sales ($ in thousands):Gas sales

$
75,106


$
156,051


$
104,853Oil sales


4,787



6,448



432Total oil and gas sales

$
79,893


$
162,499


$
105,285Avg Sales Price (unhedged):Gas ($ per Mcf)

$
3.54


$
7.32


$
6.18Oil ($ per Bbl)

$
57.66


$
92.36


$
61.10Gas equivalent ($ per Mcfe)

$
3.68


$
7.47


$
6.19Avg Sales Price (hedged)(1):Gas ($ per Mcf)

$
8.11


$
7.02


$
6.60Oil ($ per Bbl)

$
69.93


$
90.44


$
61.10Gas equivalent ($ per Mcfe)

$
8.19


$
7.18


$
6.61Oil and gas operating expenses ($ per Mcfe):Production costs, excluding production and property taxes

$
1.19


$
1.58


$
1.71Production and property taxes

$
0.35


$
0.45


$
0.42Net Revenue ($ per Mcfe)

$
2.14


$
5.44


$
4.06     (1)
    
    Data includes the effects of our commodity derivative contracts
    that do not qualify for hedge accounting. The following table
    summarizes the realized gains (losses) by commodity type by
    period:  Year Ended December 31,2009


2008


2007Realized gain (loss) on hedgesGas Hedges

$
97,130


$
(6,254
)

$
7,279Oil Hedges

$
1,018


$
(134
)


Total

$
98,148


$
(6,388
)

$
7,279     Year Ended December 31, 2009Natural Gas (Bcfe)

Oil (Bbls)

Total (Bcfe)Production:Cherokee Basin


20.2



9,474



20.26Appalachia


0.96



18,432



1.06Central Oklahoma and other


0.08



55,109



0.41   12




---



##### Table of Contents



Natural Gas (per Mcfe)

Oil (per Bbl)

Total (per Mcfe)Average Sales PricesCherokee Basin

$
3.31


$
54.66


$
3.32Appalachia


8.30



51.90



8.34Central Oklahoma and other


4.30



60.10



8.91   Year EndedDecember 31, 2009Production Costs (per Mcfe):Cherokee Basin

$
1.04Appalachia


3.11Central Oklahoma and other


3.67   Producing
    Wells and Acreage
    Producing WellsGas

Oil

TotalGross

Net

Gross

Net

Gross

NetDecember 31, 2007


2,225



2,218.2



29



28.1



2,254



2,246.3December 31, 2008(1)


2,873



2,825.0



82



80.2



2,955



2,905.2December 31, 2009(2)


2,442



2,397.8



48



43.7



2,490



2,441.6     (1)
    
    Increase includes approximately 500 gross Appalachian Basin
    wells acquired in the acquisition of PetroEdge Resources (WV)
    LLC in July 2008, or the PetroEdge acquisition, and
    55 gross wells acquired in Seminole County, Oklahoma.(2)
    
    Decrease from 2008 is due primarily to shutting in wells as a
    result of low natural gas prices.  AcreageProducing(1)


Nonproducing


TotalGross


Net


Gross


Net


Gross


NetDecember 31, 2007(2)


403,048



393,480



204,104



187,524



607,152



581,004December 31, 2008(3)(4)


464,702



446,537



208,224



180,707



672,926



627,244December 31, 2009(5)(6)


446,129



432,008



139,018



130,161



585,147



562,169     (1)
    
    Includes acreage held by production or the payment of shut in
    royalties under the terms of the lease.(2)
    
    Includes acreage in the states of Kansas, Oklahoma, New Mexico,
    Texas and Pennsylvania.(3)
    
    Includes acreage in the states of Kansas, Oklahoma, New York,
    Pennsylvania, and West Virginia.(4)
    
    Includes approximately 37,723 gross and 31,565 net
    acres attributable to various farm-out agreements or other
    mechanisms in the Appalachian Basin. Approximately
    6,912 net acres were earned and approximately
    24,653 net acres were unearned under these agreements as of
    December 31, 2008. There are certain drilling or payment
    obligations that must be met before this unearned acreage is
    earned.(5)
    
    Includes approximately 37,805 gross and 31,883 net
    acres attributable to various farm-out agreements or other
    mechanisms in the Appalachian Basin. Approximately
    10,058 net acres are earned and approximately
    21,825 net acres are unearned under these agreements as of
    December 31, 2009. There are certain drilling or payment
    obligations that must be met before this unearned acreage is
    earned.(6)
    
    Includes acreage in the states of Kansas, Oklahoma, West
    Virginia, Pennsylvania and New York. 13




---



##### Table of Contents



Drilling
    Activities
    Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2009


2008


2007Gross


Net


Gross


Net


Gross


NetExploratory wells drilled:Productive










1



1







Dry


1



1



1



1







Development wells drilled:Productive


4



2.5



339



338



572



572Dry






















Wells plugged and abandoned


11



11



17



17







Wells acquired capable of production(1)


9



1.6



551



514.5







Net increase in capable wells


3



(5.9
)


875



837.5



572



572Recompletion of old wells:Capable of production










14



14



50



49     (1)
    
    Includes 53.5 net and 55 gross oil wells capable of
    production acquired in Seminole County, Oklahoma in February
    2008. The remainder of the 2008 acquired wells were acquired as
    part of the PetroEdge acquisition.  Independence
    and Qualifications of Reserve Preparer
    Exploration
    and Production
  General
  day-to-day
   14




---



##### Table of Contents



Oil
    and Gas Leases and Development Rights
            Gas
    Gathering Systems
   15




---



##### Table of Contents



2
          Year Ended December 31,2009

2008Pipeline Natural Gas Vols (Mmcf):Cherokee Basin


26,083



27,093Appalachian Basin


956



476   Third-Party
    Gas Gathering
    Interstate
    Natural Gas Pipeline
  160 MMcf/d.
 16




---



##### Table of Contents



Impairment
    of Gas Gathering and Interstate Pipelines
      Marketing
    and Major Customers
  Exploration
    and Production
          Interstate
    Pipeline
   17




---



##### Table of Contents



Capacity

Time Period57,568 Dth/d

November 1, 2009 through October 31, 201244,636 Dth/d(*)

November 1, 2009 through October 31, 201543,171 Dth/day(*)

November 1, 2015 through October 31, 201712,000 Dth/d

November 1, 2009 through October 31, 20136,900 Dth/d

November 1, 2002 through September 30, 20176,857 Dth/d

November 1, 2002 through March 31, 2017     (*)
    
    yearly average, some volumes adjusted for seasonal needs.  Commodity
    Derivative Activities
       18




---



##### Table of Contents



Form 10-K.
  Competition
  Exploration
    and Production
    Gas
    Gathering
    Interstate
    Pipelines
    Operating
    Hazards and Insurance
         19




---



##### Table of Contents



Title to
    Properties
  Oil
    and Natural Gas Properties
    rights-of-way
  Pipeline
    Rights-of-Way
  rights-of-way
  rights-of-way rights-of-way right-of-way right-of-way rights-of-way,
  rights-of-way
  Seasonal
    Nature of Business
  Exploration
    and Production
   20




---



##### Table of Contents



Interstate
    Pipelines
    Environmental,
    Health and Safety Matters and Regulation
  General
    
    require the acquisition of various permits before drilling
    commences;
    limit or curtail some or all of the operations of facilities
    deemed in non-compliance with permits or other legal
    requirements;
    restrict the types, quantities and concentration of various
    substances that can be released into the environment in
    connection with oil and gas drilling, production, gathering,
    treating and transportation activities;
    limit or prohibit drilling activities on certain lands lying
    within wilderness, wetlands, areas inhabited by endangered or
    threatened species, and other protected areas; and
    require remedial measures to mitigate pollution from former and
    ongoing operations, such as requirements to close pits, plug
    abandoned wells, and restore, remediate or mitigate impacted
    environmental media.     21




---



##### Table of Contents



Waste
    Management
    Comprehensive
    Environmental Response, Compensation, and Liability
    Act
      Water
    Discharges and Water Quality
   22




---



##### Table of Contents



Air
    Emissions
     23




---



##### Table of Contents



Climate
    Change
    i.e.
   24




---



##### Table of Contents



and/or
  and/or
  Hydrogen
    Sulfide
    National
    Environmental Policy Act
   25




---



##### Table of Contents



Endangered
    Species Act
    OSHA
    and Other Laws and Regulation
  right-to-know and/or
    Other
    Regulation of the Oil and Gas Industry
      Exploration
    and Production
    
    the location of wells;
    the method of drilling and casing wells; 26




---



##### Table of Contents




    the surface use and restoration of properties upon which wells
    are drilled;
    the plugging and abandoning of wells; and
    notice to surface owners and other third parties.      Interstate
    Pipelines
      e.g.
 27




---



##### Table of Contents



State
    Severance, Production and Other Taxes
            Federal
    Regulation of Transportation of Gas
    
    rates and charges for natural gas transportation services;
    certification and construction of new facilities;
    extension or abandonment of services and facilities;
    maintenance of accounts and records;
    relationships between pipelines and certain affiliates;
    terms and conditions of service;
    depreciation and amortization policies;
    acquisition and disposition of facilities; and
    initiation and discontinuation of services.   28




---



##### Table of Contents



State
    Regulation of Natural Gas Gathering Pipelines
     29




---



##### Table of Contents



Sales
    of Natural Gas
    Pipeline
    Safety
    Other
    and/or
 30




---



##### Table of Contents



Employees
    Where To
    Find Additional Information
      
    Audit Committee Charter;
    Compensation Committee Charter;
    Nominating Committee Charter; and
    Code of Business Conduct and Ethics. 31




---



##### Table of Contents



GLOSSARY
    OF SELECTED TERMS
  Form 10-K. Rule 4-10(a) Regulation S-X.
  Appalachian Basin.
  Bbl.
  Bbls/d.
  Bcf.
  Bcfe.
  Brown Shales.
  British Thermal Unit.
  CBM.
  Cherokee Basin.
  Completion.
  Condensate.
  Developed Acreage.
  Developed Reserves.
  Development Costs.
  Development Project.
  Development well.
  Devonian Sands.
  Dry well.
  Dth.
 32




---



##### Table of Contents



Earned acreage.
  Economically producible.
  Exploitation.
  Exploration costs.
  Exploratory well.
  Extension well.
  Farm-out.
  Field. and/or
  Frac/fracturing.
  Gas.
  Gathering system.
  Gross acres or gross wells.
  Horizon or formation.
  Marcellus Shale.
  MBoe.
  Mcf.
  Mcf/d.
  Mcfe.
  MMbbl.
  Mmbtu.
 33




---



##### Table of Contents



Mmcf.
  Mmcf/d.
  Mmcfe.
  Mmcfe/d.
  Net acres or net wells.
  Net production.
  Net revenue interest.
  NGLs.
  NYMEX.
  Oil.
  Permeability.
  Possible reserves.
  Probable reserves.
  Production costs.
  Productive well.
  Proved developed non-producing
    reserves.
  Proved developed reserves.
  Proved reserves.
  Proved undeveloped reserves.
  Reasonable certainty.
 34




---



##### Table of Contents



Reliable technology.
  Recompletion.
  Reserves.
  Reservoir. and/or
  Resources.
  Royalty Interest.
  Service well.
  Shut in.
  Standardized measure.
  Unconventional resource development.
  Undeveloped acreage.
  Undeveloped reserves.
  Unearned acreage.
  Working interest.
 35




---



##### Table of Contents



ITEM 1A.
    RISK
    FACTORS  Risks
    Related to Our Business
  Our
    independent registered public accounting firm has expressed
    substantial doubt about our predecessors ability to
    continue as a going concern.
  Form 10-K and/or
  We
    have identified significant and pervasive material weaknesses in
    our internal control over financial reporting, which may
    persist.
    
    We did not maintain a sufficient control environment. The
    control environment, which is the responsibility of senior
    management, sets the tone of the organization, influences the
    control consciousness of its people, and is the foundation for
    all other components of internal control over financial
    reporting. Specifically, during the first two quarters of the
    year, managements attention was focused on the restatement
    and reaudit of prior year financial statements and the
    recombination, which resulted in the full implementation of our
    remediation plan being delayed until the third quarter of 2009.
    During the first two quarters of 2009, only specific identified
    risks related to items such as the fraud hotline, segregation of
    duties and cash management controls were actively monitored.
    We did not maintain sufficient monitoring controls to determine
    the adequacy of our internal control over financial reporting.
    We did not maintain sufficient controls over certain of our
    period-end financial close and reporting processes.
    We did not maintain sufficient controls to ensure completeness
    and accuracy of stock compensation costs.
    We did not maintain sufficient controls to ensure completeness
    and accuracy of depreciation, depletion and amortization expense.
    We did not maintain sufficient controls to ensure the accuracy
    and application of GAAP related to the impairment of oil and gas
    properties and, specifically, to determine, review and record
    oil and gas property impairments.       36




---



##### Table of Contents



The
    recent financial crisis and current economic conditions have
    had, and may continue to have, a material adverse impact on our
    business and financial condition.
      
    our ability to obtain credit and access the capital markets to
    fund the exploration or development of reserves, the
    construction of additional assets or the acquisition of assets
    or businesses from third parties may continue to be restricted;
    the counterparties to our derivative financial instrument
    contracts could default on their contractual obligations;
    the values we are able to realize in asset sales or other
    transactions we engage in to raise capital may be reduced, thus
    making these transactions more difficult to consummate and less
    economic; and
    the demand for oil and natural gas could decline due to
    deteriorating economic conditions, which could adversely affect
    our business, financial condition or results of operations.     37




---



##### Table of Contents



Energy
    prices are very volatile, and if commodity prices remain low or
    decline, our revenues, profitability and cash flows will be
    adversely affected. A sustained or further decline in oil and
    natural gas prices may adversely affect our business, financial
    condition or results of operations and our ability to fund our
    capital expenditures and meet our financial
    commitments.
    
    the domestic and foreign supply of and demand for oil and
    natural gas;
    the price and level of foreign imports of oil and natural gas;
    the level of consumer product demand;
    weather conditions;
    overall domestic and global economic conditions;
    political and economic conditions in oil and natural gas
    producing countries, including embargoes and continued
    hostilities in the Middle East and other sustained military
    campaigns, acts of terrorism or sabotage;
    actions of the Organization of Petroleum Exporting Countries and
    other state-controlled oil companies relating to oil price and
    production controls;
    the impact of the U.S. dollar exchange rates on oil and
    natural gas prices;
    technological advances affecting energy consumption;
    domestic and foreign governmental regulations and taxation;
    the impact of energy conservation efforts;
    the costs, proximity and capacity of natural gas pipelines and
    other transportation facilities; and
    the price and availability of alternative fuels.    
    reduce the amount of cash flow available for capital
    expenditures, including for the drilling of wells and the
    construction of infrastructure to transport the natural gas it
    produces;
    negatively impact the value of our reserves because declines in
    oil and natural gas prices would reduce the amount of oil and
    natural gas we can produce economically;
    reduce the drilling and production activity of our third-party
    customers and increase the rate at which our customers shut in
    wells;
    potentially reduce natural gas available for transport on the
    KPC Pipeline; and
    limit our ability to borrow money or raise additional capital. 38




---



##### Table of Contents



Future
    price declines may result in a write-down of our asset carrying
    values.
      We
    recorded an impairment charge on our interstate and gathering
    pipelines and related contract-based intangible assets in
    2009.
    As a
    result of our financial condition, we have had to significantly
    reduce our capital expenditures, which will ultimately reduce
    cash flow and result in the loss of some leases.
   39




---



##### Table of Contents



We are
    highly leveraged.
      
    our ability to obtain additional debt or equity financing, if
    necessary, for drilling, expansion, working capital and other
    business needs may be impaired or such financing may not be
    available on favorable terms;
    a substantial decrease in our revenues as a result of lower oil
    and natural gas prices, decreased production or other factors
    could make it difficult for us to pay our liabilities. Any
    failure by us to meet these obligations could result in
    litigation, non-performance by contract counterparties or
    bankruptcy;
    our funds available for operations and future business
    opportunities will be reduced by that portion of our cash flow
    required to make principal or interest payments on our debt;
    we may be more vulnerable to competitive pressures or a downturn
    in our business or the economy generally; and
    our flexibility in responding to changing business and economic
    conditions may be limited.  and/or
  There
    may be events of default under QRCPs, QELPs and
    QMLPs indebtedness enabling the lenders to accelerate such
    indebtedness, which could lead to the foreclosure of collateral
    and the bankruptcy of us, QRCP, QELP and QMLP.
     40




---



##### Table of Contents



and/or
    Our
    credit agreements have substantial restrictions and financial
    covenants that restrict our business and financing
    activities.
    
    incur indebtedness;
    make capital expenditures above specified amounts;
    grant liens;
    pay dividends; 41




---



##### Table of Contents




    redeem or repurchase equity interests;
    make certain acquisitions and investments, loans or advances;
    lease equipment;
    enter into a merger, consolidation or sale of assets;
    dispose of property;
    enter into hedging arrangements with certain counterparties;
    limit the use of loan proceeds; and
    enter into transactions with affiliates, including transactions
    and transfers of funds among QRCP, QELP and QMLP.      An
    increase in market interest rates will cause our debt service
    obligations to increase.
    Former
    senior management were terminated in 2008 following the
    discovery of various misappropriations of funds of QRCP and
    QELP.
   42




