Restatement

As discussed in the Explanatory Note to this Annual Report on Form 10-K and in Note 18 - Restatement to our consolidated financial statements, we are restating the consolidated financial statements included in this Annual Report on Form 10-K as of December 31, 2007 and 2006 and for the three years ended December 31, 2007. We are also restating previously issued Quarterly Financial Data for 2008 and 2007 presented in Note 20 - Supplemental Financial Information - Quarterly Financial Data (Unaudited) to the consolidated financial statements. This Management's Discussion and Analysis of Financial Condition and Results of Operations for the years ended December 31, 2008, 2007, 2006 and 2005 reflects the restatements.

The following discussion should be read together with the consolidated financial statements and the notes to consolidated financial statements, which are included in Item 8 of this Form 10-K, and the Risk Factors, which are set forth in Item 1A.

Overview of Our Company

Since QRCP controls the general partner interests in Quest Energy and Quest Midstream, QRCP reflects its ownership interest in these partnerships on a consolidated basis, which means that our financial results are combined with Quest Energy's and Quest Midstream's financial results and the results of our other subsidiaries. The interest owned by non-controlling partners' share of income is reflected as an expense in our results of operations. Since the initial public offering of Quest Energy in November 2007, QRCP's potential sources of revenue and cash flows consist almost exclusively of distributions on its partnership interests in Quest Energy and Quest Midstream, because QRCP's Appalachian assets largely consist of undeveloped acreage. Our consolidated results of operations are derived from the results of operations of Quest Energy and Quest Midstream and also include interest of non-

controlling partners in Quest Energy's and Quest Midstream's net income, interest income (expense) and general and administrative expenses not reflected in Quest Energy's and Quest Midstream's results of operations. Accordingly, the discussion of our financial position and results of operations in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" primarily reflects the operating activities and results of operations of Quest Energy and Quest Midstream.

We are an integrated independent energy company involved in the acquisition, development, transportation, exploration, and production of natural gas, primarily from coal seams (coal bed methane, or "CBM"), and oil. Our principal operations and producing properties are located in the Cherokee Basin of southeastern Kansas and northeastern Oklahoma; Seminole County, Oklahoma; and West Virginia, New York and Pennsylvania in the Appalachian Basin. We conduct substantially all of our production operations through Quest Energy and our natural gas transportation, gathering, treating and processing operations through Quest Midstream. Our Cherokee Basin operations are currently focused on developing CBM gas production through Quest Energy, which is served by a gas gathering pipeline network owned through Quest Midstream. Quest Midstream also owns an interstate natural gas transmission pipeline. Our Appalachian Basin operations are primarily focused on the development of the Marcellus Shale through Quest Energy and Quest Eastern.

Recent Developments

The following is a discussion of some of the more significant events that occurred during 2008 and the first part of 2009. Please read Items 1. and 2. "Business and Properties - Recent Developments" for additional information regarding these and other events that occurred during the year.

PetroEdge Acquisition

On July 11, 2008, QRCP acquired PetroEdge and simultaneously transferred PetroEdge's natural gas producing wells to Quest Energy. Quest Energy funded its purchase of the PetroEdge wellbores with borrowings under its revolving credit facility, which was increased from $160 million to $190 million as part of the acquisition and the proceeds from the Second Lien Loan Agreement. QRCP funded the balance of the PetroEdge acquisition with proceeds from a public offering of 8,800,000 shares of QRCP common stock at a price of $10.25 per share that closed on July 8, 2008. QRCP received net proceeds from this offering of approximately $84.2 million. Simultaneously with the closing of the PetroEdge acquisition, QRCP converted its then existing $50 million revolving credit facility to a $35 million term loan with a maturity date of July 11, 2010. RBC required QRCP to use $13 million of the proceeds from the equity offering to reduce the outstanding indebtedness under the Credit Agreement from $48 million to $35 million. The purpose of the PetroEdge acquisition was to expand our operations to another geologic basin with less basins differential, that had significant resource potential. The acquisition closed during the peak month of natural gas pricing in 2008.

