QUESTAR MARKET RESOURCES INC, S-3/A, 2000-11-15

QUESTAR MARKET RESOURCES INC
S-3/A, 2000-11-15
DRILLING OIL & GAS WELLS

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 15, 2000

REGISTRATION STATEMENT NO. 333-34640
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 1
TO

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------

QUESTAR MARKET RESOURCES, INC.

(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C>
UTAH 87-0287750
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>

180 EAST 100 SOUTH STREET
P. O. BOX 45601
SALT LAKE CITY, UTAH 84145-0601
(801) 324-2600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
--------------------------

CONNIE C. HOLBROOK, ESQ.
QUESTAR MARKET RESOURCES, INC.
180 EAST 100 SOUTH STREET
P. O. BOX 45601
SALT LAKE CITY, UTAH 84145-0601
(801) 324-2600
(Name, address, including zip code, and telephone number
including area code, of agent for service)
--------------------------

COPIES TO:

<TABLE>
<S> <C>
RICHARD J. GROSSMAN, ESQ. PAUL C. PRINGLE, ESQ.
Skadden, Arps, Slate, Meagher & Flom LLP Brown & Wood LLP
Four Times Square 555 California Street, Suite 5000
New York, New York 10036-6522 San Francisco, California 94104
Tel: (212) 735-3000 Tel: (415) 772-1200
Fax: (212) 735-2000 Fax: (415) 397-4621
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box: / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement for the same offering: / /

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
number for the same offering: / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
% Notes Due 20[ ]...................... $150,000,000 100% $150,000,000 $39,600
</TABLE>

(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) of the Securities Act.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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--------------------------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED NOVEMBER 15, 2000

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
P R O S P E C T U S

$150,000,000

[LOGO]

QUESTAR MARKET RESOURCES, INC.
(A SUBSIDIARY OF QUESTAR CORPORATION)
% NOTES DUE 20[ ]

We will pay interest on the notes on and of each year, beginning
, 2001. The notes will mature on , 20[ ]. We may redeem
some or all of the notes at any time at redemption prices described in this
prospectus.

The notes will be unsecured obligations and rank equally with our other
unsecured indebtedness. The notes will be issued only in registered form in
denominations of $1,000.

Investing in our notes involves risks. See "Risk Factors" beginning on
page 8.

<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- ------------
<S> <C> <C>
Public offering price(1)................................. 100% $150,000,000
Underwriting discount.................................... % $
Proceeds, before expenses, to Questar Market Resources... % $
</TABLE>

------------------------

(1) Plus accrued interest from , 2000, if settlement occurs after
that date

These notes are being offered on a firm commitment basis. The underwriters
have agreed to purchase all of the notes sold pursuant to the purchase agreement
if any of these notes are purchased.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The notes will be ready for delivery in book-entry form only through The
Depository Trust Company on or about , 2000.

MERRILL LYNCH & CO.

BANC OF AMERICA SECURITIES LLC

BANC ONE CAPITAL MARKETS, INC.

TD SECURITIES
------------------------

The date of this prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary..................................................... 2

Risk Factors................................................ 8

Cautionary Statement Regarding Forward-Looking Statements... 12

Use of Proceeds............................................. 12

Capitalization.............................................. 13

Selected Consolidated Financial Data........................ 14

Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 16

Business.................................................... 24

Our Relationship with Questar............................... 29

Description of the Notes.................................... 30

Underwriting................................................ 40

Legal Matters............................................... 41

Experts..................................................... 42

Where You Can Find Additional Information................... 42

Glossary of Commonly Used Oil & Gas Terms................... 43
</TABLE>

------------------------

You should rely only on the information contained or incorporated by
reference in this prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not, and the underwriters are not, making an offer to sell the notes
in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus is accurate only as of the
date on the front cover of this prospectus. Our business, financial condition,
results of operations and prospects may have changed since that date.

1
<PAGE>

SUMMARY

This summary highlights selected information from this prospectus, but does
not contain all information that may be important to you. You should read the
entire prospectus carefully, including the financial data and related notes,
before making an investment decision. We have provided definitions for some of
the oil and gas terms used in this prospectus in the "Glossary of Commonly Used
Oil & Gas Terms" on page 43 of this prospectus.

THE COMPANY

Questar Market Resources, Inc, (variously referred to as "Questar Market
Resources", "we", "us", and "our", which references shall include our
wholly-owned subsidiaries) is a wholly-owned subsidiary of Questar Corporation
("Questar"). Questar is a publicly traded diversified natural gas company with
two principal business units, Market Resources and Regulated Services. We
comprise the Market Resources unit of Questar and as such engage in oil and gas
exploration and production; gas gathering and processing; wholesale gas,
electricity, and hydrocarbon liquids marketing and trading; and the acquisition
and development of producing oil and gas properties. We are a subholding company
of Questar and carry out our business through the following subsidiaries:

- Questar Exploration and Production Company ("Questar E&P") and its
Canadian subsidiaries Celsius Energy Resources Ltd. ("Celsius Ltd.") and
Canor Energy Ltd. ("Canor")

- Wexpro Company ("Wexpro")

- Questar Energy Trading Company ("Questar Energy Trading")

- Questar Gas Management Company ("Questar Gas Management")

Management of Questar has identified our company as the primary growth area
within Questar's business strategy. Questar expects to spend approximately 70%
of its budgeted capital expenditures over the next five years on non-regulated
activities, primarily to expand our oil and gas reserves through drilling and
acquisitions and to enlarge our infrastructure of gathering systems, processing
plants, header facilities and nonregulated storage facilities. Our management
believes that the diversity of our activities enhances our basic strategy to
pursue complementary growth for our subsidiaries. As an example, as Questar E&P,
Celsius Ltd. and Canor, our exploration and production subsidiaries, find or
acquire new oil and gas reserves, Questar Gas Management should have more
opportunities to expand gathering and processing activities, and Questar Energy
Trading should have more physical production to support its marketing programs.

We are parties to several agreements with Questar and its affiliates which
govern different aspects of our relationship with Questar. Summaries of the
agreements may be found under the heading "OUR RELATIONSHIP WITH QUESTAR" in
this prospectus.

2
<PAGE>
OUR CORPORATE STRUCTURE

The following is a diagram of Questar's and our corporate structure:

[LOGO]

OUR BUSINESS STRATEGY

We believe we can best meet and balance the expectations of Questar and our
fixed income investors by pursuing the following strategies in our business:

- achieve a prudent, disciplined program for growing our oil and gas
reserves

- provide stakeholder value performance in both the short and long term

- employ hedging and other risk management tools to manage cyclicality

- maintain a strong balance sheet that permits prudent growth opportunities

- maintain a portfolio of quality drilling prospects

- identify and divest non-core and marginal assets and activities

- employ technology and proven innovations to reduce costs

3
<PAGE>
RECENT DEVELOPMENTS

CANADIAN ACQUISITION. On January 26, 2000, we completed the acquisition of
all of the outstanding shares of Canor Energy Ltd., an oil and gas exploration
company based in Calgary, Alberta. Canor owns or operates more than 800 wells
located primarily in the province of Alberta, as well as in British Columbia and
Saskatchewan. The purchase price for the cash transaction was approximately
$61 million (U.S.) plus the assumption of $5.4 million (U.S.) of short-term
debt. The Canor acquisition will provide a broader operating and financial base
for our Canadian activities, particularly in the areas of exploration and
exploitation opportunities. We anticipate combining Celsius Ltd. and Canor into
a single entity at some point in the future. The combination of Canor with
Celsius Ltd. expanded our reported proved reserves by approximately 61.1 Bcfe,
or 10%, and added about 150,000 net acres to our Canadian undeveloped leasehold
inventory, principally in the province of Alberta.

PINEDALE PROJECT. In January 2000, Questar E&P and Wexpro completed a
high-volume producing well in our Pinedale Anticline development in Sublette
County, Wyoming. The Mesa Unit No. 3 produced 11.4 MMcf of natural gas into a
pipeline and 113 barrels of oil from the Lance Formation during the initial
24-hour period. The Lance Formation in the Pinedale Anticline area is a geologic
structure comprised of many discrete sandstone intervals found at depths between
8,500 and 13,500 feet. The Mesa Unit No. 3 was drilled to a total measured depth
of 13,055 feet and was fracture-stimulated (a production enhancement technique)
in 11 individual sandstone intervals. Questar E&P and Wexpro have a combined
93.8% working interest in the well. While this is not a new discovery--the first
test well into the Pinedale Anticline was drilled in 1939 and Questar drilled
its first acreage holding well in this area in 1963--it has only been recently
that improvements in well completion and production enhancement technology has
provided the means to attain higher production rates from multiple sand
intervals such as the Lance Formation at a reasonable cost. We have completed a
second Mesa Unit well (No. 6) located about one-half mile south of the Mesa Unit
No. 3. The second well encountered a similar number of potentially productive
sandstone intervals and initial test results are comparable to the Mesa Unit
No. 3. A third well failed to produce economic quantities of gas because of
lower-quality reservoir rock. The unsuccessful well does not diminish our
expectations for the development potential of our 14,800 gross acres in the Mesa
area of the Pinedale Anticline, where our subsidiaries own a combined average
60% working interest.