---



##### Table of Contents



QRCP
    and QELP are involved in securities lawsuits that may result in
    judgments, settlements, and/or indemnity obligations that are
    not covered by insurance and that may have a material adverse
    effect on us.
  and/or
      U.S.
    government investigations could affect our results of operations
    and financial condition.
     43




---



##### Table of Contents



We may
    be unable to pass through all of our costs and expenses for
    gathering and compression to royalty owners under our gas
    leases, which would reduce our net income and cash
    flows.
  and/or
  We
    depend on one customer for sales of substantially all our
    Cherokee Basin natural gas. A reduction by this customer in the
    volumes of gas it purchases from us could result in a
    substantial decline in our revenues and net
    income.
    We are
    exposed to trade credit risk in the ordinary course of our
    business activities.
  and/or
  Unless
    we replace the reserves that we produce, our existing reserves
    and production will decline, which would adversely affect our
    revenues, profitability and cash flows.
   44




---



##### Table of Contents



There
    is a significant delay between the time we drill and complete a
    CBM well and when the well reaches peak production. As a result,
    there will be a significant lag time between when we make
    capital expenditures and when we will begin to recognize
    significant cash flow from those expenditures.
  50-55 Mcf/d
  Our
    estimated reserves are based on assumptions that may prove to be
    inaccurate. Any material inaccuracies in these reserve estimates
    or underlying assumptions will materially affect the quantities
    and present value of our reserves.
    
    a constant level of future oil and gas prices;
    geological conditions;
    production levels;
    capital expenditures;
    operating and development costs;
    the effects of governmental regulations and taxation; and
    availability of funds.       45




---



##### Table of Contents




    the actual prices we receive for oil and natural gas;
    our actual operating costs in producing oil and natural gas;
    the amount and timing of actual production;
    the amount and timing of our capital expenditures;
    supply of and demand for oil and natural gas; and
    changes in governmental regulations or taxation.  Extractive Activities  Oil and Gas
  Drilling
    for and producing oil and gas is a costly and high-risk activity
    with many uncertainties that could adversely affect our
    financial condition or results of operations.
    
    high costs, shortages or delivery delays of drilling rigs,
    equipment, labor or other services;
    adverse weather conditions;
    difficulty disposing of water produced as part of the coal bed
    methane production process;
    equipment failures or accidents;
    title problems;
    pipe or cement failures or casing collapses;
    compliance with environmental and other governmental
    requirements;
    environmental hazards, such as gas leaks, oil spills, pipeline
    ruptures and discharges of toxic gases;
    lost or damaged oilfield drilling and service tools;
    loss of drilling fluid circulation;
    unexpected operational events and drilling conditions;
    increased risk of wellbore instability due to horizontal
    drilling;
    unusual or unexpected geological formations;
    natural disasters, such as fires and floods;
    blowouts, surface craterings and explosions; and
    uncontrollable flows of oil, gas or well fluids. 46




---



##### Table of Contents



We
    have less information regarding reserves and decline rates in
    the Marcellus Shale than in the Cherokee Basin. Wells drilled to
    the Marcellus Shale are deeper, more expensive and more
    susceptible to mechanical problems in drilling and completing
    than wells in the Cherokee Basin.
    The
    revenues of our interstate pipeline business are generated under
    contracts that must be renegotiated periodically.
      
    competition by other pipelines, including the change in rates or
    upstream supply of existing pipeline competitors, as well as the
    proposed construction by other companies of additional pipeline
    capacity in markets served by our interstate pipelines;
    changes in state regulation of local distribution companies,
    which may cause them to negotiate short-term contracts or turn
    back their capacity when their contracts expire;
    reduced demand and market conditions in the areas we serve; 47




---



##### Table of Contents




    the availability of alternative energy sources or natural gas
    supply points; and
    regulatory actions.  Our
    hedging activities could result in financial losses or reduce
    our income.
        
    a counterparty may not perform its obligation under the
    applicable derivative instrument;
    there may be a change in the expected differential between the
    underlying commodity price in the derivative instrument and the
    actual price received; and
    the steps we take to monitor our derivative financial
    instruments may not detect and prevent violations of our risk
    management policies and procedures.  Because
    of our lack of asset and geographic diversification, adverse
    developments in our operating areas would adversely affect our
    results of operations.
    The
    oil and gas industry is highly competitive and we may be unable
    to compete effectively with larger companies, which may
    adversely affect our results of operations.
   48




---



##### Table of Contents



Our
    business involves many hazards and operational risks, some of
    which may not be fully covered by insurance. If a significant
    accident or event occurs that is not fully insured, our
    operations and financial results could be adversely
    affected.
    
    damage to wells, pipelines, related equipment and surrounding
    properties caused by hurricanes, tornadoes, floods, fires and
    other natural disasters and acts of terrorism;
    inadvertent damage from construction, farm and utility equipment;
    leaks of gas or oil spills as a result of the malfunction of
    equipment or facilities;
    fires and explosions; and
    other hazards that could also result in personal injury and loss
    of life, pollution and suspension of operations.     49




---



##### Table of Contents



Shortages
    of crews could delay our operations, adversely affect our
    ability to increase our reserves and production and adversely
    affect our results of operations.
  and/or
  Certain
    of our undeveloped acreage is subject to leases or other
    agreements that may expire in the near future.
      Our
    identified drilling location inventories will be developed over
    several years, making them susceptible to uncertainties that
    could materially alter the occurrence or timing of their
    drilling, resulting in temporarily lower cash from operations,
    which may impact our results of operations.
   50




---



##### Table of Contents



We may
    incur losses as a result of title deficiencies in the properties
    in which we invest.
      A
    change in the jurisdictional characterization of some of our
    gathering assets by federal, state or local regulatory agencies
    or a change in policy by those agencies may result in increased
    regulation of our gathering assets, which may indirectly cause
    our revenues to decline and operating expenses to
    increase.
     51




---



##### Table of Contents



The
    KPC Pipeline is subject to regulation by FERC, which could have
    an adverse impact on our ability to establish transportation
    rates that would allow us to recover the full cost of operating
    the KPC pipeline, plus a reasonable return, which may affect our
    business and results of operations.
    
    transportation of natural gas;
    rates, operating terms and conditions of service;
    the types of services KPC may offer to its customers;
    construction of new facilities;
    acquisition, extension or abandonment of services or facilities;
    accounting and recordkeeping;
    commercial relationships and communications with affiliated
    companies involved in certain aspects of the natural gas
    business; and
    the initiation and discontinuation of services.     52




---



##### Table of Contents



We
    could be subject to penalties and fines if we fail to comply
    with FERC regulations.
    We may
    incur significant costs and liabilities in the future resulting
    from a failure to comply with new or existing environmental and
    operational safety regulations or an accidental release of
    hazardous substances into the environment.
       53




---



##### Table of Contents



We may
    face unanticipated water and other waste disposal
    costs.
      
    we cannot obtain future permits from applicable regulatory
    agencies;
    water of lesser quality or requiring additional treatment is
    produced;
    our wells produce excess water;
    new laws and regulations require water to be disposed in a
    different manner; or
    costs to transport the produced water to the disposal wells
    increase.    Pipeline
    integrity programs and repairs may impose significant costs and
    liabilities on us.
    
    perform ongoing assessments of pipeline integrity;
    identify and characterize applicable threats to pipeline
    segments that could impact a high consequence area; 54




---



##### Table of Contents




    improve data collection, integration and analysis;
    repair and remediate the pipeline as necessary; and
    implement preventive and mitigating actions.    
    our estimate does not include the costs of repairs, remediation
    or preventative or mitigating actions that may be determined to
    be necessary as a result of the testing program, which could be
    substantial;
    additional regulatory requirements that are enacted could
    significantly increase the amount of these expenditures;
    the actual implementation costs may be materially higher than
    our estimates because of increased industry-wide demand for
    contractors and service providers and the related increase in
    costs; or
    failure to comply with DOT regulations and any corresponding
    deadlines, which could subject us to penalties and fines.  Recent
    and future environmental laws and regulations may significantly
    limit, and increase the cost of, our exploration, production and
    transportation operations.
  cap-and-trade and/or
 55




---



##### Table of Contents



Increased
    regulation of hydraulic fracturing could result in reductions or
    delays in natural gas production in unconventional plays, which
    could adversely impact our revenues.
    Growing
    our business by constructing new assets is subject to
    regulatory, political, legal and economic risks.
    and/or
  
    inability to complete construction of these projects on schedule
    or at the budgeted cost due to the unavailability of required
    construction personnel or materials;
    failure to receive any material increases in revenues until the
    project is completed, even though we may have expended
    considerable funds during the construction phase, which may be
    prolonged;
    facilities may be constructed to capture anticipated future
    growth in production in a region in which such growth does not
    materialize;
    reliance on third-party estimates of reserves in making a
    decision to construct facilities, which estimates may prove to
    be inaccurate because there are numerous uncertainties inherent
    in estimating reserves;
    inability to obtain
    rights-of-way
    to construct additional pipelines or the cost to do so may be
    uneconomical;
    the construction of additions or modifications to the KPC
    Pipeline may require the issuance of certificates of public
    convenience and necessity from FERC, which may result in delays
    or increased costs; and
    additions to or modifications of our gas gathering systems could
    result in a change in their NGA-exempt status. 56




---



##### Table of Contents



Our
    ability to grow and to increase our profitability depends in
    part on our ability to make acquisitions. Our acquisition
    strategy is subject to a number of risks.
    and/or
  
    mistaken assumptions about reserves, future production, volumes,
    revenues and costs, including synergies;
    an inability to integrate successfully the businesses we acquire;
    a decrease in our liquidity as a result of our using a
    significant portion of our available cash or borrowing capacity
    to finance the acquisition;
    a significant increase in our interest expense or financial
    leverage if we incur additional debt to finance the acquisition;
    the assumption of unknown liabilities for which we are not
    indemnified or for which our indemnity is inadequate;
    an inability to hire, train or retain qualified personnel to
    manage and operate our growing business and assets;
    limitations on rights to indemnity from the seller;
    mistaken assumptions about the overall costs of equity or debt;
    the diversion of managements and employees attention
    from other business concerns;
    the incurrence of other significant charges, such as impairment
    of goodwill or other intangible assets, asset devaluation or
    restructuring charges;
    unforeseen difficulties operating in new product areas or new
    geographic areas; and
    customer or key employee losses at the acquired businesses.      
    geology;
    well economics;
    availability of third-party services;
    transportation charges; 57




---



##### Table of Contents




    content, quantity and quality of oil and gas produced;
    volume of waste water produced;
    state and local regulations and permit requirements; and
    production, severance, ad valorem and other taxes.    If
    third-party pipelines and other facilities interconnected to our
    natural gas pipelines become unavailable to transport or produce
    natural gas, our revenues and cash available for distribution
    could be adversely affected.
    Failure
    of the natural gas that we gather on our gas gathering systems
    to meet the specifications of interconnecting interstate
    pipelines could result in curtailments by the interstate
    pipelines.
    Our
    interstate natural gas pipeline has recorded certain assets that
    may not be recoverable from our customers.
    Operational
    limitations of the KPC Pipeline could cause a significant
    decrease in our revenues and operating results.
   58




---



##### Table of Contents



We do
    not own all of the land on which our pipelines are located or on
    which we may seek to locate pipelines in the future, which could
    disrupt our operations and growth.
  right-of-way
  rights-of-way rights-of-way rights-of-way. rights-of-way
  Our
    success depends on our key management personnel, the loss of any
    of whom could disrupt our business.
    Risks
    Related to the Ownership of Our Common Stock
  The
    price of our common stock may experience
    volatility.
    Our
    charter and bylaws contain provisions that may make it more
    difficult for a third party to acquire control of us, even if a
    change in control would result in the purchase of our
    stockholders common stock at a premium to the market price
    or would otherwise be beneficial to our
    stockholders.
   59




---



##### Table of Contents



We do
    not expect to pay dividends on our common stock for the
    foreseeable future.
    The
    value of the shares of our common stock may be diluted by future
    equity issuances.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS.    ITEM 2.
    PROPERTIES.  Form 10-K.
  Administrative
    Facilities
    sub-lease
    month-to-month
  ITEM 3.
    LEGAL
    PROCEEDINGS.   60




---



##### Table of Contents



Federal
    Securities Class Actions
  Michael
    Friedman, individually and on behalf of all others similarly
    situated v. Quest Energy Partners LP, Quest Energy GP LLC,
    Quest Resource Corporation, Jerry Cash, and David E. Grose,Case
    No. 08-cv-936-M,
    U.S. District Court for the Western District of Oklahoma, filed
    September 5, 2008
  James
    Jents, individually and on behalf of all others similarly
    situated v. Quest Resource Corporation, Jerry Cash, David
    E. Grose, and John Garrison,Case
    No. 08-cv-968-M,
    U.S. District Court for the Western District of Oklahoma, filed
    September 12, 2008
  J.
    Braxton Kyzer and Bapui Rao, individually and on behalf of all
    others similarly situated v. Quest Energy Partners LP,
    Quest Energy GP LLC, Quest Resource Corporation and David E.
    Grose,Case
    No. 08-cv-1066-M,
    U.S. District Court for the Western District of Oklahoma, filed
    October 6, 2008
  Paul
    Rosen, individually and on behalf of all others similarly
    situated v. Quest Energy Partners LP, Quest Energy GP LLC,
    Quest Resource Corporation, Jerry Cash, and David E. Grose,Case
    No. 08-cv-978-M, U.S. District Court for the Western District of
    Oklahoma, filed September 17, 2008
  Rule 10b-5 and/or Michael Friedman, individually and on behalf of
    all others similarly situated v. Quest Energy Partners LP,
    Quest Energy GP LLC, Quest Resource Corporation, Jerry Cash, and
    David E. Grose No. 08-cv-936-M, Friedman v. Quest Energy Partners, LP, et al. no. CIV-08-936-M, Jents v. Quest Resource Corporation, et al. no. CIV-08-968-M. Friedman Friedman Jents Friedman Jents
 61




---



##### Table of Contents



Federal
    Individual Securities Litigation
  Bristol
    Capital Advisors v. Quest Resource Corporation, Inc., Jerry
    Cash, David E. Grose, and John Garrison,Case
    No. CIV-09-932,
    U.S. District Court for the Western District of Oklahoma, filed
    August 24, 2009
  and/or
  J.
    Steven Emerson, Emerson Partners, J. Steven Emerson Roth IRA, J.
    Steven Emerson IRA RO II, and Emerson Family Foundation v.
    Quest Resource Corporation, Inc., Quest Energy Partners L.P.,
    Jerry Cash, David E. Grose, and John Garrison,Case
    No. 5:09-cv-1226-M,
    U.S. District Court for the Western District of Oklahoma, filed
    November 3, 2009
  and/or
 62




---



##### Table of Contents



Federal
    Derivative Cases
  James
    Stephens, derivatively on behalf of nominal defendant Quest
    Resource Corporation v. William H. Damon III, Jerry Cash,
    David Lawler, David E. Grose, James B. Kite Jr., John C.
    Garrison and Jon H. Rateau,Case
    No. 08-cv-1025-M,
    U.S. District Court for the Western District of Oklahoma, filed
    September 25, 2008
  and/or
  William
    Dean Enders, derivatively on behalf of nominal defendant Quest
    Energy Partners, L.P. v. Jerry D. Cash, David E. Grose,
    David C. Lawler, Gary Pittman, Mark Stansberry, J. Philip
    McCormick, Douglas Brent Mueller, Mid Continent Pipe &
    Equipment, LLC, Reliable Pipe & Equipment, LLC, RHB
    Global, LLC, RHB, Inc., Rodger H. Brooks, Murrell, Hall,
    McIntosh & Co. PLLP, and Eide Bailly LLP,Case
    No. CIV-09-752-F,
    U.S. District Court for the Western District of Oklahoma, filed
    July 17, 2009
  and/or
  State
    Court Derivative Cases
  Tim
    Bodeker, derivatively on behalf of nominal defendant Quest
    Resource Corporation v. Jerry Cash, David E. Grose, Bob G.
    Alexander, David C. Lawler, James B. Kite, John C. Garrison, Jon
    H. Rateau and William H. Damon III,Case
    No. CJ-2008-9042,
    District Court of Oklahoma County, State of Oklahoma, filed
    October 8, 2008
  William
    H. Jacobson, derivatively on behalf of nominal defendant Quest
    Resource Corporation v. Jerry Cash, David E. Grose, David
    C. Lawler, James B. Kite, Jon H. Rateau, Bob G. Alexander,
    William H. Damon III, John C. Garrison, Murrell, Hall,
    McIntosh & Co., LLP, and Eide Bailly, LLP,Case
    No. CJ-2008-9657,
    District Court of Oklahoma County, State of Oklahoma, filed
    October 27, 2008
  Amy
    Wulfert, derivatively on behalf of nominal defendant Quest
    Resource Corporation, v. Jerry D. Cash, David C. Lawler,
    Jon C. Garrison, John H. Rateau, James B. Kite Jr., William H.
    Damon III, David E. Grose, N. Malone Mitchell III, and Bryan
    Simmons,Case
    No. CJ-2008-9042 
    consolidated December 30, 2008, District Court of Oklahoma
    County, State of Oklahoma (Original Case
    No. CJ-2008-9624,
    filed October 24, 2008)
  Jacobson
 63




