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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008.
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to          .
 Commission file number: 001-33787
 QUEST ENERGY PARTNERS, L.P.
  Delaware
    
    26-0518546(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 210 Park Avenue, Suite 2750, Oklahoma City, OK 73102
  405-600-7704
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



QUEST ENERGY PARTNERS, L.P.
 FORM 10-Q
 FOR THE QUARTER ENDED JUNE 30, 2008
 TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    4Item 1. Financial Statements
    
    
    4Balance Sheets:
June 30, 2008 and December 31, 2007
    
    
    F-1Statements of Operations and Comprehensive Income:
Three and six months ended June 30, 2008 and 2007
    
    
    F-2Statements of Cash Flows:
Six months ended June 30, 2008 and 2007
    
    
    F-3Notes to Unaudited Consolidated/Carve Out Financial Statements
    
    
    F-4Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    5Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    14Item 4(T). Controls and Procedures
    
    
    14PART II  OTHER INFORMATION
    
    
    14Item 1. Legal Proceedings
    
    
    14Item 1A. Risk Factors
    
    
    14Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 3. Defaults Upon Senior Securities
    
    
    16Item 4. Submission of Matters to a Vote of Security Holders
    
    
    16Item 5. Other Information
    
    
    16Item 6. Exhibits
    
    
    17SIGNATURES
    
    
    19
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
    
    when we use the terms Quest Energy Partners, the Company, Successor, our, we,
us and similar terms in a historical context prior to November 15, 2007, we are referring to
Predecessor, and when we use such terms in a historical context on or after November 15, 2007,
in the present tense or prospectively, we are referring to Quest Energy Partners, L.P. and its
subsidiaries, Quest Cherokee, LLC and Quest Cherokee Oilfield Service, LLC;
    
    when we use the term Predecessor, we are referring to the assets, liabilities and
operations of our Parent located in the Cherokee Basin (other than its midstream assets),
which our Parent contributed to us at the completion of our initial public offering on
November 15, 2007;
    
    when we use the terms Quest Energy GP or our general partner, we are referring to Quest
Energy GP, LLC, our general partner;
    
    when we use the term our Parent, we are referring to Quest Resource Corporation (Nasdaq:
QRCP), the owner of our general partner, and its subsidiaries (other than us); and
    
    when we use the term Quest Midstream, we are referring to Quest Midstream Partners, L.P.
and its subsidiaries.
 
 -3-




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements .
    -4-




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 ($ in thousands)
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (Audited)ASSETSCurrent assets:Cash
    
    $
    21,505
    
    
    $
    10,170Restricted cash
    
    
    112
    
    
    
    1,205Accounts receivable, trade
    
    
    
    
    
    
    297Due from affiliated companies
    
    
    18,948
    
    
    
    12,788Other current assets
    
    
    3,367
    
    
    
    2,923Inventory
    
    
    9,845
    
    
    
    4,956Short-term derivative asset
    
    
    151
    
    
    
    6,729Total current assets
    
    
    53,928
    
    
    
    39,068Property and equipment, net of accumulated
depreciation of $7,481 and $6,183
    
    
    18,665
    
    
    
    17,063Oil and gas properties:Properties being amortized
    
    
    460,646
    
    
    
    406,661Properties not being amortized
    
    
    19,399
    
    
    
    19,328480,045
    
    
    
    425,989Less: Accumulated depreciation, depletion,
amortization and impairment
    
    
    (147,139
    )
    
    
    (127,968
    )Net property plant and equipment
    
    
    332,906
    
    
    
    298,021Other assets, net
    
    
    3,185
    
    
    
    3,526Long-term derivative asset
    
    
    
    
    
    
    1,568Total assets
    
    $
    408,684
    
    
    $
    359,246LIABILITIES AND PARTNERS EQUITYCurrent liabilities:Accounts payable
    
    $
    18,815
    
    
    $
    15,195Accrued expenses
    
    
    17,448
    
    
    
    5,056Current portion of notes payable
    
    
    247
    
    
    
    666Short-term derivative liability
    
    
    66,379
    
    
    
    8,241Total current liabilities
    
    
    102,889
    
    
    
    29,158Non-current liabilities:Long-term derivative liability
    
    
    81,597
    
    
    
    5,586Asset retirement obligation
    
    
    1,939
    
    
    
    1,700Notes payable
    
    
    142,396
    
    
    
    94,708Less current maturities
    
    
    (247
    )
    
    
    (666
    )Non-current liabilities
    
    
    225,685
    
    
    
    101,328Total liabilities
    
    
    328,574
    
    
    
    130,486Commitments and contingenciesPartners equity:Partners equity
    
    
    208,921
    
    
    
    230,245Accumulated other comprehensive (loss)
    
    
    (128,811
    )
    
    
    (1,485
    )Total partners equity
    
    
    80,110
    
    
    
    228,760Total liabilities and partners equity
    
    $
    408,684
    
    
    $
    359,246
  F-1




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
 
 STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 (UNAUDITED)
 ($ in thousands, except per unit data)
 Successor
    
    
    Predecessor
    
    
    Successor
    
    
    PredecessorThree Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Consolidated)
    
    
    (Carve out)
    
    
    (Consolidated)
    
    
    (Carve out)Revenue:Oil and gas sales
    
    $
    39,901
    
    
    $
    27,867
    
    
    $
    77,252
    
    
    $
    53,416Other revenue (expense)
    
    
    71
    
    
    
    (19
    )
    
    
    120
    
    
    
