Questar Corporation (NYSE:STR) reported 2010 income from
continuing operations of $192.3 million or $1.08 per diluted share,
including an after-tax $8.8 million or a $0.05 per diluted share
charge for separation costs associated with the June 30, 2010,
spinoff of QEP Resources, Inc. Net income from continuing
operations grew 7% over 2009 net income from continuing operations
of $180.5 million or $1.02 per diluted share. In the fourth quarter
2010, income from continuing operations grew 15% to $63.7 million
or $0.36 per diluted share, compared to $55.4 million or $0.31 per
diluted share for the fourth quarter of 2009. Excluding separation
charges, Questar earned $201.1 million or $1.13 per diluted share
for the year, an 11% increase over the year-ago period.
INCOME (LOSS) FROM CONTINUING
OPERATIONS
3 Months EndedDecember 31,
12 Months EndedDecember 31,
2010 2009 Change 2010
2009 Change ($ in millions, except earnings per share)
Wexpro $22.7 $21.5 6 % $88.1 $80.7 9 %
Questar Pipeline 18.0 14.4 25 % 67.4 58.2 16 %
Questar
Gas 22.1 19.9 11 % 43.9 41.6 6 %
Corporate 0.9
(0.4 ) -- (7.1 ) -- --
Total $63.7
$55.4 15 % $192.3 $180.5 7 %
Earnings from continuingoperations per
diluted share
$0.36 $0.31 16 % $1.08 $1.02 6 % Average diluted shares 178.8 176.7
1 % 178.0 176.3 1 %
“All Questar business units achieved record earnings in 2010,”
said Ronald W. Jibson, Questar president and CEO. “Excluding
separation costs, we delivered more than $201 million of net
income, an 11% increase from 2009. Our business units also
generated over $523 million of EBITDA from continuing operations, a
6% increase from 2009. Wexpro grew its investment base 6%, and
Questar Pipeline and Questar Gas both executed on their growth
plans,” Jibson added. In addition to announcing strong earnings in
2010, the company affirmed 2011 guidance of $1.07 to $1.11 per
share. On Feb. 18, Questar increased its dividend by 9% to an
annual rate of $0.61 per share.
Spinoff transaction completed
On June 30, 2010, Questar completed a tax-free spinoff of QEP
Resources, its natural gas and oil exploration-and-production and
midstream-field-services businesses. Results of operations for QEP
for the first half of 2010 and prior periods are reported in the
attached recast financial statements as income from discontinued
operations. Following the spinoff, Questar’s subsidiaries are
Wexpro Company, Questar Pipeline Company and Questar Gas
Company.
Wexpro results
Wexpro grew net income to $88.1 million, an increase of 9% from
2009 and generated $199.4 million of EBITDA, driven by a higher
average investment base. Wexpro grew its investment base to $456.6
million at year-end 2010, compared to $431.9 million at year-end
2009, a 6% increase. Wexpro earned a 19.8% after-tax return on
average investment base in 2010. During 2010, Wexpro produced a
record 50.2 billion cubic feet of cost-of-service gas for Questar
Gas, comprising 51% of the utility’s gas-supply needs. Under a
long-standing agreement with the states of Utah and Wyoming, Wexpro
recovers its costs and earns an unlevered after-tax return on its
investment base – the investment in commercial wells and related
facilities, reduced for deferred income taxes and accumulated
depreciation. A summary of changes in Wexpro’s investment base is
provided below:
Change in Wexpro Investment
Base
12 Months Ended December 31, 2010
2009 (in millions) Beginning investment base
$431.9
$410.6
Successful development wells 99.9 99.8 Depreciation, depletion
& amortization
(57.9
)
(54.3
)
Change in deferred taxes
(17.3
)
(24.2
)
Ending investment base
$456.6
$431.9
Questar Pipeline results
Questar Pipeline grew net income to $67.4 million in 2010, up
16% from 2009 and generated $181.6 million of EBITDA. Questar
Pipeline earned an 11.9% return on average equity in 2010. Questar
Pipeline’s net income increase was largely driven by $15.5 million
or 9% higher transportation revenues and $12.7 million or 113%
higher natural gas liquids (NGL) sales. A summary of changes in
Questar Pipeline revenues is provided below:
Change in Questar Pipeline
Revenues
3 Months Ended
12 Months Ended
December 31, December 31, 2010 vs 2009 2010 vs 2009
(in millions) Transportation $3.4 $15.5 Storage (0.5 ) (1.8 ) NGL
sales – transportation 2.5 5.3 NGL sales – field services 0.4 7.4
Energy services 0.1 0.3 Other 1.2 (0.9 )
Increase $7.1 $25.8
At December 31, 2010, Questar Pipeline held net
firm-transportation contracts totaling 4,744 thousand decatherms
(Mdth) per day, compared to 4,243 Mdth per day at December 31,
2009, a 12% increase. Transportation revenues increased due to an
Overthrust Pipeline compression-expansion project completed in the
fourth quarter of 2009, which added transportation contracts
totaling 300 Mdth per day.
