Questar Corp.’s exploration and production (E&P) unit, which continued to be hobbled by realized gas prices in 4Q2009, saw production jump to just over 600 MMcfe/d, up 46% from 4Q2008, driven by strong growth from the company’s Haynesville Shale, Woodford Shale and Pinedale Anticline plays.

“We want investors to take note that the strategy we put in place a few years ago to expand our E&P business beyond our traditional Rockies focus is working,” CEO Keith O. Rattie said during a conference call with analysts Thursday.

Questar E&P generated earnings before interest, taxes, depreciation and amortization (EBITDA) of nearly $1 billion in 2009, down 11% compared with 2008, due primarily to a 13% decrease in realized natural gas prices and a 37% decrease in realized oil and natural gas liquids (NGL) prices, Rattie said. Lower prices also drove a 7% decline in 4Q2009 E&P EBITDA compared with 4Q2008.

Realized natural gas prices at Questar E&P averaged $6.05/Mcf in 4Q2009, down 21% compared to $7.70/Mcf in 4Q2008, while average realized crude oil and NGL prices averaged $53.47/bbl, a 3% increase compared with the year ago period. Natural gas hedges increased 4Q2009 revenues by $120.7 million. Questar E&P has hedged about 73% of forecast natural gas and oil-equivalent production for 2010 with fixed-price swaps, and an additional 5% with collars.

4Q2009 production was 55.4 Bcfe, an increase of 20% compared with 46 Bcfe in 4Q2008. Production included 26.7 Bcfe from the Midcontinent — a 46% increase compared with 4Q2008 — and 18.4 Bcfe from the Pinedale Anticline, an 18% increase from the year-ago period. Production for all of 2009 was 189.5 Bcfe, an 11% increase compared with 171.4 Bcfe in 2008.

The company will allocate about $900 million of capital spending to Questar E&P this year, about 60% of it to the Haynesville and Pinedale plays, Rattie said.

Salt Lake City-based Questar reported 4Q2009 net income of $150 million (85 cents/share), up 24% compared with $121.2 million (69 cents/share) in 4Q2008. The company posted net income of $393.3 million ($2.23/share) for all of 2009, a decrease of 42% compared with $683.8 million ($3.88/share) in 2008. Questar revised its 2010 EBITDA guidance to $1.45-1.55 billion from $1.48-1.58 billion, reflecting revised assumptions for natural gas and oil prices, and affirmed its prior production guidance of 210-215 Bcfe.

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