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Questar Boosts Spending on High-Return E&P Projects
Questar Corp. said Tuesday it will increase capital spending by $25 million to accelerate its drilling programs in the Rockies and Midcontinent regions. The company now expects to spend $480 million for 2004 capital projects, with $344 million targeted for exploration and production, gas development, gas gathering and other nonregulated activities through its Questar Market Resources subsidiary. The regulated pipeline and utility businesses plan to spend $127 million.
Questar’s exploration and production businesses “are generating double-digit growth with the drill bit against a backdrop of declining overall production for the industry,” said CEO Keith O. Rattie. The company has managed a 13% year-over-year rise in nonregulated natural gas equivalent production in the first half of 2004.
Rattie said the expanded spending program would be funded with internal cash flow. “Our balance sheet is strong. Our total debt to capitalization is now in the middle of our 40 to 45% target range. What’s more, we have attractive projects that generate risk-adjusted returns well above our cost of capital, even at natural gas prices well below current levels.
“We continue to evaluate alternative uses of free cash flow — stock buyback, dividend increases, and/or debt reduction. But we believe our best option for creating shareholder value today is to reinvest in our core natural gas businesses,” he said.
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