(Source: Business Wire)
Questar Corp. (NYSE:STR) reported $98.2 million net income for the third
quarter 2009, or $0.56 per diluted share. Excluding gains and losses
from sales of non-core assets and mark-to-market losses on natural gas
basis-only swaps, Questar net income was $0.60 per diluted share in the
third quarter of 2009. Third-quarter 2009 EBITDA was $373.7 million,
down 18% from the third quarter of 2008. Reflecting continued voluntary
curtailments, Questar E&P third-quarter production was 43.8 Bcfe,
compared to 45.3 Bcfe in the third quarter of 2008 and 43.4 Bcfe in the
second quarter of 2009.
NET INCOME (LOSS) BY SUBSIDIARY (in millions, except earnings per share)
3 Months EndedSeptember 30, 9 Months EndedSeptember 30,
2009 2008 Change 2009 2008 Change
Market Resources
Questar E&P $49.6 $146.8 (66 %) $ 64.3 $360.1 (82 %)
Wexpro 20.6 20.4 1 59.2 55.4 7
Gas Management((a)) 21.5 24.5 (12 ) 47.4 64.7 (27 )
Energy Trading and other 0.3 5.9 (95 ) 6.5 18.8 (65 )
Market Resources Total((a)) 92.0 197.6 (53 ) 177.4 499.0 (64 )
Questar Pipeline 14.1 15.4 (8 ) 43.8 44.0 --
Questar Gas (8.1 ) (8.8 ) 8 21.7 19.8 10
Corporate 0.2 -- -- 0.4 (0.2 ) --
QUESTAR CORPORATION TOTAL((a)) $98.2 $204.2 (52 %) $243.3 $562.6 (57 %)
Earnings per diluted share $0.56 $1.16 $1.38 $3.19
Average diluted shares 176.3 176.1 176.1 176.2
((a)) Net income represents amounts attributable to Questar after deducting noncontrolling interest.
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EBITDA BY SUBSIDIARY(a) (in millions)
3 Months EndedSeptember 30, 9 Months EndedSeptember 30,
2009 2008 Change 2009 2008 Change
Market Resources
Questar E&P $237.3 $309.8 (23 %) $ 714.3 $ 811.1 (12 %)
Wexpro 45.9 42.7 7 133.3 118.4 13
Gas Management 47.0 50.2 (6 ) 113.9 134.2 (15 )
Energy Trading and other 1.0 9.4 (89 ) 11.3 29.5 (62 )
Market Resources Total 331.2 412.1 (20 ) 972.8 1,093.2 (11 )
Questar Pipeline 39.9 42.0 (5 ) 122.4 126.0 (3 )
Questar Gas 2.6 0.7 -- 83.1 75.7 10
Corporate -- 0.1 -- 0.2 0.2 --
QUESTAR CORPORATION TOTAL $373.7 $454.9 (18 %) $1,178.5 $1,295.1 (9 %)
((a)) Management defines EBITDA as net income before mark-to-market gains and losses on basis-only swaps, gains and losses from asset sales, interest and other income, interest expense, depreciation, depletion, amortization, abandonments, impairments, exploration expense and income taxes.
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"Questar has remained financially strong in 2009 despite a steep decline
in natural gas prices over the past year," said Keith O. Rattie, Questar
Chairman, President and CEO. "Natural gas prices are likely to improve
in 2010, so we intend to get Questar E&P production turned back up in
the fourth quarter, and we're gearing up to deliver strong production
growth in 2010 and beyond. We estimate that Questar E&P 2010 production
could range from 210-215 Bcfe, up about 15% from 2009 -- and if we
execute our five-year plan, Questar E&P could grow production 12-15% per
year over the next five years. We have good visibility on this growth
because Questar E&P has a large development-drilling inventory in
perhaps the two most economic natural gas plays in North America -- the
Haynesville Shale in northwest Louisiana and the Pinedale Anticline in
southwest Wyoming. With recent acquisitions, we now have 43,000 net
acres in the core of the Haynesville -- up 39% from a few months ago. In
2010, we plan to increase investment in horizontal drilling in the
promising Granite Wash and Woodford Shale plays in the Anadarko Basin,
and the Bakken oil play in North Dakota's Williston Basin. Meanwhile,
the rest of Questar' -- Wexpro, Gas Management, Questar Pipeline, and
Questar Gas -- continues to contribute solid earnings and cash flow that
is relatively insensitive to commodity prices," Rattie added.
