Questar Corporation. East Coast Analyst Meetings A NATURAL GAS-FOCUSED ENERGY COMPANY. Boston and New York City June 10-11, 2008

Transcription

1 Questar Corporation A NATURAL GAS-FOCUSED ENERGY COMPANY East Coast Analyst Meetings Boston and New York City June 10-11, 2008

2 Questar is a natural gas-focused energy company Net income contribution TTM March 2008 Market Resources 83% Wexpro (E&P) 11% Gas Management (Gathering & Processing) 11% Questar E&P 56% Questar Pipeline (Interstate Transportation) 9% Questar Gas (Distribution) 7% $14 billion enterprise value 2

3 We ve grown EPS at a 25% CAGR over the past five years 2008 EPS guidance Key assumptions (effective 4/28/08) 80% of remaining 2008 production fixed prices Price and basis for unhedged production Gas: $10.00-$11.00 / MMBtu NYMEX Oil: $105-$115 / bbl NYMEX Rockies basis: $3.00-$2.50 / MMBtu Midcon basis: $1.60-$1.35 / MMbtu Questar E&P production: Bcfe Average diluted shares (millions): $0.94 Earnings per diluted share (actual and forecast) $ $3.40 $ % CAGR $1.34 $1.87 $2.54 $ F 3

4 Questar E&P is one of the fastest growing independent E&P companies in America 1600 Bcfe Proved YE reserves (Bcfe)* 10-year CAGR: 15% Bcfe Production (Bcfe)* 10-year CAGR: 9% Bcfe '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 50 *excludes Wexpro reserves and production 4

5 We focus on returns on capital E&P margins drive returns Return on assets* March 2008 (TTM) 15.8% 19.0% 10.0% 7.8% Questar Questar Market Resources Questar Pipeline Questar Gas ROE 22.5 % 26.7% 12.6% 10.4% * EBIT/average assets 5

6 We protect margins and returns by maintaining a low cost structure relative to E&P peers 2007 YE cost structure versus 38 E&P peers (DD&A + LOE + production taxes + G&A + interest) $10.00 $8.00 $6.00 Questar E&P $3.47/Mcfe Median $5.22/Mcfe $4.00 $2.00 $0.00 Source: Company data and Credit-Suisse E&P Stat Sort, April

7 We reduce exposure to commodity price volatility and lock in returns by hedging $14 $12 $10 Total Cash Cost Total Fixed Equivalent Gas Hedges Rockies Forward Strip NYMEX Forward Strip "Realized" Equivalent Gas Prices Rockies Historical NYMEX Historical $/ Mcfe $8 $6 $4 Margin extraction works as long as we maintain our low cost structure $2 $0 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 7

8 Hedging has taken commodity price risk mostly out of the equation for 2008 and 2009 Gas and oil hedges as of 4/28/08 (Volumes and net-to-well prices) 98 Bcf gas $7.55/ Mcf 18% Unhedged 6 Bcfe oil $68.55 / bbl 3 Bcf Rox Basis $1.83 / Mcf 126 Bcf gas $7.66 / Mcf 4 Bcfe oil $62.95 / bbl 30% Unhedged 2008 (Apr-Dec) 9 Bcf Rox Basis $1.35 / Mcf 3 Bcf Midcon Basis $1.08 / Mcf 10 Bcf Rox Basis $2.68 / Mcf 3 Bcf Midcon Basis $0.94 / Mcf 66 Bcf gas $7.84 / Mcf 66% Unhedged 2009 Hedged gas Rox basis hedge Unhedged production Hedged oil Midcon basis hedge

9 Questar E&P is active in some of the most important resource plays in North America 2007 YE Reserves (Bcfe) QEP: 1,868 Wexpro*: 642 QEP Rockies 1,494 Bcfe (80% of reserves) QEP Midcontinent 374 Bcfe Pinedale Anticline Bakken Shale Wexpro 642 Bcfe 2007 Production (Bcfe) QEP: Wexpro*: 37.4 Uinta Basin Granite Wash Woodford Shale QEP Rockies 89.2 Bcfe (64% of production) QEP Midcontinent 51.0 Bcfe Wexpro 37.4 Bcfe * Wexpro cost-of-service reserves and production Hosston Cotton Valley Haynesville 9