As of June 30, 2000, there were eight proved developed producing wells on
our acreage in the Pinedale area. Malkewicz Hueni Associates, Inc., independent
petroleum engineers, have identified an additional 28 proved undeveloped
locations, based on SEC definitions and guidelines, on our acreage. The gross
reserve range for the proved developed wells was 3.1 to 7.5 Bcfe and the gross
reserve range for the proved undeveloped locations was 3.1 to 6.4 Bcfe. An
average completed well cost of $2,350,000 was assumed for the proved undeveloped
locations. Based on 80-acre spacing, which is less dense than the 40-acre
spacing currently permitted by the State of Wyoming, we estimate the potential
for 130 or more drilling locations within our acreage in the Pinedale Anticline.

On July 27, 2000, the Wyoming State Office of the Bureau of Land Management
("ABLM") issued its Record of Decision ("AROD") approving the Pinedale Anticline
natural gas project under the Resource Protection Alternative of its
Environmental Impact Statement, as modified. The ROD allows 700 producing well
pads in the area, which encompasses approximately 197,000 acres, including our
acreage, and does not restrict the number of drilling rigs to be employed. We
are currently employing five contract drilling rigs to drill the first five
wells of an 8 to 10 well program planned for the remainder of 2000. The
accelerated rate of drilling activity is necessary in order to complete the
drilling program prior to being required to cease drilling activity due to
winter wildlife habitat restrictions.

4
<PAGE>

OUR EXECUTIVE OFFICES

Our executive offices are located at 180 East 100 South, PO Box 45601, Salt
Lake City, Utah 84145-0601, and our telephone number is (801) 324-2600.

THE OFFERING

The following is a brief summary of some of the terms of this offering. For
a more complete description of the terms of the notes see "DESCRIPTION OF THE
NOTES" in this prospectus.

<TABLE>
<S> <C>
Issuer....................................... Questar Market Resources, Inc.

Securities offered........................... $150,000,000 aggregate principal amount of
% notes due 20[ ].

Maturity..................................... , 20[ ].

Interest payment dates....................... and , beginning , 2001.

Ranking...................................... The notes will be unsecured and rank equally
with our other unsecured indebtedness. Since
we are a holding company, the claims of
creditors of our subsidiaries will have
priority over the claims of holders of the
notes. At the present time we have no debt
that would be considered senior to the notes.
The indenture does not restrict the amount of
indebtedness that we or our subsidiaries may
incur.

As of September 30, 2000, after giving pro
forma effect to this offering and our use of
the gross proceeds, there would have been
outstanding approximately $297.1 million of
total indebtedness.

Optional redemption.......................... We may redeem some or all of the notes at any
time at the redemption prices described in
this prospectus.

Use of proceeds.............................. We estimate that the net proceeds from the
offering will be approximately
$148.5 million. We intend to use these
proceeds to:

- repay bank term debt, and

- repay intercompany indebtedness owed to
Questar.
</TABLE>

5
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Revenues..................... $494,365 $359,068 $498,311 $458,272 $523,640 $484,080 $309,466
Operating expenses........... 399,008 308,600 421,533 401,643 459,803 419,395 265,613
Write-down of full cost oil
and gas properties......... -- -- -- 31,000 6,000 -- --
Write-down of gas gathering
properties................. -- -- -- -- 3,000 -- --
-------- -------- -------- -------- -------- -------- --------
Operating income............. 95,357 50,468 76,778 25,629 54,837 64,688 43,853
Other income................. 8,799 3,455 5,035 2,708 5,566 145 6,108
Minority interest............ (441)
Debt expense................. (17,573) (12,772) (17,363) (12,631) (10,882) (8,699) (6,323)
Income tax (expense)
credit..................... (29,903) (11,158) (18,584) 1,019 (10,410) (13,687) (11,984)
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations................. 56,239 29,993 45,866 16,725 39,111 42,447 31,654
Loss from discontinued
operations................. -- -- -- (563) (1,021) (322) --
-------- -------- -------- -------- -------- -------- --------
Net income................... $ 56,239 $ 29,993 $ 45,866 $ 16,162 $ 38,090 $ 42,125 $ 31,654
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
Adjusted EBITDA(2)........... $166,890 $112,472 $160,421 $130,714 $136,481 $123,512 $100,034
Ratio of earnings to fixed
charges(3)................. 4.89 2.19 4.46 2.07 5.13 7.13 7.43
Net cash provided from
operating activities....... $115,294 $ 89,982 $140,857 $127,513 $136,935 $ 83,309 $ 79,596
Net cash used in investing
activities................. 125,346 87,612 94,426 246,689 81,292 184,453 17,606
Net cash provided from (used
in) financing activities... 35,838 (9,450) (48,281) 120,060 (54,615) 97,508 (63,200)
Cash dividends paid to
Questar.................... 12,975 12,450 16,600 15,900 16,325 14,500 13,000
</TABLE>

<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets................. $953,268 $826,403 $847,891 $815,153 $696,675 $696,754 $457,620
Short-term debt.............. 43,200 19,700 24,500 121,800 44,300 78,000 14,000
Long-term debt............... 253,894 263,924 264,894 181,624 133,387 120,000 53,000
Common equity................ 433,863 378,881 387,834 359,638 359,283 337,666 282,144
</TABLE>

------------------------

(1) The information for nine months ended September 30, 2000 and 1999 and the
years ended December 31, 1996 and 1995 is unaudited.

(2) As used in this prospectus, Adjusted EBITDA means earnings before interest
(debt expense), income taxes, depreciation and amortization, and the
write-down of investment in full cost oil and

6
<PAGE>

gas and gas gathering properties. Adjusted EBITDA is not a calculation based
upon generally accepted accounting principles. Adjusted EBITDA should not be
considered as an alternative to net income as an indicator of our operating
performance, or as an alternative to cash flow as a better measure of
liquidity. Adjusted EBITDA presented in this prospectus may not be
comparable to other similarly titled measures reported by other companies.
In evaluating Adjusted EBITDA, we believe that investors should consider,
among other things, the amount by which Adjusted EBITDA exceeds interest
expense, how Adjusted EBITDA compares to principal repayments on debt and
how Adjusted EBITDA compares to capital expenditures for each period.
Investors should avoid undue reliance on Adjusted EBITDA because it may not
reflect signi-ficant trends otherwise important to an investor. In addition,
we may have other functional or legal requirements that may require the
conservation of funds for other uses such that the amount reported as
Adjusted EBITDA may not be available for debt service.

(3) For purposes of this presentation, earnings represent income from continuing
operations before income taxes and fixed charges for the 12 month-ended
period. Fixed charges consist of total interest charges and amortization of
debt issuance costs and the interest portion of rental costs (which is
estimated at 50%) for the 12 month-ended period. The ratio of earnings to
fixed charges was negatively affected by writedowns of our investment in
full cost oil and gas and gas gathering properties totaling $31 million in
1998 and $9 million in 1997.

7
<PAGE>

RISK FACTORS

Before deciding to invest in the notes, you should carefully consider the
following risk factors. The factors discussed below are not all inclusive, but
represent key risk factors you should consider in your decision.

DECREASED OIL AND GAS PRICES COULD ADVERSELY AFFECT OUR REVENUES, CASH FLOWS
AND PROFITABILITY. Our operations are materially dependent on prices received
for our oil and gas production. Both short-term and long-term price trends
affect the economics of exploring for, developing, producing, gathering and
processing oil and gas. Oil and gas prices can be volatile. We sell most of our
oil and gas at current market prices rather than through fixed-price contracts,
although as discussed below, we frequently hedge the price of a significant
portion of future production in the financial markets. The prices we receive
depend upon factors beyond our control, which include:

- weather conditions;

- the supply and price of foreign oil and gas;

- the level of consumer product demand;

- worldwide economic conditions;

- political conditions in foreign countries;

- the price and availability of alternative fuels;

- the proximity to and capacity of transportation facilities;

- worldwide energy conservation measures; and

- government regulations, such as regulation of natural gas transportation
and price controls.

We believe that any prolonged reduction in oil and gas prices would depress
our ability to continue the level of activity we otherwise would pursue, which
could have a material adverse effect on our revenues, cash flows, and results of
operations.