NGL sales increased due to higher prices and volumes sold in
each period. The average NGL price for 2010 was $1.33 per gallon,
up 45% from 2009. In the fourth quarter of 2010, the average price
rose 24% from the prior-year quarter to $1.49 per gallon. NGL
volumes increased 48% in 2010 over 2009 due to subsidiary Questar
Transportation Services’ completion of a processing plant in Price,
Utah, during the third quarter of 2009. NGL volumes increased 38%
in the fourth quarter over the same 2009 period. The sum of
operating, maintenance, general and administrative expense for 2010
totaled $0.11 per decatherm transported, compared to $0.10 in
2009.
Questar Gas results
Questar Gas reported net income of $43.9 million in 2010, a 6%
increase and generated $139.0 million of EBITDA. Questar Gas earned
a 10.8% return on average equity in 2010. Changes in Questar Gas
margin (revenues less cost of gas sold) are summarized in the
following table:
Change in Questar Gas Margin
3 Months Ended 12 Months Ended December 31, December
31, 2010 vs 2009 2010 vs 2009 (in millions)
New customers $1.0 $3.0 Change in rates 3.6 3.1
Demand-side-management cost recovery (3.2 ) 12.2 Recovery of
gas-cost portion of bad debt costs (0.3 ) (0.7 ) Other (1.5
) (0.2 ) Increase (decrease) ($0.4 ) $17.4
Customer growth and an increase in rates associated with the
company’s conservation-enabling (revenue-decoupling) tariff
contributed to higher margins in 2010. Operating, maintenance,
general and administrative expenses, excluding
demand-side-management (DSM) costs, were $138 per customer in 2010
compared to $136 per customer for 2009. Changes in margin from DSM
cost-recovery revenues are offset by equivalent changes in the
program’s expenses.
On April 8, 2010, the Public Service Commission of Utah approved
a settlement in Questar Gas’s Utah general rate case. The
stipulation, effective August 1, 2010, authorized an increase in
the utility’s allowed return on equity from 10% to 10.35% and
indefinitely extended the existing conservation-enabling tariff.
The stipulation further approved an infrastructure-cost-tracking
mechanism that allows the company to place into rate base and earn
on capital expenditures for a multi-year high-pressure feeder-line
replacement program once the new facilities are in service. At
December 31, 2010, Questar Gas served 909,600 customers, up 11,000
or 1.2% from December 31, 2009.
2011 EPS guidance affirmed
Questar affirms prior guidance that 2011 net income should range
between $1.07 to $1.11 per diluted share. The company’s affirmed
earnings guidance considers expectations of lower NGL sales volumes
at Questar Pipeline in 2011 and increased deferred taxes at Wexpro.