10 Questar E&P growth is driving STR net income and cash flow Questar E&P net income ($ millions) Questar E&P EBITDAX ($ millions) 41% CAGR % CAGR TTM 3/ TTM 3/08 10

11 We re finding new opportunities on our core Rockies properties Deep potential Downspacing potential Stratigraphic plays on flanks of old fields Hydraulic fracturing 3-D seismic Coal-bed methane Pinedale Moxa Arch WYOMING Wamsutter Approximately 1,100,000 net acres of Rockies leasehold South Baxter QMR leasehold UTAH Vermillion Wedge Gas fields Oil fields COLORADO Uinta Basin 11

12 Our Pinedale project drives production and earnings growth Concentrated asset Proven play Low F&D and LOE Downspacing potential Developed infrastructure Gathering and processing QMR leasehold 18,923 gross acres Pinedale Field Jonah Field 12

13 We have over 1,600 low-risk development locations on the Pinedale Anticline QEP net proved reserves: 1,034 Bcfe * Additional probable and possible reserves: 1.5 Tcfe net Low F&D cost Over 1600 remaining well locations on combination of 5- and 10-acre density 10-acre density wells likely recover < 50% OGIP 264 producing wells at 05/30/ QEP PUDs booked on combination of 10 and 20-acre density * well completions in 2008 SEIS ROD expected this summer * 12/31/07 13

14 We have significant growth opportunities in the Uinta Basin Wasatch / Upper Mesaverde Formations targets tight gas sands 31 operated and 31 non-operated remaining low-risk locations on 40-acre density Lower Mesaverde / Blackhawk / Mancos / Dakota Fms tight gas sand and shale play significantly over-pressured 31 Km / Kd wells completed to date over 30 wells planned for 2008 combined deep / shallow reserves 3 to 6 Bcfe per well 4 wells completing, 4 currently drilling Flat Rock / Garmesa Trend multiple targets in Jurassic and Cretaceous Gas Management gathering 9 productive wells 2 wells completing / 2 wells drilling Core L. Mesaverde / Blackhawk / Mancos Play Flat Rock / Garmesa Trend Km/Kd wells* Wasatch / U. Mesaverde Play *Km: Mancos shale Kd: Dakota sandstone Updated May 27, Mi 14

15 Our Uinta Basin deep play is working we expect to drill over 30 deep wells this year Targets at depths of 5,000 to 18,000 feet T 7 S Questar E&P drilling well Questar E&P completing well T 8 S Producer with Questar E&P interest Questar E&P leasehold T 9 S Proposed 3D R 20 E R 21 E R 22 E R 23 E R 24 E Updated May 27, Mi 15

16 We re developing our Flat Rock / Wolf Flat play in the southern Uinta Basin 34,000 gross / 21,483 net acres in Wolf Flat and Flat Rock 9 producing wells / 2 completing / 2 drilling R 12 E R 21 E T 11 S 7 wells planned for 2008 High-rate Entrada formation wells/multiple objectives Gas Management midstream presence Seven Mile Canyon West Tavaputs/ Prickly Pear GarMesa Shear Flat Rock Wolf Flat T 16 S 6 Mi Questar E&P drilling well Producer with Questar E&P interest Questar E&P completing well Questar E&P leasehold Updated May 27, 2008

17 We re evaluating deep potential on our 146,000 net acres in the Vermillion Basin Targets at depths of 10,000 to 15,000 feet Dak/Fr/Baxter or Baxter only producer QMR leasehold Shallow production 1 Mile Trail Shallow Canyon Creek Shallow E&W Hiawatha/Sugarloaf Shallow Updated April 1,

