Jun. 4--Quest Resource Corp. may be forced into bankruptcy, the Oklahoma City-based energy company reported Wednesday in an annual report delayed by financial improprieties by former executives.

Quest Resources' independent auditor, in the company's annual report, issued a statement expressing "substantial doubt" about the company's ability to survive.

Quest Resources had $4 million in cash as of Dec. 31, but no ability to borrow under its credit agreements, the company said in its filing with the U.S. Securities and Exchange Commission. The company estimated that it will run out of cash Aug. 31.

"Unless QRCP (Quest Resources) is able to sell additional assets, restructure its indebtedness, issue equity securities and/or complete some other strategic transaction, we may be forced to make a bankruptcy filing or take other actions that could have a material adverse effect on our business, the price of our common stock and our results of operations," the company said.

Quest Resources depends on payments from Quest Energy Partners and Quest Midstream Partners, but those entities suspended distributions last year, the company said.

"QRCP does not expect to receive any distributions from Quest Energy or Quest Midstream in 2009 and is unable to estimate at this time when such distributions may be resumed," the company said.

Companies to merge Quest Resources, Quest Energy Partners and Quest Midstream Partners have agreed, in a nonbinding document, to form one publicly traded company that would own all three entities. Before that can happen, the companies must negotiate a merger agreement and a new credit facility. The deal also would require approval of shareholders and regulators, the company said.

The three companies' boards have elected David Lawler as chief executive officer of each entity. Lawler said combining the companies makes economic sense.

"While much work must still be completed, we believe a recombination would make the Quest entities more competitive in today's market environment by allowing us to further reduce costs, increase operational efficiency and simplify our organizational structure," Lawler said in a statement.

Quest Resources lost $167.4 million last year and, according to its restated financials, has posted a profit only once in the past six years.

Quest Resources and Quest Energy Partners next week will seek to persuade Nasdaq officials not to remove those companies' stock listings from the stock exchange.

Nasdaq notified the companies that they were facing delisting for failing to file required quarterly and annual reports.

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