    (32
    )Total revenues
    
    
    39,972
    
    
    
    27,848
    
    
    
    77,372
    
    
    
    53,384Costs and expenses:Oil and gas production
    
    
    18,438
    
    
    
    14,549
    
    
    
    35,282
    
    
    
    28,137General and administrative
    
    
    1,925
    
    
    
    4,093
    
    
    
    4,383
    
    
    
    5,846Depreciation, depletion and amortization
    
    
    9,732
    
    
    
    7,326
    
    
    
    19,242
    
    
    
    14,063Total costs and expenses
    
    
    30,095
    
    
    
    25,968
    
    
    
    58,907
    
    
    
    48,046Operating income
    
    
    9,877
    
    
    
    1,880
    
    
    
    18,465
    
    
    
    5,338Other income (expense):Other income (expense)
    
    
    (26
    )
    
    
    (304
    )
    
    
    (6
    )
    
    
    (197
    )Change in derivative fair value
    
    
    8,695
    
    
    
    279
    
    
    
    (15,136
    )
    
    
    (185
    )Interest income
    
    
    90
    
    
    
    103
    
    
    
    107
    
    
    
    280Interest expense
    
    
    (2,415
    )
    
    
    (7,189
    )
    
    
    (4,555
    )
    
    
    (14,160
    )Total other income (expense)
    
    
    6,344
    
    
    
    (7,111
    )
    
    
    (19,590
    )
    
    
    (14,262
    )Income (loss) before income taxes
    
    
    16,221
    
    
    
    (5,231
    )
    
    
    (1,125
    )
    
    
    (8,924
    )Income tax expense  deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income (loss)
    
    $
    16,221
    
    
    $
    (5,231
    )
    
    $
    (1,125
    )
    
    $
    (8,924
    )Comprehensive income (loss)
    
    $
    (95,341
    )
    
    $
    2,682
    
    
    $
    (128,451
    )
    
    $
    (14,492
    )General partners interest in net income (loss)
    
    $
    324
    
    
    
    
    
    
    $
    (23
    )Limited partners interest in net income (loss)
    
    $
    15,897
    
    
    
    
    
    
    $
    (1,102
    )Net income
(loss) per limited partner unit:Common units (basic and diluted)
    
    $
    0.75
    
    
    
    
    
    
    $
    (0.05
    )Subordinated units (basic and diluted)
    
    $
    0.75
    
    
    
    
    
    
    $
    (0.05
    )Weighted average limited partner units outstanding:Common units (basic and diluted)
    
    
    12,331,521
    
    
    
    
    
    
    
    12,331,521Subordinated units (basic and diluted)
    
    
    8,857,981
    
    
    
    
    
    
    
    8,857,981
  F-2




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
 
 STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 ($ in thousands)
 Successor
    
    
    PredecessorFor the Six Months EndedJune 30,2008
    
    
    2007(Consolidated)
    
    
    (Carve out)Cash flows from operating activities:Net (loss)
    
    $
    (1,125
    )
    
    $
    (8,924
    )Adjustments to reconcile net income (loss) to cash provided by (used in)
operations:Depreciation and depletion
    
    
    20,586
    
    
    
    15,316Change in derivative fair value
    
    
    14,969
    
    
    
    185Capital contributions for directors fees
    
    
    272
    
    
    
    (25
    )Capital contributions for employees
    
    
    1,555
    
    
    
    2,343Amortization of loan origination fees
    
    
    456
    
    
    
    1,024Amortization of gas swap fees
    
    
    
    
    
    
    125Bad debt expense
    
    
    10
    
    
    
    (Gain) loss on sale of assets
    
    
    (21
    )
    
    
    240Change in assets and liabilities:Restricted Cash
    
    
    1,094
    
    
    
    (10
    )Accounts receivable
    
    
    436
    
    
    
    (2,602
    )Other receivables
    
    
    (72
    )
    
    
    (1,143
    )Other current assets
    
    
    (444
    )
    
    
    (591
    )Inventory
    
    
    (4,788
    )
    
    
    (1,083
    )Due from affiliates
    
    
    (12,462
    )
    
    
    Accounts payable
    
    
    3,539
    
    
    
    (3,496
    )Revenue payable
    
    
    
    
    
    
    2,524Accrued expenses
    
    
    (167
    )
    
    
    (1,344
    )Net cash provided by operating activities
    
    
    23,838
    
    
    
    2,539Cash flows from investing activities:Equipment, development and leasehold costs
    
    
    (42,026
    )
    
    
    (41,804
    )Oil and gas property acquisition
    
    
    (9,500
    )
    
    
    Net additions to other property and equipment
    
    
    (2,925
    )
    
    
    (3,662
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    (20
    )Increase in other assets
    
    
    
    
    
    
    (10
    )Net cash used in investing activities
    
    
    (54,451
    )
    
    
    (45,496
    )Cash flows from financing activities:Proceeds from bank borrowings
    
    
    48,000
    
    
    
    10,000Repayments of note borrowings
    
    
    (312
    )
    
    
    (300
    )Proceeds from issuance of common stock
    
    
    (201
    )
    
    
    Capital contributions (distributions)
    
    
    (5,590
    )
    
    
    23,511Refinancing costs
    
    
    (116
    )
    
    
    (1,688
    )Change in other long-term liabilities
    
    
    167
    
    
    
    80Net cash provided by financing activities
    
    
    41,948
    
    
    
    31,603Net increase (decrease) in cash
    
    
    11,335
    
    
    
