SALT LAKE CITY Questar Corp. (NYSE:STR) issued the following information in connection with a security-analyst presentation scheduled for Tuesday, Mar. 13, in New York City. The presentation, which begins at 8 a.m. EST, will be available on Questar's web site, www.questar.com.
The company estimated that earnings for the first quarter of 2001 could be 10% to 20% higher than the First Call consensus estimate of $.67 per diluted share. Questar officials made the following comments about the corporation's projected first-quarter performance:
The average realized price in the first quarter of 2001 may be the highest for the year, even with March spot-market prices almost 50% lower than in January. First-quarter realized gas prices, including hedges, are expected to average $4 per Mcf net to the well.
Projected first-quarter 2001 gas production is expected to about equal the fourth quarter of 2000 approximately 20 billion cubic feet (Bcf) despite a reserve sale at the end of the 2000 period.
The projected first-quarter earnings will include about $1 million pre-tax from the sale of certain gathering assets.
Questar also said there is a good probability that 2001 earnings would meet or exceed the current First Call estimate of $1.99 per share, barring a radical gas-price drop or other unexpected events. The company described various factors that could increase 2001 earnings for its Market Resources' subsidiary, which conducts oil and gas exploration and production and other nonregulated activity.
Market Resources' 2000 earnings of $85 million included a one-time, $12 million pre-tax litigation expense.
Hedged-gas volumes drop from about 63% in the first quarter of 2001 to about 52% for the remainder of the year. Hedges with ceilings are about $3.00 per Mcf , while hedges with floors are $2.75. This compares with a 2000 average realized price of $2.80 per Mcf. Essentially all hedges expire at year-end 2001.
The current NYMEX strip price would yield a price for the balance of the year of $3.75, net to the well. A $3.50 NYMEX price for the balance of the year would yield a $3.15 per Mcf, net to the well head, approximately $.35 above the year 2000 average realized price.
The company projected that Questar Market Resources' earnings could increase 10% over a year earlier with flat production, a $3.50 NYMEX price for the remainder of the year, and no extraordinary events.
Questar also provided an operational update on major projects that could affect the company's performance and capital expenditures.
The 2001 drilling program for Questar Exploration and Production for the Pinedale Anticline in southwestern Wyoming should begin in April. First-quarter 2001 activity at Pinedale has focused on wells drilled by Wexpro Co., a subsidiary that manages and develops gas reserves owned by Questar's distribution utility.
Pinedale was planned with a 10-well drilling program in 2001. However, the company said the Bureau of Land Management appears willing to work with the company to expand the drilling "window," which would allow more aggressive development. This development combined with a recently approved program for "pad drilling" prompted the company to increase the focus on drilling in its 2001 capital-spending plan. This may result in increased booking of reserves and enhanced production in the second half of the year.
There is a higher probability that Questar Pipeline will proceed this year with two major pipeline-construction projects, Main Line 104 and the Southern Trails Pipeline.
Main Line 104 is a 75-mile, 24-inch-diameter line that will carry gas from central Utah to the Wasatch Front and to an interconnection with the Kern River Pipeline. The project's estimated cost is $80 million, with construction expected to begin this summer.
The Southern Trails Pipeline is a 700-mile former oil-products line that is being converted to carry natural gas from the Four Corners region to Long Beach, Calif. The pipeline's east zone, which runs to the California border, would have a capacity of 80,000 decatherms (dth) per day. The west zone, from the state line to Long Beach, will have a
120,000 dth capacity. Questar Pipeline purchased the predominately 16-inch-diameter pipeline in 1998 for $38 million. Projected capital spending for the line in 2001 is $45 million.
Questar is a $2.5 billion diversified natural gas company headquartered in Salt Lake City. Through subsidiaries, it engages in energy development and production; gas gathering and processing; wholesale gas, electricity and liquids trading; retail energy services; interstate gas transmission and storage; retail gas distribution; and information systems and technologies.
ForwardLooking Statements:
This release contains statements expressing expectations of future plans, objectives and performance that constitute forwardlooking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements based on future expectations rather than on historical facts are forwardlooking statements that are dependent on certain events, risks and uncertainties that could cause actual results to differ materially from those anticipated. A discussion of risks and uncertainties, which could affect future results of Questar and its subsidiaries, is included in the company's periodic reports filed with the Securities and Exchange Commission.
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