Questar Corp. grew net income 14% in 2007 to $507.4 million, or $2.88 per diluted share, compared to $444.1 million, or $2.54 per diluted share, for the prior year. The increase was the result of record net income by all four Market Resources subsidiaries. The 2006 result included a $15.8 million, or $0.09 per diluted share, net after-tax gain from the sale of assets.
In the fourth quarter of 2007, Questar net income was $130.8 million, or $0.74 per diluted share, compared to $121.5 million, or $0.69 per diluted share, for the 2006 period, an 8% increase.
"Questar posted double-digit net income growth for the fifth-straight year in 2007," said Keith Rattie, Questar chairman, president and CEO. "Questar E&P grew natural gas and oil-equivalent production 8% compared to 2006 – and 15% if you add back the unhedged production we intentionally shut in due to low Rockies prices. Also, in 2007 we increased investment in our second E&P business, Wexpro, and in Gas Management, our Rockies-focused gathering and processing business. Both businesses factor big in our five-year plan – and both delivered in 2007," Rattie added.
Questar E&P natural gas, oil and natural gas liquids (NGL) production totaled 140.2 billion cubic feet of natural gas equivalents (Bcfe), compared to 129.6 Bcfe in 2006. Natural gas comprised 87% of reported volumes. During 2007 the company shut in approximately 10.3 Bcfe (net) of unhedged natural gas and associated liquid hydrocarbon production in response to low regional market prices for natural gas in the Rocky Mountain producing region.
Questar E&P replaced 268% of 2007 production and grew proved reserves 14% to 1,868 Bcfe at year-end 2007.
Realized natural gas prices at Questar E&P increased $0.46 per thousand cubic feet (Mcf), or 8%, while realized crude oil and NGL prices increased $4.87 per barrel (bbl), or 10%. Natural gas hedges increased reported revenues by $245.7 million, while oil hedges reduced revenues by $17.2 million.
Excluding the effects of the pending Louisiana acquisitions discussed below, Questar expects 2008 earnings to range from $2.90 to $3.05 per diluted share, compared to previous guidance of $2.85 to $3.00 per diluted share. The company expects Questar E&P 2008 production to range from 148 to 151 Bcfe. The lower end of the guidance range assumes an average NYMEX price of $7.50 per million Btu (MMBtu) for currently unhedged 2008 natural gas production and an average prompt-month NYMEX oil price of $85.00 per barrel applied to unhedged volumes. The upper end assumes an average NYMEX gas price of $8.50 per MMBtu and an average prompt-month NYMEX oil price of $90.00 per barrel applied to unhedged 2008 production. On January 31, 2008, Questar E&P announced that it had reached definitive agreement to acquire natural gas-producing properties near its core Elm Grove play in northwest Louisiana from two separate groups of sellers. The company expects to close these acquisitions by the end of February 2008 and will update net income and production guidance for the acquisitions at that time.
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