Volume 6, Number 32 - November 2, 2006
brought to you online by Pinedale Online
Questar reports net income up 45 percent
It’s good news for company stockholders, as higher natural gas production and higher realized prices for natural gas, oil and natural gas liquids produced a net income growth of 45 percent for Questar during the third quarter of 2006.
“All Questar operating units posted double-digit net income growth in the first nine months of 2006,” said Keith O. Rattie, Questar chairman, president and CEO, in a press released issued by the company. “All are on track to deliver record net income this year. Note also that Questar E&P grew production 16 percent in the third quarter compared to a year ago. Questar E&P has now delivered 15 percent or higher production growth for five straight years.”
“It’s a strong quarter,” said Martin H. Craven of Questar Corporation. Craven noted that while the quarter wasn’t a record increase for the company, “(it is) the fifth straight quarter of production growth in excess of 15 percent.”
That 15 percent is in excess of the company’s target, Craven said, which usually is in the range of 2 to 5 percent for a quarter, with long-term growth looking for 5 to 10 percent a year.
The production growth also translates into growing income for the Utah corporation as well, as the release noted that Questar’s net income for the first nine months of 2006 rang in at $322.6 million compared to the same period in 2005, in which the company’s income was at $221.7 million, marking a 46 percent increase.
Of the company’s reporting subsidiaries, three have leases or interests in Sublette County: Questar Exploration and Production, Wexpro, and Questar Pipeline.
Some of the noted third-quarter highlights in the release included a reported 16 percent increase in natural gas, oil and NGL production volumes to 33. 8 billion cubic feet (Bcfe) of natural gas equivalent compared to 29.2 in the same 2005 quarter for Questar E&P.
The release also noted that natural gas comprised 87 percent of reported volumes during the quarter.
“Realized natural gas prices at Questar E&P rose 12 percent and realized crude oil and NGL prices rose 16 percent,” according to the release. The release also noted that natural gas hedges increased reported revenues by $18.3 milling while oil hedges reduce revenues by $6.7 million.
“We are very aggressive hedging our (products),” Craven said, adding that hedging is an agreement with counterparts on a set price for product to be delivered in the future.
On the down side, Questar E&P also plugged an abandoned exploratory portion of Stewart Point 15-29 well on the Pinedale Anticline after it failed to establish commercial production, which led to an after-tax charge recorded at $6.3 million related to the abandonment, according to the release.
Wexpro’s investment base grew 14 percent, to $224.8 million Sept. 30, compared to $197.6 million a year earlier. Wexpro also produced 10.2 Bcfe during the quarter on behalf of affiliate Questar Gas, allowing the company to also benefit from the 15 percent higher realized oil and NGL prices in its net income.
Questar Gas Management gas-gathering volumes increased 13 percent, and its total gather margin rose 22 percent in comparison to the quarter in 2005.
“Gas-processed volumes increased 56 percent in the third quarter of 2006 to 30.6 million MMBtu compared to 19.5 million for the year-earlier quarter,” according to the release.
Questar Pipeline also noted a net income growth of 10 percent, “driven by new transportation contracts on its southern system in central Utah and on Overthrust Pipeline.”
While the nine-month period net income was reported at $322.6 million for the three month period of the third quarter, the corporation’s total net income tallied more than $95 million for the 45 percent increase over 2005’s third quarter with the company’s income at $65.8 million.
The net income for Questar E&P was reported at $66 million as a 47 percent increase for the quarter compared to the previous year at $44.8 million.
Driven by an 18 percent increase in production and higher realized natural gas, oil and NGL prices compared to the year-earlier period, the release noted, a 67 percent increase over the first nine months of 2006 to the same nine months in 2005.
“Natural gas comprised about 87 percent of Questar E&P production in the 2006 period,” according to the release.
Wexpro’s reporting revealed a 7 percent increase from 11.3 million in the same quarter of 2005, to 12.1 million in 2006 with a 13 percent increase for the first nine months of 2006.
The release noted that Wexpro’s investment base grew by 14 percent, to $224.8 million Sept. 30, compared to $197.6 million a year earlier. With the company’s net income also benefiting from the 15 percent higher realized oil and NGL prices, according to the release.
“Under a long-standing agreement with the states of Utah and Wyoming, Wexpro recovers its costs and earns an unlevered after-tax return of about 19 to 20 percent on its investment base – the investment in commercial wells and related facilities, adjusted for working capital and reduced for deferred income taxes and accumulated deprecitation,” according to the release.
Questar Pipeline reported its net income up 10 percent for the quarter and 25 percent up for the nine-month period.
The company, “a subsidiary that provides interstate natural gas-transportation and storage services,” reported net income at $10.1 million for the quarter, with results driven by “a $3.1 million increase in transportation revenues from recent system expansions,” according to the release.
For the first nine months of 2006, Questar Pipeline reported net income at $31.5 million compared to the same period in 2005 at $25.2 million for the 25 percent increase, “driven by $9.5 million in higher transportation revenues from system expansion and $1.7 million higher NGL revenues,” according to the release.
The company also noted a decrease in operating, maintenance, general and administrative costs per decatherm transported to 12 cents in the first nine months of 2005 to 14 cents in 2005 “due to a 13 percent increase in transportation volumes and a 5-percent decrease in expense.”
Outlook for 2007
Questar now expects that the diluted share for the 2006 earnings per share to range from $4.65 to $4.75.
“The company estimates that 2007 net income could range from $5.20 to $5.50 per diluted share,” the release noted.
While the natural gas, gas and oil prices are much lower in this fourth quarter of 2006 compared to last year, “(The lower price) shouldn’t hurt Questar,” Craven said, adding,“A year ago we were recovering from that hurricane in the Gulf Coast that had a tremendous impact on raising natural gas ... prices.”
Craven also said the company’s practice of hedging would translate into a very slight difference in the share price as with hedging, you’re locking in known price today for future delivery of natural gas.
“(Questar has) about 76 percent of product in the fourth quarter hedged or prices locked in,” Craven said. “So if natural gas changes by a dollar per cubic feet, it means about a penny per share.”
The release also noted that the Questar E&P has hedged out 65 percent of forecast 2007 natural gas and oil-equivalent production with fixed-price swaps.
See The Archives for past articles.
Copyright © 2002-2006 Sublette Examiner
All rights reserved. Reproduction by any means must have permission of the Publisher.
Sublette Examiner, PO Box 1539, Pinedale, WY 82941 Phone 307-367-3203