    (11,354
    )Cash, beginning of period
    
    
    10,170
    
    
    
    21,334Cash, end of period
    
    $
    21,505
    
    
    $
    9,980Supplemental disclosure of cash flow information:Cash paid during the period for:Interest expense
    
    $
    4,102
    
    
    $
    14,160Income taxes
    
    $
    
    
    
    $
    
  F-3




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
 (UNAUDITED)
 1. Formation of the Company and Description of Business
    2. Basis of Presentation
    3. Summary of Significant Accounting Policies
  Consolidation Policy
  F-4




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
   Use of Estimates
   Basis of Accounting
  Revenue Recognition
  Cash Equivalents
  Uninsured Cash Balances
  Restricted Cash
  Accounts Receivable
   Inventory
  F-5




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
 Other Current Assets
  Concentration of Credit Risk
   Natural Gas and Oil Properties
     F-6




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
   Other Property and Equipment
    
    
    Buildings:25 years
    
    Equipment:10 years
    
    Vehicles:7 years
 Debt Issue Costs
  Other Dispositions
  Marketable Securities
 Accounting for
Certain Investments in Debt and Equity Securities
 Income Taxes
  Fair Value Measurements
  F-7




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
        Derivative Instruments and Hedging Activities
 Accounting for Derivative Instruments and Hedging
Activities
   F-8




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
 Fair ValueDerivative Type
    
    Gains/Losses
    
    Financial Statement ReportingNon-hedge derivatives
and
Hedge derivatives
ineffective portion
    
    Unrealized
and
Realized
    
    Reported in the consolidated income statements
as derivative fair value (gain) lossHedge derivatives
effective portion
    
    Unrealized
    
    Reported in partners equity
in the consolidated balance sheets
as accumulated other comprehensive (loss)Realized
    
    Reported in the consolidated income statements
and classified based on the hedged item
(e.g., gas revenue or oil revenue)
  Asset Retirement Obligations
 Accounting for Asset Retirement Obligations
  Net Income per Limited Partner Unit
  Business Segment Reporting
  Allocation of Costs
  F-9




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##### Table of Contents



QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
  
    
    Revenues include all revenues earned by the Cherokee Basin Operations, before
elimination of intercompany sales with QRC and its subsidiaries. Pursuant to the
midstream services agreement with an affiliate of the Company, Bluestem Pipeline, LLC
(Bluestem), for 2007 the fee was $0.50 per MMBtu of gas for gathering, dehydration and
treating services and $1.10 per MMBtu of gas for compression services, subject to annual
adjustment. Please read Note 13  Related Party Transactions.
    
    Certain common expenses of QRCs operations and the Cherokee Basin Operations
were treated as follows:
 
    
    general and administrative expenses associated with the pipeline
operations were eliminated; and
    
    third party costs incurred at the QRC level that are clearly identifiable
as Cherokee Basin Operations costs, such as insurance premiums related to the
Cherokee Basin Operations and legal fees of outside counsel related to contracts
entered into or claims made by or against the Cherokee Basin Operations and salaries
and benefits of Cherokee Basin Operations executives paid by QRC, were allocated to
the Cherokee Basin Operations.
 
    
    Non-producing acreage located outside of the Cherokee Basin and not transferred
to the Company was eliminated from the balance sheet and related expenses were
eliminated.
    
    To the extent that the common expenses described above were charged to the
Cherokee Basin Operations in the past, the reduction in expenses was retroactively
reflected with the offsetting debit to partners equity.
    
    Since the Company is not subject to entity level income taxes, no allocation of
income taxes or deferred income taxes was reflected in the financial statements.
    
    Derivative transactions remained with the Cherokee Basin Operations.
    
    Managements estimates of the expenses of the Cherokee Basin Operations on a
stand-alone basis were not expected to be significantly different from those reflected
in the statements.
 Earnings per Unit
  Recently Issued Accounting Standards
    The Fair Value Option for Financial Assets and
Financial Liabilities
  F-10




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
  Business Combinations.
 Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51
 Disclosures about Derivative Instruments and Hedging
Activities"
 Determination of the Useful
Life of Intangible Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles
 4. Equity-Based Compensation
  F-11




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
   5. Acquisition
  6. Long-Term Debt
  June 30, 2008
    
    December 31, 2007($ in thousands)Senior credit facility
    
    $
    142,000
    
    
    $
    94,000Notes
payable to banks and finance companies, secured by equipment and
vehicles, due in installments through October 2013 with interest
ranging from 1.9% to 9.8% per annum
    
    
    396
    
    
    
    708Total long-term debt
    
    
    142,396
    
    
    
    94,708Less  current maturities
    
    
    247
    
    
    
    666Total long-term debt, net of current maturities
    
    $
    142,149
    
    
    $
    94,042
  2008
    
    $
    2472009
    
    
    592010
    
    
    142,0522011
    
    
    262012
    
    
    62013
    
    
    6Thereafter
    
    
    $
    142,396
 Credit Facility
   F-12




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
   Other Long-Term Indebtedness
  7. Financial Instruments and Hedging Activities
 Natural Gas and Oil Hedging Activities
    Six MonthsEndingDecember 31,
    
    Years Ending December 31,2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Total(dollars in thousands, except per MMBtu and Bbl data)Natural Gas Swaps:Contract volumes (MMBtu)
    
    
    2,511,000
    
    
    
    14,629,000
    
    
    
    12,499,000
    
    
    
    2,000,000
    
    
    