WE HAVE SIGNIFICANT TRANSACTIONS INVOLVING COMMODITY PRICE HEDGING. In
order to protect ourselves to some extent against unusual price volatility and
to lock in favorable pricing on oil and gas production, we periodically enter
into commodity price derivatives contracts (hedging arrangements) with respect
to a portion of our expected production. These contracts may at any time cover
as much as 75% of our energy production. These contracts reduce exposure to
subsequent price drops but can also limit our ability to benefit when commodity
prices rise. Use of energy price hedges also exposes us to the risk of
non-performance by a contract counterparty. We carefully evaluate the financial
strength of all contract counterparties but can make no assurance that these
parties will be able to perform their obligations under the hedge arrangements.
It is our policy that the use of commodity derivatives contracts be strictly
confined to the price hedging of existing and forecast production, and we
maintain a system of internal controls to assure there is no unauthorized
trading or speculation on commodity prices. We cannot, however, assure that
unauthorized speculative trades could not occur that may expose us to
substantial losses to cover a position in the contract.

WE COMPETE IN A HIGHLY COMPETITIVE INDUSTRY, WHICH MAY ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS. The oil and gas exploration and production industry in
which we compete is highly competitive. We compete with major oil companies,
independent oil and gas businesses, and individual producers and operators, many
of which have greater financial and other resources than we do. Industry members
compete on both a national and regional basis for the acquisition of properties.
Prices for production are dictated by national commodity markets and there is
very little brand loyalty or distinction between competitors. We must also
compete for pipeline capacity to transport gas to our markets. The industry,

8
<PAGE>

as a whole, competes with other industries which supply energy to industrial,
commercial and other consumers.

THE NATURE OF OUR OPERATIONS PRESENTS INHERENT RISKS OF LOSS THAT, IF NOT
INSURED OR INDEMNIFIED AGAINST, COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS. Our operations are subject to inherent hazards and risks such as:

- fires;

- natural disasters;

- explosions;

- formations with abnormal pressures;

- blowouts;

- collapses of wellbore, casing or other tubulars;

- pipeline ruptures; and

- spills.

Any of these events could cause a loss of hydrocarbons, environmental
pollution, personal injury or death claims, damage to our properties, or damage
to the properties of others. As protection against operation hazards, we
maintain insurance coverage against some, but not all, potential losses. Our
coverages include:

- operator's extra expense;

- physical damage to certain assets;

- employer's liability;

- business interruption;

- comprehensive general liability;

- automobile; and

- workers' compensation.

Generally, the agreements that we execute with contractors provide for the
division of responsibilities between the contractor and ourselves, and we seek
to obtain an indemnification from the contractor for certain of these risks. To
the extent we are unable to transfer such risks to the contractor, we seek
protection through insurance that our management considers to be adequate.
However, there is no assurance that such insurance or indemnification agreements
will adequately protect us against liability from all of the consequences of the
hazards described above. The occurrence of an event not fully insured or
indemnified against, or the failure of a contractor to meet its indemnification
obligations, could result in substantial losses to us. In addition, there can be
no assurance that insurance will be available to cover any or all of these
risks, or, even if available, that it will be adequate or that insurance
premiums or other costs will not rise significantly in the future, so as to make
such insurance prohibitively expensive.

WE FACE MANY GOVERNMENT REGULATIONS. Extensive federal, state and local
regulation of the oil and gas industry significantly affects our operations. In
particular, our oil and gas exploration, development and production, and our
storage, transportation and processing of liquid hydrocarbons, are subject to
stringent environmental regulations. These regulations delay and increase the
cost of planning, designing, drilling, installing, operating, and abandoning oil
and gas wells and other related facilities. These regulations may become more
demanding in the future.

9
<PAGE>

WE EXPEND SIGNIFICANT RESOURCES, BOTH FINANCIAL AND MANAGERIAL, TO COMPLY
WITH ENVIRONMENTAL REGULATIONS AND PERMITTING REQUIREMENTS. Although we believe
that our operations generally comply with applicable laws and regulations, we
could be liable for personal injuries, property damage, oil spills, discharge of
hazardous materials, remediation and clean-up cost and other environmental
damages. We do not believe that full insurance coverage for all potential
environmental damages is available at a reasonable cost. Failure to comply with
these laws and regulations also may result in the suspension or termination of
our operations and subject us to administrative, civil, and criminal penalties.
Moreover, these laws and regulations could change in ways that substantially
increase our costs.

OUR RESERVES ARE UNCERTAIN. Estimating our proved reserves involves many
uncertainties, including factors beyond our control. Petroleum engineers
consider many factors and make assumptions in estimating our oil and gas
reserves and future net cash flows. These factors include:

- historical production from the area compared with production from other
producing areas;

- the assumed effect of governmental regulation; and

- assumptions concerning oil and gas prices, production and development
costs, severance and excise taxes, and capital expenditures.

Lower oil and gas prices generally cause lower estimates of proved reserves.
Estimates of reserves and expected future cash flows prepared by different
engineers, or by the same engineers at different times, may differ
substantially. Ultimately, actual production, revenues and expenditures relating
to our reserves will vary from any estimates, and these variations may be
material. You should not assume that the present value of future net cash flows
from our proved reserves is the current market value of our estimated oil and
gas reserves. In accordance with Securities and Exchange Commission
requirements, we base the estimated discounted future net cash flows from our
proved reserves on prices and costs as of the date of the estimate. Actual
future prices and costs may differ materially from those used in the net present
value estimate.

THERE ARE MANY RISKS IN DRILLING FOR OIL AND GAS WELLS. Our drilling
activities subject us to many risks, including the risk that we will not find
commercially productive reservoirs. Drilling for oil and gas can be
unprofitable, not only from dry wells, but from productive wells that do not
produce sufficient revenues to return a profit. Also, title problems, weather
conditions, governmental requirements and shortages or delays in the delivery of
equipment and services can delay our drilling operations or result in their
cancellation. The cost of drilling, completing and operating wells is often
uncertain, and we cannot assure that new wells will be productive or that we
will recover all or any portion of our investment.

WE DEPEND ON CERTAIN KEY INDIVIDUALS. Our business is dependent, to a
significant extent, upon the performance of certain key individuals, including
Gary L. Nordloh, our President and CEO, and R. D. Cash, Chairman of the Board
and Chairman, President and CEO of Questar. The loss of services of these
individuals could have a material adverse effect on us, if we were not able to
replace them with individuals who had comparable skills and experience.

AS A HOLDING COMPANY, WE DEPEND ON OUR SUBSIDIARIES TO MEET OUR FINANCIAL
OBLIGATIONS. We are a holding company with no significant assets other than the
stock of our subsidiaries. In order to meet our financial needs, we rely
exclusively on repayments of principal and interest on intercompany loans made
by us to our operating subsidiaries and income from dividends and other cash
flow from the subsidiaries. We cannot assure that such operating subsidiaries
will generate sufficient net income to pay upstream dividends or cash flow to
make payments of principal or interest on our intercompany loans. There are,
however, no contractual or regulatory restrictions on the ability of our
subsidiaries to pay dividends to us or repay intercompany debt and we have full
discretion over receipt of dividends, intercompany loan repayments and receipt
of other payments from our subsidiaries.

10
<PAGE>

THE ABSENCE OF A PUBLIC MARKET FOR THE NOTES COULD LIMIT A PURCHASER'S
ABILITY TO RESELL THEM. The notes will be a new issue of securities with no
established trading market. The underwriters may make a market in the notes, but
the underwriters will not be obligated to do so and may discontinue any
market-making at any time without notice. Consequently, no assurance can be
given as to the liquidity of any secondary market for the notes. The notes will
not be listed on any public exchange.

WE ARE DEPENDENT ON BANK CREDIT FACILITIES AND CONTINUED ACCESS TO CAPITAL
MARKETS TO SUCCESSFULLY EXECUTE OUR OPERATING STRATEGIES. Prior to the issuance
of the notes, we have relied upon bank borrowing and intercompany loans from
Questar to finance the execution of our operating strategies. Questar has in
turn relied upon its own access to short-term commercial paper markets to make
intercompany loans to us. We are dependent on these capital sources to provide
capital to acquire and develop our properties. The availability and cost of
these credit sources is cyclical and there can be no assurance that these
capital sources will remain available to us or that we can get the money at a
reasonable cost in the future. In addition, all of our bank loans and short term
loans from Questar are in the form of floating rate debt. From time to time we
have used interest rate derivatives to fix the rate on a portion of our variable
rate debt, but at present we have no active interest rate hedges in place to
protect against interest rate fluctuations on bank and parent company debt. In
addition, the interest rate on our bank loan is tied to our debt credit ratings
published by Standard & Poor's and Moody's Investors Service. A ratings
down-grade could increase the interest cost of this debt and decrease future
availability of money from banks and other sources. We believe it is important
to maintain investment grade credit ratings to conduct our business, but we
can't guarantee that we can keep investment grade ratings.

