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Questar Says It Will Beat 3Q Estimates

October 20, 2008
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Questar Corp. expects third-quarter and full-year 2008 net income to be significantly above current First Call mean estimates. The company also estimates that Questar E&P 2008 natural gas and oil-equivalent production will come in at the high end of its previous guidance of 166-169 Bcfe, it said last week.

Questar CEO Keith Rattie said the company was providing the operations and financial update "to assure Questar equity and debt investors that we're acting to protect their interests under very difficult market conditions."

Shares of Questar were among those that enjoyed a sharp rebound following sharp declines among energy patch players and in the broader stock market (see related story). The company turned in strong results from the second quarter (see NGI, Aug. 4).

The company will report third-quarter financial and operating results on Oct. 29. Subject to board approval, the company estimates that 2009 capital expenditures may range from $1.5 billion to $1.6 billion, down from approximately $2.6 billion in 2008. The 2008 capital investment program included approximately $710 million in property acquisitions.

Cash flow from operations and existing credit facilities should provide adequate liquidity to fund anticipated 2009 capital investments, operating expenses and dividends, the company said. At this level of capital investment, Questar E&P 2009 production may still grow 10-15% from 2008 levels, it said.

Questar has hedged approximately 70% of Questar E&P's forecast 2009 gas production at average net-to-the-well prices "significantly above the current forward strip." Questar said operating cash flows from its subsidiaries, Wexpro, Gas Management, Questar Pipeline and Questar Gas, are relatively insensitive to changes in gas and crude oil prices.

The company said it has sufficient liquidity to support its operating and capital investment plans through 2009. Questar has $475 million undrawn debt capacity on subsidiary Questar Market Resources' $800 million revolving credit facility. In addition, the company has $365 million of committed commercial paper credit lines with eight banks. Questar may further bolster liquidity by issuing up to $300 million in term notes under an existing market resources shelf registration. The proceeds would be used to pay down the market resources revolving credit facility.

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