Questar Buys HS Resources E&P Unit for $157.5 M
Questar Corp. subsidiary Universal Resources will increase its
daily gas and oil production 20% and reserves 31% with a $157.5
million acquisition of HSRTW Inc., a Midcontinent region
exploration and production subsidiary of HS Resources of San
In the cash transaction announced last week, Universal will
receive 150 Bcfe of proved oil and gas reserves (80% gas) primarily
in Oklahoma, as well as Texas, Arkansas and Louisiana. It also
receives another 50 Bcfe of reserves considered probable and
possible. The properties include 1,000 wells in the Anadarko and
Universal Resources CEO Gary L. Nordloh said the acquisition is
accretive to earnings in the amount of $1.5 to $2 million in 1998.
He said the $157.5 million purchase price includes $155 million for
the reserves and other assets of the company, and $2.5 million for
working capital. The amortization rate for the new acquisition is
The newly acquired properties have current average daily
production rates of 32 MMcf of gas and 870 bbl of oil. Nordloh said
future production is hedged for 11 to 18 months under contracts
with an average price of $2.30/Mcf for gas and $17.75/bbl of oil.
First half production from the properties was 6,725 MMcfe, which
generated $8.2 million net of related operating expenses and
overhead, HS said.
"Through the value derived from our Mid-Continent activities, we
have already realized approximately $126 million in proceeds from
production and previous divestitures, less approximately $33
million for cumulative capital expenditures and overhead. Moreover,
we are retaining ownership of HS Energy Services, which has
contributed more than $4.3 million of pre-tax net operating income
since the acquisition in mid-1996. When the proceeds from this
divestiture are accounted for, it should be clear that our work in
the Mid-Continent created important value for our shareholders,"
said HS Resources President Mike Highum. The transaction is
scheduled to close and be effective Sept. 1.
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