OUR COMPETITIVE POSITION AND FINANCIAL STRENGTH ARE ENHANCED BY OUR
RELATIONSHIP WITH QUESTAR. We are a wholly owned subsidiary of Questar and our
goals and strategies are important to Questar. Questar, however, offers no
explicit promise of continued ownership or of the availability of capital going
forward. Our ability to receive future equity and debt capital from our parent
also depends on Questar's ability to access capital markets on reasonable terms.
We also benefit from business transactions with affiliated operating companies.
Questar Gas Management and Wexpro have long-term agreements to gather and
develop reserves owned by an affiliate, Questar Gas Company ("Questar Gas").
Although all transactions are on an arm's-length basis, there can be no
assurance that such business relationships will continue.

WE HAVE SIGNIFICANT INVESTMENT IN CANADIAN OIL AND GAS PROPERTIES. With the
acquisition of Canor, we have significant foreign investment in Canada. In order
to protect against foreign exchange translation losses on our Canadian
investment, we attempt to borrow money in Canadian dollars, the value of which
changes as the value of the Canadian assets change. While we expect to be able
to continue this practice, we can make no assurance of the continued
availability of Canadian dollar debt. We are also exposed to foreign currency
risk in the value of our income from these operations. For the present time this
risk is reduced by our desire to reinvest the cash flows of the Canadian
operation. In Canada we are also exposed to foreign laws, drilling and
transportation constraints, business practices and markets that may be different
from our experience in the United States. We believe we can reduce this risk by
retaining competent local professionals with experience in Canadian operating
and legal practices, but can make no assurances that unexpected developments
could not expose us to risk of investment loss in Canada or that qualified
personnel can be found to manage this investment.

THE NOTES ARE EFFECTIVELY SUBORDINATE TO INDEBTEDNESS OF OUR
SUBSIDIARIES. The notes will rank equally with our other unsecured debt, but
will be considered subordinate to claims of creditors of our subsidiaries. At
the present time we have no debt that would be considered senior to these notes.
The indenture does not contain any financial covenants or otherwise restrict the
amount of indebtedness which we or our subsidiaries may incur. At the present
time the only debt owed by our subsidiaries is debt that is either guaranteed by
us or is intercompany debt owed to us as the parent.

11
<PAGE>

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes "forward-looking statements" within the meaning of
Section 27(a) of the Securities Act of 1933, as amended, and Section 21(e) of
the Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included or incorporated by reference in this
prospectus, including, without limitation, statements regarding our future
financial position, business strategy, budgets, projected costs and plans and
objectives of management for future operations, are forward-looking statements.
In addition, forward-looking statements generally can be identified by the use
of forward-looking terminology such as "may", "will", "could," "expect",
"intend", "project", "estimate", "anticipate", "believe", "forecast" or
"continue" or the negative thereof or variations thereon or similar terminology.
Although we believe that the expectations reflected in these forward-looking
statements are reasonable, we cannot assure you that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from those expressed or implied in forward-looking statements
include changes in general economic conditions, gas and oil prices and supplies,
competition, regulation of the Wexpro settlement agreement, availability of gas
and oil properties for sale or exploration, the rate of inflation, the weather
and other natural phenomena, the effect of accounting policies issued
periodically by accounting standard-setting bodies, and other factors beyond our
control that could affect adversely our financial condition and results of
operations. All our subsequent written and oral forward-looking statements or
those of persons acting on our behalf, are qualified by these cautionary
statements. We assume no duty to update or revise our forward-looking statements
based on changes in internal estimates or expectations or otherwise.

USE OF PROCEEDS

We plan to use the net proceeds from the sale of the notes to repay a
portion of our bank term debt and to repay indebtedness we owe Questar. At
September 30, 2000, our bank term debt totaled approximately $253.9 million and
had an average interest rate of 7.03% per annum, short-term debt owed to Questar
totaled approximately $11.7 million and had an interest rate of 6.76% per annum
and outstanding commercial paper of $31.5 million had an interest rate of 7.1%
per annum. We incurred our bank term debt and short-term debt for general
corporate purposes, including working capital needs.

If gross proceeds of this offering were applied first to repayment of
intercompany debt outstanding at September 30, 2000 and then to repayment of our
bank term debt on that date, affiliates of certain of the underwriters would
receive the following loan repayment amounts: Bank America--$27.7 million; Bank
One NA--$27.7 million; and Toronto Dominion--$9.2 million.

12
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization on a consolidated basis as
of September 30, 2000 and as adjusted for the gross proceeds of this offering.
You should refer to our consolidated financial statements, including the notes
to such financial statements, included in the documents incorporated by
reference herein for additional information. See "Where You Can Find Additional
Information".

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS)
-----------------------------------------------
AS
NOTE ADJUSTED
ACTUAL OFFERING AS ADJUSTED PERCENTAGE
-------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Short-term debt--
Intercompany debt owed Questar.................. $ 11,700 ($ 11,700) $ 0
Commercial paper................................ 31,500 31,500
-------- --------- --------
Total short-term debt......................... 43,200 (11,700) 31,500 4.3%
-------- --------- --------
Long-term debt--
Bank term debt.................................. 253,894 (138,300) 115,594
Notes offered hereby............................ 150,000 150,000
-------- --------- --------
Total long-term debt.......................... 253,894 11,700 265,594 36.3%
-------- --------- --------
Common shareholder's equity....................... 433,863 433,863 59.4%
-------- -------- -----
Total capitalization.............................. $730,957 $730,957 100.0%
======== ======== =====
</TABLE>

13
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth our selected financial data. You should read
this table together with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in this prospectus and the
Consolidated Financial Statements and the notes thereto included in our
registration statement on Form 10/A dated November 9, 2000 and in our Quarterly
Report on Form 10-Q for the quarter-ended September 30, 2000, each of which is
incorporated by reference in this prospectus. The information for the nine
months ended September 30, 2000 and 1999 and the years ended December 31, 1996
and 1995 is unaudited.

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Revenues..................... $494,365 $359,068 $498,311 $458,272 $523,640 $484,080 $309,466
Operating expenses........... 399,008 308,600 421,533 401,643 459,803 419,395 265,613
Write-down of full cost oil
and gas properties......... -- -- -- 31,000 6,000 -- --
Write-down of gas gathering
properties................. -- -- -- -- 3,000 -- --
-------- -------- -------- -------- -------- -------- --------
Operating income............. 95,357 50,468 76,778 25,629 54,837 64,688 43,853
Other income................. 8,799 3,455 5,035 2,708 5,566 145 6,108
Minority Interest............ (441)
Debt expense................. (17,573) (12,772) (17,363) (12,631) (10,882) (8,699) (6,323)
Income tax (expense)
credit................... (29,903) (11,158) (18,584) 1,019 (10,410) (13,687) (11,984)
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations............... 56,239 29,993 45,866 16,725 39,111 42,447 31,654
Loss from discontinued
operations............... -- -- -- (563) (1,021) (322) --
-------- -------- -------- -------- -------- -------- --------
Net income................... $ 56,239 $ 29,993 $ 45,866 $ 16,162 $ 38,090 $ 42,125 $ 31,654
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
Adjusted EBITDA(1)........... $166,890 $112,472 $160,421 $130,714 $136,481 $123,512 $100,034
Ratio of earnings to fixed
charges(2)................. 4.89 2.19 4.46 2.07 5.13 7.13 7.43
Net cash provided from
operating activities....... $115,294 $ 89,982 $140,857 $127,513 $136,935 $ 83,309 $ 79,596
Net cash used in investing
activities................. 125,346 87,612 94,426 246,689 81,292 184,453 17,606
Net cash provided from (used
in) financing activities... 35,838 (9,450) (48,281) 120,060 (54,615) 97,508 (63,200)
Cash dividends paid to
Questar.................... 12,975 12,450 16,600 15,900 16,325 14,500 13,000
</TABLE>

14
<PAGE>

(1) As used in this prospectus, Adjusted EBITDA means earnings before interest
(debt expense), income taxes, depreciation and amortization, and the
write-down of investment in full cost oil and gas and gas gathering
properties. Adjusted EBITDA is not a calculation based upon generally
accepted accounting principles. Adjusted EBITDA should not be considered as
an alternative to net income as an indicator of our operating performance,
or as an alternative to cash flow as a better measure of liquidity. Adjusted
EBITDA presented in this prospectus may not be comparable to other similarly
titled measures reported by other companies. In evaluating Adjusted EBITDA,
we believe that investors should consider, among other things, the amount by
which Adjusted EBITDA exceeds interest expense, how Adjusted EBITDA compares
to principal repayments on debt and how Adjusted EBITDA compares to capital
expenditures for each period. Investors should avoid undue reliance on
Adjusted EBITDA because it may not reflect significant trends otherwise
important to an investor. In addition, we may have other functional or legal
requirements that may require the conservation of funds for other uses such
that the amount reported as Adjusted EBITDA may not be available for debt
service.