---



##### Table of Contents



Wulfert In re Quest Resource Corporation Shareholder Derivative
    Litigation No. CJ-2008-9042.
  Royalty
    Owner Class Action
  Hugo
    Spieker, et al. v. Quest Cherokee, LLC,Case
    No. 07-1225-MLB,
    U.S. District Court for the District of Kansas, filed
    August 6, 2007
    Litigation
    Related to Oil and Gas Leases
  Billy
    Bob Willis, et al. v. Quest Resource Corporation, et al.,Case
    No. CJ-09-063,
    District Court of Nowata County, State of Oklahoma, filed
    April 28, 2009
  et al.
 64




---



##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES.  Market
    Information
      Dividends
    Unregistered
    Sales of Equity Securities
    Issuer
    Purchases of Equity Securities
   65




---



##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA (PREDECESSOR).  Form 10-K. Form 10-K/A Form 10-K Form 10-K.
  Years Ended December 31,2009


2008


2007


2006


2005(In thousands, except share and per share data)Statement of Operations Data:Revenues:Oil and gas sales

$
79,893


$
162,499


$
105,285


$
72,410


$
70,628Gas pipeline revenue


26,188



28,176



9,853



5,014



3,939Total revenues


106,081



190,675



115,138



77,424



74,567Costs and expenses:Oil and gas production


33,451



44,111



36,295



25,338



18,532Pipeline operating


29,083



29,742



21,098



13,151



7,703General and administrative


41,723



28,269



21,023



8,655



6,218Depreciation, depletion and amortization


47,802



70,445



39,782



27,011



22,244Impairments


268,630



298,861











Loss (Recovery) from misappropriation of funds


(3,412
)






2,000



6,000



2,000Total costs and expenses


417,277



471,428



120,198



80,155



56,697Operating income (loss)


(311,196
)


(280,753
)


(5,060
)


(2,731
)


17,870Other income (expense):Gain (loss) from derivative financial instruments


48,122



66,145



1,961



52,690



(73,566
)Gain (loss) on sale of assets






24



(322
)


3



12Loss on early extinguishment of debt


















(12,355
)Other income (expense)


83



305



(9
)


99



389Interest expense, net


(29,329
)


(25,373
)


(43,628
)


(20,567
)


(28,225
)Total other income and (expense)


18,876



41,101



(41,998
)


32,225



(113,745
)Income (loss) before income taxes


(292,320
)


(239,652
)


(47,058
)


29,494



(95,875
)Income tax benefit (expense)


















Net income (loss)


(292,320
)


(239,652
)


(47,058
)


29,494



(95,875
)Net loss attributable to noncontrolling interests


147,398



72,268



2,904



14



Net income (loss) attributable to common stockholders


(144,922
)


(167,384
)


(44,154
)


29,508



(95,875
)Preferred stock dividends


















(10
)Net income (loss) available to common shareholders

$
(144,922
)

$
(167,384
)

$
(44,154
)

$
29,508


$
(95,885
)Net income (loss) available to common shareholders per share:Basic and diluted

$
(4.55
)

$
(6.20
)

$
(1.97
)

$
1.33


$
(11.48
)Weighted average common and common equivalent shares outstanding:Basic and diluted


31,833,222



27,010,690



22,379,479



22,119,497



8,351,945Balance Sheet Data (at end of period):Total assets

$
283,655


$
650,176


$
672,537


$
467,936


$
274,768Long-term debt, net of current maturities

$
19,295


$
343,094


$
233,046


$
225,245


$
100,581  66




---



##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS.  Form 10-K Form 10-K.
  Forward-Looking
    Statements
      
    current weak economic conditions;
    our current financial condition and liquidity constraints;
    volatility of oil and natural gas prices;
    benefits or effects of the recombination;
    increases in the cost of drilling, completion and gas gathering
    or other costs of developing and producing our reserves;
    our restrictive debt covenants;
    access to capital, including debt and equity markets;
    results of our hedging activities;
    drilling, operational and environmental risks; and
    regulatory changes and litigation risks.  Form 10-K,
 67




---



##### Table of Contents



Overview
    of Our Company
      
    Oil and natural gas production, and
    Natural gas pipelines, including transporting, gathering,
    treating and processing natural gas.    Operating
    Highlights
    
    Reduced oil and natural gas production costs to $1.54 per Mcfe
    (including production and property taxes of $0.35 per Mcfe) in
    2009 from $2.03 per Mcfe (including production and property
    taxes of $0.45 per Mcfe) in 2008, which reduced operating costs
    by $10.6 million.
    Sustained a production level of 21.7 MMcfe in 2009 despite
    minimal current period capital expenditures on acquisition and
    development.  Cost-cutting
    Measures.
   68




---



##### Table of Contents



Material
    Events and Transactions
    Pipeline
    segment impairment
      Oil and
    natural gas impairment
    Settlement
    of misappropriation
    Increased
    Costs
   69




---



##### Table of Contents



How We
    Evaluate Our Operations
    General
    Trends and Outlook
  Realized
    Prices
  (
    Form 10-K
  Supply
    and Demand of Oil and Natural Gas
  year-over-year
 70




---



##### Table of Contents



Capital
    Constraints
    Results
    of Operations
  Form 10-K.
  2009


2008


2007(In thousands)Revenues:Oil and gas production

$
79,893


$
162,499


$
105,285Natural gas pipelines


67,323



63,722



39,032Elimination of inter-segment revenue


(41,135
)


(35,546
)


(29,179
)Natural gas pipelines, net of inter-segment revenue


26,188



28,176



9,853Total segment revenues

$
106,081


$
190,675


$
115,138Operating profit (loss):Oil and gas production(a)

$
(129,788
)

$
(269,729
)

$
5,999Natural gas pipelines(b)


(143,097
)


17,245



11,964Total segment operating profit (loss)


(272,885
)


(252,484
)


17,963General and administrative expenses


41,723



28,269



21,023Loss (Recovery) from misappropriation of funds


(3,412
)






2,000Total operating income (loss)

$
(311,196
)

$
(280,753
)

$
(5,060
)     (a)
    
    Includes impairment of oil and gas properties of
    $102.9 million and $298.9 million in 2009 and
    2008, respectively.(b)
    
    Includes impairment of pipeline related assets of
    $165.7 million in 2009. 71




---



##### Table of Contents



Year
    ended December 31, 2009 compared to the year ended
    December 31, 2008
  Oil
    and Gas Production Segment
  Year EndedDecember 31,


Increase/2009


2008


(Decrease)($ in thousands)Oil and gas sales

$
79,893


$
162,499


$
(82,606
)


(50.8
)%Oil and gas production costs

$
33,451


$
44,111


$
(10,660
)


(24.2
)%Transportation expense (intercompany)

$
41,135


$
35,546


$
5,589



15.7
%Depreciation, depletion and amortization

$
32,193


$
53,710


$
(21,517
)


(40.1
)%Impairment charge of oil and natural gas properties

$
102,902


$
298,861


$
(195,959
)


(65.6
)%   Production.
  Year Ended December 31,


Increase/2009


2008


(Decrease)Production Data:Total production (Mmcfe)


21,733



21,748



(15
)


(0.1
)%Average daily production (Mmcfe/d)


59.5



59.4



0.1



0.2
%Average Sales Price per Unit (Mcfe)

$
3.68


$
7.47


$
(3.79
)


(50.7
)%Average Unit Costs per Mcfe:Production costs

$
1.54


$
2.03


$
(0.49
)


(24.1
)%Transportation expense (intercompany)

$
1.89


$
1.63


$
0.26



16.0
%Depreciation, depletion and amortization

$
1.48


$
2.47


$
(0.99
)


(40.1
)%   Oil and Gas Sales.
  Oil and Gas Operating Expenses.
      Depreciation, Depletion and Amortization.
 72




---



##### Table of Contents



Impairment of Oil and Natural Gas
    Properties.
  Natural
    Gas Pipelines Segment
  Year Ended December 31,2009


2008


Increase/(Decrease)($ in thousands, except per Mcf data)Natural Gas Pipeline Revenue:Gas pipeline revenue  Third Party

$
26,188


$
28,176


$
(1,988
)


(7.1
)%Gas pipeline revenue  Intercompany

$
41,135


$
35,546


$
5,589



15.7
%Total natural gas pipeline revenue

$
67,323


$
63,722


$
3,601



5.7
%Pipeline operating expense

$
29,083


$
29,742


$
(659
)


(2.2
)%Depreciation and amortization expense

$
15,609


$
16,735


$
(1,126
)


(6.7
)%Impairment of long-lived assets

$
165,728


$



$
165,728




*%Throughput Data (Mcf):Throughput  Third Party


11,095



11,111



(16
)


(0.1
)%Throughput  Intercompany


24,510



25,390



(880
)


(3.5
)%Total throughput (Mcf)


35,605



36,501



(896
)


(2.5
)%Average Pipeline Operating Costs per Mcf:Pipeline operating expense

$
0.82


$
0.81


$
0.01



1.2
%Depreciation and amortization

$
0.44


$
0.46


$
(0.02
)


(4.3
)%     *
    
    Not meaningful  Pipeline Revenue.
      Pipeline Operating Expense.
 73




---



##### Table of Contents



Depreciation and Amortization.
  Impairment of Long-lived Assets.
  Unallocated
    Items
  General and Administrative Expenses.
  Gain from Derivative Financial
    Instruments.
  Interest expense, net.
  Recovery from Misappropriation of Funds.
  Year
    ended December 31, 2008 compared to the year ended
    December 31, 2007
  Oil
    and Gas Production Segment
  Year EndedDecember 31,

Increase/2008

2007

(Decrease)($ in thousands)Oil and gas sales

$
162,499


$
105,285


$
57,214



54.3
%Oil and gas production costs

$
44,111


$
36,295


$
7,816



21.5
%Transportation expense (intercompany)

$
35,546


$
29,179


$
6,367



21.8
%Depreciation, depletion and amortization

$
53,710


$
33,812


$
19,898



58.8
%Impairment of oil and gas properties

$
298,861


$



$
298,861



*
%     *
    
    Not meaningful 74




---



##### Table of Contents



Production.
  Year EndedDecember 31,

Increase/2008

2007

(Decrease)Production Data:Total production (Mmcfe)


21,748



17,017



4,731



27.8
%Average daily production (Mmcfe/d)


59.4



46.6



12.8



27.5
%Average Sales Price per Unit (Mcfe)

$
7.47


$
6.19


$
1.28



20.7
%Average Unit Costs per Mcfe:Production costs

$
2.03


$
2.13


$
(0.10
)


(4.7
)%Transportation expense (intercompany)

$
1.63


$
1.71


$
(0.08
)


(4.7
)%Depreciation, depletion and amortization

$
2.47


$
1.99


$
0.48



24.1
%   Oil and Gas Sales.
  Oil and Gas Operating Expenses.
      Depreciation, Depletion and Amortization.
  Impairment of Oil and Gas Properties.
 75




---



##### Table of Contents



Natural
    Gas Pipelines Segment
  Year EndedDecember 31,2008


2007


Increase/(Decrease)($ in thousands)Natural Gas Pipeline Revenue:Gas pipeline revenue  Third Party

$
28,176


$
9,853


$
18,323



186.0
%Gas pipeline revenue  Intercompany

$
35,546


$
29,179


$
6,367



21.8
%Total natural gas pipeline revenue

$
63,722


$
39,032


$
24,690



63.3
%Pipeline operating expense

$
29,742


$
21,098


$
8,644



41.0
%Depreciation and amortization expense

$
16,735


$
5,970


$
10,765



180.3
%Throughput Data (Mcf):Throughput  Third Party


11,111



1,686



9,425



559.0
%Throughput  Intercompany


25,390



17,148



8,242



48.1
%Total throughput (Mcf)


36,501



18,834



17,667



93.8
%Average Pipeline Operating Costs per Mcf:Pipeline operating expense

$
0.81


$
1.12


$
(0.31
)


(27.7
)%Depreciation and amortization

$
0.46


$
0.32


$
0.14



43.8
%   Pipeline Revenue.
      Pipeline Operating Expense.
  Depreciation and Amortization.
 76




---



##### Table of Contents



Unallocated
    Items
  General and Administrative Expenses.
  Loss from Misappropriation of Funds.
  Other Income (Expense).
  Interest Expense, net.
  Liquidity
    and Capital Resources
    
    Reduced total debt by $58.8 million from December 31,
    2008.
    Increased cash and cash equivalents by $7.1 million from
    December 31, 2008.
    Repriced derivatives during the second quarter of 2009 and
    received $26 million.  Historical
    Cash Flows and Liquidity
  Cash Flows from Operating Activities.
   77




---



##### Table of Contents



Cash Flows from Investing Activities.
  Year Ended December 31,2009


2008


2007(In thousands)Capital expenditures:Leasehold acquisition

$
1,998


$
18,945


$
15,847Exploration


128



1,273



Development


5,087



58,070



67,586Acquisition of PetroEdge






142,618



Acquisition of Seminole County, Oklahoma property






9,500



Acquisition of KPC Pipeline










124,936Pipelines


1,835



27,649



48,668Other items (primarily capitalized overhead and interest)


511



9,061



7,832Total capital expenditures

$
9,559


$
267,116


$
264,869   Cash Flows from Financing Activities.
  Working Capital Deficit.
 78




---



##### Table of Contents



Credit
    Agreements
  QRCP
  payment-in-kind payment-in-kind
  Modification of Debt. 470-50-40 Debt  Modifications and
    Extinguishments  Derecognition
  Interest Rate and Other Fees. payment-in-kind payment-in-kind payment-in-kind
    Payments.
 79




---



##### Table of Contents



Maturity Dates. payment-in-kind payment-in-kind
  Security Interest. pari passu
  Covenants.
  Events of Default. 30-day
  QELP
  Quest Cherokee Credit Agreement.
  Modification of Debt. 470-50-40 Debt  Modifications and
    Extinguishments  Derecognition.
 80




---



##### Table of Contents



Borrowing Base.
  Payments.
  March 31, 2010

$
141,000June 30, 2010

$
141,000September 30, 2010

$
138,000December 31, 2010

$
134,000       Interest Rate.
  Maturity Date.
  Security Interest. pari passu
 81




---



##### Table of Contents



Covenants.
  
    permitting the ratio of QELPs consolidated current assets
    (as defined) to consolidated current liabilities (as defined) at
    any fiscal quarter-end to be less than 1.0 to 1.0;
    permitting the interest coverage ratio of adjusted consolidated
    EBITDA to consolidated interest charges at any fiscal
    quarter-end to be less than 2.5 to 1.0 measured on a rolling
    four quarter basis; and
    permitting the leverage ratio of consolidated funded debt to
    adjusted consolidated EBITDA at any fiscal quarter-end to be
    greater than 3.5 to 1.0 measured on a rolling four quarter basis.  Events of Default. 30-day
    Second Lien Loan Agreement.
  Modification of Debt. 470-50-40 Debt  Modifications and
    Extinguishments  Derecognition
  Interest Rate.
  Payments.
  Maturity Date.
  Security Interest.
 82




---



##### Table of Contents



Covenants.
  
    permitting the ratio of QELPs consolidated current assets
    (as defined) to consolidated current liabilities (as defined) at
    any fiscal quarter-end to be less than 1.0 to 1.0;
    permitting the interest coverage ratio of adjusted consolidated
    EBITDA to consolidated interest charges at any fiscal
    quarter-end to be less than 2.5 to 1.0 measured on a rolling
    four quarter basis; and
    permitting the leverage ratio of consolidated funded debt to
    adjusted consolidated EBITDA at any fiscal quarter-end to be
    greater than 3.5 to 1.0 measured on a rolling four quarter basis.    Events of Default. 30-day
    QMLP
    Modification of Debt. 470-50-40 Debt  Modifications and
    Extinguishments  Derecognition.
  Interest Rate.
  Payments.
 83




---



##### Table of Contents



Maturity Dates.
  Security Interest.
  Covenants.
    
    permitting the interest coverage ratio (ratio of adjusted
    consolidated EBITDA to consolidated interest charges) on a
    rolling four quarter basis to be less than 2.50 to 1.00 for the
    fiscal quarter ending on or prior to March 31, 2010 and
    increasing to 2.75 to 1.00 for each fiscal quarter end
    thereafter; and
    permitting the total leverage ratio (ratio of adjusted
    consolidated funded debt to adjusted consolidated EBITDA) on a
    rolling four quarter basis to be greater than 5.00 to 1.00 for
    the fiscal quarter ending on or prior to March 31, 2010,
    and decreasing to 4.50 to 1.00 for each fiscal quarter end
    thereafter.  Events of Default. 30-day
    and/or
  Sources
    of Liquidity in 2010 and Capital Requirements
     84




---



##### Table of Contents



payment-in-kind
  Contractual
    Obligations
    Payments Due by PeriodLess Than


1-3


4-5


More ThanTotal


1 Year


Years


Years


5 Years(In thousands)Revolving Credit Facility  QRCP

$
4,300


$
4,300


$



$



$
Term Loan and Promissory Notes QRCP


31,358



12,108



19,250







1st Lien Term Loan  QELP


145,000



11,000



134,000







2nd Lien Loan  QELP


29,821







29,821







Term Loan  QMLP


118,728







118,728







Other Note obligations


103



58



34



11



Interest expense on bank credit facilities


26,055



20,461



5,594







Operating lease obligations


17,141



8,929



4,369



2,060



1,783Total commitments

$
372,506


$
56,856


$
311,796


$
2,071


$
1,783   Off-Balance
    Sheet Arrangements
   85




---



##### Table of Contents



Critical
    Accounting Policies
    Oil
    and Gas Reserves
    12-month
  Oil
    and Gas Properties
    units-of-production
 86




