SALT LAKE CITY — Questar Corp. (NYSE:STR) reported net income of $26.9 million, or $.33 per diluted share, in the second quarter of 2001, slightly exceeding the year-earlier quarterly net income that included $4.6 million from the sale of securities.

Excluding the nonrecurring gains from securities sales, the quarterly comparison was $.33 per share in the 2001 quarter versus $.27 per share for the year-earlier period – a 22% improvement. Questar's nonregulated Market Resources group, which includes oil and gas exploration and production, increased year-to-year quarterly income by $5.8 million, or $.07 per share. Questar's other primary businesses – interstate gas transmission and retail gas distribution – achieved 15% higher combined earnings during the current-year period.

For the first six months of 2001, Questar earned $91.7 million, or $1.12 per diluted share, compared with $76.4 million, or $.95 per share, a year earlier. Recurring earnings per share for the current-year period were $1.12, 37% higher than for the first six months of 2000. There was an average 81.6 million shares outstanding during the 2001 period compared with 80.6 million in the first half of 2000.

R.D. Cash, Questar chairman and chief executive officer, said second quarter and year-to-date earnings "demonstrate that the company's strategies are on track."

"We intend to drive shareholder value by consistently delivering yearly double-digit earnings growth. The second quarter of 2001 represented the sixth straight quarter in which we have delivered at least a 10% year-to-year increase in recurring earnings," he said. "Our excellent exploration and production results were enhanced by a 15% year-to-year earnings improvement from our regulated businesses, which provide consistently strong cash flows and earnings for our enterprise," he said.

Cash said a key factor in Questar's earnings performance – natural gas and oil production – will be impacted positively by the company's announced purchase of Shenandoah Energy Inc. (SEI). Cash said the $406 million acquisition, which will close July 31, will immediately increase Questar's production by approximately 63 million cubic feet of gas per day.

Through the acquisition, Questar received 415 billion cubic feet equivalent (Bcfe) of proved reserves with an acquisition cost of $.52 per thousand cubic feet equivalent (Mcfe), as well as 198 Bcfe of high-quality probable reserves, 331 Bcfe of possible reserves, 100 million cubic feet per day of processing capacity, 90 miles of gathering lines, 114,000 acres of undeveloped leasehold acreage, and four drilling rigs.

SECOND-QUARTER RESULTS

Questar Market Resources had net income of $23 million in second-quarter 2001 compared with $17.2 million in the prior-year period. Questar Exploration and Production (QEP), which operates in the Rocky Mountains, Midcontinent and western Canada, increased its net income by $6 million to $15.6 million. The average selling price of natural gas was $3.31 per thousand cubic feet (Mcf), net to the wellhead, 33% higher than for the 2000 quarter. Gas production declined 10% to 15.8 billion cubic feet (Bcf) due to a property sale in the fourth quarter of 2000 and normal reserve depletion. Average selling price for oil and natural gas liquids rose 3% to $20.36 per barrel, while production dropped 7% to 522,000 barrels.

QEP's reserves increased 8% after production to 792 Bcfe in the six months ended June 30, 2001. The increase does not include reserves acquired in the Shenandoah Energy purchase.

Bolstered by higher drilling activity and related investment, Wexpro earned $6.5 million during the 2001 quarter, a $500,000 improvement. Other Market Resources activities – gas gathering and energy trading – earned $700,000 less in 2001 due to lower margins from gas processing and other factors.

Questar Regulated Services – which includes retail gas distribution and interstate transmission and storage subsidiaries – increased its combined earnings from $3.9 million in the second quarter of 2000 to $4.5 million in the current-year period.

Questar Pipeline, an interstate gas-transmission and storage subsidiary, earned $6.9 million, slightly below the $7.1 million in the 2000 quarter. Total transportation volumes grew 19%, including a 33% increase for non-Questar companies. The pipeline's earnings were hampered by $1 million in after-tax operating losses for the TransColorado Pipeline, in which a subsidiary has a 50% interest.

Questar Gas, a retail gas-distribution company, reduced its seasonal loss by $800,000 to $2.5 million in second-quarter 2001. The utility's results benefited from a 3.9% general rate increase fully implemented in August 2000, and from cost reductions associated with an early retirement program in October 2000.

Questar Gas's total deliveries increased 14% in second-quarter 2001 versus a year earlier, with a 24% increase in residential deliveries due to customer additions and greater heating demand. Industrial deliveries also rose 7% as the economy in the primary Utah market area remained healthy.

Corporate and Other Operations recorded a $600,000 loss during second quarter 2001 versus net income of $5.1 million in the year-earlier period, which included a $4.1 million after-tax gain from securities sales. Questar lost $2 million after taxes from its 82% interest in Consonus, an Internet-services subsidiary. Adverse market conditions resulted in the slower-than-expected occupancy of a data center that began operation in the first quarter of 2001.

YEAR-TO-DATE RESULTS

Questar's net income increased 20% in the first six months of 2001 to $91.7 million, or $1.12 a share. Earnings for the first six months of 2000 were $76.4 million, or $.95 a share, which included $10.1 million ($.13 per share) from stock sales. Excluding nonrecurring earnings, Questar's net income was $66.3 million, or $.82 per share, for the comparable year-ago period.

Market Resources earned $57.0 million in the current-year period, a 77% year-to-year improvement. Questar Exploration and Production more than doubled its earnings, from $18 million in the 2000 period to $39.3 million in 2001. Average natural gas selling price, net to the wellhead, was $3.74 per Mcf compared with $2.33 in the first six months of 2000. Natural gas production was 9% lower for the 2001 period at 31.6 Bcf.

Regulated Services earned $36.1 million year-to-date, $4.3 million above the 2000 period. Questar Gas's earnings rose $3.8 million to $21.2 million, primarily because of the impact of the August 2000 general rate increase, and cost savings from an early retirement program. Questar Pipeline had net income of $14.5 million, slightly higher than a year earlier. An increase in transportation revenues was offset by the TransColorado Pipeline operating losses.

Corporate and Other operations lost $1.4 million for the first half of 2001 versus earnings of $12.4 million in the 2000 period, which included the $9.6 million gain from stock sales.

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.

Forward-Looking 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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