(2) For purposes of this presentation, earnings represent income from continuing
operations before income taxes and fixed charges for the 12 month-ended
period. Fixed charges consist of total interest charges and amortization of
debt issuance costs and the interest portion of rental costs (which is
estimated at 50%) for the 12 month-ended period. The ratio of earnings to
fixed charges was negatively affected by writedowns of our investment in
full cost oil and gas and gas gathering properties totaling $31 million in
1998 and $9 million in 1997.

15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis addresses changes in our financial
condition and results of operations.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- ------------------------------
2000 1999 1999 1998 1997
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
Operating income
Revenues:
Natural gas sales........................... $132,374 $ 89,278 $125,245 $ 98,767 $ 89,489
Oil and NGL sales........................... 44,893 29,516 41,521 36,722 53,722
Cost of service gas operations.............. 53,850 44,586 61,705 61,448 52,950
Energy marketing............................ 238,589 176,491 243,296 234,565 297,413
Gas gathering and processing................ 20,817 15,939 22,341 21,954 25,998
Other....................................... 3,842 3,258 4,203 4,816 4,068
-------- -------- -------- -------- --------
Total revenues............................ 494,365 359,068 498,311 458,272 523,640
Operating expenses:
Energy purchases............................ 234,606 174,729 239,201 230,462 291,851
Operating and maintenance................... 72,647 59,029 79,916 73,763 72,958
Depreciation and amortization............... 63,175 58,549 78,608 71,377 67,078
Write-down of full cost oil and gas
properties................................ 31,000 6,000
Write-down of gas gathering properties...... 3,000
Other taxes................................. 25,122 15,009 21,516 24,988 25,569
Wexpro settlement agreement-oil income
sharing................................... 3,458 1,284 2,292 1,053 2,347
-------- -------- -------- -------- --------
Total operating expenses.................. 399,008 308,600 421,533 432,643 468,803
-------- -------- -------- -------- --------
Operating income........................ $ 95,357 $ 50,468 $ 76,778 $ 25,629 $ 54,837
======== ======== ======== ======== ========
Operating statistics
Production volumes (excluding cost of service
activities):
Natural gas (MMcf).......................... 51,985 45,946 62,712 51,309 47,442
Oil and NGL (MBbl).......................... 1,679 1,770 2,311 2,340 2,377
Production revenue (excluding cost of service
activities):
Natural gas (per Mcf)....................... $ 2.55 $ 1.94 $ 2.00 $ 1.92 $ 1.89
Oil and NGL (per Bbl)....................... 20.48 13.18 13.92 12.70 17.77
Wexpro investment base, net of deferred income
taxes (in thousands)........................ $116,150 $106,298 $108,890 $ 97,594 $ 72,867
Energy-marketing volumes (in thousands of
equivalent Dth)............................. 79,148 87,829 112,982 113,513 142,601
Natural gas-gathering volumes (in MDth):
For unaffiliated customers.................. 68,244 64,485 84,961 72,908 57,586
For Questar Gas............................. 26,588 22,257 32,050 29,893 28,506
For other affiliated customers.............. 18,154 14,083 19,659 17,720 17,679
-------- -------- -------- -------- --------
Total gathering........................... 112,986 100,825 136,670 120,521 103,771
======== ======== ======== ======== ========
Gathering revenue (per Dth)................. $ 0.13 $ 0.15 $ 0.15 $ 0.16 $ 0.21
</TABLE>

16
<PAGE>

REVENUES

TWELVE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO TWELVE MONTHS ENDED
DECEMBER 31, 1998

Revenues from natural gas sales were 27% higher in 1999 compared with 1998.
Gas production rose 22% and selling prices were 4% higher. Revenues from selling
oil and NGL, excluding cost of service activities, climbed 8% in 1999 due to a
10% increase in average selling prices.

Revenues and product purchases for marketing activities both increased 4% in
1999 compared with 1998 resulting in no change in the margin year to year. In
1999, we received refunds from pipelines as a result of orders issued by the
Federal Energy Regulatory Commission ("FERC"). Marketing volumes were unchanged
year to year.

Revenues from gas gathering and processing grew 2% in 1999. Gathering
volumes increased 13% because of increased drilling and gas production in the
Rocky Mountain region. A change in the terms of the gathering contract with
Questar Gas reduced the gathering rate from $.21 per Dth in 1997 to $.16 per Dth
in 1998 and also resulted in a $3 million write-down of gathering assets in 1997
due to the projected reduction of gathering revenue.

During 1999, we had forward sale contracts in place on approximately 59% of
our gas production at an average price of $2.03 per Mcf, net back to the well.
Approximately 56% of oil production, excluding cost of service oil production
was hedged at an average price of $15.02 per barrel, net back to the well, which
was equivalent to $16.33 per barrel using the West Texas Intermediate benchmark.
At December 31, 1999, approximately 52% of our owned gas production in 2000 and
2001 was under hedging contracts with prices, net back to the well, between
$2.15 and $2.23 per Mcf. On that date, approximately 84% of oil production in
2000 and 2001, excluding cost of service oil production, was hedged at $17.22 to
$17.67 per barrel, net back to the well.

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999

Continued strength in commodity prices and increased gas production in 2000
resulted in revenues that were substantially higher than the revenues reported
for the comparable 1999 period. The average natural gas price per Mcf increased
31% in the first nine months of 2000 when compared with the same period of 1999.
Double-digit gas production growth also contributed to the increase in revenues
in the 2000 period. Oil and NGL prices increased 55% per barrel in the first
nine months of 2000 (excluding Wexpro's oil production).

The higher gas price realizations were the combined result of hedging
contracts on a portion of the gas produced and higher spot market prices on the
remainder. Approximately 42% of the gas produced in the third quarter was sold
under hedge contracts at an average price of $2.20 per Mcf, net back to the
wellhead. About one-third of the contracts in place at September 30, 2000 are
collars and the remainder are fixed price contracts. The floor price of collar
arrangements was used in calculating the average hedged price. Approximately 77%
of oil produced in the third quarter, excluding Wexpro production, was hedged at
an average price of $17.03 per barrel, net back to the wellhead.

Gas production benefitted from a successful development drilling program and
the first quarter acquisition of Canadian producing properties. In the third
quarter, Canadian gas production grew 143% to 1.8 Bcf. U.S. gas production was
5% above year-ago levels at 15.6 Bcf as increased drilling activity offset a
property sale in the fourth quarter of 1999. However, the increased drilling did
not fully replace the production of oil and NGL as a result of selling
nonstrategic properties in the fourth-quarter of 1999.

17
<PAGE>

EXPENSES

TWELVE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO TWELVE MONTHS ENDED
DECEMBER 31, 1998

A 31% drop in the average selling price of oil and NGL caused a $31 million
write-down of oil and gas properties in the fourth quarter of 1998 under full
cost accounting rules. The write-down reduced our income in 1998 by
$18.5 million after taxes. Our revenues decreased 12% in 1998 compared with
1997, due primarily to lower marketing revenues and lower selling prices for oil
and NGL. Natural gas production increased 8% primarily as a result of producing
properties acquired in September 1998. Lower commodity prices in Canada
accounted for a $6 million full cost write-down in 1997.

Operating and maintenance expenses increased 8% in 1999 primarily due to an
increase in the number of gas and oil properties. Production costs in aggregate
increased 10% in 1999 compared with 1998, but were 6% lower on a cost per Mcfe
basis. The full cost amortization rate decreased to $.80 per Mcfe of production
for 1999, down from $.85 in 1998. However, depreciation and amortization expense
increased 10% in 1999 because of higher gas production.

We achieved a five-year average full cost finding and acquisition cost of
$.90 per Mcfe in 1999 compared with $.95 per Mcfe in 1998. With respect to our
cost of service activities, the five-year average finding cost was $.64 per Mcfe
and $.80 per Mcfe in 1999 and 1998; respectively.

Debt expense was $10.9 million, $12.6 million and $17.4 million in 1997,
1998 and 1999, respectively. Debt expense was higher in 1999 and 1998 when
compared with the corresponding prior year, because of higher levels of
borrowings used to finance capital expansion.