Recent federal income tax legislation allows 100% bonus
depreciation, which will result in increased deferred taxes with a
corresponding reduction to Wexpro’s net investment base calculation
under terms of the Wexpro Agreement. Affirmed guidance also
recognizes the 2011 interest expense impact of $250 million of
2.75% public notes issued by Questar in December 2010.
2010 earnings teleconference
Questar management will discuss 2010 results from continuing
operations and the outlook for 2011 in a conference call with
investors Wednesday, February 23, beginning at 9:30 a.m. EST. The
call can be accessed on the company website at www.questar.com.
About Questar Corporation
Questar is a Rockies-based integrated natural gas company with
an enterprise value of about $4.4 billion, operating through three
principal subsidiaries:
- Wexpro develops and produces
natural gas on behalf of Questar Gas;
- Questar Pipeline operates
interstate natural gas pipelines and storage facilities in the
western U.S. and provides other energy services; and
- Questar Gas provides retail
natural gas distribution in Utah, Wyoming and Idaho.
Forward-Looking Statements
This document may contain or incorporate by reference
information that includes or is based upon "forward-looking
statements" within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Forward-looking statements give expectations
or forecasts of future events. You can identify these statements by
the fact that they do not relate strictly to historical or current
facts. They use words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," and other words and terms
of similar meaning in connection with a discussion of future
operating or financial performance. Any or all forward-looking
statements may turn out to be wrong. These statements are based on
current expectations and the current economic environment. They
involve a number of risks and uncertainties that are difficult to
predict. Actual results could differ materially from those
expressed or implied in the forward-looking statements. Factors
that could cause actual results to differ materially include, but
are not limited to the following:
- general economic conditions, including
the performance of financial markets and interest rates;
- changes in industry trends;
- changes in laws or regulations;
and
- other factors, most of which are beyond
Questar’s control.
Questar undertakes no obligation to publicly correct or update
the forward-looking statements in this document, in other
documents, or on the website to reflect future events or
circumstances. All such statements are expressly qualified by this
cautionary statement.
For more information, visit Questar’s website at
www.questar.com.
QUESTAR CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
3 Months Ended 12 Months Ended December
31, December 31,
2010 2009
2010 2009 (in millions, except per share amounts)
REVENUES Questar Gas
$302.7 $292.4
$901.8 $918.9
Questar Pipeline
52.0 44.8
197.2 173.2 Wexpro
8.0 6.8
24.6
17.8 Total Revenues
362.7
344.0
1,123.6 1,109.9
OPERATING EXPENSES Cost of sales (excluding operating
expenses shown separately)
127.4 118.4
280.9 331.4
Operating and maintenance
47.9 53.5
175.8 167.6