Internal Investigation; Restatements and Reaudits

On August 23, 2008, only six weeks after the PetroEdge transaction closed, our then chief executive officer resigned following the discovery of the Transfers. The Transfers were brought to the attention of the boards of directors of each of the Company, Quest Energy GP and Quest Midstream GP as a result of an inquiry and investigation that had been initiated by the Oklahoma Department of Securities. The Company's board of directors, jointly with the boards of directors of Quest Energy GP and Quest Midstream GP, formed a joint special committee to investigate the matter and to consider the effect on our consolidated financial statements. We also retained a new independent registered public accounting firm to reaudit our financial statements.

The investigation revealed that the Transfers resulted in a loss of funds totaling approximately $10 million by the Company. Further, it was determined that our former chief financial officer directly participated and/or materially aided our former chief executive officer in connection with the unauthorized Transfers. In addition, the Oklahoma Department of Securities has filed a lawsuit alleging that our former chief financial officer and our former purchasing manager each received kickbacks of approximately $0.9 million from several related suppliers over a two-year period and that during the third quarter of 2008, they also engaged in the direct theft of $1 million for their personal benefit and use.

We experienced significant increased costs in the second half of 2008 and continue to experience such increased costs in the first half of 2009 due to, among other things:

• We had costs associated with the internal investigation and our responding to inquiries from the Oklahoma Department of Securities, the Federal Bureau of Investigation, the Department of Justice, SEC and the IRS.

• As a result of the termination of the former chief executive officer and chief financial officer, we immediately retained consultants to perform the accounting and finance functions and to assist in the determination of the intercompany debt discussed under Items 1. and 2. "Business and Properties - Recent Developments - Intercompany Accounts."

• We retained law firms to respond to the class action and derivative suits that have been filed against QRCP and Quest Energy GP and QELP and to pursue the claims against the former employees.

• We had costs associated with amending the credit agreements of QRCP, QELP and QMLP and obtaining the necessary waivers from our lenders thereunder as well as incremental increased interest expense related thereto. See "- Liquidity and Capital Resources."

• We retained external auditors, who completed reaudits of the restated consolidated financial statements for the years ended December 31, 2007, 2006 and 2005.

• Each of QRCP, QELP and QMLP retained financial advisors to consider strategic options and each retained outside legal counsel or increased the amount of work being performed by its previously engaged outside legal counsel.

We estimate that the increased costs related to the foregoing will be approximately $7.0 million to $8.0 million in total.

Global Financial Crisis and Impact on Capital Markets and Commodity Prices

At about the same time as the Transfers were discovered, the global economy experienced a significant downturn. The crisis began over concerns related to the U.S. financial system and quickly grew to impact a wide range of industries. There were two significant ramifications to the exploration and production industry as the economy continued to deteriorate. The first was that capital markets essentially froze. Equity, debt and credit markets shut down. Future growth opportunities have been and are expected to continue to be constrained by the lack of access to liquidity in the financial markets.

The second impact to the industry was that fear of global recession resulted in a significant decline in oil and gas prices. In addition to the decline in oil and gas prices, the differential from NYMEX pricing to our sales point for our Cherokee Basin gas production has widened and is still at unprecedented levels of volatility.

Our operations and financial condition are significantly impacted by these prices. During the year ended December 31, 2008, the NYMEX monthly gas index price (last day) ranged from a high of $13.58 per Mmbtu to a low of $5.29 per Mmbtu. Natural gas prices came under pressure in the second half of the year as a result of lower domestic product demand that was caused by the weakening economy and concerns over excess supply of natural gas. In the Cherokee Basin, where we produce and sell most of our gas, there has been a widening of the historical discount of prices in the area to the NYMEX pricing point at Henry Hub as a result of elevated levels of natural gas drilling activity in the region and a lack of pipeline takeaway capacity. During 2008, this discount (or basis differential) in the Cherokee Basin ranged from $0.67 per Mmbtu to $3.62 per Mmbtu.

The spot price for NYMEX crude oil in 2008 ranged from a high of $145.29 per barrel in early July to a low of $33.87 per barrel in late December. The volatility in oil prices during the year was a result of the worldwide recession, geopolitical activities, worldwide supply disruptions, actions taken by the Organization of Petroleum Exporting Countries and the value of the U.S. dollar in international currency markets as well as domestic concerns about refinery utilization and petroleum product inventories pushing prices up during the first half of the year. Due to our relatively low level of oil production relative to gas and our existing commodity hedge positions, the volatility of oil prices had less of an effect on our operations.

