Questar Corp. said Wednesday that its low-risk development gas drilling programs have deliverability by 40% this year at its core Rocky Mountain plays in western Wyoming and eastern Utah. Despite intentionally curtailing Rockies production because of low prices and unprecedented basis differentials, the company is on track to grow production by 12% this year, said Chuck Stanley, executive vice president of Questar’s Market Resources (QMR) subsidiary.

“We’re also taking advantage of strong forward prices to increase our hedge positions, particularly in the Rockies, reducing our exposure to basis volatility through at least the middle of next year and beyond,” Stanley added. “Operationally, we continue to be pleased by results from our Pinedale Anticline drilling program, and we’re quite encouraged by early test results from the deeper Mesaverde Formation.”

QMR conducts Questar’s natural gas and oil exploration and production activities. It holds a sizeable stake on the Pinedale Anticline, located near Pinedale, WY. Questar has drilled 45 Pinedale wells without a dry hole in the past three years. Stanley noted that the company has just received, for the first time, approval for winter-pad drilling in Pinedale’s Mesa area, which will allow the company to drill up to six wells from a single surface location this winter.

For the first three quarters of 2002, QMR posted non-regulated production of 73 Bcfe, 20% higher than the prior year. So far this year, about 3.3 Bcfe of potential production has been curtailed because of depressed Rockies prices.

Heading into the fourth quarter, QMR said it continues to add to hedge positions to protect against commodity-price volatility and to meet earnings objectives. For gas hedges, QMR subsidiaries currently have 12.9 Bcf of net-revenue-interest non-regulated production hedged for the fourth quarter at an average net-to-the-well price of $3.22/Mcf. The company reported that hedged volumes are pretty evenly distributed between the Rocky Mountains and Midcontinent areas with average net-to-the-well prices of $2.83 and $3.66/Mcf, respectively. QMR allowed that approximately 5 of the 6.8 Bcf Rockies fourth-quarter total is for November and December at an average price of $2.85/Mcf net to the well.

Looking on to the coming years, the company said a total of 32.7 Bcf of its net-revenue-interest non-regulated gas production is hedged for 2003, and 14.5 Bcf for 2004. The average net-to-the-well price for hedges in both years is about $3.25/Mcf.

In 2003, the company said 20.7 Bcf of Rockies gas production is hedged at an average net-to-the-well price of $3.02/Mcf (12.8 Bcf in the first half of 2003). QMR added that about 12 Bcf of production in the Midcontinent gas production is hedged at an average net-to-the-well price of $3.60/Mcf. In 2004, 11.1 Bcf of Rockies production and 3.4 Bcf of Midcontinent production is hedged at average net-to-the-well prices of $3.09 and $3.71/Mcf, respectively.

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