General and administrative
30.1 23.6
108.5 93.4
Separation costs
- -
11.5 - Production and other
taxes
10.9 9.6
50.6 42.4 Depreciation, depletion and
amortization
38.9 38.8
153.4 147.1 Total Operating Expenses
255.2 243.9
780.7 781.9 Net gain (loss) from asset
sales
0.3 (0.2 )
0.4
0.2 OPERATING INCOME
107.8 99.9
343.3 328.2 Interest and other income
3.4 3.3
11.7 12.5 Income from unconsolidated affiliate
1.0
1.0
3.8 3.8 Interest expense
(14.7 )
(14.4 )
(57.1 ) (59.6 ) INCOME
FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
97.5 89.8
301.7 284.9 Income taxes
(33.8 )
(34.4 )
(109.4 ) (104.4 ) INCOME FROM
CONTINUING OPERATIONS
63.7 55.4
192.3 180.5 Income from
discontinued operations, net of taxes
- 95.5
148.2
215.4 Discontinued operations, noncontrolling interest
- (0.9 )
(1.3 )
(2.6 ) Total Discontinued Operations, Net Of Income Taxes
- 94.6
146.9
212.8 NET INCOME ATTRIBUTABLE TO QUESTAR
$63.7 $150.0
$339.2
$393.3
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO
QUESTAR
Basic from continuing operations
$0.36 $0.31
$1.09
$1.03 Basic from discontinued operations
-
0.55
0.84 1.23
Basic total
$0.36 $0.86
$1.93 $2.26 Diluted from
continuing operations
$0.36 $0.31
$1.08 $1.02 Diluted
from discontinued operations
- 0.54
0.83 1.21 Diluted total
$0.36 $0.85
$1.91
$2.23 Weighted-average common shares
outstanding Used in basic calculation
176.2 174.4
175.4 174.1 Used in diluted calculation
178.8 176.7
178.0 176.3 Dividends per common share
$0.14 $0.13
$0.54 $0.505 QUESTAR CORPORATION
OPERATIONS BY LINE OF BUSINESS (Unaudited) 3 Months Ended 12
Months Ended December 31, December 31,
2010
2009
2010 2009 (in millions)
Revenues from Unaffiliated Customers Wexpro
$8.0 $6.8
$24.6 $17.8 Questar Pipeline
52.0 44.8
197.2
173.2 Questar Gas
302.7 292.4
901.8 918.9 Total
$362.7
$344.0
$1,123.6
$1,109.9
Revenues from Affiliated Companies Wexpro
$61.1 $58.5
$240.2 $225.1 Questar Pipeline
18.5 18.6
74.0 72.2 Questar Gas
0.5
0.4
1.1 1.0 Total
$80.1 $77.5
$315.3
$298.3
Operating Income (Loss) Wexpro
$34.8 $34.2
$133.7 $124.6 Questar Pipeline
34.1 27.8
130.8 115.2 Questar Gas
39.2 36.5
88.6 86.9 Corporate
(0.3 ) 1.4
(9.8 ) 1.5 Total
$107.8 $99.9
$343.3
$328.2
Income (Loss) from Continuing
Operations Wexpro
$22.7 $21.5
$88.1 $80.7 Questar
Pipeline
18.0 14.4
67.4 58.2 Questar Gas
22.1
19.9
43.9 41.6 Corporate
0.9
(0.4 )
(7.1 ) - Total
$63.7 $55.4
$192.3
$180.5 QUESTAR CORPORATION
SELECTED OPERATING STATISTICS (Unaudited) 3 Months Ended Dec. 31,
12 Months Ended Dec. 31,
2010 2009
2010 2009
WEXPRO Production volumes
Natural gas (Bcf)
12.7 12.0
50.2 48.2 Oil and NGL
(MMbbl)
0.1 0.1
0.4 0.4 Oil and NGL sales price (per
bbl)
$71.34 $60.32
$65.55 $46.73 Investment base at
Dec. 31 ($ in millions)
$456.6 $431.9
- -
QUESTAR
PIPELINE Natural gas-transportation volumes (MMdth) For
unaffiliated customers
151.9 142.7
642.4 624.1 For
Questar Gas
22.6 27.8
112.0 112.9 Total transportation
174.5 170.5
754.4
737.0 Transportation revenue (per dth)
$0.27
$0.26
$0.25 $0.24 Net firm-daily transportation demand at
Dec. 31 (Mdth)
4,744 4,243
- - Natural gas processing
NGL sales (MMgal)
4.4 3.2
17.9 12.1 NGL sales price
(per gal)
$1.49 $1.20
$1.33 $0.92
QUESTAR GAS
Natural gas volumes (MMdth) Residential and commercial