    2,000,000
    
    
    
    33,639,000Weighted average
fixed price per MMBtu
(1)
    
    $
    8.16
    
    
    $
    7.85
    
    
    $
    7.42
    
    
    $
    8.00
    
    
    $
    8.11
    
    
    $
    7.74Fixed-price sales
    
    $
    20,488
    
    
    $
    114,861
    
    
    $
    92,778
    
    
    $
    16,000
    
    
    $
    16,220
    
    
    $
    260,347Fair value, net
    
    $
    (9,356
    )
    
    $
    (52,065
    )
    
    $
    (34,220
    )
    
    $
    (3,781
    )
    
    $
    (3,485
    )
    
    $
    (102,907
    )Natural Gas Collars:Contract volumes (MMBtu)Floor
    
    
    3,533,000
    
    
    
    
    
    
    
    
    
    
    
    3,000,000
    
    
    
    3,000,000
    
    
    
    9,533,000Ceiling
    
    
    3,533,000
    
    
    
    
    
    
    
    
    
    
    
    3,000,000
    
    
    
    3,000,000
    
    
    
    9,533,000
 F-13




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QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
 Six MonthsEndingDecember 31,
    
    Years Ending December 31,2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Total(dollars in thousands, except per MMBtu and Bbl data)Weighted average fixed
price per MMBtu
(1)Floor
    
    $
    6.54
    
    
    $
    
    
    
    $
    
    
    
    $
    7.00
    
    
    $
    7.00
    
    
    $
    6.75Ceiling
    
    $
    7.54
    
    
    $
    
    
    
    $
    
    
    
    $
    9.60
    
    
    $
    9.40
    
    
    $
    8.44Fixed-price sales (2)
    
    $
    23,112
    
    
    $
    
    
    
    $
    
    
    
    $
    21,000
    
    
    $
    21,000
    
    
    $
    65,112Fair value, net
    
    $
    (18,506
    )
    
    $
    
    
    
    $
    
    
    
    $
    (4,564
    )
    
    $
    (4,353
    )
    
    $
    (27,423
    )Total Natural Gas
Contracts(3):Contract volumes (MMBtu)
    
    
    6,044,000
    
    
    
    14,629,000
    
    
    
    12,499,000
    
    
    
    5,000,000
    
    
    
    5,000,000
    
    
    
    43,172,000Weighted average
fixed price per MMBtu
(1)
    
    $
    7.21
    
    
    $
    7.85
    
    
    $
    7.42
    
    
    $
    7.40
    
    
    $
    7.44
    
    
    $
    7.54Fixed-price sales (2)
    
    $
    43,600
    
    
    $
    114,861
    
    
    $
    92,778
    
    
    $
    37,000
    
    
    $
    37,220
    
    
    $
    325,459Fair value, net
    
    $
    (27,862
    )
    
    
    ($52,065
    )
    
    
    ($34,220
    )
    
    
    ($8,345
    )
    
    
    ($7,838
    )
    
    $
    (130,330
    )Oil Swaps:Contract volumes (Bbl)
    
    
    18,000
    
    
    
    36,000
    
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    84,000Weighted average
fixed price per Bbl (1)
    
    $
    95.92
    
    
    $
    90.07
    
    
    $
    87.50
    
    
    
    
    
    
    
    
    
    
    $
    90.91Fixed-price sales
    
    $
    1,727
    
    
    $
    3,243
    
    
    $
    2,625
    
    
    
    
    
    
    
    
    
    
    $
    7,594Fair value, net
    
    $
    (918
    )
    
    $
    (1,758
    )
    
    $
    (1,413
    )
    
    $
    
    
    
    $
    
    
    
    $
    (4,089
    )
 
 (1)
    
    The prices to be realized for hedged production are expected to vary from the prices shown
due to basis.(2)
    
    Assumes ceiling prices for natural gas collar volumes.(3)
    
    Does not include basis swaps with a notional volume of 3,156,000 MMBtu for 2008.      Interest Rate Hedging Activities
  F-14




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##### Table of Contents



QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
 Change in Derivative Fair Value
  Successor
    
    
    Predecessor
    
    
    Successor
    
    
    PredecessorFor the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007($ in thousands)Change in fair value of
derivative not qualifying as
cash flow
hedges
    
    $
    (3,409
    )
    
    $
    (285
    )
    
    $
    (26,957
    )
    
    $
    (1,321
    )Settlements due to ineffective
cash flow hedges
    
    
    (167
    )
    
    
    

    
    
    
    (167
    )
    
    
    Ineffective portion of oil
derivatives qualifying as cash
flow hedges
    
    
    12,271
    
    
    
    564
    
    
    
    11,988
    
    
    
    1,136$
    8,695
    
    
    $
    279
    
    
    $
    (15,136
    )
    
    $
    (185
    )
  Fair Value Measurements
  June 30, 2008
    
    

December 31, 2007Significant
    
    
    
    
    
    
    SignificantOther
    
    
    Significant
    
    
    Other
    
    
    SignificantObservable
    
    
    Unobservable
    
    
    Observable
    
    
    UnobservableInputs
    
    
    Inputs
    
    
    Inputs
    
    
    Inputs(Level II)
    
    
    (Level III)
    
    
    (Level II)
    
    
    (Level III)(in thousands)Derivative Assets:Fixed-price natural gas futures and basis swaps
    
    $
    151
    
    
    $
    
    
    