Third Quarter 2009 Highlights
Questar E&P EBITDA declined 23% compared to the 2008 quarter due
primarily to a 15% decrease in realized natural gas prices and a 40%
decrease in realized oil and natural gas liquids (NGL) prices in the
2009 quarter.
Questar E&P natural gas, oil and NGL production was 43.8 billion cubic
feet of natural gas equivalent (Bcfe), down 3% compared to 45.3 Bcfe
for the 2008 quarter, but up 1% from the second quarter of 2009. The
company continued to defer completions, curtail production, and shut
in some existing wells in response to low natural gas prices during
the quarter. Natural gas comprised 89% of reported production volumes.
Realized natural gas prices at Questar E&P averaged $6.46 per thousand
cubic feet (Mcf), down 15% compared to the prior-year quarter, and
realized crude oil and NGL prices averaged $52.41 per barrel (bbl),
down 40%. Natural gas hedges mitigated the impact of lower natural gas
prices, increasing reported revenues by $156.7 million, or $4.00 per
Mcf, while oil hedges decreased revenues by $0.7 million or $0.89 per
bbl in the quarter.
Depreciation, depletion and amortization (DD&A) expense at Questar E&P
increased to $2.76 per Mcfe, compared to $1.86 per Mcfe in the 2008
quarter. However, the DD&A rate was $0.31 per Mcfe lower than the
second quarter of 2009. Production volume-weighted DD&A rates
increased due to price-related negative reserve revisions in certain
fields, and growing production from fields in the Midcontinent that
have higher DD&A rates.
Net mark-to-market losses on natural gas basis-only swaps decreased
net income $6.7 million in the 2009 quarter compared to a loss of
$14.0 million in the year-earlier period.
Wexpro net income was $20.6 million, up 1% from the 2008 quarter.
Lower crude oil and NGL prices decreased gross liquids revenues $3.8
million in the 2009 quarter compared to 2008. The Wexpro investment
base grew 12% to $419.5 million at September 30, 2009. Wexpro produced
11.4 Bcf of cost-of-service gas for delivery to affiliate Questar Gas,
compared to 12.2 Bcf in the 2008 quarter.
Gas Management net income declined 12% compared to the 2008 quarter
due to lower processing margins combined with higher depreciation
expense. Gathering margin was up 3% to $32.2 million while processing
margin was down 7% to $22.1 million due to a 12% decrease in
keep-whole processing margin (frac spread). Depreciation expense grew
$4.2 million or 60% as the result of significant 2008 capital
investments in a new 30-inch gathering line and related facilities in
western Wyoming and a new processing plant in eastern Utah.
Questar Pipeline net income was $14.1 million in the third quarter of
2009, an 8% decrease from the year-ago period, due to lower NGL prices
and higher general and administrative expense.
Questar Gas reported a seasonal $8.1 million net income loss, compared
to an $8.8 million loss in the year-ago period.
Questar Raises 2009 Guidance and Provides Initial 2010 Guidance
Questar expects full-year 2009 EBITDA to range from $1.58 to $1.63
billion. The company expects 2009 net income to range from $2.45 to
$2.55 per diluted share, up from prior guidance of $2.35 to $2.45 per
diluted share. The company now expects Questar E&P 2009 production to
range from 183 to 186 Bcfe, compared to previous guidance of 180 to 186
Bcfe.
Questar also provided initial 2010 EBITDA and production guidance. The
company estimates that 2010 Questar Corporation EBITDA could range from
$1.48 to $1.58 billion. The 2010 guidance anticipates $1.20 to $1.25 per
Mcf lower realized natural gas prices compared to 2009. The company
estimates Questar E&P EBITDA could range from $840 to $890 million while
Questar E&P 2010 production could range from 210 to 215 Bcfe. Questar
has established an overall 2010 capital budget of $1.56 billion. The
company has decided to defer initial 2010 net income guidance until
Questar E&P's year-end 2009 reserves have been finalized under the new
SEC reserve reporting rules.