Effective income tax rates are below the combined Federal, state and foreign
statutory rate of about 40% primarily due to a portion of our gas production
qualifying for nonconventional fuel tax credits, which reduced income tax
expense by $5.3 million in 1999, $5.7 million in 1998, and $6.6 million in 1997.

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999

Operating and maintenance expenses were higher in the nine-month period of
2000 when compared with the corresponding 1999 period primarily because of the
increase in the number of producing properties, including the acquisition of
Canor in January 2000, and an increase in legal expenses. In addition, higher
gas prices increased the cost of replacing gas in extraction plant operations.

The combined U.S. and Canadian full cost amortization rate for the first
nine months of 2000 declined $.02 to $.79 per Mcfe compared with the rate a year
ago. The lower rate was due to successfully adding reserves through drilling and
purchases, while selling nonstrategic properties at favorable prices.
Depreciation and amortization expenses were higher in the 2000 period when
compared with the 1999 period because increased production volumes from full
cost properties more than offset the lower amortization rates. Also, increased
investment in other properties resulted in a higher depreciation expense in the
2000 period. The fourth quarter rate is expected to be $.78 per Mcfe.

Higher commodity prices and increased gas production volumes resulted in an
increase in production-related taxes reported as Other Taxes on the consolidated
income statement. Debt expense was higher in the 2000 period because of
increased borrowings and higher interest rates.

The effective income tax rate for the first nine months of 2000 was 34.7%,
up from the 27.1% for the same period of 1999. The effective income tax rate
increased largely because of a reduction in nonconventional fuel tax credits and
a higher portion of earnings derived from Canada, where income

18
<PAGE>

tax rates are higher. We recognized $3,332,000 of nonconventional fuel tax
credits in the 2000 period and $3,992,000 in the 1999 period.

OPERATING INCOME AND NET INCOME

TWELVE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO TWELVE MONTHS ENDED
DECEMBER 31, 1998

Our operating income increased 36% in 1999 compared with 1998, excluding the
1998 full cost write-down. Net income increased 32% over the prior year,
excluding the full cost write-down. Primary factors were an increase in gas
production, higher commodity prices and an increase in the Wexpro investment
base.

Wexpro's investment base, net of deferred income taxes, grew 12% to
$108.9 million as of December 31, 1999, through our successful development
drilling program. Wexpro's investment base represents the unamortized portion of
the dollars we have invested in assets that are regulated by the Wexpro
Settlement Agreement, as described in Note 10 of the Notes to Consolidated
Financial Statements included in our registration statement on Form 10/A and
incorporated by reference in this prospectus. Wexpro's effective after-tax
return on investment in those properties was 18.9% at the end of the year.

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999

Our nine month operating income increased 89% compared with 1999 and net
income increased 88% over the same period last year. Higher commodity prices and
gas production were the primary reasons for the increase. Also, earnings for
Wexpro and gathering, processing and marketing were higher. Wexpro's net income
increased $2.7 million in the first nine months of 2000. Wexpro increased its
investment in development-drilling projects during the period. In addition,
higher oil and NGL prices contributed to Wexpro's improved earnings.

Our other income was substantially higher in the first nine months of 2000.
We recorded $1.9 million of capitalized finance costs (AFUDC) on our gas storage
facility, of which $476,000 was attributable to our partner in the project.
Operation of the underground gas storage facility began in September 2000. The
remainder of the increase was the result of a $1.6 million pre-tax gain from the
sale of securities and interest earned on the cash collateral deposited in
commodity trading accounts with brokers.

Gathering, processing and marketing operations reported a $4.3 million
increase in earnings for the first nine months of 2000 versus the 1999 period.
The increase resulted primarily from higher liquids prices realized from
processing plants and our share of AFUDC recorded on a storage facility.

RESERVES

Excluding activities with respect to cost of service related reserves, we
achieved a 131% reserve replacement ratio in 1999. Reserve additions, revisions
and purchases amounted to 134 Bcfe with 108% of the reserve replacement ratio
coming from drilling results and 23% coming from purchases. Our reserve
replacement ratio measures the extent to which our annual oil and gas production
volumes are replaced in the current year through acquisitions, discoveries,
development drilling and revisions of prior estimates, less any sales of
reserves that may have occurred. In 1999 we sold 34 Bcfe of nonstrategic
reserves mostly in the Permian Basin and Kansas with combined daily production
of 4.3 MMcf of gas and 1,100 barrels of oil. The sale proceeds helped reduce the
full cost amortization rate in the fourth quarter of 1999. Reserve replacement
in 1998 was 260% or 170 Bcfe, primarily as a result of acquiring an estimated
150 Bcfe of proved oil and gas reserves, primarily in Oklahoma, as well as in
Texas, Arkansas and Louisiana. The proved reserves associated with properties
qualifying for nonconventional fuel credits are not dependent upon the existence
of the income tax credits to be

19
<PAGE>

economically producible and are not a significant part of our proved reserves.
The expiration of these credits on December 31, 2002 is not expected to have a
significant impact on future operations or proved reserves.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES

Net cash provided from operating activities was derived from the following:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
2000 1999 1999 1998 1997
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Income...................................... $ 56,239 $ 29,993 $ 45,866 $ 16,162 $ 38,090
Non-cash transactions........................... 65,786 61,447 90,077 100,106 77,132
Changes in working capital...................... (6,731) (1,458) 4,914 11,245 21,713
-------- -------- -------- -------- --------
Net cash provided from operating activities..... $115,294 $ 89,982 $140,857 $127,513 $136,935
======== ======== ======== ======== ========
</TABLE>

Net cash provided from our operating activities increased 10% in 1999,
primarily due to higher net income. Cash flows from accounts receivable
declined, representing increases in balances in 1999, due to higher commodity
prices. The write-downs of oil and gas properties in both 1998 and 1997 and
their effect on deferred income taxes were noncash transactions.

Net cash provided from operating activities in the first nine months of 2000
increased 28%, primarily due to higher net income. Partially offsetting this
source of cash was an increase in the amount of cash deposits as collateral for
hedging contracts. The deposits are interest bearing and totaled $25 million as
of September 30, 2000. Cash collateral deposits were included with receivables
on the consolidated balance sheet.

INVESTING ACTIVITIES

Our capital expenditures and other investing activities amounted to
$134.3 million in 1999, $254.5 million in 1998 and $92.3 million in 1997.
Following is a summary of actual capital expenditures for 1999 and 1998, and a
forecast for 2000:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
FORECAST ACTUAL ACTUAL
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital expenditures and other investing activities:
Exploratory drilling...................................... $ 2,800 $ 1,538 $ 5,898
Development drilling...................................... 83,500 64,642 60,402
Other exploration......................................... 7,800 19,464 6,789
Reserve acquisitions...................................... 66,900 3,704 158,000
Production................................................ 16,900 12,856 8,434
Gathering and processing.................................. 12,600 12,703 11,046
General and other......................................... 500 19,362 3,977
-------- -------- --------
Total..................................................... $191,000 $134,269 $254,546
======== ======== ========
</TABLE>

Capital expenditures in 1999 were primarily comprised of exploration and
development of gas and oil reserves and a $9.1 million equity contribution in a
partnership that operates a liquids processing

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<PAGE>
plant. We participated in drilling 235 wells (93 net wells) in 1999 that
resulted in 167 gas wells, 10 oil wells, 19 dry holes and 39 wells in progress
at year end. The 1999 drilling success rate was 90%.

Capital expenditures in the first nine months of 2000 were $137.2 million
which includes $66.1 million (U.S.), net of cash received, for the purchase of
Canor.

FINANCING ACTIVITIES

Net cash flow provided from operating activities was sufficient to fund 1999
capital expenditures. In 1999, we used the proceeds of long-term debt and
collection of notes receivable from Questar to reduce short-term borrowings from
Questar and refinance reserve-based, long-term debt used to acquire gas and oil
reserves. Proceeds from a sale of nonstrategic gas and oil properties were
placed in an escrow account pending a reinvestment in strategic-producing
properties.

In 1999, we entered into a long-term revolving-credit facility with a
syndicate of banks. The credit facility currently has a $300 million capacity.
We had borrowed $253.9 million and $264.9 million as of September 30, 2000 and
December 31, 1999, respectively, under this arrangement. Net working capital was
negative at September 30, 2000 and December 31, 1999 because of short-term
borrowings used to expand operations. We intend to refinance a portion of our
debt with the proceeds from this offering.

We financed capital expenditures for the nine months ended September 30,
2000, including the acquisition of Canor, through borrowings from Questar, from
our revolving-credit facility, from net cash provided from operating activities,
from cash released from an escrow account, and from issuance of commercial
paper. In the third quarter of 2000, we initiated an unrated commercial paper
program with $100 million of capacity. Commercial paper borrowings are limited
to and supported by available capacity on our existing revolving-credit
facility. At September 30, 2000, we had a commercial paper balance of
$31.5 million.