---



##### Table of Contents



400-20 Retirement and Environmental Obligations-Asset Retirement
    Obligation
  Unevaluated
    Properties
    Future
    Abandonment Costs
     87




---



##### Table of Contents



Form 10-K).
  Derivative
    Instruments
  Derivatives and Hedging mark-to-market
  Revenue
    Recognition
        Income
    Taxes
  Income
    Taxes
   88




---



##### Table of Contents



Recent
    Accounting Pronouncements
  Generally Accepted
    Accounting Principles
    Earnings Per Share
  No. 33-8995, Modernization of Oil and Gas Reporting
  Subsequent Events
  Consolidation 810-10
 89




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.  Quantitative
    and Qualitative Disclosures about Market Risk
    Commodity
    Price Risk
          2009


2008


2007Realized gain (loss)

$
98,148


$
(6,388
)

$
7,279Unrealized gain (loss)


(50,026
)


72,533



(5,318
)Total gain from derivative financial instruments

$
48,122


$
66,145


$
1,961  90




---



##### Table of Contents



Year Ending December 31,2010

2011

2012

2013

Total($ in thousands, except volumes and per unit data)Natural Gas Swaps:Contract volumes (Mmbtu)


16,129,060



13,550,302



11,000,004



9,000,003



49,679,369Weighted-average fixed price per Mmbtu

$
6.26


$
6.80


$
7.13


$
7.28


$
6.78Fair value, net

$
10,424


$
7,530


$
6,662


$
4,763


$
29,379Natural Gas Basis Swaps:Contract volumes (Mmbtu):


3,630,000



8,549,998



9,000,000



9,000,003



30,180,001Weighted-average fixed price per Mmbtu

$
(0.63
)

$
(0.67
)

$
(0.70
)

$
(0.71
)

$
(0.69
)Fair value, net

$
(1,402
)

$
(2,973
)

$
(2,879
)

$
(2,717
)

$
(9,971
)Crude Oil Swaps:Contract volumes (Bbl)


30,000















30,000Weighted-average fixed price per Bbl

$
87.50


$



$



$



$
87.50Fair value, net

$
155


$



$



$



$
155Total fair value, net

$
9,177


$
4,557


$
3,783


$
2,046


$
19,563   Interest
    Rate Risk
      ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA.  page F-1.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE.    ITEM 9A(T).
    CONTROLS
    AND PROCEDURES.  Conclusion
    Regarding the Effectiveness of Disclosure Controls and
    Procedures
  Rules 13a-15(e) 15d-15(e)
 91




---



##### Table of Contents



Form 10-K, Form 10-K
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
  Form 10-K,
    Control environment
 92




---



##### Table of Contents



Internal control over financial reporting
    Period-end financial close and reporting
  Stock compensation cost
  Depreciation, depletion and amortization
  Impairment of oil and gas properties
      Changes
    in Internal Control Over Financial Reporting
           93




---



##### Table of Contents



and/or
                    Auditor
    Attestation Report
  Regulation S-K,
  ITEM 9B.
    OTHER
    INFORMATION.   94




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE
    GOVERNANCE.  Form 10-K
  ITEM 11.
    EXECUTIVE
    COMPENSATION.  Form 10-K
  ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS.  Form 10-K
  ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE.  Form 10-K
  ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES.  Form 10-K
 PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES.  (a)(1) and (2) Financial
    Statements. page F-1 Form 10-K.
  (a)(3) Index to Exhibits. Regulation S-K Form 10-K
 95




---



##### Table of Contents



Index to
    Financial Statements
  PostRock Energy CorporationReport of Independent Registered Public
    Accounting FirmBalance Sheet of PostRock Energy Corporation


F-1Notes to Balance Sheet of PostRock Energy
    Corporation


F-2Quest Resource Corporation (Predecessor)Report of Independent Registered Public
    Accounting Firm


F-4Consolidated Balance Sheets of Quest Resource
    Corporation


F-5Consolidated Statements of Operations of Quest
    Resource Corporation


F-6Consolidated Statements of Cash Flows of Quest
    Resource Corporation


F-7Consolidated Statements of Stockholders
    (Deficit) Equity of Quest Resource Corporation


F-8Notes to Consolidated Financial Statements of
    Quest Resource Corporation


F-9




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED
    PUBLIC ACCOUNTING FIRM




---



##### Table of Contents



POSTROCK
    ENERGY CORPORATION
  BALANCE SHEET
  December 31,2009ASSETSCurrent assets:Cash and cash equivalents

$
10Total assets

$
10LIABILITIES AND STOCKHOLDERS EQUITYStockholders equity:Common stock, $0.01 par value; authorized
    shares  1,000; issued and outstanding 
    1,000

$
10Total liabilities and stockholders equity

$
10    F-1




---



##### Table of Contents



Note 1 
    Organization
    and Nature of Operations    Note 2 
    Statements
    of Operations, Cash Flows and Equity    Note 3 
    Subsequent
    Events  Recombination
    
    Quest Resource Acquisition Corp., a wholly owned subsidiary of
    PostRock, merged with and into QRCP and QRCP common stockholders
    received 0.0575 shares of PostRock common stock in exchange
    for each share of QRCP common stock held;
    Quest Energy Acquisition, LLC, a wholly owned subsidiary of
    QRCP, merged with and into QELP (the QELP merger)
    and QELP common unitholders (other than QRCP) received
    0.2859 shares of PostRock common stock in exchange for each
    QELP common unit held; and
    QMLP merged with and into Quest Midstream Acquisition, LLC, a
    wholly owned subsidiary of QRCP (the QMLP merger),
    QMLP common unitholders received 0.4033 shares of PostRock
    common stock in exchange for each QMLP common unit held and the
    general partner interests in QMLP were converted into shares of
    PostRock common stock equal to approximately 0.14% of the
    PostRock common stock issued in the recombination.    Termination
    of Certain Intercompany Agreements
    
    Omnibus Agreement among QRCP, QMGP, Bluestem Pipeline, LLC and
    QMLP, dated December 22, 2006;
    Omnibus Agreement among QELP, QEGP and QRCP, dated
    November 15, 2007; and F-2




---



##### Table of Contents




    Amended and Restated Investors Rights Agreement, dated
    November 1, 2007, among QMLP, QMGP, QRCP and certain
    private investors of QMLP party thereto.  Registration
    Rights Agreement
    Other
   F-3




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                  F-4




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  December 31,2009


2008($ in thousands, except share and per share data)ASSETSCurrent assets:Cash and cash equivalents

$
20,884


$
13,785Restricted cash


718



559Accounts receivable  trade, net


13,707



16,715Other receivables


2,269



9,434Inventory


9,702



11,420Other current assets


8,141



2,858Current derivative financial instrument assets


10,624



42,995Total current assets


66,045



97,766Oil and natural gas properties under full cost method of
    accounting, net


40,478



172,537Pipeline assets, net


136,017



310,439Other property and equipment, net


19,433



23,863Other assets, net


2,727



14,735Long-term derivative financial instrument assets


18,955



30,836Total assets

$
283,655


$
650,176LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
10,852


$
35,804Revenue payable


5,895



8,309Accrued expenses


11,417



7,138Current portion of notes payable


310,015



45,013Current derivative financial instrument liabilities


1,447



12Total current liabilities


339,626



96,276Non-current liabilities:Long-term derivative financial instrument liabilities


8,569



4,230Notes payable


19,295



343,094Other


6,552



5,922Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value; authorized
    shares  50,000,000; none issued and outstanding






Common stock, $0.001 par value; authorized
    shares  200,000,000; issued  32,160,121
    and 32,224,643 at December 31, 2009 and 2008;
    outstanding  31,981,317 and 31,720,312 at
    December 31, 2009 and 2008, respectively


33



33Additional paid-in capital


299,010



298,583Treasury stock at cost


(7
)


(7
)Accumulated deficit


(447,413
)


(302,491
)Total stockholders deficit


(148,377
)


(3,882
)Noncontrolling interests


57,990



204,536Total (deficit) equity


(90,387
)


200,654Total liabilities and equity

$
283,655


$
650,176    F-5




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF
    OPERATIONS
  Years Ended December 31,2009


2008


2007($ in thousands, except share and per share data)Revenue:Oil and gas sales

$
79,893


$
162,499


$
105,285Gas pipeline revenue


26,188



28,176



9,853Total revenues


106,081



190,675



115,138Costs and expenses:Oil and gas production


33,451



44,111



36,295Pipeline operating


29,083



29,742



21,098General and administrative expenses


41,723



28,269



21,023Depreciation, depletion and amortization


47,802



70,445



39,782Impairments


268,630



298,861



Loss (recovery) from misappropriation of funds


(3,412
)






2,000Total costs and expenses


417,277



471,428



120,198Operating loss


(311,196
)


(280,753
)


(5,060
)Other income (expense):Gain from derivative financial instruments


48,122



66,145



1,961Gain (loss) on sale of assets






24



(322
)Other income (expense)


83



305



(9
)Interest expense


(29,573
)


(25,609
)


(44,044
)Interest income


244



236



416Total other income (expense)


18,876



41,101



(41,998
)Loss before income taxes and noncontrolling interests


(292,320
)


(239,652
)


(47,058
)Income tax benefit (expense)










Net loss


(292,320
)


(239,652
)


(47,058
)Net loss attributable to noncontrolling interests


147,398



72,268



2,904Net loss attributable to common shareholders

$
(144,922
)

$
(167,384
)

$
(44,154
)Net loss attributable to common stockholders per share:Basic and diluted

$
(4.55
)

$
(6.20
)

$
(1.97
)Weighted average common and common equivalent shares outstanding:Basic and diluted


31,833,222



27,010,690



22,379,479    F-6




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Years Ended December 31,2009


2008


2007($ in thousands)Cash flows from operating activities:Net loss

$
(292,320
)

$
(239,652
)

$
(47,058
)Adjustments to reconcile net loss to cash provided by operations:Depreciation, depletion and amortization


47,802



70,445



39,782Impairments


268,630



298,861



Stock-based compensation


1,279



2,425



7,218Amortization of deferred financing costs


7,761



2,100



11,220Change in fair value of derivative financial instruments


50,026



(72,533
)


5,318Bad debt expense










22Recovery of misappropriated funds, net of liabilities assumed


(977
)






Loss on disposal of property and equipment


25







1,363Other non-cash changes to items affecting net loss


1,000







Change in assets and liabilities:Accounts receivable


3,008



(1,158
)


(5,928
)Other receivables


7,165



(7,954
)


(1,245
)Other current assets


1,461



4,173



(2,827
)Other assets


193



318



15Accounts payable


(25,115
)


5,233



14,347Revenue payable


(2,526
)


584



2,736Accrued expenses


7,142



(1,187
)


4,001Other long-term liabilities


65



404



220Other






(159
)


(388
)Net cash flows from operating activities


74,619



61,900



28,796Cash flows from investing activities:Restricted cash


(159
)


677



(86
)Acquisition of business  PetroEdge






(141,777
)


Acquisition of business  KPC










(133,725
)Equipment, development, leasehold and pipeline


(8,426
)


(141,553
)


(138,657
)Proceeds from sale of oil and gas properties


8,898



16,100



Net cash flows from investing activities


313



(266,553
)


(272,468
)Cash flows from financing activities:Proceeds from bank borrowings






86,195



44,580Repayments of note borrowings


(14,141
)


(59,800
)


(225,441
)Proceeds from revolver note


4,300



128,000



224,000Repayment of revolver note


(53,272
)






(35,000
)Proceeds from Quest Energy










163,800Proceeds from Quest Midstream










75,230Syndication costs










(14,618
)Distributions to unitholders






(24,413
)


(5,872
)Refinancing costs


(4,720
)


(3,018
)


(10,147
)Repurchase of restricted stock






(7
)


Proceeds from issuance of common stock






84,801



Net cash flows from financing activities


(67,833
)


211,758



216,532Net increase (decrease) in cash


7,099



7,105



(27,140
)Cash and cash equivalents beginning of period


13,785



6,680



33,820Cash and cash equivalents end of period

$
20,884


$
13,785


$
6,680    F-7




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF
    STOCKHOLDERS (DEFICIT) EQUITY
    FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 and 2007
  TotalPreferred


Common


Common


Additional


Shares of








Stockholders


Non-


TotalPreferred


Stock


Shares


Stock


Paid-in


Treasury


Treasury


Accumulated


(Deficit)


Controlling


EquityShares


Par Value


Issued


Par Value


Capital


Stock


Stock


Deficit


Equity


Interests


(Deficit)($ in thousands, except share amounts)Balance, December 31, 2006





$




22,365,883


$
22


$
205,772






$



$
(90,953
)

$
114,841


$
84,173


$
199,014Stock-based compensation


















6,081















6,081



1,137



7,218Restricted stock grants, net of forfeitures










1,187,347



2



(1
)














1







1Contributions, net






































224,449



224,449Distributions to non-controlling interests






































(9,470
)


(9,470
)Net loss






























(44,154
)


(44,154
)


(2,904
)


(47,058
)Balance, December 31, 2007










23,553,230



24



211,852











(135,107
)


76,769



297,385



374,154Proceeds from stock offering










8,800,000



9



84,692















84,701



486



85,187Stock-based compensation


















1,939















1,939







1,939Restricted stock grants, net of forfeitures










(138,587
)






























Exercise of stock options










10,000







100















100







100Repurchase of common stock






















21,955



(7
)






(7
)






(7
)Distributions to non-controlling interests






































(21,067
)


(21,067
)Net loss






























(167,384
)


(167,384
)


(72,268
)


(239,652
)Balance, December 31, 2008










32,224,643



33



298,583



21,955



(7
)


(302,491
)


(3,882
)


204,536



200,654Stock-based compensation


















427















427



852



1,279Restricted stock grants, net of forfeitures










(64,522
)






























Net loss






























(144,922
)


(144,922
)


(147,398
)


(292,320
)Balance, December 31, 2009





$




32,160,121


$
33


$
299,010



21,955


$
(7
)

$
(447,413
)

$
(148,377
)

$
57,990


$
(90,387
)    F-8




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Note 1 
    Organization,
    Misappropriation and Going Concern  Organization
      Misappropriation
    and settlement
       F-9




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
  Cash, net of legal expenses

$
2,435Oil and gas properties


1,972Other assets


50Current liabilities


(326
)Long-term debt


(719
)Net assets received

$
3,412   Recombination
      and/or
  Going
    Concern
     F-10




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 2 
    Summary
    of Significant Accounting Policies  Principles of Consolidation
  Use of Estimates in the Preparation of Financial
    Statements
  Revenue Recognition
   F-11




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Cash and Cash Equivalents
  Accounts Receivable
  Inventory
  Oil and Natural Gas Properties
  units-of-production
    Unevaluated Properties
 F-12




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Capitalized General and Administrative
    Expenses
  Capitalized Interest Costs
  Other Property and Equipment
    Impairment 
  Other Assets
  Asset Retirement Obligations
 F-13




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Derivative Instruments
    mark-to-market
  mark-to-market
    Legal
  Environmental Costs  and/or
 F-14




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock-Based Compensation
  Compensation  Stock Compensation
  Income Taxes Income Taxes
    Net Income (Loss) per Common Share
  Concentrations of Market Risk
  Concentrations of Credit Risk
   F-15




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Fair Value Fair Value Measurements and Disclosures
    
    Level 1  Quoted prices available in
    active markets for identical assets or liabilities as of the
    reporting date.
    Level 2  Pricing inputs other than quoted
    prices in active markets included in Level 1 which are
    either directly or indirectly observable as of the reporting
    date. Level 2 consists primarily of non-exchange traded
    commodity derivatives.
    Level 3  Pricing inputs include
    significant inputs that are generally less observable from
    objective sources.      Recent
    Accounting Pronouncements
  Generally Accepted
    Accounting Principles
  Derivatives and
    Hedging
  Earnings Per Share
 F-16




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    No. 33-8995, Modernization of Oil and Gas Reporting
  Subsequent Events
  Business
    Combinations
  Consolidation
 F-17




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 3 
    Acquisitions
    and Divestitures  Acquisitions
  PetroEdge 
    Current assets

$
3,069Oil and gas properties


142,618
(a)Gathering facilities


1,820Current liabilities


(3,537
)Asset retirement obligations


(2,193
)(a)Purchase price

$
141,777     (a)
    
    Net assets acquired by Quest Cherokee consisted of
    $73.4 million of proved oil and gas properties and
    $2.2 million of asset retirement obligations.  KPC Pipeline  160 MMcf/d. and/or
   F-18




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Pipeline assets

$
124,936Contract-related intangible assets


9,934Liabilities assumed


(1,145
)Purchase price

$
133,725   Pro Forma
    Summary Data related to acquisitions (unaudited)
    2008


2007Pro forma revenue

$
182,813


$
143,913Pro forma net loss

$
(246,175
)

$
(60,677
)Pro forma net loss per share  basic

$
(7.79
)

$
(1.95
)Pro forma net loss per share  diluted

$
(7.79
)

$
(1.95
)       Divestitures
           F-19




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 4 
    Long-Term
    Debt  and/or
    2009


