He who bids and runs away lives to bid another day-and at alower price. That could be the new mantra at Questar Corp. whichannounced a record $546 million capital spending plan for 1999.
Back in 1997, before commodity prices tanked, Salt Lake City,UT-based Questar was a frustrated bidder for E&P assets, saidspokesman Curt Burnett. “We put a billion dollars worth of bids outon the table in 1997 and were unsuccessful. We were unwilling tooverpay even though there was a lot of pressure at the time to makeacquisitions..”
Times have changed, and Questar finds itself in a buyer’s marketwith money to spend. The integrated company, with pipeline and LDCholdings, is somewhat insulated from the commodity price downturn,not unlike The Coastal Corp., which recently posted record earnings(see NGI Feb. 1, 1999). Coastal has said it too is looking to buy.Questar will release year-end earnings Tuesday,
“The difficult times for the energy industry provide growthopportunities for Questar because of our growing cash flows, strongbalance sheet and flexible, integrated structure,” said CEO R.D.Cash. “Despite low commodity prices, we have broad-based financialstrength to continue investing in energy-related endeavors thatshould provide solid results over the long term.”
Last September, Questar completed the acquisition of HSRTW Inc.,a Midcontinent oil and gas operation, from HS Resources Inc. Thecompany paid $155 million for 150 Bcfe of proved oil and gasreserves in Oklahoma, Texas, Arkansas, and Louisiana. A yearearlier, Burnett said, Questar came in second in a bid for theproperties. However, the sale to the winning bidder didn’t gothrough, and the second time around Questar was able to snare theproperties for less.
Burnett said Questar is looking for E&P assets within thesame geographic areas it operates in now. The company is active inwestern Alberta, the Green River Basin, and the Midcontinent, Texasand Louisiana. Questar has no off-shore holdings and doesn’t planto acquire any.
Cash said Questar’s 1999 capital budget includes a $192 millionexception fund designated for a large gas-and-oil reserveacquisition. “If low energy prices persist, we expect high-qualityreserve packages to become available at reasonable prices. Wesignificantly increased our non-utility natural gas reserves overthe past five years, primarily through prudent acquisitions, and weare aggressively seeking other opportunities.”
Cash noted that if the company does not use the exception fund,projected 1999 capital spending could still exceed $350 million,the second highest total ever for the company.
Questar 1999 capital spending is to be funded primarily frominternally generated cash flows and short- and long-term debt.
Joe Fisher, Houston
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