Questar's Production Eggs Lie in One Basket
If Questar's predictions concerning its Pinedale Anticline field
hold true, then the Utah-based company is about to embark on one of
the most significant exploration and production projects in the its
history. Although some drilling has already taken place at the
Sublette County, WY, field, Questar is preparing to launch a
massive drilling program aimed at cultivating the projected 3 Tcf
the field holds.
Questar said that if the five- to 10-year program is successful,
the company's nearly 500 Bcf of reserves could double. By 2002, the
company is estimating it will exceed 300 MMcf/d of production.
There are an estimated 135 to 150 drilling locations on site. It
owns 60% of the field and holds leases on more than 13,500 acres of
land. In addition, Questar Gas Management has the rights to the
field's gas gathering operations and Questar Energy Trading has the
marketing rights to the production.
Kurt Burnett, a Questar spokesman, said last week that although
no final amounts have been agreed upon, the company plans on making
a $60 to $70 million investment into the drilling program next
year. Overall, Questar has said it expects to direct more than $350
million to the development project over the course of 10 years.
"The Pinedale field holds the potential to be our most important
project over the next five to 10 years," Burnett said.
The company, however, is not jumping head-first into the
project. Questar still has not decided on the speed of the program.
"There are a lot of factors that will determine the speed with
which we develop the field," Burnett said. "The main contingent is
drilling success. But commodity prices and other factors will also
affect the decision. Dependant on these factors, we will decide if
we want two or four rigs drilling wells."
Petrie Parkman & Co., an equity research firm, viewed this
play as a major boost for Questar. In a report published earlier
this year, Petrie said production from this play could have major
positive implications on the company's overall future performance.
"Despite our forecast of modestly lower commodity prices in 2001,
success at the Pinedale Anticline is expected to boost 2001 net gas
production by some 16% and lower amortization by $0.04 MMBtu,
causing net income..to reach $143 Million ($1.70/share)," the
The boost is sorely needed. Excluding write-downs on its oil and
gas properties, Questar's year-end 1998 net income was $97.2
million, or $1.18 per diluted share, compared with $104.8 million,
or $1.27 per diluted share, for the prior year. Early last week,
its share price hit a 52-week low of $14.75.
Petrie sees this field as vital for Questar's success as a
company. "Known for its low-risk, profitable growth, Questar
E&P now has a new project that could nearly double the
company's proved reserves and production at a time of strong North
American demand growth."
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