Overall, as a result, our operating profitability was seriously adversely affected during the second half of 2008 and is expected to continue to be impaired during 2009. While our existing commodity hedge position mitigates the impact of commodity price declines, it does not eliminate the potential effects of changing commodity prices. See Item 1A. "Risk Factors - Risks Related to Our Business - The current financial crisis and deteriorating economic conditions may have a material adverse impact on our business and financial condition that we cannot predict."

Credit Agreement Amendments

In October and November 2008, QRCP, Quest Cherokee and Quest Energy, and Quest Midstream and Bluestem entered into amendments to their respective credit agreements that, among other things, amended and/or waived certain of the representations and covenants contained in each credit agreement in order to rectify any possible covenant violations or non-compliance with the representations and warranties as a result of (1) the questionable Transfers of funds discussed above and (2) not timely settling certain intercompany accounts among QRCP, Quest Energy and Quest Midstream. The Quest Cherokee amendment also extended the maturity date of the Second Lien Loan Agreement from January 11, 2009 to September 30, 2009 due to our inability to refinance the Second Lien Loan Agreement as a result of a combination of the ongoing investigation and the global financial crisis. The amendments also restricted the ability of Quest Midstream and Quest Energy to pay distributions to QRCP.

In May 2009, QRCP entered into an amendment to the Credit Agreement to, among other things, waive certain events of default related to its financial covenants and collateral requirements, extend certain financial reporting deadlines and permit the settlement agreements with Mr. Cash discussed below.

See "- Liquidity and Capital Resources - Credit Agreements" for additional information regarding our credit agreements.

Suspension of Distributions and Asset Sales

Distributions were suspended on Quest Energy's subordinated units beginning with the third quarter of 2008 and distributions were suspended on all of Quest Energy's units, including its common units, beginning with the fourth quarter of 2008. Since these distributions would have been substantially all of QRCP's cash flows for 2009, the loss of the Quest Energy distributions was material to QRCP's financial position.

In October 2008, we negotiated an additional $6 million term loan under the Credit Agreement with a maturity date of November 30, 2008. We agreed with our lenders that the additional term loan would be repaid with the net proceeds from asset sales by QRCP and that the first $4.5 million of net proceeds in excess of any additional term loans that were borrowed would be used to repay QRCP's $35 million term loan.

On October 30, 2008, QRCP sold its interest in approximately 22,600 net undeveloped acres and one well in Somerset County, Pennsylvania to a private party for approximately $6.8 million. On November 26, 2008, QRCP sold its interest in the development rights and related purchase option, which it had purchased on June 4, 2008 covering approximately 28,700 acres in Potter County, Pennsylvania, to an undisclosed party for approximately $3.2 million. On February 13, 2009, QRCP sold its interest in approximately 23,076 net undeveloped acres in the Marcellus Shale and one well in Lycoming County, Pennsylvania to a third party for approximately $8.7 million.

Management decided that these undeveloped acres were good candidates for disposition in the current environment given the lack of gathering and transportation infrastructure in the immediate area and the cost and time that would be involved in establishing significant flow of natural gas.

In addition to these sales, on November 5, 2008, QRCP sold a 50% interest in approximately 4,500 net undeveloped acres, three wells in various stages of completion and existing pipelines and facilities in Wetzel County, West Virginia to another party for $6.1 million. QRCP will continue to operate the Wetzel County property. All future development costs will be split equally between QRCP and the other party. This joint venture arrangement allows QRCP to retain a significant interest in the Wetzel County property, which we believe is a desirable asset due to established infrastructure, pipeline taps and proved offset production in the area.

QRCP borrowed $2 million of the additional $6 million term loan under its Credit Agreement in October 2008. QRCP's portion of the proceeds from the asset sales were used to repay the $2 million additional term loan and to reduce QRCP's $35 million term loan to $28.3 million as of May 15, 2009.