34.7 38.4
105.8
109.4 Industrial
1.1 0.3
4.5 1.3
Transportation for industrial customers
14.9
14.8
59.3 58.0
Total industrial
16.0 15.1
63.8 59.3 Total deliveries
50.7 53.5
169.6
168.7 Natural gas revenue (per dth)
Residential and commercial sales
$8.29 $7.29
$7.88
$7.99 Industrial
6.49 6.34
5.89 6.50 Transportation
for industrial customers
$0.11 $0.24
$0.16 $0.19
Temperatures - colder (warmer) than normal
(6%
)
14%
1%
5%
Temperature-adjusted usage per customer (dth)
36.1 35.8
106.9 109.0 Customers at Dec. 31 (thousands)
909.6
898.6 - - QUESTAR CORPORATION PRELIMINARY CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
December 31,
December 31,
2010 2009 (in millions)
ASSETS Current Assets Cash and cash equivalents
$21.8 $11.5
Accounts and notes receivable, net
159.2 162.1 Unbilled-gas
accounts receivable
81.6 86.9 Inventories
62.7 62.8
Prepaid expenses and other
9.0 8.6 Current regulatory assets
53.5 43.4 Deferred income taxes - current
11.8 14.3
Current assets of discontinued operations
-
562.4 Total Current Assets
399.6
952.0 Property, Plant and Equipment
4,642.8
4,338.9 Accumulated depreciation, depletion and amortization
(1,758.2 ) (1,625.3 ) Net property, plant and
equipment of discontinued operations
-
5,091.3 Net Property, Plant and Equipment
2,884.6 7,804.9 Investment in
unconsolidated affiliate
27.9 28.1 Goodwill
9.8 9.8
Noncurrent regulatory and other assets
51.7 48.6 Noncurrent
assets of discontinued operations
-
175.2 TOTAL ASSETS
$3,373.6
$9,018.6 LIABILITIES AND EQUITY Current Liabilities
Short-term debt
$242.0 $221.9 Accounts payable and accrued
expenses
225.1 232.2 Current regulatory liabilities
6.0 30.7 Current portion of long-term debt
182.0 -
Current liabilities of discontinued operations
-
584.2 Total Current Liabilities
655.1 1,069.0 Long-term debt, less
current portion
898.5 831.2 Deferred income taxes
474.7 377.7 Other long-term liabilities
309.2 359.4
Noncurrent liabilities of discontinued operations
- 2,824.2
EQUITY Common Shareholders' Equity
1,036.1 3,502.2
Noncontrolling interest of discontinued operations
-
54.9 Total Equity
1,036.1
3,557.1 TOTAL LIABILITIES AND EQUITY
$3,373.6 $9,018.6 QUESTAR
CORPORATION PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited) 12 Months Ended December 31,
2010 2009 (in millions) OPERATING ACTIVITIES Net
income
$340.5 $395.9 Discontinued operations, net of income
taxes
(148.2 ) (215.4 ) Adjustments to reconcile net
income to net cash provided by operating activities by continuing
operations: Depreciation, depletion and amortization
161.8
154.3 Deferred income taxes
91.4 82.1 Share-based
compensation
15.4 9.3 Net (gain) from asset sales
(0.4 ) (0.2 ) (Income) from unconsolidated affiliate
(3.8 ) (3.8 ) Distributions from unconsolidated
affiliate and other
2.5 3.3 Changes in operating assets and
liabilities
(108.3 ) 3.3 NET
CASH PROVIDED BY OPERATIONS BY CONTINUING OPERATIONS
350.9 428.8 INVESTING ACTIVITIES
Property, plant and equipment
(320.3 ) (299.8 )
Equity investment in QEP Resources, Inc.
(250.0 ) -
Cash used in disposition of assets
(2.6 ) (2.0 )
Proceeds from disposition of assets and other
0.6 1.9 Change
in notes receivable
39.3 50.1 Distribution from QEP
Resources, Inc.
