Questar Reports First-Quarter 2002 Earnings Decline On Lower Prices
Natural Gas And Oil Production Jumps 31 Percent Over Prior Year

SALT LAKE CITY — Questar Corp. (NYSE:STR) today said lower natural gas and oil prices and a change in the method of accounting for goodwill reduced first-quarter 2002 net income to $34.9 million, or $.42 per share, compared with $69.3 million, or $.85 per share, in the year-earlier period. Excluding the noncash goodwill write-down of $15.3 million, or $.19 per share, Questar's first-quarter 2002 earnings were $50.2 million, or $.61 per share.

Questar President and Chief Executive Officer Keith O. Rattie said the company's first-quarter results are in line with previous guidance for the year. Excluding the impact of the accounting change, Rattie reiterated the company's previous estimate that 2002 earnings will range between $1.85 and $2.05 per share, based on current forward price curves and current hedges, as summarized in an April news release.

"The bottom line on our first quarter is that our 31% increase in nonregulated natural gas and oil production did not overcome sharply lower commodity prices compared with year-ago levels," he said. "The good news is that we jumped on the recent run-up in energy prices to lock in higher prices for the rest of the year, and we remain on track to increase 2002 nonregulated production by 10-15% over our 2001 level of 85.6 billion cubic feet equivalent (bcfe). Our first-quarter results also highlight the value of our regulated businesses, which provide predictable earnings that do not fluctuate with commodity prices."

In first-quarter 2002, the Questar Market Resources (QMR) subsidiary – which conducts exploration and production and other nonregulated activities – earned $17.6 million compared with $38.3 million in the prior-year period. Natural gas production rose 27% to 20 billion cubic feet, and nonregulated oil and natural gas-liquids production increased 51% to 747,000 barrels. Production increases resulted primarily from the July 31, 2001, acquisition of producing properties in Utah's Uinta Basin.

The average realized selling price for natural gas declined 41% from $4.17 to $2.44 per Mcf (thousand cubic feet), while the combined nonregulated oil and natural gas liquids selling price fell 12% to $18.85 per barrel. Sales of noncore producing properties netted a $2.8 million after-tax gain compared to $5.9 million a year earlier.

Wexpro Co., a QMR subsidiary, increased its earnings from $6.6 million in first-quarter 2001 to $7.6 million in the 2002 period due to increased investment in successful gas-development drilling. QMR's gas-gathering and marketing activities earned a combined $1.2 million in the 2002 quarter compared with $3.6 million a year earlier. Improved revenues from an 11% increase in gathering volumes were offset by increased gathering expenses and lower marketing margins. Gathering results in 2001 benefited from a $700,000 after-tax gain from an asset sale.

Questar Regulated Services – which includes interstate natural gas transmission and retail gas distribution – earned $31.8 million in first-quarter 2002, about the same as the 2001 quarter. Questar Gas – which provides gas service to some 735,000 customers in Utah and portions of Wyoming and Idaho – earned $24.2 million, a $500,000 year-to-year improvement. The utility's overall deliveries grew 7%, boosted by a 4.2% year-to-year customer-growth rate. The company added 10,500 customers through a mid-2001 acquisition of small distribution systems in eastern Utah and southwestern Wyoming. Consistent with national industry trends, Questar Gas's financial performance was hampered by a continuing decline in usage per customer and higher bad-debt expense.

Questar Pipeline – which operates an interstate transmission and storage system in Utah, Wyoming and Colorado – earned $7.4 million in first-quarter 2002 versus $7.7 million in the 2001 quarter. Total transportation volumes rose 26% to 104 million decatherms, while the average transportation price declined 9%. Legal costs associated with the TransColorado Pipeline partially offset the added revenues. Questar TransColorado, a subsidiary of Questar Pipeline, is a partner in the TransColorado Pipeline with a Kinder Morgan subsidiary. The pipeline is the subject of a lawsuit between the partners. The trial concludes this week with a decision expected by the end of the third quarter.

The goodwill-impairment charge was required by the company's Jan. 1, 2002, adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." Under the new rule, amortization of goodwill has been replaced by an annual test for impairment of goodwill. An impairment is indicated if the current fair value of goodwill is less than the carrying value. The change affects Consonus, a Web-hosting and services subsidiary in which Questar has an 89% ownership. Goodwill acquired by Consonus has declined in value because of the sharp downturn in the information-technology sector.

In April, Questar announced an agreement with Aquila Energy, an energy merchant company, for a pilot project to market a Questar Energy Trading storage contract at the Clay Basin underground storage facility in northern Utah. To date, the company is pleased with the progress of this pilot, which could be a stepping-stone to a broader marketing/risk-management alliance.

Questar is a $3.1 billion diversified natural gas company headquartered in Salt Lake City. Through subsidiaries, it engages in gas and oil development and production; gas gathering, processing and marketing; retail energy services; interstate gas transmission and storage; retail gas distribution; and information systems and technologies.

This release contains statements expressing expectations of future plans, objectives and performance that constitute forward-looking 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 forward-looking 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.