Decrease in Year-End Reserves; Impairment

Due to the low price for natural gas as of December 31, 2008 as described above, revisions resulting from further technical analysis (see Note 21 - Supplemental Information on Oil and Gas Producing Activities (Unaudited) to the accompanying consolidated financial statements and production during the year, proved reserves decreased 17.2% to 174.8 Bcfe at December 31, 2008 from 211.1 Bcfe at December 31, 2007, and the standardized measure of our proved reserves decreased 49.1% to $164.1 million as of December 31, 2008 from $286.2 million as of December 31, 2007. Proved reserves also decreased as a result of our production during the year. Our proved reserves at December 31, 2008 were calculated using a spot price of $5.71 per Mmbtu (adjusted for basis differential, prices were $5.93 per Mmbtu in the Appalachian Basin and $4.84 per Mmbtu in the Cherokee Basin). As a result of this decrease, we recognized a non-cash impairment of $298.9 million for the year ended December 31, 2008.

As a result, the lenders under QELP's revolving credit facility are likely to reduce QELP's borrowing base in the near term. See "- Liquidity and Capital Resources - Sources of Liquidity in 2009 and Capital Requirements - Quest Energy."

Settlement Agreements

As discussed above, we filed lawsuits against Mr. Cash, the entity controlled by Mr. Cash that was used in connection with the Transfers and two former officers, who are the other owners of the controlled-entity, seeking, among other things, to recover the funds that were transferred. On May 19, 2009, QRCP, QELP and QMLP entered into settlement agreements with Mr. Cash, the controlled-entity and the other owners to settle this litigation. Under the terms of the settlement agreements, QRCP received (1) approximately $2.4 million in cash and (2) 60% of the controlled-entity's interest in a gas well located in Louisiana and a landfill gas development project located in Texas. While QRCP estimates the value of these assets to be less than the amount of the Transfers and cost of the internal investigation, they represent the majority of the value of the controlled-entity. We did not take Mr. Cash's stock in QRCP, which he represented had been pledged to secure personal loans with a principal balance far in excess of the current market value of the stock. QELP received all of Mr. Cash's equity interest in STP, which owns certain oil producing properties in Oklahoma, and other assets as reimbursement for all of the costs of the internal investigation and the costs of the litigation against Mr. Cash that have been paid by QELP.

Outlook for 2009; Recombination

Given the liquidity challenges facing the Company, Quest Midstream and Quest Energy, each entity has undertaken a strategic review of its assets and may enter into one or more transactions to dispose of assets in order to raise additional funds for operations and/or to repay indebtedness. In addition, in the current economic environment we believe the complexity and added overhead costs of our structure is negatively affecting our ability to restructure our indebtedness and raise additional equity. See "- Liquidity and Capital Resources." On April 28, 2009, the Company, Quest Midstream and Quest Energy entered into a non-binding letter of intent to enter into the Recombination, pursuant to the terms of which all three companies would form a new publicly traded holding company that would wholly-own all three entities. The new company would continue to develop the unconventional resources of the Cherokee and Appalachian Basins with a clear focus on value creation through efficient operations. The closing of the Recombination is subject to the satisfaction of a number of conditions, including the entry into a definitive merger agreement, the negotiation of a new credit facility for the new company, regulatory approval and the approval of the transaction by the stockholders of the Company and the unitholders of Quest Energy and Quest Midstream. There can be no assurance that the definitive documentation will be agreed to or that the Recombination will close.

Segment Overview

After the acquisition of the KPC Pipeline in November 2007, we began reporting our results of operations as two business segments. These segments and the activities performed to provide services to our customers and create value for our stockholders are as follows:

• Oil and gas production; and

• Natural gas pipelines, including transporting, gathering, treating and processing natural gas.