7.3 - NET CASH
USED IN INVESTING ACTIVITIES BY CONTINUING OPERATIONS
(525.7 ) (249.8 ) FINANCING ACTIVITIES
Common stock
6.8 9.1 Long-term debt issued, net of issuance
costs
244.6 50.8 Long-term debt repaid
- (42.0 )
Change in long-term notes payable
- (50.0 ) Change in
short-term debt
73.0 (62.1 ) Change in notes payable
(52.9 ) 12.2 Checks outstanding in excess of cash
balances
- (1.2 ) Dividends paid
(94.8 ) (87.9
) Tax benefits from share-based compensation
8.4
3.6 NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES FROM CONTINUING OPERATIONS
185.1
(167.5 ) CASH PROVIDED BY CONTINUING OPERATIONS
10.3 11.5 Cash provided by operations
of discontinued operations
475.5 1,149.4 Cash used in
investing activities of discontinued operations
(598.6
) (1,146.4 ) Cash provided by (used in) financing activities
of discontinued operations
103.8 (8.8 ) Effect of change in
cash and cash equivalents of discontinued operations
19.3 5.8 Change in cash and cash
equivalents
10.3 11.5 Beginning cash and cash equivalents
11.5 - Ending cash and cash
equivalents
$21.8 $11.5
QUESTAR CORPORATIONNON-GAAP FINANCIAL MEASURES(Unaudited)
In addition to financial measures calculated in accordance with
generally accepted accounting principles (GAAP), this press release
contains non-GAAP financial measures. The Company believes that
such non-GAAP financial measures are useful to investors because
they provide an alternative method for assessing the Company's
ongoing operating results. The Company's management uses these
non-GAAP financial measures for the same purpose, and for planning
and forecasting purposes. The presentation of non-GAAP financial
measures is not meant to be a substitute for financial measures in
accordance with GAAP.
1. The following table reconciles GAAP and non-GAAP income from
continuing operations and diluted earnings per common share before
separation costs associated with the June 30, 2010, spinoff of QEP
Resources, Inc.
3 Months Ended 12 Months Ended December 31, December
31, 2010 2009 2010 2009 (in
millions, except earnings per share) Income from
continuing operations $63.7 $55.4 $192.3 $180.5 Separation costs -
- 11.5 - Income taxes on separation costs - -
(2.7 ) - After-tax separation costs - -
8.8 - Income from continuing operations before
separation costs $63.7 $55.4 $201.1
$180.5 EARNINGS PER COMMON SHARE Diluted from
continuing operations $0.36 $0.31 $1.08 $1.02 Diluted from
after-tax separation costs - - 0.05
- Earnings per diluted share from continuing operations
before separation costs $0.36 $0.31 $1.13
$1.02 Weighted-Average Common Shares
Outstanding Diluted 178.8 176.7 178.0 176.3
2. Management defines EBITDA as income from continuing
operations before the following items: separation costs,
depreciation, depletion, and amortization, net (gain) loss from
asset sales, interest expense and income taxes. Management believes
EBITDA is an important measure of the Company's cash flow and
liquidity, and a key measure for comparing the Company's financial
performance to other companies.
The following table reconciles Questar's income from continuing
operations to EBITDA for the twelve months ended December 31,
2010:
Questar Wexpro
Questar Questar
Consolidated Company Pipeline
Gas Corporate (in millions) Income
(loss) from continuing operations $192.3 $88.1 $67.4 $43.9 ($7.1 )
Separation costs 11.5 - - - 11.5 Depreciation, depletion and
amortization 153.4 62.1 47.4 43.7 0.2 Net (gain) loss from asset
sales (0.4 ) 0.4 (0.8 ) - - Interest expense 57.1 0.3 28.8 26.2 1.8
Income taxes 109.4 48.5
38.8 25.2 (3.1 )
EBITDA $523.3 $199.4
$181.6 $139.0 $3.3
The following table reconciles Questar's income from continuing
operations to EBITDA for the twelve months ended December 31,
2009:
Questar Wexpro
Questar Questar
Consolidated Company Pipeline
Gas Corporate (in millions)
Income from continuing operations $180.5 $80.7 $58.2 $41.6 $ -
Depreciation, depletion and amortization 147.1 58.8 44.3 43.8 0.2
Net (gain) loss from asset sales (0.2 ) 0.3 (0.5 ) - - Interest
expense 59.6 0.9 29.5 28.5 0.7 Income taxes 104.4
46.2 33.8
24.4 - EBITDA $491.4
$186.9 $165.3
$138.3 $0.9
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