Questar Corp. said on Friday that its Questar Market Resources Inc. (QMR) subsidiary has entered an agreement with EnerMark Inc., a subsidiary of Calgary-based Enerplus Resources Fund, to sell its Canadian exploration and production subsidiary, Celsius Energy Resources Ltd. (CERL), for $101 million (C$160 million).

A spokesman said ever since its $400 million acquisition of Shenandoah Energy in mid-2001 (see NGI, July 30, 2001), which it financed with debt, Questar has undertaken a nonstrategic asset sale to bring its debt ratio back to a “traditional conservative” level. “We needed to refocus our energy on our core properties, which are the Rocky Mountains…and a significant midcontinent presence,” said Curtis Burnett, a Questar spokesman.

He added that a $110 million from a favorable court order on its TransColorado Pipeline litigation against Kinder Morgan (see NGI, Sept. 2) combined with the proceeds from the Canadian asset sale will go to pay down debt. “That will get our debt down to somewhere around 52 or 53%,” he said. Burnett added that the company will continue to divest non-strategic assets until it gets its debt level under 50%. “We are repositioning ourselves for another sizeable acquisition in our core areas in the next year or two as soon as we get our balance sheet in order,” he said.

Questar said Celsius has current net daily production of about 28 MMcfe and approximately 76 Bcfe proved reserves, located primarily in the provinces of Alberta and British Columbia.

“The CERL divestiture is an important step in our plan to reduce debt through sale of nonstrategic assets,” said Keith Rattie, Questar CEO. “CERL represents about 10% of QMR ‘s current nonregulated production and about 8% of nonregulated reserves, and in the first half of this year generated U.S.$1 million of net income; so this transaction will have only a modest impact on QMR’s ongoing operations and financial performance. QMR will focus on its inventory of low-risk development locations in its core properties to drive production and earnings growth in the future.”

Questar added that the transaction became effective on July 31 with closure of the sale subject to typical conditions, including approval under Canada’s Competition Act. Both parties said they anticipate completing the transaction before year-end.

Salt Lake City-based Questar is a diversified natural gas company with more than $3.1 billion in assets. Questar and its subsidiaries engage in gas and oil development and production; gas gathering, processing and marketing; interstate gas transmission and storage; retail gas distribution; retail energy services; and information systems and technologies.

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