2008Borrowings under bank senior credit facilities:QRCP:Term Loan

$
30,108


$
29,000Promissory Notes


1,250



Revolving Line of Credit


4,300



Quest Energy:Quest Cherokee Credit Agreement


145,000



189,000Second Lien Loan Agreement


29,821



41,200QMLP:Credit Agreement


118,728



128,000Notes payable to banks and finance companies


103



907Total debt


329,310



388,107Less current maturities included in current liabilities


310,015



45,013Total long-term debt

$
19,295


$
343,094  F-20




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2010

$
310,0152011


6,0292012


13,2552013


52014


6Total

$
329,310   Other
    Long-Term Indebtedness
    Credit
    Facilities
  QRCP
  payment-in-kind payment-in-kind
  Modification of Debt. 470-50-40 Debt  Modifications and
    Extinguishments  Derecognition 470-50-40)
  Interest Rate and Other Fees. payment-in-kind
 F-21




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  payment-in-kind payment-in-kind
    Payments.
  Maturity Dates. payment-in-kind payment-in-kind
  Security Interest. pari passu
  Covenants.
    Events of Default. 30-day
 F-22




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    QELP
  Quest Cherokee credit agreement.
  Modification of Debt. 470-50-40.
  Borrowing Base.
  Payments.
 F-23




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Interest Rate.
  Maturity Date.
  Security Interest. pari passu
  Covenants.
  
    permitting the ratio of QELPs consolidated current assets
    (as defined) to consolidated current liabilities (as defined) at
    any fiscal quarter-end to be less than 1.0 to 1.0;
    permitting the interest coverage ratio of adjusted consolidated
    EBITDA to consolidated interest charges at any fiscal
    quarter-end to be less than 2.5 to 1.0 measured on a rolling
    four quarter basis; and
    permitting the leverage ratio of consolidated funded debt to
    adjusted consolidated EBITDA at any fiscal quarter-end to be
    greater than 3.5 to 1.0 measured on a rolling four quarter basis.    Events of Default. 30-day
   F-24




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Second Lien Loan Agreement.
  Modification of Debt. 470-50-40
  Interest Rate.
  Payments.
  Maturity Date.
  Security Interest.
  Covenants.
  
    permitting the ratio of QELPs consolidated current assets
    (as defined) to consolidated current liabilities (as defined) at
    any fiscal quarter-end to be less than 1.0 to 1.0;
    permitting the interest coverage ratio of adjusted consolidated
    EBITDA to consolidated interest charges at any fiscal
    quarter-end to be less than 2.5 to 1.0 measured on a rolling
    four quarter basis; and
    permitting the leverage ratio of consolidated funded debt to
    adjusted consolidated EBITDA at any fiscal quarter-end to be
    greater than 3.5 to 1.0 measured on a rolling four quarter basis.     F-25




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Events of Default. 30-day
    QMLP
    Modification of Debt. 470-50-40.
  Interest Rate.
  Payments.
  Maturity Dates.
  Security Interest.
  Covenants.
 F-26




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    permitting the interest coverage ratio (ratio of adjusted
    consolidated EBITDA to consolidated interest charges) on a
    rolling four quarter basis to be less than 2.50 to 1.00 for the
    fiscal quarter ending on or prior to March 31, 2010 and
    increasing to 2.75 to 1.00 for each fiscal quarter end
    thereafter; and
    permitting the total leverage ratio (ratio of adjusted
    consolidated funded debt to adjusted consolidated EBITDA) on a
    rolling four quarter basis to be greater than 5.00 to 1.00 for
    the fiscal quarter ending on or prior to March 31, 2010 and
    decreasing to 4.50 to 1.00 for each fiscal quarter end
    thereafter.    Events of Default. 30-day
   F-27




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 5 
    Property    2009


2008Oil and natural gas properties under the full cost method of
    accounting:Properties being amortized

$
205,199


$
299,629Properties not being amortized


596



10,108Total oil and natural gas properties, at cost


205,795



309,737Less: accumulated depletion, depreciation and amortization


(165,317
)


(137,200
)Oil and natural gas properties, net

$
40,478


$
172,537Pipeline assets, at cost

$
170,737


$
333,966Less: accumulated depreciation


(34,720
)


(23,527
)Pipeline assets, net

$
136,017


$
310,439Other property and equipment at cost

$
33,704


$
33,994Less: accumulated depreciation


(14,271
)


(10,131
)Other property and equipment, net

$
19,433


$
23,863     Pipelines

15 to 40 yearsBuildings

25 yearsMachinery and equipment

10 yearsSoftware and computer equipment

3 to 5 yearsFurniture and fixtures

10 yearsVehicles

7 years     Impairment of oil and natural gas properties 
  Impairment of pipeline related assets 
 F-28




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 6 
    Noncontrolling
    Interests    2009


2008Quest Energy:Beginning of year

$
58,666


$
145,364Contributions, net






Distributions






(13,438
)Interest in earnings (loss)


(43,553
)


(73,295
)Stock compensation expense related to QELP unit-based awards


237



35End of year

$
15,350


$
58,666Quest Midstream:Beginning of year

$
145,870


$
152,021Contributions, net






Distributions






(7,629
)Interest in earnings (loss)


(103,845
)


1,027Stock compensation expense related to QMLP unit-based awards


615



451End of year

$
42,640


$
145,870Total non-controlling interest at end of year

$
57,990


$
204,536   QELP
  per-unit
 F-29




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            QMLP
  per-unit
         F-30




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 7 
    Derivative
    Financial Instruments    Over-the-counter
  Derivatives and Hedging
  Fair
    Value of Derivative Financial Instruments
  December 31,Derivative Financial Instruments

Balance Sheet location

2009


2008Commodity contracts

Current derivative financial instrument asset

$
10,624


$
42,995Commodity contracts

Long-term derivative financial instrument asset


18,955



30,836Commodity contracts

Current derivative financial instrument liability


(1,447
)


(12
)Commodity contracts

Long-term derivative financial instrument liability


(8,569
)


(4,230
)$
19,563


$
69,589  F-31




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009


2008


2007Realized gain (loss)(1)

$
98,148


$
(6,388
)

$
7,279Unrealized gain (loss)


(50,026
)


72,533



(5,318
)Total gain from derivative financial instruments

$
48,122


$
66,145


$
1,961     (1)
    
    In 2009, includes $26 million received in June 2009 from
    exiting or amending certain above market natural gas derivative
    contracts.    Year Ending December 31,2010

2011

2012

Thereafter

Total($ in thousands, except volumes and per unit data)Natural Gas Swaps:Contract volumes (Mmbtu)


16,129,060



13,550,302



11,000,004



9,000,003



49,679,369Weighted-average fixed price per Mmbtu

$
6.26


$
6.80


$
7.13


$
7.28


$
6.78Fair value, net

$
10,424


$
7,530


$
6,662


$
4,763


$
29,379Natural Gas Basis Swaps:Contract volumes (Mmbtu):


3,630,000



8,549,998



9,000,000



9,000,003



30,180,001Weighted-average fixed price per Mmbtu

$
(0.63
)

$
(0.67
)

$
(0.70
)

$
(0.71
)

$
(0.69
)Fair value, net

$
(1,402
)

$
(2,973
)

$
(2,879
)

$
(2,717
)

$
(9,971
)Crude Oil Swaps:Contract volumes (Bbl)


30,000















30,000Weighted-average fixed price per Bbl

$
87.50


$



$



$



$
87.50Fair value, net

$
155


$



$



$



$
155Total fair value, net

$
9,177


$
4,557


$
3,783


$
2,046


$
19,563  F-32




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ending December 31,2009


2010


2011


Thereafter


Total($ in thousands, except volumes and per unit data)Natural Gas Swaps:Contract volumes (Mmbtu)


14,629,200



12,499,060



2,000,004



2,000,004



31,128,268Weighted-average fixed price per Mmbtu

$
7.78


$
7.42


$
8.00


$
8.11


$
7.67Fair value, net

$
38,107


$
14,071


$
2,441


$
2,335


$
56,954Natural Gas Collars:Contract volumes (Mmbtu):


750,000



630,000



3,549,996



3,000,000



7,929,996Weighted-average fixed price per Mmbtu:Floor

$
11.00


$
10.00


$
7.39


$
7.03


$
7.79Ceiling

$
15.00


$
13.11


$
9.88


$
7.39


$
9.52Fair value, net

$
3,630


$
1,875


$
3,144


$
2,074


$
10,723Total Natural Gas Contracts:Contract volumes (Mmbtu)


15,379,200



13,129,060



5,550,000



5,000,004



39,058,264Weighted-average fixed price per Mmbtu

$
7.94


$
7.55


$
7.61


$
7.44


$
7.70Fair value, net

$
41,737


$
15,946


$
5,585


$
4,409


$
67,677Crude Oil Swaps:Contract volumes (Bbl)


36,000



30,000











66,000Weighted-average fixed price per Bbl

$
90.07


$
87.50


$



$



$
88.90Fair value, net

$
1,246


$
666


$



$



$
1,912Total fair value, net

$
42,983


$
16,612


$
5,585


$
4,409


$
69,589   Note 8 
    Financial
    Instruments    Fair Value 
  Netting andCash


Total Net FairAt December 31, 2009

Level 1


Level 2


Level 3


Collateral*


ValueDerivative financial instruments  assets

$



$
18,033


$
11,546


$



$
29,579Derivative financial instruments  liabilities

$



$



$
(10,016
)

$



$
(10,016
)Total

$



$
18,033


$
1,530


$



$
19,563   F-33




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Netting andCash


Total Net FairAt December 31, 2008

Level 1


Level 2


Level 3


Collateral*


ValueDerivative financial instruments  assets

$



$
8,866


$
64,883


$
(4,160
)

$
69,589Derivative financial instruments  liabilities

$



$
(224
)

$
(3,936
)

$
4,160


$
Total

$



$
8,642


$
60,947


$



$
69,589     *
    
    Amounts represent the effect of legally enforceable master
    netting agreements between us and its counterparties and the
    payable or receivable for cash collateral held or placed with
    the same counterparties.          Balance at beginning of year

$
60,947Realized and unrealized gains included in earnings


29,202Purchases, sales, issuances, and settlements


(88,619
)Transfers into and out of Level 3


Balance as of December 31, 2009

$
1,530  F-34




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 9 
    Asset
    Retirement Obligations    2009


2008Asset retirement obligations at beginning of year

$
5,922


$
2,938Liabilities incurred


78



134Liabilities settled


(13
)


(22
)Acquisition of PetroEdge






2,193Accretion


565



388Revisions in estimated cash flows






291Asset retirement obligations at end of year

$
6,552


$
5,922   Note 10 
    Stockholders
    Equity  Stockholders Rights Plan
  Stock Awards
 F-35




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    WeightedNumber of


AverageNon-Vested


Grant-DateRestricted Shares


Fair ValueNon-vested restricted shares at December 31, 2006


117,000


$
9.43Granted


1,192,968



8.71Vested


(222,472
)


9.21Forfeited


(5,621
)


8.67Non-vested restricted shares at December 31, 2007


1,081,875


$
8.69Granted


405,362
(a)


7.50Vested


(470,912
)


8.28Forfeited


(533,949
)


8.75Non-vested restricted shares at December 31, 2008


482,376


$
8.01Granted


1,108,696
(b)


0.38Vested


(274,609
)


4.77Forfeited


(175,266
)


7.93Non-vested restricted shares at December 31, 2009


1,141,197


$
1.39     (a)
    
    Includes 140,000 stock options converted to 70,000 restricted
    shares during the year.(b)
    
    Consists of restricted shares granted to employees of QRCP, QELP
    and QMLP in December 2009. For those employees with greater than
    18 months service, 20% of the shares vest immediately and
    20% each year for four years. For those employees with less than
    18 months service, 25% of the shares vest each year for
    four years.    Stock Options 
 F-36




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted AverageStock


Exercise Price perOptions


ShareOptions outstanding at December 31, 2006


150,000


$
10.00Granted


100,000



10.05Exercised






Forfeited






Options outstanding at December 31, 2007


250,000



10.00Granted


300,000



0.63Exercised


(10,000
)


10.05Converted


(140,000
)


10.03Options outstanding at December 31, 2008


400,000



2.98Granted


300,000



0.62Exercised






Forfeited


(30,000
)


10.00Options outstanding at December 31, 2009


670,000



1.61Options exercisable at December 31, 2009


370,000


$
2.41       12-month
  2009


2008

2007Expected option life  years


10


10


10Volatility


101.2
%

69.8%


61.1
%Risk-free interest rate


4.93
%

5.42%


5.35
%Dividend yield








Fair value

$
0.45


$0.41 - $0.61

$
7.96    F-37




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Earnings (Loss) per Share 
  2009


2008


2007Basic earnings per share:Net income (loss) available to common shareholders

$
(144,922
)

$
(167,384
)

$
(44,154
)Shares:Weighted average number of common shares outstanding


31,833



27,011



22,379Basic earnings (loss) per share:Total basic earnings (loss) per share

$
(4.55
)

$
(6.20
)

$
(1.97
)Diluted earnings per share:Net income (loss) available to common shareholders

$
(144,922
)

$
(167,384
)

$
(44,154
)Shares:Weighted average common shares and common stock equivalents


31,833



27,011



22,379Diluted earnings (loss) per share:Total diluted earnings (loss) per share

$
(4.55
)

$
(6.20
)

$
(1.97
)     Note 11 
    Income
    Taxes      2009


2008


2007Income tax expense (benefit) at statutory rate

$
(50,723
)

$
(58,584
)

$
(15,454
)State income tax expense (benefit), net of federal


(3,131
)


(3,789
)


(956
)Other


2,548



300



752Change in valuation allowance


51,306



62,073



15,658Total tax expense (benefit)

$



$



$
    F-38




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2009


2008Current deferred income tax assets:Commodity derivative expense recorded for book, not for tax

$



$
Accrued liabilities






219Allowance for bad debts






78Unearned revenue






236Total current deferred income tax assets






533Noncurrent deferred income tax assets:Partnership basis differences


49,889



7,401Property and equipment basis differences


19,284



18,434Net operating loss carryforwards


89,523



72,635Other tax credit carryforwards


34



4,352Misappropriation of assets






3,728Other expense recorded for books, not for tax


979



1,320Total noncurrent deferred income tax assets


159,709



107,870Total deferred income tax assets


159,709



108,403Total current deferred income tax liabilities






Total noncurrent deferred income tax liabilities






Total deferred income tax liabilities






Net deferred income tax assets


159,709



108,403Valuation allowance


(159,709
)


(108,403
)Total deferred tax asset (liability)

$



$
        F-39




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    740-10 740-10,
  Note 12 
    Commitments
    and Contingencies  Litigation
  Federal
    Securities Class Actions
  Michael
    Friedman, individually and on behalf of all others similarly
    situated v. Quest Energy Partners LP, Quest Energy GP LLC,
    Quest Resource Corporation, Jerry Cash, and David E.
    Grose,
    Case
    No. 08-cv-936-M,
    U.S. District Court for the Western District of Oklahoma,
    filed September 5, 2008
  James
    Jents, individually and on behalf of all others similarly
    situated v. Quest Resource Corporation, Jerry Cash, David
    E. Grose, and John Garrison,Case
    No. 08-cv-968-M,
    U.S. District Court for the Western District of Oklahoma,
    filed September 12, 2008
  J. Braxton
    Kyzer and Bapui Rao, individually and on behalf of all others
    similarly situated v. Quest Energy Partners LP, Quest
    Energy GP LLC, Quest Resource Corporation and David E.
    Grose,
    Case
    No. 08-cv-1066-M,
    U.S. District Court for the Western District of Oklahoma,
    filed October 6, 2008
  Paul
    Rosen, individually and on behalf of all others similarly
    situated v. Quest Energy Partners LP, Quest Energy GP LLC,
    Quest Resource Corporation, Jerry Cash, and David E.
    Grose,
    Case No. 08-cv-978-M, U.S. District Court for the Western
    District of Oklahoma, filed September 17, 2008
  Rule 10b-5 and/or
 F-40




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Michael Friedman, individually and on
    behalf of all others similarly situated v. Quest Energy
    Partners LP, Quest Energy GP LLC, Quest Resource Corporation,
    Jerry Cash, and David E. Grose No. 08-cv-936-M, Friedman v. Quest Energy Partners, LP, et
    al. no. CIV-08-936-M, Jents v. Quest Resource Corporation, et al. no. CIV-08-968-M. Friedman Friedman Jents Friedman Jents
    Federal
    Individual Securities Litigation
  Bristol
    Capital Advisors v. Quest Resource Corporation, Inc., Jerry
    Cash, David E. Grose, and
    John Garrison,
    Case
    No. CIV-09-932,
    U.S. District Court for the Western District of Oklahoma,
    filed August 24, 2009
  and/or
 F-41