Previously reported amounts have been adjusted to reflect this change, which did not impact our consolidated financial statements. Operating segment data for the years ended December 31, 2008, 2007, 2006, and 2005 follows (in thousands):

                                                   2008           2007           2006           2005

Revenues:
Oil and gas production                          $  147,937      $ 105,285      $  72,410      $ 70,628
Natural gas pipelines                               63,722         39,032         25,833        11,732
Elimination of inter-segment revenue               (35,546 )      (29,179 )      (20,819 )      (7,793 )

Natural gas pipelines, net of inter-segment
revenue                                             28,176          9,853          5,014         3,939

Total segment revenues                          $  176,113      $ 115,138      $  77,424      $ 74,567

Operating profit (loss):
Oil and gas production(a)                       $ (284,244 )    $   5,999      $   1,861      $ 23,508
Natural gas pipelines                               17,198         11,964         10,063         2,580

Total segment operating profit (loss)             (267,046 )       17,963         11,924        26,088
General and administrative expenses                 28,269         21,023          8,655         6,218
Misappropriation of funds                                -          2,000          6,000         2,000

Total operating income (loss)                   $ (295,315 )    $  (5,060 )    $  (2,731 )    $ 17,870

(a) 2008 includes impairment of oil and gas properties of $298.9 million in 2008.

Results of Operations

The following discussion of financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements, which are included elsewhere in this report.

Oil and Gas Production Segment

Year ended December 31, 2008 compared to the year ended December 31, 2007

Overview. The following discussion of results of operations compares amounts for
the year ended December 31, 2008 to the amounts for the year ended December 31,
2007, as follows:


                                                  Year Ended
                                                 December 31,                Increase/
                                              2008          2007             (Decrease)
                                                            ($ in thousands)

 Oil and gas sales                          $ 147,937     $ 105,285     $  42,652       40.5 %
 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   $  53,663     $  33,812     $  19,851       58.7 %
 Impairment charge                          $ 298,861     $       -     $ 298,861          * %

* Not meaningful

Production. The following table presents the primary components of revenues of our Oil and Gas Production Segment (oil and gas production and average oil and gas prices), as well as the average costs per Mcfe, for the fiscal years ended December 31, 2008 and 2007.

                                                   Year Ended
                                                  December 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):       $   6.80     $   6.19     $  0.61        9.9 %
   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 sales increased $42.7 million, or 40.5%, to $147.9 million during the year ended December 31, 2008. This increase was the result of increased sales volumes and an increase in average realized prices. Additional volumes of 4,731 Mmcfe accounted for $32.2 million of the increase. The increased volumes resulted from additional wells completed in 2008. The remaining increase of $10.4 million was attributable to an increase in the average product price in 2008. Our average product prices, which exclude hedge settlements, on an equivalent basis (Mcfe) increased to $6.80 per Mcfe for the 2008 period from $6.19 per Mcfe for the 2007 period.

Oil and Gas Operating Expenses. Oil and gas operating expenses consist of oil and gas production costs, which include lease operating expenses, severance taxes and ad valorem taxes, and transportation expense. Oil and gas operating expenses increased $14.2 million, or 21.7%, to $79.7 million during the year ended December 31, 2008, from $65.5 million during the year ended December 31, 2007.

Oil and gas production costs increased $7.8 million, or 21.5%, to $44.1 million during the year ended December 31, 2008, from $36.3 million during the year ended December 31, 2007. This increase was primarily due to increased volumes in 2008. Production costs including gross production taxes and ad valorem taxes were $2.03 per Mcfe for the year ended December 31, 2008 as compared to $2.13 per Mcfe for the year ended December 31, 2007. The decrease in per unit cost was due to higher volumes over which to spread fixed costs.

Transportation expense increased $6.4 million, or 21.8%, to $35.5 million during the year ended December 31, 2008, from $29.2 million during the year ended December 31, 2007. The increase was primarily due to increased volumes, which resulted in additional expense of approximately $7.6 million. This increase was offset by a decrease in

per unit cost of $0.08 per Mcfe. Transportation expense was $1.63 per Mcfe for the year ended December 31, 2008 as compared to $1.71 per Mcfe for the year ended December 31, 2007. This decrease in per unit cost was due to increased volumes, over which to spread fixed costs.

Depreciation, Depletion and Amortization. We are subject to variances in our depletion rates from period to period due to changes in our oil and gas reserve quantities, production levels, product prices and changes in the depletable cost basis of our oil and gas properties. Our depreciation, depletion and amortization increased approximately $19.9 million, or 58.7%, in 2008 to $53.7 million from $33.8 million in 2007. On a per unit basis, we had an increase of $0.48 per Mcfe to $2.47 per Mcfe in 2008 from $1.99 per Mcfe in . . .