    $
    8,297
    
    
    $
    Fixed-price oil futures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Derivative Liabilities:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fixed-price natural gas futures and basis swaps
    
    
    (143,888
    )
    
    
    
    
    
    
    (13,827
    )
    
    
    Fixed-price oil futures
    
    
    (4,088
    )
    
    
    
    
    
    
    
    
    
    
    Net derivative liability
    
    $
    (147,825
    )
    
    $
    
    
    
    $
    (5,530
    )
    
    $
    Asset retirement obligation
    
    $
    
    
    
    $
    (1,939
    )
    
    $
    
    
    
    $
    (1,700
    )
 Accounting for Derivative
Instruments and Hedging Activities
 Credit Risk
  F-15




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##### Table of Contents



QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
  Market Risk
    8. Asset Retirement Obligations
 Accounting for Asset Retirement Obligations
 Successor
    
    
    Predecessor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007($ in thousands)Asset retirement obligation beginning balance
    
    $
    1,820
    
    
    $
    1,477
    
    
    $
    1,700
    
    
    $
    1,410Liabilities incurred
    
    
    83
    
    
    
    42
    
    
    
    171
    
    
    
    83Liabilities settled
    
    
    (1
    )
    
    
    (2
    )
    
    
    (3
    )
    
    
    (3
    )Accretion expense
    
    
    37
    
    
    
    29
    
    
    
    71
    
    
    
    56Revisions in estimated cash flows
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Asset retirement obligation ending balance
    
    $
    1,939
    
    
    $
    1,546
    
    
    $
    1,939
    
    
    $
    1,546
 F-16




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##### Table of Contents



QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
 9. Comprehensive Income (Loss)
  Successor
    
    
    Predecessor
    
    
    Successor
    
    
    PredecessorThree Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Consolidated)
    
    
    (Carve out)
    
    
    (Consolidated)
    
    
    (Carve out)Net Income (loss)
    
    $
    16,221
    
    
    $
    (5,231
    )
    
    $
    (1,125
    )
    
    $
    (8,924
    )Other comprehensive income (loss), net of tax:Change in fixed-price contract and other
derivative fair value, net of tax of $0 for all
periods
    
    
    (121,665
    )
    
    
    8,341
    
    
    
    (138,641
    )
    
    
    (4,145
    )Reclassification adjustments  contract
settlements, net of tax of $0 for all periods
    
    
    10,103
    
    
    
    (428
    )
    
    
    11,315
    
    
    
    (1,423
    )Other comprehensive income (loss)
    
    
    (111,562
    )
    
    
    7,913
    
    
    
    (127,326
    )
    
    
    (5,568
    )Comprehensive income (loss)
    
    $
    (95,341
    )
    
    $
    2,682
    
    
    $
    (128,451
    )
    
    $
    (14,492
    )
 10. Partners Equity
   11. Net Income (Loss) Per Limited Partner Unit
 Participating Securities and the
Two-Class Method under FASB Statement No. 128
  Three Months Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2008Per Limited
    
    
    
    
    
    
    Per Limited$
    
    
    Partner Unit
    
    
    $
    
    
    Partner UnitNet income (loss)
    
    $
    16,221
    
    
    $
    
    
    
    $
    (1,125
    )Less: General
partners 2%
interest in net
income (loss)
    
    
    324
    
    
    
    
    
    
    
    (23
    )Net income (loss)
available for
limited partners
    
    $
    15,897
    
    
    $
    0.75
    
    
    
    (1,102
    )
    
    $
    (0.05
    )
   12. Commitments and Contingencies
  F-17




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##### Table of Contents



QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
 et al
 et al.
     F-18




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##### Table of Contents



QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
      13. Related Party Transactions
  Midstream Services Agreement
 F-19




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##### Table of Contents



QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
     Management Services Agreement.
     Omnibus Agreement.
  F-20




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##### Table of Contents



QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
    Midstream Omnibus Agreement.
  
    
    the gathering, treating, processing and transporting of gas in North America;
    
    the transporting and fractionating of gas liquids in North America;
    
    any other midstream activities, including but not limited to crude oil storage, transportation, gathering and terminaling;
    
    constructing, buying or selling any assets related to the foregoing businesses; and
    
    any line of business other than those described in the preceding bullet points that generates qualifying income, within
the meaning of Section 7704(d) of the Code, other than any business that is primarily engaged in the exploration for and
production of oil or gas and the sale and marketing of gas and oil derived from such exploration and production
activities.
   
    
    the ownership of a passive investment of less than 5% in an entity engaged in a Restricted Business;
    
    any business in which Quest Midstream permits the Company to engage;
    
    the ownership or operation of assets used in a Restricted Business if the value of the assets is less than $4 million; and
    
    any business that the Company has given Quest Midstream the option to acquire and it has elected not to purchase.
  F-21




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##### Table of Contents



QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
  Contribution, Conveyance and Assumption Agreement.
  14. Subsequent Events
 PetroEdge Acquisition
   Other
  F-22




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##### Table of Contents



QUEST ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED/CARVE OUT FINANCIAL STATEMENTS
(UNAUDITED)
    F-23




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Business of Issuer
  Significant Developments During the Six Months Ended June 30, 2008
     Recent Developments
 PetroEdge Acquisition
    ths
   5




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##### Table of Contents



Results of Operations
  Overview.
 For the Three Months
    
    
    
    
    
    
    
    
    
    For the Six MonthsEnded June 30,
    
    
    
    
    
    
    
    
    
