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Tortoise Gas and Oil Corp. Responds to Recent Developments Related to Quest Energy Partners, L.P. And Quest Midstream Partners, L.P. And Announces Distribution Increase

Posted on: Thursday, 28 August 2008, 18:00 CDT

Tortoise Gas and Oil Corp. ("TGO") is responding to the recent announcement by the boards of directors of Quest Resource Corporation (NASDAQ: QRCP), Quest Energy Partners, L.P. (NASDAQ: QELP) and Quest Midstream Partners, L.P. ("QMP") (collectively, "Quest") that they have accepted the resignation of Jerry Cash, as Chairman and CEO of all three entities, effective immediately. The resignation followed the discovery, in connection with an inquiry from the Oklahoma Department of Securities, of questionable transfers of company funds to an entity controlled by Mr. Cash. It has been reported that initial indications are that the amount in question appears to be about $10 million.

TGO owned 306,800 common units of publicly traded QELP (purchased in the November 2007 IPO) and 465,000 common units of privately held QMP, collectively representing approximately 13 percent of TGO's total assets, based on the aggregate fair value of $13 million as of May 31, 2008. On Aug. 13, 2008, TGO received QMP's second quarter cash distribution of $0.425 per common unit, and received QELP's second quarter cash distribution of $0.43 per unit on Aug. 14, 2008.

It has been reported that promptly following the discovery of alleged misappropriation of funds, members of the three boards met in joint sessions on Friday and over last weekend. The boards immediately formed a Joint Special Committee comprised of representatives from each board, including the chairs of the audit committees of QRCP and QELP, to investigate the matter and consider the effects on the companies' financial statements. The Joint Special Committee has retained Spencer C. Barasch of Andrews Kurth LLP to lead the investigation. QRCP, QELP and QMP Chief Financial Officer David Grose was placed on a paid administrative leave of absence during the investigation. In Quest's announcement, it was stated that Quest has reported this matter to, and intends to fully cooperate with, the U.S. Securities and Exchange Commission and other appropriate governmental and regulatory organizations.

The board of directors of QMP was increased to seven members and Ed Russell, the President of TGO, was named as a director of QMP on Aug. 24, 2008.

QMP was formed by QRCP to acquire and develop transmission and gathering assets in the midstream natural gas and oil industry. QMP is a privately held company with two main assets: Bluestem Pipeline, LLC which serves QELP and other 3rd parties and the KPC Pipeline System, a 1,148 mile interstate pipeline in Kansas and Northern Oklahoma. QMP's latest financial statements reflect that the KPC and Bluestem assets each account for approximately 50 percent of QMP's year to date EBITDA. QMP's capital structure has common units held by outside investors and subordinated units held by QRCP. As of June 30, 2008, there are 8,614,866 common units, 35,134 Class A subordinated units, 4,900,000 Class B subordinated units and 276,531 general partner units of QMP outstanding.

QELP is a publicly traded company that engages in the acquisition, exploitation, and development of oil and natural gas properties. It focuses on the development of coal bed methane (CBM) in southeastern Kansas and northeastern Oklahoma.

QRCP is a fully integrated E&P company that owns 100 percent of the general partner and a 57 percent limited partner interest in QELP; and 85 percent of the general partner and a 36 percent limited partner interest in QMP. QRCP operates and controls QELP and QMP through its ownership of their general partners.

Tortoise Gas and Oil Corp. Announces Distribution Increase

On August 11, 2008 the Board of Directors of Tortoise Gas and Oil Corp. declared the company's third quarter 2008 distribution of $0.27 per share compared to $0.2625 in the previous quarter. The distribution will be paid on Sept. 2, 2008 to stockholders of record on Aug. 21, 2008.

A portion of this distribution is expected to be treated as return of capital for income tax purposes, although the ultimate determination will not be made until determination of our earnings and profits after our year-end. Based on current financial information, this distribution is estimated to consist of 100 percent return of capital for book purposes.

About Tortoise Gas and Oil Corp.

Tortoise Gas and Oil Corp. invests primarily in privately held companies and publicly traded MLPs and their affiliates operating primarily in the upstream segment, and to a lesser extent the midstream segment, of the energy sector. The company seeks a high level of total return through capital appreciation and current income.

About Tortoise Capital Advisors

Tortoise Capital Advisors, LLC is a pioneer in capital markets for master limited partnership (MLP) investment companies and a leader in closed-end funds and separately managed accounts focused on MLPs in the energy sector. As of July 31, 2008, the adviser had approximately $2.6 billion of assets under management. For more information, visit our Web site at www.tortoiseadvisors.com.

Safe Harbor Statement

This press release shall not constitute an offer to sell or a solicitation to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer or solicitation or sale would be unlawful prior to registration or qualification under the laws of such state or jurisdiction.

Source: Business Wire

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