Our consolidated capital structure, excluding short-term debt, consisted of
41% long-term debt and 59% common shareholder's equity at December 31, 1999 and
37% long-term debt and 63% common shareholder's equity at September 30, 2000.

MARKET RISK

Our primary market-risk exposures arise from commodity price changes for
natural gas, oil and other hydrocarbons and changes in long-term interest rates.
We have an investment in a Canadian operation that subjects us to exchange-rate
risk. We have also reserved certain volumes of pipeline capacity for which we
are obligated to pay approximately $3 million annually for the next seven years,
whether or not we are able to market the capacity to others.

ENERGY PRICE RISK MANAGEMENT. Energy price risk is a function of changes in
commodity prices as supply and demand fluctuate. We bear a majority of the risk
associated with changes in commodity prices. A primary objective of energy price
hedging is to protect our product sales from adverse changes in energy prices.
We do not enter into derivatives contracts for speculative purposes.

At September 30, 2000, hedge contracts held by us covered price exposure for
about 49.8 million Dth of natural gas and 1.3 MMBbl of oil. We held hedge
contracts covering the price exposure for about 72.1 million Dth of gas and
2.4 million Bbl of oil at December 31, 1999. A year earlier hedge contracts
covered 45.3 million Dth of natural gas and 464,000 Bbl of oil. The hedging
contracts exist for a significant share of our owned gas and oil production and
for a portion of gas-marketing transactions. Hedge contracts at September 30,
2000 and December 31, 1999 had terms extending through October 2002 and
December 2001, respectively, with about 22% and 65%, respectively, expiring by
the end of 2000.

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<PAGE>

The mark-to-market adjustment of gas and oil price-hedging contracts at
September 30, 2000 was a negative $80.8 million. A 10% decline in gas and oil
prices would cause a positive $18.9 million mark-to-market adjustment resulting
in a negative $61.9 million balance on that date. Conversely, a 10% increase in
prices results in a $18.8 million negative mark-to-market adjustment resulting
in a negative $99.6 million balance as of September 30, 2000. The mark-to-market
adjustment of gas and oil price-hedging contracts at December 31, 1999, was a
negative $6.2 million. A 10% decline in gas and oil prices would cause a
positive $16.7 million mark-to-market adjustment resulting in a $10.5 million
balance. A 10% increase in prices results in a $16.3 million negative
mark-to-market adjustment, resulting in a negative $22.5 million balance. The
fair value of hedging contracts at December 31, 1998 was $6 million. In 1998, a
10% decrease in prices would have resulted in a $3.9 million increase in the
fair value of contracts, while a 10% increase in prices would have resulted in a
$4.1 million lower fair value calculation. The mark-to-market calculations used
energy prices posted on the NYMEX for the indicated measurement dates. These
sensitivity calculations do not consider the effect of gains or losses
recognized on the underlying physical side of these transactions, which should
largely offset the change in value.

INTEREST RATE RISK MANAGEMENT. We owed $297.1 million of variable rate debt
at September 30, 2000, $289.4 million at December 31, 1999 and $303.4 million at
December 31, 1998. The book value of variable rate debt approximates its fair
value. If interest rates change by 10%, interest costs would increase or
decrease by about $1.7 million in 1999 and $1.1 million in 1998. This
sensitivity calculation does not represent the cost to retire the debt
securities.

SECURITIES AVAILABLE FOR SALE. Securities available for sale represent
equity instruments traded on national exchanges. The value of these investments
is subject to day to day market volatility. A 10% change in prices would result
in an insignificant change in value at September 30, 2000 and December 31, 1999.

FOREIGN CURRENCY RISK MANAGEMENT. We do not hedge the Canadian currency
exposure of our Canadian operation's net assets. The net assets of the Canadian
operation were negative at September 30, 2000 and December 31, 1999. Long-term
debt held by the Canadian operation, amounting to $58.9 million (U.S.) and
$59.9 million (U.S.) at September 30, 2000 and December 31, 1999, respectively,
is expected to be repaid from future operations of the foreign company. In
January 2000, we expanded our foreign operations by acquiring 100% of the
outstanding common stock of Canor for approximately $61 million (U.S.) plus the
assumption of $5.4 million (U.S.) of short-term debt.

LITIGATION

We are party to various legal actions arising in the normal course of
business. We and Questar are also among the named defendants in a class action
lawsuit (Bridenstine vs. Kaiser-Francis Oil Company) that claims damages that
have at times been estimated in excess of $80 million, plus punitive damages.
See "Item 8. Legal Proceedings" included in our registration statement on
Form 10/A filed November 9, 2000 and incorporated by reference in this
prospectus. We regularly review potential liabilities related to legal
proceedings and record appropriate accruals after considering estimates of the
outcome of such matters and our experience in contesting, litigating, and
settling similar matters. While it is not currently possible to predict or
determine the outcome of the various actions, it is the opinion of our
management that the outcomes will not have a material adverse effect on our
future results of operations, financial position or liquidity.

YEAR 2000 ISSUES

Questar established a team to address the issue of computer programs and
embedded computer chips being unable to distinguish between the year 1900 and
the year 2000 ("Y2K"). The team

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identified 55 projects among Questar and its affiliated companies that were
assessed, remediated, tested, and determined to be completed. In the process,
Questar employees contacted more than 8,000 vendors and suppliers to assess
their readiness to meet obligations to Questar. The cost of the Y2K project was
approximately $5.1 million and our share of those costs was $.4 million.

We did not experience a disruption of operations because of Y2K. Preparation
for Y2K provided several benefits. We completed an inventory of our primary
systems and a testing laboratory. Systems were tested and remediated where
necessary. The testing laboratory will become an important part of our
information-technology management. In response to the Y2K challenge, business
contingency plans were revised and successfully tested.

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<PAGE>
BUSINESS

GENERAL

We and our subsidiaries comprise the Market Resources unit of Questar, a
publicly-traded diversified natural gas company with two principal business
units, Market Resources and Regulated Services. We engage in oil and gas
exploration and production; gas gathering and processing; wholesale gas,
electricity, and hydrocarbon liquids trading; and the acquisition and
development of producing oil and gas properties. We are a subholding company of
Questar and carry out our business through the following subsidiaries:

- Questar E&P, and its Canadian subsidiaries Celsius Ltd. and Canor

- Questar Gas Management

- Questar Energy Trading

- Wexpro

Our executive offices are located at 180 East 100 South Street, P.O. Box
45601, Salt Lake City, Utah 84145-0601, and our telephone number is
(801) 324-2600. We also maintain regional operating offices in Denver, Colorado;
Oklahoma City, Oklahoma; Tulsa, Oklahoma; Rock Springs, Wyoming; and Calgary,
Alberta.

OIL AND GAS EXPLORATION AND PRODUCTION--QUESTAR E&P, CELSIUS LTD. AND CANOR

Our exploration and production, or E&P, subsidiaries, Questar E&P,
Celsius Ltd. and Canor, form a unique group that conducts a blended program of
low-cost development drilling, low-risk oil and gas reserve acquisition, and
high-quality exploration. A low-risk oil and gas reserve acquisition is
considered by us to be one where (i) existing proved developed producing
reserves make up a substantial percentage (75%+) of the overall value of the
transaction with the remaining value supported by proved undeveloped reserves
recognized by the seller or developed by us; (ii) cash flow from the properties,
and/or borrowing capacity associated with the properties, is sufficient to
support development of the acquisition properties; and (iii) the geographic
location of the properties and the technology required to develop the underlying
reserves are within our known areas of expertise. The E&P group also maintains a
geographical balance and diversity while concentrating its activities in core
areas in which it has accumulated geologic knowledge and developed significant
management expertise. Core areas of activity include the Rocky Mountain Region
of Wyoming, Colorado, and Utah; the Mid-Continent Region of Oklahoma, the Texas
Panhandle, East Texas, and the Upper Gulf Coast; the Southwest Region of
northwest New Mexico and southwest Colorado; and the Western Canada Sedimentary
Basin located primarily in Alberta, Canada.

At December 31, 1999, we had proved reserves of 597.6 Bcfe of natural gas,
crude oil and natural gas liquids associated with our oil and gas exploration
and development activities. Natural gas

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<PAGE>

comprised 86% of total proved reserves and proved developed reserves comprised
84% of our total proved reserves on an energy equivalent basis.

Our proved reserves, as discussed here, do not include the cost of service
reserves managed and developed by Wexpro for Questar Gas; see " Development and
Production--Wexpro" below.