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    J. Steven
    Emerson, Emerson Partners, J. Steven Emerson Roth IRA, J. Steven
    Emerson IRA RO II, and Emerson Family Foundation v. Quest
    Resource Corporation, Inc., Quest Energy Partners L.P., Jerry
    Cash, David E. Grose, and John Garrison,Case
    No. 5:09-cv-1226-M,
    U.S. District Court for the Western District of Oklahoma,
    filed November 3, 2009
  and/or
  Federal
    Derivative Cases
  James
    Stephens, derivatively on behalf of nominal defendant Quest
    Resource Corporation v. William H. Damon III,
    Jerry Cash, David Lawler, David E. Grose, James B. Kite Jr.,
    John C. Garrison and Jon H. Rateau,Case
    No. 08-cv-1025-M,
    U.S. District Court for the Western District of Oklahoma,
    filed September 25, 2008
  and/or
  William
    Dean Enders, derivatively on behalf of nominal defendant Quest
    Energy Partners, L.P. v. Jerry D. Cash, David E.
    Grose, David C. Lawler, Gary Pittman, Mark Stansberry, J. Philip
    McCormick, Douglas Brent Mueller, Mid Continent Pipe &
    Equipment, LLC, Reliable Pipe & Equipment, LLC, RHB
    Global, LLC, RHB, Inc., Rodger H. Brooks, Murrell, Hall,
    McIntosh & Co. PLLP, and Eide Bailly LLP,Case
    No. CIV-09-752-F,
    U.S. District Court for the Western District of Oklahoma,
    filed July 17, 2009
   F-42




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
  State
    Court Derivative Cases
  Tim
    Bodeker, derivatively on behalf of nominal defendant Quest
    Resource Corporation v. Jerry Cash, David E. Grose, Bob G.
    Alexander, David C. Lawler, James B. Kite, John C. Garrison, Jon
    H. Rateau and William H. Damon
    III,
    Case
    No. CJ-2008-9042,
    District Court of Oklahoma County, State of Oklahoma, filed
    October 8, 2008
  William
    H. Jacobson, derivatively on behalf of nominal defendant Quest
    Resource Corporation v. Jerry Cash, David E. Grose,
    David C. Lawler, James B. Kite, Jon H. Rateau, Bob G. Alexander,
    William H. Damon III, John C. Garrison, Murrell, Hall,
    McIntosh & Co., LLP, and Eide Bailly, LLP,Case
    No. CJ-2008-9657,
    District Court of Oklahoma County, State of Oklahoma, filed
    October 27, 2008
  Amy
    Wulfert, derivatively on behalf of nominal defendant Quest
    Resource Corporation, v. Jerry D. Cash, David C. Lawler,
    Jon C. Garrison, John H. Rateau, James B. Kite Jr., William H.
    Damon III, David E. Grose, N. Malone Mitchell III, and
    Bryan
    Simmons,
    Case
    No. CJ-2008-9042 
    consolidated December 30, 2008, District Court of Oklahoma
    County, State of Oklahoma (Original Case
    No. CJ-2008-9624,
    filed October 24, 2008)
  Jacobson Wulfert In re Quest Resource Corporation Shareholder
    Derivative Litigation No. CJ-2008-9042.
  Royalty
    Owner Class Action
  Hugo
    Spieker, et al. v. Quest Cherokee, LLC,Case
    No. 07-1225-MLB,
    U.S. District Court for the District of Kansas, filed
    August 6, 2007
   F-43




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Litigation
    Related to Oil and Gas Leases
  Billy
    Bob Willis, et al. v. Quest Resource Corporation, et al.,Case
    No. CJ-09-063,
    District Court of Nowata County, State of Oklahoma, filed
    April 28, 2009
  et al.
  Environmental Matters
  Operating Lease Commitments
        Year ending December 31,2010

$
8,9292011


3,1842012


1,1852013


1,1282014


932Thereafter


1,783Total minimum lease obligations

$
17,141     Financial Advisor Contracts
 F-44




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Note 13 
    Other
    Assets  Intangible Assets 
  2009


2008Gross carrying amount

$
9,934


$
9,934Accumulated amortization


(7,635
)


(4,340
)Impairment


(1,035
)


Net carrying amount

$
1,264


$
5,594      F-45




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Deferred Financing Costs  470-50-40
    Note 14 
    Supplemental
    Cash Flow Information  Year Ended December 31,2009


2008


2007(In thousands)Cash paid for interest

$
19,293


$
21,813


$
32,884Cash paid for income taxes










Accrued purchases of property and equipment


415



1,492



861Accrued distributions  QMLP










3,600   Note 15 
    Related
    Party Transactions    Note 16 
    Operating
    Segments    
    Oil and natural gas production; and
    Natural gas pipelines, including transporting, gathering,
    treating and processing natural gas.   F-46




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Oil and





Other andNatural Gas


Natural Gas


IntersegmentProduction


Pipelines


Eliminations


TotalYear Ended December 31, 2009:Total revenues

$
79,893


$
67,323


$
(41,135
)

$
106,081Inter-segment revenues






(41,135
)


41,135



Third-party revenues

$
79,893


$
26,188


$



$
106,081Segment operating profit (loss)

$
(129,788
)

$
(143,097
)

$



$
(272,885
)Capital expenditures

$
7,569


$
1,990


$



$
9,559Depreciation, depletion and amortization

$
32,193


$
15,609


$



$
47,802Impairment

$
102,902


$
165,728


$



$
268,630Year Ended December 31, 2008:Total revenues

$
162,499


$
63,722


$
(35,546
)

$
190,675Inter-segment revenues






(35,546
)


35,546



Third-party revenues

$
162,499


$
28,176


$



$
190,675Segment operating profit

$
(269,729
)

$
17,245


$



$
(252,484
)Capital expenditures

$
239,467


$
27,649


$



$
267,116Depreciation, depletion and amortization

$
53,710


$
16,735


$



$
70,445Impairment

$
298,861


$



$



$
298,861Year Ended December 31, 2007:Total revenues

$
105,285


$
39,032


$
(29,179
)

$
115,138Inter-segment revenues






(29,179
)


29,179



Third-party revenues

$
105,285


$
9,853


$



$
115,138Segment operating profit (loss)

$
5,999


$
11,964


$



$
17,963Capital expenditures

$
91,265


$
173,604


$



$
264,869Depreciation, depletion and amortization

$
33,812


$
5,970


$



$
39,782Identifiable assets:December 31, 2009

$
128,548


$
155,107


$



$
283,655December 31, 2008

$
311,592


$
338,584


$



$
650,176  F-47




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2009


2008


2007Segment operating profit (loss)(1)

$
(272,885
)

$
(252,484
)

$
17,963General and administrative expenses


(41,723
)


(28,269
)


(21,023
)Recovery of (loss on) misappropriation of funds


3,412







(2,000
)Gain from derivative financial instruments


48,122



66,145



1,961Interest expense, net


(29,329
)


(25,373
)


(43,628
)Other income (expense), net


83



329



(331
)Loss before income taxes and noncontrolling interests

$
(292,320
)

$
(239,652
)

$
(47,058
)   Note 17 
    Profit
    Sharing Plan    Note 18 
    Subsequent
    Events  Recombination
    
    Quest Resource Acquisition Corp., a wholly owned subsidiary of
    PostRock, merged with and into QRCP and QRCP common stockholders
    received 0.0575 shares of PostRock common stock in exchange
    for each share of QRCP common stock held;
    Quest Energy Acquisition, LLC, a wholly owned subsidiary of
    QRCP, merged with and into QELP (the QELP merger)
    and QELP common unitholders (other than QRCP) received
    0.2859 shares of PostRock common stock in exchange for each
    QELP common unit held; and
    QMLP merged with and into Quest Midstream Acquisition, LLC, a
    wholly owned subsidiary of QRCP (the QMLP merger),
    QMLP common unitholders received 0.4033 shares of PostRock
    common stock in exchange for each QMLP common unit held and the
    general partner interests in QMLP were converted into shares of
    PostRock common stock equal to approximately 0.14% of the
    PostRock common stock issued in the recombination.   F-48




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Termination
    of Certain Intercompany Agreements
    
    Omnibus Agreement among QRCP, QMGP, Bluestem Pipeline, LLC and
    QMLP, dated December 22, 2006;
    Omnibus Agreement among QELP, QEGP and QRCP, dated
    November 15, 2007; and
    Amended and Restated Investors Rights Agreement, dated
    November 1, 2007, among QMLP, QMGP, QRCP and certain
    private investors of QMLP party thereto.  Other
    Note 19 
    Supplemental
    Financial Information  Quarterly Financial Data
    (Unaudited)    Quarters EndedDecember 31,

September 30,

June 30,

March 31,2009Total revenues

$
28,348


$
23,962


$
23,693


$
30,078Impairment(2)


165,728











102,902Operating income (loss)(1)(4)


(174,491
)


(18,416
)


(6,617
)


(111,672
)Net income (loss)(4)


(166,026
)


(16,724
)


(30,530
)


(79,040
)Net income (loss) per common share:Basic

$
(2.01
)

$
(0.36
)

$
(0.57
)

$
(1.62
)Diluted

$
(2.01
)

$
(0.36
)

$
(0.57
)

$
(1.62
)   Quarters EndedDecember 31,

September 30,

June 30,

March 31,2008Total revenues

$
32,125


$
57,043


$
56,292


$
45,215Impairment(3)


298,861











Operating income (loss)(1)


(317,179
)


16,352



12,855



7,219Net income (loss)


(254,533
)


154,356



(97,652
)


(41,823
)Net income (loss) per common share:Basic

$
(5.43
)

$
2.75


$
(2.53
)

$
(1.11
)Diluted

$
(5.43
)

$
2.75


$
(2.53
)

$
(1.11
)     (1)
    
    Total revenue less total costs and expenses.(2)
    
    The impairment charge of $102.9 million in the first
    quarter is related to the carrying value of oil and natural gas
    properties and the impairment charge of $165.7 million in
    the fourth quarter is related to the carrying value of pipeline
    assets. F-49




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (3)
    
    The impairment charge of $298.9 million in the fourth
    quarter is related to the carrying value of oil and natural gas
    properties.(4)
    
    Fourth quarter of 2009 was impacted by the change in prices used
    in oil and natural gas reserves.  Note 20 
    Supplemental
    Information on Oil and Natural Gas Producing Activities
    (Unaudited)  Extractive
    Activities  Oil and Gas ,
  Modernization
    of Oil and Gas Reporting
  Form 10-K
    
    Pricing mechanism for oil and gas reserves estimation The SECs previous rules required proved
    reserve estimates to be calculated using prices as of the end of
    the period and held constant over the life of the reserves.
    Price changes could be made only to the extent provided by
    contractual arrangements. The revised rules require reserve
    estimates to be calculated using a
    12-month
    average price. The
    12-month
    average price will also be used for purposes of calculating the
    full cost ceiling limitations. The use of a
    12-month
    average price rather than a
    single-day
    price is expected to reduce the impact on reserve estimates and
    the full cost ceiling limitations due to short-term volatility
    and seasonality of prices.
    Reasonable certainty The SECs previous
    definition of proved oil and gas reserves incorporated certain
    specific concepts such as lowest known hydrocarbons,
    which limited the ability to claim proved reserves in the
    absence of information on fluid contacts in a well penetration,
    notwithstanding the existence of other engineering and
    geoscientific evidence. The revised rules amend the definition
    to permit the use of new reliable technologies to establish the
    reasonable certainty of proved reserves. This revision also
    includes provisions for establishing levels of lowest known
    hydrocarbons and highest known oil through reliable technology
    other than well penetrations.      
    Unproved reserves The SECs previous
    rules prohibited disclosure of reserve estimates other than
    proved in documents filed with the SEC. The revised rules permit
    disclosure of probable and possible reserves and provide
    definitions of probable reserves and possible reserves.
    Disclosure of probable and F-50




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  possible reserves is optional. However, such disclosures must
    meet specific requirements. Disclosures of probable or possible
    reserves must provide the same level of geographic detail as
    proved reserves and must state whether the reserves are
    developed or undeveloped. Probable and possible reserve
    disclosures must also provide the relative uncertainty
    associated with these classifications of reserves estimations.  Net
    Capitalized Costs
    2009


2008Oil and natural gas properties and related leasehold costs:Proved

$
205,199


$
299,629Unproved


596



10,108205,795



309,737Accumulated depreciation, depletion and amortization


(165,317
)


(137,200
)Net capitalized costs

$
40,478


$
172,537     Costs
    Incurred
    2009


2008


2007Proved property acquisition costs

$
1,293


$
152,118
(a)

$
Unproved property acquisition costs


705



18,945



15,847Exploration costs


128



1,273



Development costs


5,087



58,070



67,586$
7,213


$
230,406


$
83,433     (a)
    
    Includes the acquisition of the PetroEdge & Seminole
    County, Oklahoma properties.  Oil and
    Gas Reserve Quantities
     F-51




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Gas  Mcf


Oil  BblsProved reserves:Balance, December 31, 2006


198,040,000



32,272Purchase of reserves in place






Extensions, discoveries, and other additions


26,368,000



Sale of reserves






Revisions of previous estimates(1)


3,490,473



11,354Production


(16,975,067
)


(7,070
)Balance, December 31, 2007


210,923,406



36,556Purchase of reserves in place


94,727,687



1,560,946Extensions, discoveries, and other additions


13,897,600



Sale of reserves


(4,386,200
)


Revisions of previous estimates(2)


(123,204,433
)


(833,070
)Production


(21,328,687
)


(69,812
)Balance, December 31, 2008


170,629,373



694,620Purchase of reserves in place


142,985



34,905Extensions, discoveries, and other additions


62,067



Sale of reserves






Revisions of previous estimates


(79,724,789
)


177,528Production


(21,235,065
)


(83,015
)Balance, December 31, 2009


69,874,571



824,038Proved developed reservesBalance, December 31, 2007


140,966,295



36,556Balance, December 31, 2008


136,544,572



682,031Balance, December 31, 2009


62,135,258



785,345     (1)
    
    During 2007, higher prices increased the economic lives of the
    underlying oil and natural gas properties and thereby increased
    the estimated future reserves.(2)
    
    Lower prices and projected increases in expected gathering costs
    at December 31, 2008 as compared to December 31, 2007
    reduced the economic lives of the underlying oil and gas
    properties and thereby decreased the estimated future reserves.
    Additionally, estimated proved reserves acquired from PetroEdge
    in 2008 decreased approximately 35.5 Bcfe due to the
    decrease in natural gas prices between the dated of the
    PetroEdge acquisition and December 31, 2008 and
    approximately 43.2 Bcfe, as a result of further technical
    analysis of the estimated PetroEdge reserves. F-52




---



##### Table of Contents



QUEST
    RESOURCE CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Standardized
    Measure of Discounted Future Net Cash Flows
    2009


2008


2007Future cash inflows

$
311,831


$
898,214


$
1,351,980Future production costs


202,645



570,142



732,488Future development costs


17,398



60,318



119,448Future income tax expense










56,371Future net cash flows


91,788



267,754



443,67310% annual discount for estimated timing of cash flows


41,229



103,660



157,496Standardized measure of discounted future net cash flows related
    to proved reserves

$
50,559


$
164,094


$
286,177   property-by-property
  2009

2008

2007Crude oil price per Bbl

$
61.18


$
44.60


$
92.01Natural gas price per Mmbtu

$
3.87


$
5.71


$
6.43     As of December 31,2009


2008


2007Present value, beginning of period

$
164,094


$
286,177


$
230,832Net changes in prices and production costs


(35,203
)


(122,702
)


13,716Net changes in future development costs


20,727



(4,247
)


(43,530
)Previously estimated development costs incurred


5,292



66,060



74,310Sales of oil and gas produced, net


(46,442
)


(103,826
)


(68,990
)Extensions and discoveries


50



15,986



49,901Purchases of reserves in-place


283



119,733



Sales of reserves in-place






(5,045
)


Revisions of previous quantity estimates


(63,230
)


(147,464
)


6,735Net change in income taxes






36,360



880Accretion of discount


17,576



31,804



25,264Timing differences and other(a)


(12,588
)


(8,742
)


(2,941
)Present value, end of period

$
50,559


$
164,094


$
286,177     (a)
    
    The change in timing differences and other are related to
    revisions in our estimated time of production and development. F-53




---



##### Table of Contents



SIGNATURES
  Form 10-K th
    David
    C. Lawler
   Chief Executive Officer and President
  POWER OF
    ATTORNEY
  Form 10-K Form 10-K Form 10-K Form 10-K)
    Name

Capacity

Date/s/  David
    C. LawlerDavid
    C. Lawler

Chief Executive Officer and President and Director (Principal
    Executive Officer)

March 19, 2010/s/  Eddie
    M. LeBlanc, IIIEddie
    M. LeBlanc, III

Chief Financial Officer (Principal Financial Officer and
    Principal Accounting Officer)

March 19, 2010/s/  Gary
    M. PittmanGary
    M. Pittman

Chairman of the Board

March 19, 2010/s/  William
    H. Damon IIIWilliam
    H. Damon III

Director

March 19, 2010/s/  Gabriel
    HammondGabriel
    Hammond

Director

March 19, 2010/s/  Duke
    R. LigonDuke
    R. Ligon

Director

March 19, 2010/s/  J.
    Philip McCormickJ.
    Philip McCormick

Director

March 19, 2010/s/  John
    H. RateauJohn
    H. Rateau

Director

March 19, 2010/s/  Daniel
    SpearsDaniel
    Spears

Director

March 19, 2010/s/  Mark
    A. StansberryMark
    A. Stansberry

Director

March 19, 2010




---



##### Table of Contents



INDEX TO
    EXHIBITS
  ExhibitNo.

