Questar Profit, Sales Miss View – Analyst Blog

Natural gas-focused energy company Questar Corp. (STR) reported weak first-quarter 2010 results on lower realized natural gas prices. Earnings per share, excluding losses from non-core asset sales and certain other one-time items, came in at 73 cents, lower than the Zacks Consensus Estimate of 75 cents and the year-ago profit of 86 cents.

 

Total revenues, at $984.0 million, were up 6.7% from the year-ago level of $922.5 million on higher production volumes but came below the Zacks Consensus Estimate of $1,027 million.

 

For the reported quarter, total operating expenses went up 9.4% year-over-year to $715.5, reflecting higher per-unit production costs.

 

 

Business segment wise, Questar Market Resources’ sales was up 21.1% to $576.3 million, while the segment income increased significantly (from $20.7 million to $99.3 million) mainly buoyed by the E&P sub-segment results.

 

Questar E&P reported a 9.8% rise in quarterly production to 51.5 billion cubic feet equivalent/Bcfe (90% natural gas) from 46.9 Bcfe, a year ago, reflecting strong well results from the Haynesville Shale in Louisiana, and the Woodford Shale in Oklahoma. Volumes were partially dragged down by declining Rockies production.

 

Growing production volumes were partially offset by 25% lower realized natural gas price and a 5% rise in per-unit production costs. Overall, the segment’s income reached $53.8 million as against a loss of $14.9 million in the first quarter of 2009. However, lower realizations pulled down E&P revenue growth to just 2.9% (from $310.8 million to $319.7 million).

 

 

Questar Pipeline’s revenue of $47.0 million was up 15.5% from the year-ago period. Net income came in at $17.2 million, an increase of 17.0%, helped by increased sales from transportation and natural gas liquids (NGL).

 

 

At $360.7 million, revenue declined 11.1% year over year. The segment reported net income of $33.1 million, up 4.1% from the first quarter of 2009. This was mainly on account of customer growth and higher margins.

 

 

The company spent $349.4 million in capital expenditure during the quarter. As of March 31, Questar’s total long-term debt stood at $2.0 billion (debt-to-capitalization ratio of 34.4%).

 

 

The company raised Questar E&P’s 2010 full-year production guidance to 212 – 217 Bcfe (from 210 – 215 Bcfe). Additionally, management now sees full-year EBITDA of $1.48 – $1.58 billion, compared with its prior view of $1.45 – $1.55 billion.