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Questar, Laramie Partner to Develop Piceance NatGas as Utility Hedge

Salt Lake City-based Questar Corp. said Wednesday its Wexpro Co. exploration and production (E&P) unit will partner with Laramie Energy II LLC to develop natural gas properties in Colorado’s Piceance Basin.

The joint venture (JV) with Laramie unit Piceance Energy LLC could lead to another cost-of-service utility gas reserves program for Questar's natural gas utility. Laramie also focuses on unconventional gas resource exploration in Utah, New Mexico and Wyoming.

Questar CEO Ron Jibson called the JV "a good match," citing Laramie’s experience in the Piceance, and Questar's track record for developing reserves in the Mesaverde formation in other basins in the Rockies.

"We view the joint venture as another step in our strategy to expand the company's cost-of-service model, which provides a long-term hedge against natural gas price volatility," Jibson said.

Wexpro plans to spend $60-70 million on an 80-well drilling program targeting the Mesaverde formation, a spokesperson said. In October, the partners plan to begin drilling, continuing to early 2017 in the Collbran Valley in Mesa County.

Under the JV agreement, Wexpro has options to acquire development rights for deeper formations and, with mutual consent, to extend and expand the program up to 300 wells, depending on commodity prices.

Separately, agreements now in place in Utah and Wyoming allow Wexpro to produce gas from properties at cost of service that benefits the Questar Gas utility customers. Wexpro has said similar cost-of-service arrangements could benefit customers or partners purchasing volumes of the anticipated JV's natural gas production. In that regard, it wants to create "an effective long-term price hedge" on a portion of the utility supply needs.

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