Description2
.1*

Agreement and Plan of Merger, dated as of July 2, 2009, by
    and among PostRock Energy Corporation (PostRock),
    Quest Resource Corporation (QRCP), Quest Midstream
    Partners, L.P., Quest Energy Partners, L.P., Quest Midstream GP,
    LLC, Quest Energy GP, LLC, Quest Resource Acquisition Corp.,
    Quest Energy Acquisition, LLC, Quest Midstream Holdings Corp.
    and Quest Midstream Acquisition, LLC (incorporated herein by
    reference to Exhibit 2.1 to QRCPs Current Report on
    Form 8-K
    filed on July 7, 2009).2
.2*

First Amendment, dated as of October 2, 2009, to the
    Agreement and Plan of Merger, dated as of July 2, 2009 by
    and among PostRock, QRCP, Quest Midstream Partners, L.P., Quest
    Energy Partners, L.P., Quest Midstream GP, LLC, Quest Energy GP,
    LLC, Quest Resource Acquisition Corp., Quest Energy Acquisition,
    LLC, Quest Midstream Holdings Corp. and Quest Midstream
    Acquisition, LLC (incorporated herein by reference to
    Exhibit 2.1 to QRCPs Current Report on
    Form 8-K
    filed on October 8, 2009).3
.1*

Restated Certificate of Incorporation of PostRock (incorporated
    herein by reference to Exhibit 3.1 to PostRocks
    Current Report on
    Form 8-K
    filed on March 10, 2010).3
.2*

Bylaws of PostRock (incorporated herein by reference to
    Exhibit 3.2 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).4
.1*

Specimen of certificate for shares of Common Stock of PostRock
    (incorporated herein by reference to Exhibit 4.1 to
    Amendment No. 1 to PostRocks Registration Statement
    on
    Form S-4
    filed on December 17, 2009, Registration
    No. 333-162366
    (the
    Form S-4).10
.1*

Registration Rights Agreement dated March 5, 2010, between
    PostRock Energy Corporation, Alerian Opportunity Partners IV,
    LP, Alerian Opportunity Partners IX, L.P., Alerian Focus
    Partners, LP, Alerian Capital Partners, LP, Swank MLP
    Convergence Fund, LP, Swank Investment Partners, LP, The Cushing
    MLP Opportunity Fund I, LP, The Cushing GP Strategies Fund,
    LP, Bel Air MLP Energy Infrastructure Fund, LP, Tortoise Capital
    Resources Corporation and Tortoise North American Energy
    Corporation (incorporated herein by reference to
    Exhibit 10.1 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).10
.2*

Form of Quest Resource Corporations Indemnification
    Agreement for Directors (incorporated herein by reference to
    Exhibit 10.10 to QRCPs Annual Report on
    Form 10-K
    filed on June 3, 2009).10
.3*

Form of Quest Resource Corporations Indemnification
    Agreement for Officers (incorporated herein by reference to
    Exhibit 10.11 to QRCPs Annual Report on
    Form 10-K
    filed on June 3, 2009).10
.4*

Employment Agreement dated April 10, 2007 between QRCP and
    David Lawler (incorporated herein by reference to
    Exhibit 10.1 to QRCPs Current Report on
    Form 8-K
    filed on April 13, 2007).10
.5*

First Amendment to Employment Agreement, dated October 20,
    2008, between QRCP and David Lawler (incorporated herein by
    reference to Exhibit 10.2 to QRCPs Current Report on
    Form 8-K
    filed on October 24, 2008).10
.6*

Nonqualified Stock Option Agreement, dated October 20,
    2008, between QRCP and David Lawler (incorporated herein by
    reference to Exhibit 10.4 to QRCPs Current Report on
    Form 8-K
    filed on October 24, 2008).10
.7*

Assignment and Amendment Agreement dated March 5, 2010,
    between PostRock Energy Corporation, Quest Resource Corporation
    and David C. Lawler (incorporated herein by reference to
    Exhibit 10.11 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).10
.8*

Employment Agreement dated December 3, 2007 between QRCP
    and Jack T. Collins (incorporated herein by reference to
    Exhibit 10.28 to QRCPs Annual Report on
    Form 10-K
    filed on March 10, 2008).10
.9*

First Amendment to Employment Agreement, dated October 23,
    2008, between QRCP and Jack Collins (incorporated herein by
    reference to Exhibit 10.3 to QRCPs Current Report on
    Form 8-K
    filed on October 24, 2008).10
.10*

Second Amendment to Employment Agreement, dated August 28,
    2009, between QRCP and Jack Collins (incorporated herein by
    reference to Exhibit 10.5 to QRCPs Quarterly Report
    on
    Form 10-Q
    filed on November 5, 2009).




---



##### Table of Contents



ExhibitNo.

Description10
.11*

Assignment and Amendment Agreement dated March 5, 2010,
    between PostRock Energy Corporation, Quest Resource Corporation
    and Jack Collins (incorporated herein by reference to
    Exhibit 10.13 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).10
.12*

Nonqualified Stock Option Agreement, dated October 23,
    2008, between QRCP and Jack Collins (incorporated herein by
    reference to Exhibit 10.5 to QRCPs Current Report on
    Form 8-K
    filed on October 24, 2008).10
.13*

Employment Agreement dated March 21, 2007 between QRCP and
    Richard Marlin (incorporated herein by reference to
    Exhibit 10.30 to QRCPs Annual Report on
    Form 10-K
    filed on March 10, 2008).10
.14*

First Amendment to Employment Agreement, dated December 29,
    2008, between QRCP and Richard Marlin (incorporated herein by
    reference to Exhibit 10.32 to QRCPs Annual Report on
    Form 10-K
    filed on June 3, 2009).10
.15*

Assignment and Amendment Agreement dated March 5, 2010,
    between PostRock Energy Corporation, Quest Resource Corporation
    and Richard Marlin (incorporated herein by reference to
    Exhibit 10.14 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).10
.16*

Employment Agreement, dated December 7, 2009, between QRCP
    and Eddie LeBlanc (incorporated herein by reference to
    Exhibit 10.2 to QRCPs Current Report on
    Form 8-K
    filed on December 11, 2009).10
.17*

Assignment and Amendment Agreement dated March 5, 2010,
    between PostRock Energy Corporation, Quest Resource Corporation
    and Eddie M. LeBlanc, III (incorporated herein by
    reference to Exhibit 10.12 to PostRocks Current
    Report on
    Form 8-K
    filed on March 10, 2010).10
.18*

Nonqualified Stock Option Agreement, dated January 12,
    2009, between QRCP and Eddie LeBlanc (incorporated herein by
    reference to Exhibit 10.1 to QRCPs Current Report on
    Form 8-K
    filed on January 14, 2009).10
.19*

Office Lease dated May 31, 2007 between QRCP and Oklahoma
    Tower Realty Investors, L.L.C. (incorporated herein by reference
    to Exhibit 10.5 to QRCPs Quarterly Report on
    Form 10-Q
    filed on August 9, 2007).10
.20*

Assignment and Assumptions of Leases, dated as of
    February 28, 2008, by and between Chesapeake Energy
    Corporation and QRCP (incorporated herein by reference to
    Exhibit 10.7 to QRCPs Quarterly Report on
    Form 10-Q
    filed on May 12, 2008).10
.21*

Amended and Restated Credit Agreement, dated as of
    November 1, 2007, by and among Quest Midstream Partners,
    L.P., Bluestem Pipeline, LLC, Royal Bank of Canada, RBC Capital
    Markets and the Lenders party thereto (incorporated herein by
    reference to Exhibit 10.5 to QRCPs Current Report on
    Form 8-K
    filed on November 2, 2007).10
.22*

First Amendment to the Amended and Restated Credit Agreement,
    dated as of November 1, 2007 among Quest Midstream
    Partners, L.P., Bluestem Pipeline, LLC, Royal Bank of Canada and
    certain guarantors (incorporated herein by reference to
    Exhibit 10.29 to QRCPs Registration Statement on
    Form S-4
    filed on February 7, 2008).10
.23*

Second Amendment to Amended and Restated Credit Agreement, dated
    as of October 28, 2008, but effective as of
    November 5, 2008, by and among Quest Midstream Partners,
    L.P., Bluestem Pipeline, LLC, Quest Kansas General Partner,
    L.L.C., Quest Kansas Pipeline, L.L.C., Quest Pipeline (KPC),
    Royal Bank of Canada and the Lenders party thereto (incorporated
    herein by reference to Exhibit 10.4 to QRCPs Current
    Report on
    Form 8-K
    filed on November 7, 2008).10
.24*

Third Amendment to Amended and Restated Credit Agreement, dated
    as of December 17, 2009, by and among Quest Midstream
    Partners, L.P., Bluestem Pipeline, LLC, Quest Kansas General
    Partner, L.L.C., Quest Kansas Pipeline, L.L.C., Quest Pipeline
    (KPC), Royal Bank of Canada and the Lenders party thereto
    (incorporated by reference to Exhibit 10.17 to
    PostRocks Registration Statement on
    Form S-4/A
    filed on December 17, 2009).10
.25*

Guaranty by Quest Kansas General Partner, L.L.C., Quest Kansas
    Pipeline, L.L.C., and Quest Pipeline (KPC) in favor of Royal
    Bank of Canada, dated as of November 1, 2007 (incorporated
    herein by reference to Exhibit 10.9 to QRCPs
    Quarterly Report on
    Form 10-Q
    filed on November 9, 2007).




---



##### Table of Contents



ExhibitNo.

Description10
.26*

Guaranty by Quest Transmission Company, LLC in favor of Royal
    Bank of Canada, dated as of February, 21, 2008 (incorporated
    herein by reference to Exhibit 10.41 to QRCPs Annual
    Report on
    Form 10-K
    filed on June 3, 2009).10
.27*

Guaranty dated March 5, 2010, by PostRock Energy
    Corporation and PostRock Energy Services Corporation (formerly
    known as Quest Resource Corporation) for the benefit of Royal
    Bank of Canada. (incorporated herein by reference to
    Exhibit 10.10 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).10
.28*

Pledge and Security Agreement by Quest Transmission Company, LLC
    in favor of Royal Bank of Canada, dated as of February 21,
    2008 (incorporated herein by reference to Exhibit 10.42 to
    QRCPs Annual Report on
    Form 10-K
    filed on June 3, 2009).10
.29*

Pledge and Security Agreement by Quest Kansas General Partner,
    L.L.C. in favor of Royal Bank of Canada, dated as of
    November 1, 2007 (incorporated herein by reference to
    Exhibit 10.10 to QRCPs Quarterly Report on
    Form 10-Q
    filed on November 9, 2007).10
.30*

Pledge and Security Agreement by Quest Kansas Pipeline, L.L.C.
    in favor of Royal Bank of Canada, dated as of November 1,
    2007 (incorporated herein by reference to Exhibit 10.11 to
    QRCPs Report on
    Form 10-Q
    filed on November 9, 2007).10
.31*

Pledge and Security Agreement by Quest Pipelines (KPC) in favor
    of Royal Bank of Canada, dated as of November 1, 2007
    (incorporated herein by reference to Exhibit 10.12 to
    QRCPs Quarterly Report on
    Form 10-Q
    filed on November 9, 2007).10
.32*

Amended and Restated Pledge and Security Agreement by Bluestem
    Pipeline, LLC in favor of Royal Bank of Canada, dated as of
    November 1, 2007 (incorporated herein by reference to
    Exhibit 10.13 to QRCPs Quarterly Report on
    Form 10-Q
    filed on November 9, 2007).10
.33*

Amended and Restated Pledge and Security Agreement by Quest
    Midstream Partners, L.P. in favor of Royal Bank of Canada, dated
    as of November 1, 2007 (incorporated herein by reference to
    Exhibit 10.14 to QRCPs Quarterly Report on
    Form 10-Q
    filed on November 9, 2007).10
.34*

First Amendment to Amended and Restated Pledge and Security
    Agreement by Quest Midstream Partners, L.P. in favor of Royal
    Bank of Canada, dated as of February 21, 2008 (incorporated
    herein by reference to Exhibit 10.48 to QRCPs Annual
    Report on
    Form 10-K
    filed on June 3, 2009).10
.35*

Pledge and Security Agreement dated March 5, 2010, by
    PostRock Energy Services Corporation (formerly known as Quest
    Resource Corporation) for the benefit of Royal Bank of Canada
    (incorporated herein by reference to Exhibit 10.9 to
    PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).10
.36*

Amended and Restated Credit Agreement, dated as of
    November 15, 2007, by and among QRCP , as the Initial
    Co-Borrower, Quest Cherokee, LLC, as the Borrower, Quest Energy
    Partners, L.P., as a Guarantor, Royal Bank of Canada, as
    Administration Agent and Collateral Agent, KeyBank National
    Association, as Documentation Agent, and the lenders from time
    to time party thereto (incorporated herein by reference to
    Exhibit 10.3 to QRCPs Current Report on
    Form 8-K
    filed on November 21, 2007).10
.37*

First Amendment to Amended and Restated Credit Agreement, dated
    as of April 15, 2008, by and among Quest Cherokee, LLC,
    Royal Bank of Canada, KeyBank National Association, and the
    lenders Party Thereto (incorporated herein by reference to
    Exhibit 10.1 to QRCPs Current Report on
    Form 8-K
    filed on April 23, 2008).10
.38*

Second Amendment to Amended and Restated Credit Agreement, dated
    as of October 28, 2008, but effective as of
    November 5, 2008, by and among Quest Cherokee, LLC, Quest
    Energy Partners, L.P., Quest Cherokee Oilfield Service, LLC,
    Royal Bank of Canada, KeyBank National Association and the
    Lenders party thereto (incorporated herein by reference to
    Exhibit 10.3 to QRCPs Current Report on
    Form 8-K
    filed on November 7, 2008).10
.39*

Third Amendment to Amended and Restated Credit Agreement, dated
    as of May 29, 2009, by and among Quest Cherokee, LLC, Quest
    Energy Partners, L.P., Quest Cherokee Oilfield Service, LLC,
    Royal Bank of Canada, KeyBank National Association and the
    Lenders party thereto (incorporated herein by reference to
    Exhibit 10.1 to QRCPs Current Report on
    Form 8-K
    filed on June 23, 2009).




---



##### Table of Contents



ExhibitNo.

Description10
.40*

Fourth Amendment to Amended and Restated Credit Agreement, dated
    as of June 30, 2009, among Quest Cherokee, LLC, Quest
    Energy Partners, L.P., Quest Cherokee Oilfield Service, LLC,
    Royal Bank of Canada, KeyBank National Association and the
    Required Lenders party thereto (incorporated herein by reference
    to Exhibit 10.5 to QRCPs Current Report on
    Form 8-K
    filed on July 7, 2009).10
.41*

Fifth Amendment to Amended and Restated Credit Agreement, dated
    as of December 17, 2009, by and among Quest Cherokee, LLC,
    Quest Energy Partners, L.P., Quest Cherokee Oilfield Service,
    LLC, STP Newco, Inc., Royal Bank of Canada, KeyBank National
    Association and the Lenders party thereto (incorporated by
    reference to Exhibit 10.32 to PostRocks Registration
    Statement on
    Form S-4/A
    filed on December 17, 2009).10
.42*

Second Amended and Restated Credit Agreement, dated as of
    September 11, 2009, by and among QRCP, as the Borrower,
    Royal Bank of Canada, as Administrative Agent and Collateral
    Agent, and the lenders from time to time party thereto
    (incorporated herein by reference to Exhibit 10.1 to
    QRCPs Current Report on
    Form 8-K
    filed on September 17, 2009).10
.43*

First Amendment to Second Amended and Restated Credit Agreement,
    dated as of November 30, 2009, by and among QRCP, as
    Borrower, Royal Bank of Canada, as Administrative Agent and
    Collateral Agent and as the Lender, and the Guarantors party
    thereto (incorporated herein by reference to Exhibit 10.1
    to QRCPs Current Report on
    Form 8-K
    filed on December 1, 2009).10
.44*

Second Amendment to Second Amended and Restated Credit
    Agreement, dated as of December 17, 2009, by and among
    QRCP, as Borrower, Royal Bank of Canada, as Administrative Agent
    and Collateral Agent and as the Lender, and the Guarantors party
    thereto (incorporated by reference to Exhibit 10.35 to
    PostRocks Registration Statement on
    Form S-4/A
    filed on December 17, 2009).10
.45*

Loan Transfer Agreement, dated as of November 15, 2007, by
    and among QRCP, Quest Cherokee, LLC, Quest Oil & Gas,
    LLC, Quest Energy Service, Inc., Quest Cherokee Oilfield
    Service, LLC, Guggenheim Corporate Funding, LLC, Wells Fargo
    Foothill, Inc., and Royal Bank of Canada (incorporated herein by
    reference to Exhibit 10.6 to QRCPs Current Report on
    Form 8-K
    filed on November 21, 2007).10
.46*

Guaranty for Credit Agreement by Quest Oil & Gas, LLC
    and Quest Energy Service, LLC in favor of Royal Bank of Canada,
    dated as of November 15, 2007 (incorporated herein by
    reference to Exhibit 10.7 to QRCPs Current Report on
    Form 8-K
    filed on November 21, 2007).10
.47*

Pledge and Security Agreement for Credit Agreement by Quest
    Energy Service, LLC for the benefit of Royal Bank of Canada,
    dated as of November 15, 2007 (incorporated herein by
    reference to Exhibit 10.8 to QRCPs Current Report on
    Form 8-K
    filed on November 21, 2007).10
.48*

Pledge and Security Agreement for Credit Agreement by Quest
    Oil & Gas, LLC for the benefit of Royal Bank of
    Canada, dated as of November 15, 2007 (incorporated herein
    by reference to Exhibit 10.9 to QRCPs Current Report
    on
    Form 8-K
    filed on November 21, 2007).10
.49*

First Amendment to Pledge and Security Agreement for Amended and
    Restated Credit Agreement by Quest Oil & Gas, LLC for
    the benefit of Royal Bank of Canada, dated May 29, 2009
    (incorporated herein by reference to Exhibit 10.67 to
    QRCPs Annual Report on
    Form 10-K
    filed on June 3, 2009).10
.50*

Pledge and Security Agreement for Credit Agreement by Quest
    Resource Corporation for the benefit of Royal Bank of Canada,
    dated as of November 15, 2007 (incorporated herein by
    reference to Exhibit 10.10 to QRCPs Current Report on
    Form 8-K
    filed on November 21, 2007).10
.51*

First Amendment to Pledge and Security Agreement for Amended and
    Restated Credit Agreement by QRCP for the benefit of Royal Bank
    of Canada, dated as of July 11, 2008 (incorporated herein
    by reference to Exhibit 10.4 to QRCPs Current Report
    on
    Form 8-K
    filed on July 16, 2008).10
.52*

Second Amendment to Pledge and Security Agreement dated
    March 5, 2010, by PostRock Energy Services Corporation
    (formerly known as Quest Resource Corporation) for the benefit
    of Royal Bank of Canada (incorporated herein by reference to
    Exhibit 10.2 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).10
.53*

Release Agreement dated March 5, 2010, by Royal Bank of
    Canada in favor of Quest Resource Corporation (incorporated
    herein by reference to Exhibit 10.3 to PostRocks
    Current Report on
    Form 8-K
    filed on March 10, 2010).