18 We ve acquired 62,000+ net acres in the emerging Bakken shale oil play in North Dakota Bakken Formation oil play > 62,000 net acres horizontal laterals $5.5 - $6.0 mm well cost IP s from 500-3,000 bopd 0.5 to 0.75 MMboe/well First well Q4/08 Sanish Field I.P s: 500-2,500 BOPD Parshall Field I.P s: 750-3,000 BOPD EUR s: 750 MBO Producing horizontal wells Drilling wells Permitted locations Questar E&P initial test well location Questar E&P leasehold Questar E&P mineral interest Bailey Field I.P s: 500-1,000 BOPD 6 mi Updated May 27,

19 We have over 1,600 Cotton Valley / Hosston locations in our NW Louisiana inventory Questar E&P Net Production from Map Area MMcfe/d Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Approx. 35,600 net acres in CV/ Hosston > 1,600 future locations (avg. WI 65%) EUR / well 0.7 to >3.25 Bcfe $1.7 - $2.5 MM well cost Existing wells Elm Grove 299 (54% avg. WI) Woodardville 69 (95% avg. WI) Thorn Lake 10 (100% WI) Cotton Valley / Hosston locations Elm Grove 189 (48% avg. WI) Woodardville 396 (94% avg. WI) Thorn Lake 483 (100% avg. WI) Other 576 (19% avg. WI) Questar E&P leasehold 6 Mi Updated May 27,

20 We are evaluating the Haynesville Shale on our 29,500 net acre leasehold in NW Louisiana Haynesville well location Haynesville drilling or WOC wells Haynesville producing wells Haynesville penetrations Horizontal well/location Questar E&P leasehold (Haynesville or deeper) 6 Mi Updated May 28,

21 We re getting solid growth from our Granite Wash/ Atoka play in the Texas Panhandle 20 Questar E&P net production from Granite Wash/Atoka MMcfe/d 10 0 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul new wells in rigs running (4 op, 3 non-op) > 235 remaining locations $2.0 to 4.6 MM well cost EUR 0.8 to 2 Bcfe / well 54,676 gross / 25,107 net acres 6 Mi Granite Wash or deeper penetration Updated May 27, 2008 QEP leasehold QEP leasehold below Atoka only 21

22 We have early success in an emerging Woodford shale play in Western Oklahoma approx. 13,000 net acres in 116 sections up to 460 horizontal locations 18% avg. Questar E&P working interest 3 WI Wells drilling 3 WI Wells completed Gross cost: $7-8 MM per well Est. gross EUR 3-5 Bcfe per well Woodford wells completed Woodford wells drilling Questar E&P leasehold 6 Mi Updated May 28, 2008 Woodford wells permitted 22

23 Our probable and possible reserve inventory provides significant organic growth opportunities Questar E&P Reserves Estimates Proved*: 1,868 bcfe Probable**: 2,500 bcfe Possible**: 3,509 bcfe * Prepared by independent reservoir engineering consultants as of 12/31/07 ** Prepared by Questar E&P and reviewed by independent reservoir engineering consultants as of 6/30/06 and EXCLUDES RECENT LA ACQUISITIONS 23

24 Wexpro has a large inventory of future development drilling locations over 770 identified risked locations $1.1 B identified risked net CAPEX successful well costs added to investment base, dry holes excluded investment base depreciated on units-ofproduction basis 19-20% after-tax return on investment base operating costs fully reimbursed future development provides competitive cost-of-service gas supply for Questar Gas UT Pinedale 133 locations* WYOMING Moxa Arch / Labarge Platform 333 locations WY CO QMR acreage Gas fields Oil fields Wexpro development areas Uinta Basin 25 locations Vermillion / Powder Wash 191 locations * Based on 10-acre development 24

25 Wexpro s $1.1 billion inventory of development locations drives 15+% / yr net income growth Net income ($ millions) Investment base ($ millions) 16% CAGR % CAGR TTM 3/ TTM 3/08 25

26 Gas Management will grow with Questar E&P and Wexpro Rockies production Vermillion Basin Processing / blending: 80 MMcfd Gathering: 500 miles Operating income: 15% Interstate pipeline connections: 1 W. Green River Basin Hub Processing / blending: 540 MMcfd QGM gathering: 500 miles Rendezvous gathering: 250 miles Rendezvous transmission: 20 miles Operating income: 52% Interstate pipeline connections: 5 UT WY CO Uinta Basin Hub Processing / blending: 320 MMcfd* QGM gathering: 750 miles UBFS gathering: 65 miles Operating income: 33% Interstate pipeline connections: 3 * with Stagecoach startup 7/1/08 26

