Exhibit 99.1
QUESTAR REPORTS SECOND QUARTER INCOME
FROM CONTINUING OPERATIONS OF $28.7 MILLION
Company completes spin-off of QEP Resources Inc., affirms2010 EPS guidance
SALT LAKE CITY — Questar Corp. (NYSE:STR) reported income of $28.7 million or $0.16 per diluted share from continuing operations, including a $7.1 million or $0.04 per diluted share charge for separation costs associated with the June 30, 2010 spin-off of QEP Resources, Inc. (NYSE: QEP). Income decreased 13% in the quarter, compared to $33.0 million or $0.18 per diluted share for the second quarter of 2009. Excluding the separation charges, Questar earned $35.8 million or $0.20 per diluted share for the quarter.
INCOME (LOSS) FROM CONTINUING OPERATIONS BY SUBSIDIARY
| | | | | | | | | |
| 3 Months Ended | | 6 Months Ended | | 12 Months Ended | |
June 30, | June 30, | June 30, |
2010 | 2009 | Change | 2010 | 2009 | Change | 2010 | 2009 | Change |
Wexpro | $22.0 | $19.8 | 11% | $43.2 | $38.6 | 12% | $85.3 | $77.5 | 10% |
Questar Pipeline | 15.9 | 15.0 | 6 | 33.1 | 29.7 | 11 | 61.6 | 59.1 | 4 |
Questar Gas | (2.2) | (2.0) | (10) | 30.9 | 29.8 | 4 | 42.7 | 41.4 | 3 |
Corporate* | (7.0) | 0.2 |
| (6.3) | 0.2 |
| (6.5) | 0.5 |
|
TOTAL | $28.7 | $33.0 | (13%) | $100.9 | $98.3 | 3% | $183.1 | $178.5 | 3% |
Earnings from continuing operations per diluted share | $0.16 | $0.18 | (11%) | $0.57 | $0.55 | 4% | $1.03 | $1.02 | 1% |
Average diluted shares | 177.6 | 176.1 | | 177.4 | 176.0 | | 176.9 | 175.8 |
|
(in millions, except earnings per share)
*Includes $7.1 million of after-tax separation costs
“Questar’s second-quarter earnings from continuing operations before one-time separation charges are up over 8% from last year. All business units are performing in line with or ahead of our expectations,” said Ron W. Jibson, President and Chief Executive Officer. “We’re pleased to have successfully completed the spin-off of QEP Resources to our shareholders, and our team is now focused on delivering the growth we described in recent investor presentations.”
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Spin-off transaction completed
On June 30, 2010, Questar completed a tax-free spin-off of QEP Resources, its natural gas and oil exploration and production and midstream field services businesses. Results of operations for QEP for the second quarter of 2010 and prior periods are reported in the attached recast financial statements as income from discontinued operations. Following the spin-off, Questar’s subsidiaries are Wexpro, Questar Pipeline, and Questar Gas.
Wexpro Results
Wexpro grew net income 11% to $22.0 million in the second quarter of 2010, compared to $19.8 million in the 2009 quarter. Wexpro earned a 20.1% after-tax return on average investment base for the 12 months ended June 30, 2010. Wexpro investment base at June 30, 2010, was $436.2 million, compared to $411.4 million a year ago, a 6% increase. Wexpro net income was $43.2 million in the first half of 2010, compared to $38.6 million in the year-ago period, driven by a higher average investment base. Wexpro net income for the 12 months ended June 30, 2010, was $85.3 million compared to $77.5 million for the year-earlier period. During the 12 months ended June 30, 2010, Wexpro produced 48.5 billion cubic feet (Bcf) of cost-of-service gas for Questar Gas, comprising about half of utility supply. Under a long-standing agreement with the states of Utah and Wyoming, Wexpro recovers its costs and earns an unlevered after-tax return on its investment base – the investment in commercial wells and related facilities, reduced by working capital, deferred income taxes and accumulated depreciation. A summary of changes in Wexpro’s investment base is provided below:
Change in Wexpro Investment Base
| | |
| 12 Months Ended June 30, |
2010 | 2009 |
| (millions) |
Beginning investment base | $411.4 | $346.4 |
Successful development wells | 98.3 | 141.3 |
Depreciation, depletion & amortization | (60.0) | (55.2) |
Change in deferred taxes | (13.5) | (21.1) |
Ending investment base | $436.2 | $411.4 |
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Questar Pipeline Results
Questar Pipeline grew net income 6% to $15.9 million in the second quarter of 2010, compared to $15.0 million in the 2009 quarter. Questar Pipeline earned an 11.2% return on average equity for the 12 months ended June 30, 2010. Questar Pipeline’s net income increase was largely driven by $4.1 million of higher contracted transportation commitments and $3.3 million of higher natural gas liquids (NGL) sales. Net income increased 11% to $33.1 million for the first half of 2010, driven by higher transportation revenues and NGL sales in the period. Net income totaled $61.6 million in the 12 months ended June 30, 2010 compared to $59.1 million for the year-earlier period. A summary of changes in Questar Pipeline revenues is provided below:
Change in Questar Pipeline Revenues
| | | | | |
| 3 Months Ended | | 6 Months Ended | | 12 Months Ended |
June 30, | June 30, | June 30, |
2010 vs 2009 | | 2010 vs 2009 | | 2010 vs 2009 |
| | | (millions) | | |
Transportation revenue | $4.1 | | $8.4 | | $10.6 |
Storage revenue | (0.5) | | (1.0) | | 0.4 |
NGL sales – transmission | 0.4 | | 0.6 | | (3.2) |
NGL sales – field services | 2.9 | | 6.0 | | 10.0 |
Energy services | 0.5 | | (0.1) | | (1.1) |
Other | (2.0) | | (1.8) | | (2.7) |
Change | $5.4 | | $12.1 | | $14.0 |
As of June 30, 2010, Questar Pipeline held net firm-transportation contracts totaling 4,671 thousand decatherms (Mdth) per day, compared to 4,221 Mdth per day as of June 30, 2009, an 11% increase. Transportation revenues increased due to the Overthrust Pipeline compression expansion completed in the fourth quarter of 2009. The company added transportation contracts totaling 460 Mdth per day associated with this expansion.