---



##### Table of Contents



ExhibitNo.

Description10
.54*

Release Agreement dated March 5, 2010, by Royal Bank of
    Canada in favor of Quest Resource Corporation (incorporated
    herein by reference to Exhibit 10.4 to PostRocks
    Current Report on
    Form 8-K
    filed on March 10, 2010).10
.55*

First Lien Senior Pledge and Security Agreement dated
    March 5, 2010, by PostRock Energy Services Corporation
    (formerly known as Quest Resource Corporation) for the benefit
    of Royal Bank of Canada (incorporated herein by reference to
    Exhibit 10.5 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).10
.56*

Guaranty dated March 5, 2010, by PostRock Energy
    Corporation and PostRock Energy Services Corporation (formerly
    known as Quest Resource Corporation) for the benefit of Royal
    Bank of Canada (incorporated herein by reference to
    Exhibit 10.6 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).10
.57*

Guaranty for Amended and Restated Credit Agreement by Quest
    Energy Partners, L.P. in favor of Royal Bank of Canada, dated as
    of November 15, 2007 (incorporated herein by reference to
    Exhibit 10.11 to QRCPs Current Report on
    Form 8-K
    filed on November 21, 2007).10
.58*

Guaranty for Amended and Restated Credit Agreement by Quest
    Cherokee Oilfield Service, LLC in favor of Royal Bank of Canada,
    dated as of November 15, 2007 (incorporated herein by
    reference to Exhibit 10.12 to QRCPs Current Report on
    Form 8-K
    filed on November 21, 2007).10
.59*

Guaranty for Amended and Restated Credit Agreement by STP Newco,
    Inc. in favor of Royal Bank of Canada, dated as of July 16,
    2009, but effective as of May 29, 2009 (incorporated herein
    by reference to Exhibit 10.45 to PostRocks
    Registration Statement on
    Form S-4/A
    filed on December 17, 2009).10
.60*

Pledge and Security Agreement for Amended and Restated Credit
    Agreement by Quest Energy Partners, L.P. for the benefit of
    Royal Bank of Canada, dated as of November 15, 2007
    (incorporated herein by reference to Exhibit 10.13 to
    QRCPs Current Report on
    Form 8-K
    filed on November 21, 2007).10
.61*

First Amendment to Pledge and Security Agreement for Amended and
    Restated Credit Agreement by Quest Energy Partners, L.P. for the
    benefit of Royal Bank of Canada, dated as of July 16, 2009,
    but effective as of May 29, 2009 (incorporated herein by
    reference to Exhibit 10.47 to PostRocks Registration
    Statement on
    Form S-4/A
    filed on December 17, 2009).10
.62*

Pledge and Security Agreement for Amended and Restated Credit
    Agreement by Quest Cherokee Oilfield Service, LLC for the
    benefit of Royal Bank of Canada, dated as of November 15,
    2007 (incorporated herein by reference to Exhibit 10.14 to
    QRCPs Current Report on
    Form 8-K
    filed on November 21, 2007).10
.63*

Pledge and Security Agreement for Amended and Restated Credit
    Agreement by Quest Cherokee, LLC for the benefit of Royal Bank
    of Canada, dated as of November 15, 2007 (incorporated
    herein by reference to Exhibit 10.15 to Quest Resource
    Corporations Current Report on
    Form 8-K
    filed on November 21, 2007).10
.64*

Pledge and Security Agreement for Amended and Restated Credit
    Agreement by STP Newco, Inc. for the benefit of Royal Bank of
    Canada, dated as of July 16, 2009, but effective as of
    May 29, 2009. (incorporated herein by reference to
    Exhibit 10.50 to PostRocks Registration Statement on
    Form S-4/A
    filed on December 17, 2009).10
.65*

Pledge and Security Agreement for Amended and Restated Credit
    Agreement by Quest Eastern Resource LLC for the benefit of Royal
    Bank of Canada, dated as of July 11, 2008 (incorporated
    herein by reference to Exhibit 10.2 to QRCPs Current
    Report on
    Form 8-K
    filed on July 16, 2008).10
.66*

Pledge and Security Agreement for Amended and Restated Credit
    Agreement, dated as of July 11, 2008, by Quest Mergersub,
    Inc., for the benefit of Royal Bank of Canada (incorporated
    herein by reference to Exhibit 10.3 to QRCPs Current
    Report on
    Form 8-K
    filed on July 16, 2008).10
.67*

Guaranty for Amended and Restated Credit Agreement by Quest
    Eastern Resource LLC in favor of Royal Bank of Canada, dated as
    of July 11, 2008 (incorporated herein by reference to
    Exhibit 10.5 to QRCPs Current Report on
    Form 8-K
    filed on July 16, 2008).10
.68*

Guaranty for Amended and Restated Credit Agreement by Quest
    Mergersub, Inc. in favor of Royal Bank of Canada, dated as of
    July 11, 2008 (incorporated herein by reference to
    Exhibit 10.6 to QRCPs Current Report on
    Form 8-K
    filed on July 16, 2008).




---



##### Table of Contents



ExhibitNo.

Description10
.69*

Second Lien Senior Term Loan Agreement, dated as of
    July 11, 2008, by and among Quest Cherokee, LLC, Quest
    Energy Partners, L.P., Royal Bank of Canada, KeyBank National
    Association, Société Générale, the lenders
    party thereto and RBC Capital Markets (incorporated herein by
    reference to Exhibit 10.7 to QRCPs Current Report on
    Form 8-K
    filed on July 16, 2008).10
.70*

First Amendment to Second Lien Senior Term Loan Agreement, dated
    as of October 28, 2008, but effective as of
    November 5, 2008, by and among Quest Cherokee, LLC, Quest
    Energy Partners, L.P., Quest Cherokee Oilfield Service, LLC,
    Royal Bank of Canada, Keybank National Association,
    Société Générale and the Lenders party
    thereto (incorporated herein by reference to Exhibit 10.2
    to QRCPs Current Report on
    Form 8-K
    filed on November 7, 2008).10
.71*

Second Amendment to Second Lien Senior Term Loan Agreement,
    dated as of June 30, 2009, among Quest Cherokee, LLC, Quest
    Energy Partners, L.P., Quest Cherokee Oilfield Service, LLC,
    Royal Bank of Canada, KeyBank National Association,
    Société Générale and the Required Lenders
    party thereto (incorporated herein by reference to
    Exhibit 10.6 to QRCPs Current Report on
    Form 8-K
    filed on July 7, 2009).10
.72*

Third Amendment to Second Lien Senior Term Loan Agreement, dated
    as of September 30, 2009, among Quest Cherokee, LLC, Quest
    Energy Partners, L.P., Quest Cherokee Oilfield Service, LLC,
    Royal Bank of Canada, KeyBank National Association,
    Société Générale and the Lenders party
    thereto (incorporated herein by reference to Exhibit 10.1
    to QRCPs Current Report on
    Form 8-K
    filed on October 1, 2009).10
.73*

Fourth Amendment to Second Lien Senior Term Loan Agreement,
    dated as of October 31, 2009, by and among Quest Cherokee,
    LLC, Quest Energy Partners, L.P., Quest Cherokee Oilfield
    Service, LLC, Royal Bank of Canada, KeyBank National
    Association, Société Générale and the
    Lenders party thereto (incorporated herein by reference to
    Exhibit 10.1 to QRCPs Current Report on
    Form 8-K
    filed on November 2, 2009).10
.74*

Fifth Amendment to Second Lien Senior Term Loan Agreement, dated
    as of November 16, 2009, by and among Quest Cherokee, LLC,
    Quest Energy Partners, L.P., Quest Cherokee Oilfield Service,
    LLC, Royal Bank of Canada, KeyBank National Association,
    Société Générale and the Lenders party
    thereto (incorporated herein by reference to Exhibit 10.1
    to QRCPs Current Report on
    Form 8-K
    filed on November 20, 2009).10
.75*

Sixth Amendment to Second Lien Senior Term Loan Agreement, dated
    as of November 20, 2009, by and among Quest Cherokee, LLC,
    Quest Energy Partners, L.P., Quest Cherokee Oilfield Service,
    LLC, Royal Bank of Canada, KeyBank National Association,
    Société Générale and the Lenders party
    thereto (incorporated herein by reference to Exhibit 10.1
    to QRCPs Current Report on
    Form 8-K
    filed on November 25, 2009).10
.76*

Seventh Amendment to Second Lien Loan Agreement, dated as of
    December 7, 2009, by and among Quest Cherokee, LLC, Quest
    Energy Partners, L.P., Quest Cherokee Oilfield Service, LLC,
    Royal Bank of Canada, KeyBank National Association,
    Société Générale and the Lenders party
    thereto (incorporated herein by reference to Exhibit 10.1
    to QRCPs Current Report on
    Form 8-K
    filed on December 11, 2009).10
.77*

Eighth Amendment to Second Lien Senior Term Loan Agreement,
    dated as of December 17, 2009, by and among Quest Cherokee,
    LLC, Quest Energy Partners, L.P., Quest Cherokee Oilfield
    Service, LLC, Royal Bank of Canada, KeyBank National
    Association, Société Générale and the
    Lenders party thereto (incorporated herein by reference to
    Exhibit 10.63 to PostRocks Registration Statement on
    Form S-4/A
    filed on December 17, 2009).10
.78*

Guaranty for Second Lien Term Loan Agreement by Quest Cherokee
    Oilfield Service, LLC in favor of Royal Bank of Canada, dated as
    of July 11, 2008 (incorporated herein by reference to
    Exhibit 10.8 to QRCPs Current Report on
    Form 8-K
    filed on July 16, 2008).10
.79*

Guaranty for Second Lien Term Loan Agreement by Quest Energy
    Partners, L.P. in favor of Royal Bank of Canada, dated as of
    July 11, 2008 (incorporated herein by reference to
    Exhibit 10.9 to QRCPs Current Report on
    Form 8-K
    filed on July 16, 2008).10
.80*

Guaranty dated March 5, 2010, by PostRock Energy
    Corporation and PostRock Energy Services Corporation (formerly
    known as Quest Resource Corporation) for the benefit of Royal
    Bank of Canada (incorporated herein by reference to
    Exhibit 10.8 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).




---



##### Table of Contents



ExhibitNo.

Description10
.81*

Second Lien Senior Pledge and Security Agreement dated
    March 5, 2010, by PostRock Energy Services Corporation
    (formerly known as Quest Resource Corporation) for the benefit
    of Royal Bank of Canada (incorporated herein by reference to
    Exhibit 10.7 to PostRocks Current Report on
    Form 8-K
    filed on March 10, 2010).10
.82*

Second Lien Senior Pledge and Security Agreement for the Second
    Lien Senior Term Loan Agreement by Quest Cherokee Oilfield
    Service, LLC for the benefit of Royal Bank of Canada, dated as
    of July 11, 2008 (incorporated herein by reference to
    Exhibit 10.10 to QRCPs Current Report on
    Form 8-K
    filed on July 16, 2008).10
.83*

Second Lien Senior Pledge and Security Agreement for the Second
    Lien Senior Term Loan Agreement by Quest Energy Partners, L.P.
    for the benefit of Royal Bank of Canada, dated as of
    July 11, 2008 (incorporated herein by reference to
    Exhibit 10.11 to QRCPs Current Report on
    Form 8-K
    filed on July 16, 2008).10
.84*

Second Lien Senior Pledge and Security Agreement for the Second
    Lien Senior Term Loan Agreement by Quest Cherokee, LLC for the
    benefit of Royal Bank of Canada, dated as of July 11, 2008
    (incorporated herein by reference to Exhibit 10.12 to
    QRCPs Current Report on
    Form 8-K
    filed on July 16, 2008).10
.85*

Amended and Restated Intercreditor Agreement and Collateral
    Agency Agreement, dated as of June 18, 2009, by and among
    Royal Bank of Canada, BP Corporation North America, Inc. and
    Quest Cherokee, LLC (incorporated herein by reference to
    Exhibit 10.2 to QRCPs Current Report on
    Form 8-K
    filed on June 23, 2009).10
.86*

First Amendment to Office Lease, dated as of February 7,
    2008, by and between Cullen Allen Holdings L.P. and Quest
    Midstream Partners, L.P. (incorporated herein by reference to
    Exhibit 10.6 to QRCPs Quarterly Report on
    Form 10-Q
    filed on May 12, 2008).10
.87*

Support Agreement, dated as of July 2, 2009, among Quest
    Resource Corporation, Quest Midstream Partners, L.P., Quest
    Energy Partners, L.P. and each of the unitholders of Quest
    Midstream Partners, L.P. party thereto (incorporated herein by
    reference to Exhibit 10.1 to QRCPs Current Report on
    Form 8-K
    filed on July 7, 2009).10
.88*

First Amendment dated as of October 2, 2009 to the Support
    Agreement, dated as of July 2, 2009, among QRCP, Quest
    Midstream Partners, L.P., Quest Energy Partners, L.P. and each
    of the unitholders of Quest Midstream Partners, L.P. party
    thereto (incorporated herein by reference to Exhibit 10.61
    to PostRocks Registration Statement on
    Form S-4
    filed on October 6, 2009).10
.89*

PostRock Energy Corporation 2010 Long-Term Incentive Plan
    (incorporated herein by reference to Annex B to the joint
    proxy statement/prospectus that is a part of PostRocks
    Registration Statement on
    Form S-4/A
    filed on February 2, 2010).10
.90*

Form of QRCPs 2005 Stock Award Plan Nonqualified Stock
    Option Agreement (incorporated herein by reference to
    Exhibit 10.8 to QRCPs Registration Statement on
    Form S-1
    filed on December 12, 2005).10
.91*

Nonqualified Stock Option Agreement, dated August 15, 2007,
    between QRCP and William Damon III (incorporated herein by
    reference to Exhibit 10.75 to PostRocks Registration
    Statement on
    Form S-4/A
    filed on December 17, 2009).10
.92*

Form of QRCPs Bonus Share Award Agreement for senior staff
    (incorporated herein by reference to Exhibit 10.3 to
    QRCPs Current Report on
    Form 8-K
    filed on December 11, 2009).10
.93*

Form of QRCPs Bonus Share Award Agreement for non-senior
    staff (incorporated herein by reference to Exhibit 10.4 to
    QRCPs Current Report on
    Form 8-K
    filed on December 11, 2009).10
.94*

Form of Quest Energy Partners, L.P.s Phantom Unit Award
    Agreement for senior staff (incorporated herein by reference to
    Exhibit 10.2 to QELPs Current Report on
    Form 8-K
    filed on December 11, 2009).10
.95*

Form of Quest Energy Partners, L.P.s Phantom Unit Award
    Agreement for non-senior staff (incorporated herein by reference
    to Exhibit 10.3 to QELPs Current Report on
    Form 8-K
    filed on December 11, 2009).10
.96*

Form of Quest Midstream Partners, L.P.s Restricted Unit
    Award Agreement for senior staff (incorporated herein by
    reference to Exhibit 10.7 to QRCPs Current Report on
    Form 8-K
    filed on December 11, 2009).




---



##### Table of Contents



ExhibitNo.

Description10
.97*

Form of Quest Midstream Partners, L.P.s Restricted Unit
    Award Agreement for non-senior staff (incorporated herein by
    reference to Exhibit 10.8 to QRCPs Current Report on
    Form 8-K
    filed on December 11, 2009).21
.1

List of Subsidiaries.23
.1

Consent of Cawley, Gillespie & Associates, Inc.23
.2

Consent of UHY, LLP.31
.1

Certification by principal executive officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a) of the Securities Exchange Act of 1934, as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification by principal financial officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a) of the Securities Exchange Act of 1934, as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification by principal executive officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

Certification by principal financial officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.99
.1

Report of Cawley, Gillespie & Associates, Inc.     *
    
    Incorporated by reference.
    
    Management contracts and compensatory plans and arrangements
    required to be filed as Exhibits pursuant to Item 14(a) of
    this report.  Form 10-K.