The company's guidance assumes hedges in place on the date of this
release and excludes net mark-to-market gains and losses on basis-only
swaps as well as any net gains and losses on asset sales. These and
other assumptions are summarized in the table below:
Guidance Assumptions
2009 2010
Current Initial Outlook
Questar Corporation EBITDA (billions) $1.58 -- $1.63 $1.48 -- $1.58
Questar E&P EBITDA (millions) $963 -- $981 $840 -- $890
Questar E&P production -- Bcfe 183 -- 186 210 -- 215
NYMEX gas price per MMBtu((a)) $4.50 -- $5.50 $5.50 -- $6.50
NYMEX crude oil price per bbl((a)) $70.00 -- $80.00 $75.00 -- $85.00
NYMEX/Rockies basis differential per MMBtu((a)) $0.50 -- $0.25 $1.25 -- $0.50
NYMEX/Midcontinent basis differential per MMBtu((a)) $0.35 -- $0.15 $0.75 -- $0.30
((a)) For unhedged volumes for the remainder of 2009 and 2010
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Questar E&P has hedged about 69% of forecast natural gas and
oil-equivalent production for the remainder of 2009 with fixed-price
swaps. The company has hedged an additional 13% of forecast remainder of
2009 production with natural gas basis-only swaps. For 2010, Questar E&P
has hedged approximately 73% of forecast 2010 natural gas and
oil-equivalent production with fixed-price swaps, plus an additional 5%
of forecast production with natural gas and oil-price collars. (See
table at the end of this release).
Questar E&P Production and EBITDA Decline in Third-Quarter of 2009
Questar E&P -- a Market Resources subsidiary that acquires, explores for,
develops and produces natural gas and oil -- reported production of 43.8
Bcfe in the third quarter of 2009 compared to 45.3 Bcfe in the 2008
quarter, a 3% decrease resulting from voluntary production curtailments
in the 2009 quarter. Questar E&P third-quarter 2009 EBITDA was $237.3
million compared to $309.8 million for the year-ago quarter. Net income
declined 66% primarily due to a combination of a 20% decline in per-unit
realized prices, a 17% increase in per-unit production costs and a $36.5
million after-tax gain in the prior-year quarter from the sale of
non-core assets. Mark-to-market losses reduced third-quarter 2009 net
income by $6.7 million, compared to a $14.0 million after-tax loss in
the 2008 period.
For the first nine months of 2009, Questar E&P EBITDA was $714.3 million
compared to $811.1 million in 2008, a 12% decline. Net income for the
first nine months of 2009 fell 82% to $64.3 million compared to $360.1
million a year earlier, due to mark-to-market losses on natural gas
basis swaps, an 18% decline in per-unit realized price, a 13% increase
in per-unit production costs, and a $36.5 million after-tax gain on
asset sales in the year-ago period. Net mark-to-market losses on natural
gas basis swaps reduced net income by $108.9 million in the first nine
months of 2009 compared to a $4.6 million after-tax gain in the 2008
period. Questar E&P grew natural gas and oil-equivalent production 7% to
134.1 Bcfe in the first nine months of 2009 compared to 125.4 Bcfe a
year ago.
Questar E&P -- Production by Region (in Bcfe)
3 Months Ended 9 Months Ended
September 30, September 30,
2009 2008 Change 2009 2008 Change
Midcontinent 20.3 17.9 13 % 61.1 49.5 23 %
Pinedale Anticline 14.7 15.4 (5 ) 43.4 41.2 5
Uinta Basin 5.6 6.9 (19 ) 17.9 19.7 (9 )
Rockies Legacy 3.2 5.1 (37 ) 11.7 15.0 (22 )
Total Questar E&P 43.8 45.3 (3 %) 134.1 125.4 7 %
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Questar E&P -- Realized Prices and Hedging Impact
3 Months Ended 9 Months Ended
September 30, September 30,
2009 2008 Change 2009 2008 Change
Realized natural gas price ($ per Mcf) $6.46 $7.64 (15 %) $6.62 $7.50 (12 %)
Natural gas hedging impact ($ per Mcf) 4.00 0.61 3.86 (0.12 )
Realized oil and NGL price ($ per bbl) $52.41 $87.34 (40 %) $43.14 $80.41 (46 %)
Oil and NGL hedging impact ($ per bbl) (0.89 ) (17.13 ) 2.05 (15.43 )
Net mark-to-market gains (losses) on natural gas basis-only swaps ($ millions)
Pre-tax ($10.7 ) ($22.5 ) ($173.4 ) $7.5
After-tax ($6.7 ) ($14.0 ) ($108.9 ) $4.6
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Questar E&P production costs per Mcfe increased 17% compared to the
third quarter of 2008, due primarily to a 48% increase in the DD&A rate.
