Energy companies have taken a beating by credit rating agencies, and finally one, Questar Corp., is fighting back. The company, whose credit remains investment grade but was downgraded by Moody’s Tuesday to A2 for Questar Pipeline and Questar Gas and Baa3 for Questar Market Resources, has done nothing to warrant a downgrade, according to CEO Keith O. Rattie.

“Our credit remains solidly investment grade — and we will maintain strong credit ratings,” said Rattie. “In assigning a stable outlook, Moody’s has confirmed there are no significant credit issues facing the company.

“That said, there is no catalyst for Moody’s to take action at this time. Questar Corp. and each of its subsidiaries are stronger today than at the time Moody’s last reviewed and rated the company,” he said.

Rattie noted that over the last six months the company has taken steps to reduce its debt and credit risk. It has sold its Canadian exploration and production business and its 50% stake in TransColorado Pipeline. “We are on track to reduce our debt by over $200 million this year,” he said.

“While Questar Market Resources (QMR), our unregulated E&P subsidiary is exposed to Rockies gas price volatility, Wexpro, a major QMR subsidiary, comprises a substantial and growing part of QMR’s E&P investment. Wexpro earns a defined return on its investment that is not based on price levels. Moreover, as reflected in the current forward curves, Rockies price fundamentals are quite favorable, and we are well positioned to capitalize on these fundamentals. QMR also benefits from a significant presence in the Midcontinent, where price volatility is significantly less than the Rockies.”

Rattie said that the downgrade of the Utah utility subsidiary, Questar Gas, was based on its 9% return, which reflects regulatory lag. However, the company has a rate case pending before the Utah Public Service Commission.

Standard and Poor’s Ratings Service also recently reaffirmed its ratings on the company and its subsidiaries: A1 on Questar Corp.; A+ for Questar Pipeline and Questar Gas; and BBB+ for QMR with a negative outlook.

In its ratings review, Moody’s said it had taken into account all the aspects of Questar’s financial situation that Rattie mentioned, including the asset sales and the rate case. However, it determined that Questar’s regulated subsidiaries have “weaker debt coverage measures” compared to their peers. It also said Questar has increasing exposure to the risks of the E&P business, moderately high leverage and future capital needs that “may forestall future debt reduction,” and greater challenges than its peers because of being located in the Rocky Mountain region where production “prices are prone to boom-and-bust cycles.”

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