    Ended June 30,Successor
    
    Predecessor
    
    Increase
    
    Successor
    
    Predecessor
    
    Increase2008
    
    2007
    
    (Decrease)
    
    2008
    
    2007
    
    (Decrease)($ in thousands)Oil and gas sales
    
    $
    39,901
    
    
    $
    27,867
    
    
    $
    12,034
    
    
    
    43.2
    %
    
    $
    77,252
    
    
    $
    53,416
    
    
    $
    23,836
    
    
    
    44.6
    %Other revenue/(expense)
    
    $
    71
    
    
    $
    (19
    )
    
    $
    90
    
    
    
    n/m
    
    
    $
    120
    
    
    $
    (32
    )
    
    $
    152
    
    
    
    n/mOil and gas production costs
    
    $
    9,763
    
    
    $
    7,723
    
    
    $
    2,040
    
    
    
    26.4
    %
    
    $
    17,944
    
    
    $
    14,967
    
    
    $
    2,977
    
    
    
    19.9
    %Transportation expense
(related affiliate)
    
    $
    8,675
    
    
    $
    6,809
    
    
    $
    1,866
    
    
    
    27.4
    %
    
    $
    17,338
    
    
    $
    13,170
    
    
    $
    4,168
    
    
    
    31.6
    %Depreciation, depletion and
amortization
    
    $
    9,732
    
    
    $
    7,326
    
    
    $
    2,406
    
    
    
    32.8
    %
    
    $
    19,242
    
    
    $
    14,063
    
    
    $
    5,179
    
    
    
    36.8
    %General and administrative
expense
    
    $
    1,925
    
    
    $
    4,093
    
    
    $
    (2,168
    )
    
    
    -53.0
    %
    
    $
    4,383
    
    
    $
    5,846
    
    
    $
    (1,463
    )
    
    
    -25.0
    %Change in derivative fair value
    
    $
    8,695
    
    
    $
    279
    
    
    $
    8,416
    
    
    
    n/m
    
    
    $
    (15,136
    )
    
    $
    (185
    )
    
    $
    (14,951
    )
    
    
    n/mInterest expense
    
    $
    2,415
    
    
    $
    7,189
    
    
    $
    (4,774
    )
    
    
    -66.4
    %
    
    $
    4,555
    
    
    $
    14,160
    
    
    $
    (9,605
    )
    
    
    -67.8
    % 
 n/m
     not meaningful
 6




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##### Table of Contents



Production.
 For the Three Months
    
    
    
    
    
    
    
    
    
    For the Six MonthsEnded June 30,
    
    
    
    
    
    
    
    
    
    Ended June 30,Increase
    
    
    
    
    
    
    
    
    
    Increase2008
    
    2007
    
    (Decrease)
    
    2008
    
    2007
    
    (Decrease)Production Data (net):Natural gas production
(MMcf)
    
    
    5,113
    
    
    
    4,058
    
    
    
    1,055
    
    
    
    26
    %
    
    
    10,104
    
    
    
    7,774
    
    
    
    2,330
    
    
    
    30
    %Oil production (Bbl)
    
    
    16,599
    
    
    
    1,935
    
    
    
    14,664
    
    
    
    758
    %
    
    
    27,787
    
    
    
    3,955
    
    
    
    23,832
    
    
    
    603
    %Total production (MMcfe)
    
    
    5,213
    
    
    
    4,069
    
    
    
    1,144
    
    
    
    28
    %
    
    
    10,271
    
    
    
    7,797
    
    
    
    2,474
    
    
    
    32
    %Average daily
production (MMcfe/d)
    
    
    57.3
    
    
    
    44.7
    
    
    
    12.6
    
    
    
    28
    %
    
    
    56.4
    
    
    
    43.3
    
    
    
    13.1
    
    
    
    30
    %Average Sales Price per
Unit:Natural
gas equivalents (Mcfe) Excluding hedges
    
    $
    9.36
    
    
    $
    6.50
    
    
    $
    2.86
    
    
    
    44
    %
    
    $
    8.50
    
    
    $
    6.67
    
    
    $
    1.83
    
    
    
    27
    %Including
hedges
    
    $
    7.62
    
    
    $
    6.85
    
    
    $
    0.77
    
    
    
    11
    %
    
    $
    7.51
    
    
    $
    6.85
    
    
    $
    0.66
    
    
    
    10
    %Natural gas (Mcf) Excluding hedges
    
    $
    9.18
    
    
    $
    6.49
    
    
    $
    2.69
    
    
    
    41
    %
    
    $
    8.35
    
    
    $
    6.66
    
    
    $
    1.69
    
    
    
    25
    %Including
hedges
    
    $
    7.44
    
    
    $
    6.84
    
    
    $
    0.60
    
    
    
    9
    %
    
    $
    7.35
    
    
    $
    6.85
    
    
    $
    0.50
    
    
    
    9
    %Oil (Bbl) Excluding hedges
    
    $
    111.25
    
    
    $
    55.32
    
    
    $
    55.93
    
    
    
    101
    %
    
    $
    105.96
    
    
    $
    52.77
    
    
    $
    53.19
    
    
    
    101
    %Including hedges
    
    $
    101.21
    
    
    $
    55.32
    
    
    $
    45.09
    
    
    
    83
    %
    
    $
    99.96
    
    
    $
    52.77
    
    
    $
    47.19
    
    
    
    89
    %Average Unit Costs per
Mcfe:Production costs
    
    $
    1.87
    
    
    $
    1.90
    
    
    $
    (0.03
    )
    
