Shale Daily / NGI All News Access

Questar Unit Adding More Wyoming Natural Gas Assets

Questar Corp.'s exploration and production subsidiary on Monday agreed to pay $106.4 million to bolt-on more natural gas wells to an existing leasehold in Wyoming.

Wexpro Co. is increasing, through the acquisition, its working interest to 88% from 46% in 78 existing gas wells it operates in the Trail Unit of southwestern Wyoming's Vermillion Basin.

The new property is "in the heart of our operations and adds value to one of our premier assets," said Questar CEO Ron Jibson.

The transaction adds an estimated 118 Bcfe net of proved reserves, including 53 Bcfe (45%) that are currently proved developed. Estimated proved plus probable and possible reserves are 195 Bcfe.

In addition to 78 producing wells, Wexpro has identified 172 additional well locations for future development on a combination of 20- and 40-acre spacing, it said. The development targets Mesaverde sands (Almond, Canyon Creek and Trail) that the operator has developed for several years.

Estimated average gross reserves attributable to each future Mesaverde well are 2-3 Bcfe, with well costs of $1.7-2.1 million.

"Trail's repeatable low-risk development locations are ideal for Wexpro's business model," said Wexpro COO Jim Lively. "Finding costs in this region over the last two years have been below $1.00/Mcfe."

Salt Lake City-based Questar operates three business units, including Questar Gas Co., which provides retail gas distribution in Utah, Wyoming and Idaho, and Questar Pipeline Co. operates interstate gas pipelines and storage facilities in the West, as well as other energy services.

Wexpro develops and produces gas from cost-of-service reserves for Questar Gas customers.

The current Trail assets are governed by the 1981 Wexpro agreement for Questar's Utah and Wyoming utility customers. A second, recently completed arrangement perpetuates that model, which stipulates that all of the acquisitions within the footprint of the original agreement be offered to the public service commissions of Utah and Wyoming as cost-of-service properties benefiting Questar's utility customers.

Properties that are not approved by regulators may be developed and operated by Wexpro, either at cost of service for other parties or as traditional market-based oil and gas properties.

The new Wyoming transaction is set to close by the end of August. Once it's completed, the asset could yield incremental production of about 2.6 Bcfe net to Questar in the final four months of this year, executives said.

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