27 Our gathering & processing business is capitalizing on Rockies production growth Questar Gas Management Net income ($ millions) $ % CAGR $35.7 $42.6 $55.3 $21.0 $ TTM 3/08 27

28 Questar Pipeline s role: eliminate pipeline bottlenecks in Questar E&P s core Rockies basins Net Income ($ millions) $49.7 $45.4 $45.0 $34.8* Northern System Overthrust Pipeline Questar Pipeline QMR producing areas Producing basins $ TTM 3/08 Total system 2,505 miles Total daily capacity 4,006 Mdth Storage capacity 53.1 Bcf Rate base (1/1/08) $878 MM Southern Trails Southern System * before $10.4MM So Trails writedown 28

29 QPC net income up 42% in Q vs. Q driven by expansion projects Overthrust (Green River Basin) Investment $259 million Revenue $36 million/yr 2008 EPS impact $0.07/share Opal Overthrust Pipeline Wamsutter Southern System (Uinta Basin) Investment $108 million Revenue $17 million/yr 2008 EPS impact $0.03/share Goshen Kanda Clay Basin Southern System WY CO 29

30 Questar Gas role: pay part of our our dividend and support our credit ratings Net Income ($ millions) $38.9 $37.0 $37.4 $36.0 Questar Gas $31.5 Major cities served Questar Pipeline TTM 3/08 Cities served 277 Customers (4/1/08) 882, deliveries 161 MMdth Rate base (1/1/08) $773 MM 30

31 Our balance sheet is strong we ll keep it strong Capitalization (includes short-term debt) ($ millions) $3,961 $3, $4, TOTAL DEBT % $2,372 $2, $ EQUITY % /08 31

32 We ve grown our dividend 36% over the past five years Dividends / payout ratio / yield Quarterly dividend $ per share 34 increases in 35 years $0.49 annualized dividend 0.7% yield on $67.00 stock price $0.34 $0.35 $0.36 $0.39 $0.43 $0.45 $0.47 $0.49 $ YTD 2008 PAYOUT RATIO 37% 36% 42% 37% 32% 24% 18% 17% YIELD 2.3% 2.9% 2.7% 2.3% 1.7% 1.2% 1.1% 0.9% 32

33 We generate strong cash flow to fund our capital programs and our dividend Cash flow from operations* ($ millions) $470 $583 24% CAGR $700 77% $883 82% $1,107 84% $1,192 84% 66% 70% TTM 3/08 QMR QPC / QGC & Corp *Before working-capital changes 33

34 Our record capital program reflects our large inventory of attractive development opportunities 2008 CAPEX Forecast $2.6 Billion Wexpro $131 MM Questar E&P $1,838 MM Gas Management $400 MM Questar Pipeline $120 MM Questar Gas $136 MM 34

35 When you invest in STR you get Questar E&P: High-quality Rockies and Midcontinent assets Large inventory of development opportunities Low cost structure, competitive organic F&D cost Wexpro: Lower-risk, high return, high-growth Rockies E&P company Gas Management: High-growth field services business piggybacking on E&P affiliate investment Questar Pipeline: Interstate pipeline and storage business in the Rockies sweet spot Questar Gas: LDC with above-average growth Strong balance sheet / investment-grade credit Track record of consistent dividend growth 35

36 Caution regarding forward-looking statements This presentation contains forward-looking statements within the meaning of the federal securities laws. Such statements are based on management's current expectations, estimates and projections, which are subject to a wide range of uncertainties and business risks. Factors that could cause actual results to differ from those anticipated are discussed in the company's periodic filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, Questar undertakes no obligation to publicly correct or update the forward-looking statements in this presentation to reflect future events or circumstances. All such statements are expressly qualified by this cautionary statement.