    
    -2
    %
    
    $
    1.75
    
    
    $
    1.93
    
    
    $
    (0.18
    )
    
    
    -9
    %Transportation expense
(intercompany)
    
    $
    1.66
    
    
    $
    1.68
    
    
    $
    (0.02
    )
    
    
    -1
    %
    
    $
    1.69
    
    
    $
    1.69
    
    
    $
    0.00
    
    
    
    0.00
    %Depreciation, depletion
and amortization
    
    $
    1.87
    
    
    $
    1.80
    
    
    $
    0.07
    
    
    
    4
    %
    
    $
    1.87
    
    
    $
    1.80
    
    
    $
    0.07
    
    
    
    4
    %General and
administrative expense
    
    $
    0.37
    
    
    $
    1.01
    
    
    $
    (0.64
    )
    
    
    -63
    %
    
    $
    0.43
    
    
    $
    0.75
    
    
    $
    (0.32
    )
    
    
    -43
    %Interest expense
    
    $
    0.46
    
    
    $
    1.77
    
    
    $
    (1.30
    )
    
    
    -74
    %
    
    $
    0.44
    
    
    $
    1.82
    
    
    $
    (1.38
    )
    
    
    -76
    %
 Three
Months Ended June 30, 2008 Compared with the Three Months Ended
June 30, 2007
 Oil and Gas Sales.
 Other Revenue/(Expense)
 Operating Expenses.
  7




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##### Table of Contents



Depreciation, Depletion and Amortization.
 General and Administrative Expense.
 Change in Derivative Fair Value.
 Interest Expense.
 Six
Months Ended June 30, 2008 Compared with the Six Months Ended
June 30, 2007
 Oil and Gas Sales.
 Other Revenue/(Expense)
 Operating Expenses.
 8




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##### Table of Contents



Depreciation, Depletion and Amortization.
 General
and Administrative Expense.
 Change in Derivative Fair Value.
 Interest Expense.
 Net
Income (Loss)
   9




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##### Table of Contents



Liquidity and Capital Resources
 Liquidity
     th th th
 Capital Expenditures
   
    
    $41.0 million to drill and complete these wells and recomplete an estimated 52 gross wells in the Cherokee Basin;
    
    $37.5 million for acreage, equipment and vehicle replacement and purchases and salt water disposal facilities in
the Cherokee Basin;
  
    
    maintenance capital expenditures, which are those capital expenditures
required to maintain our production levels and asset base over the
long term; and
 10




---



##### Table of Contents




    
    expansion capital expenditures, which are those capital expenditures
that we expect will increase our production of our gas and oil
properties and our asset base over the long term.
    Cash Flows
 Cash Flows from Operating Activities.
 Cash Flows Used in Investing Activities.
 Cash Flows from Financing Activities.
 Contractual Obligations
  Payments
Due by PeriodLess
    
    
    
    
    
    
    
    
    
    
    MoreThan 1
    
    
    1-3
    
    
    4-5
    
    
    Than 5Total
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    Years($ in thousands)Revolving Credit Facility
    
    $
    142,000
    
    
    $
    
    
    
    $
    142,000
    
    
    $
    
    
    
    $
    Notes payable
    
    
    396
    
    
    
    247
    
    
    
    111
    
    
    
    32
    
    
    
    6Interest expense obligation (1)
    
    
    22,782
    
    
    
    4,911
    
    
    
    17,868
    
    
    
    2
    
    
    
    1Drilling contractor
    
    
    856
    
    
    
    856
    
    
    
    
    
    
    
    
    
    
    
    Asset retirement obligation
    
    
    1,939
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,939Derivatives
    
    
    147,976
    
    
    
    66,379
    
    
    
    65,414
    
    
    
    16,183
    
    
    
    Total
    
    $
    315,949
    
    
    $
    72,393
    
    
    $
    225,393
    
    
    $
    16,217
    
    
    $
    1,946
 
 (1)
    
    The interest payment obligation was computed using the LIBOR interest rate as of June
30, 2008. If the interest rate were to change 1%, then the total interest payment
obligation would change by $3.3 million. Critical Accounting Policies and Estimates
 11




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##### Table of Contents



Off-Balance Sheet Arrangements
  Cautionary Statements for Purpose of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995
  
    
    projections and estimates concerning the timing and success of specific projects;
    
    financial position;
    
    business strategy;
    
    budgets;
    
    amount, nature and timing of capital expenditures;
    
    drilling of wells;
    
    acquisition and development of natural gas and oil properties;
    
    timing and amount of future production of natural gas and oil;
    
    operating costs and other expenses;
    
    estimated future net revenues from natural gas and oil reserves and the present value thereof;
    
    cash flow and anticipated liquidity; and
    
    other plans and objectives for future operations.
  12




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##### Table of Contents




    
    our ability to implement our business strategy;
    
    the extent of our success in discovering, developing and producing reserves, including the risks inherent
in exploration and development drilling, well completion and other development activities;
    
    fluctuations in the commodity prices for natural gas and crude oil;
    
    engineering and mechanical or technological difficulties with operational equipment, in well completions
and workovers, and in drilling new wells;
    
    land issues;
    
    the effects of government regulation and permitting and other legal requirements;
    
    labor problems;
    
    environmental related problems;
    
    the uncertainty inherent in estimating future natural gas and oil production or reserves;
    
    production variances from expectations;
    
