Questar Ready to Belly Up to Buyers' Market
He who bids and runs away lives to bid another day-and at a
lower price. That could be the new mantra at Questar Corp. which
announced a record $546 million capital spending plan for 1999.
Back in 1997, before commodity prices tanked, Salt Lake City,
UT-based Questar was a frustrated bidder for E&P assets, said
spokesman Curt Burnett. "We put a billion dollars worth of bids out
on the table in 1997 and were unsuccessful. We were unwilling to
overpay even though there was a lot of pressure at the time to make
Times have changed, and Questar finds itself in a buyer's market
with money to spend. The integrated company, with pipeline and LDC
holdings, is somewhat insulated from the commodity price downturn,
not unlike The Coastal Corp., which recently posted record earnings
(see NGI Feb. 1, 1999). Coastal has said it too is looking to buy.
Questar will release year-end earnings Tuesday,
"The difficult times for the energy industry provide growth
opportunities for Questar because of our growing cash flows, strong
balance sheet and flexible, integrated structure," said CEO R.D.
Cash. "Despite low commodity prices, we have broad-based financial
strength to continue investing in energy-related endeavors that
should provide solid results over the long term."
Last September, Questar completed the acquisition of HSRTW Inc.,
a Midcontinent oil and gas operation, from HS Resources Inc. The
company paid $155 million for 150 Bcfe of proved oil and gas
reserves in Oklahoma, Texas, Arkansas, and Louisiana. A year
earlier, Burnett said, Questar came in second in a bid for the
properties. However, the sale to the winning bidder didn't go
through, and the second time around Questar was able to snare the
properties for less.
Burnett said Questar is looking for E&P assets within the
same geographic areas it operates in now. The company is active in
western Alberta, the Green River Basin, and the Midcontinent, Texas
and Louisiana. Questar has no off-shore holdings and doesn't plan
to acquire any.
Cash said Questar's 1999 capital budget includes a $192 million
exception fund designated for a large gas-and-oil reserve
acquisition. "If low energy prices persist, we expect high-quality
reserve packages to become available at reasonable prices. We
significantly increased our non-utility natural gas reserves over
the past five years, primarily through prudent acquisitions, and we
are aggressively seeking other opportunities."
Cash noted that if the company does not use the exception fund,
projected 1999 capital spending could still exceed $350 million,
the second highest total ever for the company.
Questar 1999 capital spending is to be funded primarily from
internally generated cash flows and short- and long-term debt.
Joe Fisher, Houston