NGL sales increased due to higher prices and higher volumes sold in each period. The average NGL price for the first half of 2010 was $1.37 per gallon, up 96% from the first half of 2009. Volumes
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increased 35% in the first half of 2010 over the first half of 2009 due to Questar Transportation Services’ completion of a processing plant in Price, Utah, during the third quarter of 2009.
Operating, maintenance, general and administrative expenses for the first half of 2010 totaled $0.10 per decatherm transported, up from $0.09 per decatherm in the year-earlier period.
Questar Gas Results
Questar Gas reported a seasonal loss of $2.2 million in the second quarter of 2010, compared to net loss of $2.0 million in the 2009 period. Questar Gas earned a 10.4% return on average equity for the 12 months ended June 30, 2010. Questar Gas earned $30.9 million in the first half of 2010 compared to $29.8 million in the first half of 2009 and $42.7 million for the 12 months ended June 30, 2010, compared to $41.4 million in the year-earlier period. Changes in Questar Gas margin (revenues less cost of gas sold) are summarized in the following table:
Change in Questar Gas Margin
| | | | | |
| 3 Months Ended | | 6 Months Ended | | 12 Months Ended |
| June 30, | | June 30, | | June 30, |
| 2010 vs 2009 | | 2010 vs 2009 | | 2010 vs 2009 |
| | | (millions) | | |
Customer growth | $1.2 | | $2.4 | | $4.1 |
Demand-side management cost recovery | 2.5 | | 14.0 | | 25.9 |
Recovery of gas-cost portion of bad-debts | 0.1 | | (1.4) | | (4.0) |
Other | (1.0) | | (0.8) | | 0.5 |
Change | $2.8 | | $14.2 | | $26.5 |
At June 30, 2010, Questar Gas served 905,745 customers, up 15,496 or 1.7% from June 30, 2009. Higher margins from customer growth contributed to increased earnings for each period. Operating, maintenance, general and administrative expenses, excluding demand-side-management (DSM) costs, were $69 per customer in the first half of 2010 compared to $71 per customer for the first half of 2009. Changes in margin from DSM-recovery revenues are offset by equivalent changes in the program’s expenses.
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On April 8, 2010, the Public Service Commission of Utah approved a settlement in Questar Gas’s Utah general rate case. The stipulation, effective August 1, 2010, authorizes an increase in the utility’s allowed return on equity from 10.0% to 10.35% and indefinitely extends the existing conservation-enabling (revenue decoupling) tariff. The stipulation further approves an infrastructure cost tracking mechanism that allows the company to place into the rate base capital expenditures for a multi-year high-pressure natural gas feeder-line replacement program once the new facilities are in service.
Questar affirms 2010 earnings guidance
Questar expects that 2010 net income from continuing operations could range from $180 to $185 million or $1.00 to $1.05 per average diluted share. The company’s guidance includes incremental interest expense on debt incurred at the parent company concurrent with the spin-off of QEP Resources but excludes the impact of one-time separation charges associated with the transaction.
Second Quarter 2010 Earnings Teleconference
Questar management will discuss second quarter 2010 results from continuing operations and the outlook for the remainder of 2010 in a conference call with investors Wednesday, July 28, beginning at 9:30 a.m. EDT. The call can be accessed on the company website at www.questar.com.
About Questar Corporation:
Questar is a natural gas-focused energy company with an enterprise value of about $ 4.2 billion, operating through three principal subsidiaries:
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Wexprodevelops and produces natural gas on behalf of Questar Gas customers;
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Questar Pipelineoperates interstate natural gas pipelines and storage facilities in the western U.S., and;
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Questar Gasprovides retail gas distribution in Utah, Wyoming, and Idaho.
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Forward-Looking Statements
This document may contain or incorporate by reference information that includes or is based upon "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. Any or all forward-looking statements may turn out to be wrong. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties t hat are difficult to predict. Actual results could differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to the following:
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general economic conditions, including the performance of financial markets and interest rates;
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changes in industry trends;
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changes in laws or regulations; and
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other factors, most of which are beyond the control of Questar.
Questar undertakes no obligation to publicly correct or update the forward-looking statements in this document, in other documents, or on the web site to reflect future events or circumstances. All such statements are expressly qualified by this cautionary statement.
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For more information, visit Questar’s website at: www.questar.com.
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