    the substantial capital expenditures required for the drilling of wells and the related need to fund such
capital requirements through commercial banks and/or public securities markets;
    
    disruptions, capacity constraints in or other limitations on Quest Midstreams pipeline systems;
    
    costs associated with perfecting title for natural gas and oil rights in some of our properties;
    
    the need to develop and replace reserves;
    
    competition;
    
    dependence upon key personnel;
    
    the lack of liquidity of our equity securities;
    
    operating hazards attendant to the natural gas and oil business;
    
    down-hole drilling and completion risks that are generally not recoverable from third parties or insurance;
    
    potential mechanical failure or under-performance of significant wells;
    
    climatic conditions;
    
    natural disasters;
    
    acts of terrorism;
    
    availability and cost of material and equipment;
    
    delays in anticipated start-up dates;
    
    our ability to find and retain skilled personnel;
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
    
    availability of capital;
    
    the strength and financial resources of our competitors; and
    
    general economic conditions.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4(T). Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
 Form 10-K.
 Risks Related to Our Business
 The economic terms of the midstream services agreement may become unfavorable to us.
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A default by our Parent under its credit facilities could result in a change of control of our
general partner, which would be an event of default under our credit facilities and could adversely
affect our operating results.
    Risks Relating to the Acquisition of the Appalachian Basin Assets
 The integration of the PetroEdge wellbore assets presents significant challenges that may reduce
the anticipated potential benefits of the acquisition.
  
    
    integrating the existing operations of the acquired assets;
    
    coordinating geographically disparate organizations, systems and facilities;
    
    preserving customer, supplier and other important relationships and resolving
potential conflicts that may arise as a result of the acquisition;
    
    integrating internal controls, compliances under the Sarbanes-Oxley Act of 2002 and
other corporate governance matters; and
    
    incurring significant transaction and integration costs.
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Risks of Entry into the Marcellus Shale Reservoir of the Appalachian Basin
 We have limited experience in drilling wells in the Marcellus Shale. Appalachian Basin wells are
more expensive to drill and complete and are more susceptible to mechanical problems than in the
Cherokee Basin.
  Risks Related to Our Acquisition Financing
  Tax Risks to Common Unitholders
 A unitholder whose units are loaned to a short seller to cover a short sale of units may be
considered as having disposed of those units. If so, he would no longer be treated for tax purposes
as a partner with respect to those units during the period of the loan and may recognize gain or
loss from the disposition.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Default Upon Senior Securities
  
 Item 4. Submission of Matters to Vote of Security Holders
  
 Item 5. Other Information
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Item 6. Exhibits
 2.1*
    
    Agreement for Purchase and Sale, dated July 11, 2008, by and among
Quest Resource Corporation, Quest Eastern Resource LLC and Quest
Cherokee LLC (incorporated herein by reference to Exhibit 2.1 to
Quest Energy Partners, L.P.s Current Report on Form 8-K filed on
July 16, 2008).3.1*
    
    Amendment No. 1 to First Amended and Restated Agreement of Limited
Partnership of Quest Energy Partners, L.P., effective as of January
1, 2007, by Quest Energy GP, LLC (incorporated herein by reference
to Exhibit 3.1 to Quest Energy Partners, L.P.s Current Report on
Form 8-K filed on April 11, 2008).3.2*
    
    First Amended and Restated Agreement of Limited Partnership of Quest
Energy Partners, L.P., dated as of November 15, 2007, by and between
Quest Energy GP, LLC and Quest Resource Corporation (incorporated
herein by reference to Exhibit 3.1 to Quest Energy Partners, L.P.s
Current Report on Form 8-K filed on November 21, 2007).10.1*
    
    First Amendment to Amended and Restated Credit Agreement, effective
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 Quest
Energy Partners, L.P.s Current Report on Form 8-K filed on April
23, 2008).10.2*
    
    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 10.1 to Quest Energy Partners, L.P.s
Current Report on Form 8-K filed on July 16, 2008).10.3*
    
    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 10.2 to
Quest Energy Partners, L.P.s Current Report on Form 8-K filed on
July 16, 2008).10.4*
    
    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 10.3 to
Quest Energy Partners, L.P.s Current Report on Form 8-K filed on
July 16, 2008).10.5*
    
    Second Lien Senior Pledge and Security Agreement for Second Lien
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 10.4 to Quest Energy
Partners, L.P.s Current Report on Form 8-K filed on July 16, 2008).10.6*
    
    Second Lien Senior Pledge and Security Agreement for Second Lien
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 10.5 to Quest Energy Partners, L.P.s
Current Report on Form 8-K filed on July 16, 2008).10.7*
    
    Second Lien Senior Pledge and Security Agreement for Second Lien
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 10.6 to Quest Energy Partners, L.P.s Current
Report on Form 8-K filed on July 16, 2008).10.8*
    
    Intercreditor Agreement, dated as of July 11, 2008, by and between
Royal Bank of Canada and Quest Cherokee, LLC (incorporated herein by
reference to Exhibit 10.7 to Quest Energy Partners, L.P.s Current
Report on Form 8-K filed on July 16, 2008).31.1
    
    Certification by Chief 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.
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31.2
    
    Certification by Chief 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 Chief 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Previously filed. 18




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SIGNATURES
 th
 QUEST ENERGY PARTNERS, L.P.By:
    Quest Energy GP, LLC, its general partnerBy:
    /s/ Jerry D. CashJerry D. CashChief Executive OfficerBy:
    /s/ David E. GroseDavid E. GroseChief Financial Officer 19