GATHERING, PROCESSING AND TRADING--QUESTAR GAS MANAGEMENT AND QUESTAR ENERGY
TRADING

Questar Gas Management conducts gathering and processing activities in the
Rocky Mountain and Mid-Continent areas. Its activities are not subject to
regulation by the FERC because it is not engaged in transporting or selling gas
for resale in interstate commerce. The Natural Gas Act of 1938 specifically
provides that the FERC's jurisdiction does not extend to facilities involved in
the production or gathering of natural gas. Questar Gas Management was formed in
1993 as a wholly-owned subsidiary of Questar Pipeline to construct and operate
the Blacks Fork Processing Plant in southwestern Wyoming. It expanded in 1996
when Questar Pipeline transferred its gathering assets and activities to Questar
Gas Management. In mid-1996, ownership of Questar Gas Management was moved from
Questar Pipeline to us, and Questar Gas Management acquired the processing
plants that formerly belonged to Questar E&P. Questar Gas Management's gathering
system was originally built as part of a regulated company. Questar Gas
Management now operates in a different competitive environment. Often, new wells
will have connections with more than one gathering system, and producers insist
that gathering systems be tied to more than one pipeline.

Questar Gas Management's gathering system consists of 1,400 miles of
gathering lines, compressor stations, field dehydration plants and measuring
stations, and was largely built to gather production from Questar Gas' cost of
service properties. Under a contract that was assigned with the gathering assets
from Questar Pipeline, Questar Gas Management is obligated to gather Questar
Gas' cost of service production for the life of the properties. During 1999,
Questar Gas Management gathered 32.1 MMDth of natural gas for Questar Gas,
compared to 29.9 MMDth in 1998, for which it received $4.7 million and
$5.0 million in demand charges in 1999 and 1998, respectively, from Questar Gas.
Questar Gas Management's total gas gathering volumes were 136.7 MMDth in 1999
compared to 120.5 MMDth in 1998.

In addition to gathering activities, Questar Gas Management is also engaged
in processing activities. It owns a 50% interest in the Blacks Fork Processing
Plant, which has a daily capacity of 84 MMcf and may be expanded during 2000.
This plant strips liquids such as ethane and butane from natural gas volumes.
Questar Gas Management and Wexpro jointly own a new processing facility located
in the Canyon Creek area of southwestern Wyoming that has an operating capacity
of 45 MMcf per day. Questar Gas Management also owns interests in other
processing plants in the Rocky Mountain and Mid-Continent areas.

Questar Energy Trading conducts energy marketing and trading activities. It
combines gas volumes purchased from third parties and equity production
(production that is produced by our other subsidiaries) to build a flexible and
reliable portfolio. Questar Energy Trading aggregates supplies of natural gas
for delivery to large customers including industrial users and other marketing
entities. During 1999, Questar Energy Trading marketed a total of 101.1 MMDth of
natural gas, 2.0 MMBbls of liquids, and 10,000 megawatt-hours of electricity and
earned a gross profit margin of $4.1 million.

Questar Energy Trading uses derivatives as a risk management tool to provide
price protection for physical transactions involving equity production and
marketing transactions, and executes hedges for equity production on behalf of
Questar E&P with a variety of contracts for different periods of time.

As a wholesale marketing entity, Questar Energy Trading concentrates on
markets in the Pacific Northwest, Rocky Mountains, Midwest, Southwest,
California and western Canada that are close to reserves owned by us or
accessible by major pipelines.

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<PAGE>
To sustain its activities in an increasingly competitive environment in
which sellers and purchasers are becoming more sophisticated, Questar Energy
Trading will endeavor to expand its capabilities. An affiliated new limited
liability company has filed an application with the FERC and obtained
authorization to construct and operate a private storage reservoir in
southwestern Wyoming adjacent to several interstate pipelines and is negotiating
partnerships to obtain additional expertise and access to sophisticated
information technology.

DEVELOPMENT AND PRODUCTION--WEXPRO

We conduct development drilling and provide production services to Questar
Gas through Wexpro. Wexpro was incorporated in 1976 as a subsidiary of Questar
Gas. Questar Gas' efforts to transfer producing properties and leasehold acreage
to Wexpro resulted in protracted regulatory proceedings and legal adjudications
that ended with a court-approved settlement agreement that was effective
August 1, 1981. Wexpro became our subsidiary in 1982.

Wexpro manages and develops cost of service properties for which the
operations and return on investment are regulated by the settlement agreement.
Cost of service reserves are derived from properties that primarily produce oil
("productive oil reservoirs") as well as properties that primarily produce gas
("productive gas reservoirs"). Pursuant to the terms of the settlement
agreement, all hydrocarbon reserves (oil, natural gas liquids and natural gas)
in productive oil reservoirs are owned by Wexpro. All hydrocarbon reserves
associated with productive gas reservoirs are owned by Questar Gas. Wexpro
manages and develops all cost of service reserves, in accordance with the
provisions of the settlement agreement, regardless of reserve ownership.

Unlike our other E&P companies, Wexpro generally does not conduct
exploratory operations and does not acquire leasehold acreage for exploration
activities. It conducts oil and gas development and production activities on
certain producing properties located in the Rocky Mountain region under the
terms of the settlement agreement. Wexpro produces gas from specified properties
for Questar Gas and is reimbursed for its costs plus a return on its investment.
In connection with its operations, Wexpro charges Questar Gas for its cost plus
a specified rate of return (at the end of 1999, 18.9%, and adjusted annually
based on a specified formula) on its net investment in these properties adjusted
for working capital and deferred taxes. Under the terms of the settlement
agreement, Wexpro bears all dry hole costs. The settlement agreement is
monitored by the Utah Division of Public Utilities, the staff of the Public
Service Commission of Wyoming, and experts retained by those agencies. A summary
of the settlement agreement may be found below under the heading "OUR
RELATIONSHIP WITH QUESTAR--Wexpro Settlement Agreement with Questar Gas" in this
prospectus.

The gas volumes produced by Wexpro for Questar Gas are reflected in Questar
Gas' rates at cost of service. Cost of service gas produced by Wexpro satisfied
approximately 49% of Questar Gas' system requirements during 1999. Questar Gas
relies upon Wexpro's drilling program to develop the properties from which the
cost of service gas is produced. During 1999, the average wellhead cost of cost
of service gas was $1.50 per Dth, which is lower than Questar Gas' average price
for field-purchased gas. To fulfill its obligations to Questar Gas under the
settlement agreement, Wexpro must continue to be a prudent operator. In 1999,
Wexpro produced 38.9 Bcf of natural gas from cost-of-service properties and
added cost of service reserves of 52.4 Bcf through drilling activities and
reserve estimate revisions.

Wexpro participates in drilling activities in response to the demands of
other working interest owners, to protect its rights and to meet the needs of
Questar Gas. Wexpro has had an ownership interest in the wells and facilities
related to its oil reservoirs and in the wells and facilities that have been
installed to develop and produce gas reservoirs described above since August 1,
1981.

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<PAGE>
GOVERNMENT REGULATION

Our operations are subject to various levels of government controls and
regulation in the United States and Canada.

UNITED STATES REGULATION. In the United States, legislation affecting the
oil and gas industry has been pervasive and is subject to continuing review for
amendment or expansion. Various Federal, state and local laws and regulations
cover environmental, safety and conservation matters. Numerous Federal, state
and local departments and agencies have issued extensive rules and regulations
binding on the oil and gas industry and its individual members, some of which
carry substantial penalties for the failure to comply. These laws and
regulations have a significant impact on oil and gas drilling and production
activities, increase the cost of doing business and, consequently, affect
profitability. Because new legislation affecting the oil and gas industry is
commonplace and existing laws and regulations are frequently amended or
reinterpreted, we are unable to predict the future cost or impact of complying
with these laws and regulations.

CANADIAN REGULATION. The oil and gas industry in Canada is subject to
extensive controls and regulations imposed by various levels of government,
including royalties and incentives payable to the federal and provincial
governments, export licensing, environmental regulation, and regulation of the
acquisition of Canadian businesses and certain natural resource properties by
non-Canadians. We do not expect that any of these controls or regulations will
materially affect our Canadian operations or be any more burdensome to us than
to other companies involved in oil and gas exploration and production activities
in Canada.

We take the issue of environmental stewardship very seriously and work
diligently to comply with applicable environmental rules and regulations.
Compliance with environmental laws and regulations has not had a material
adverse effect on our operations or financial condition in the past. However,
because environmental laws and regulations are becoming increasingly stringent,
it is possible that these laws and regulations or any environmental law or
regulation enacted in the future will have a material adverse effect on our
operations or financial condition. We are not aware of any currently pending
environmental legislation or regulation in the United States or Canada that
would have a material adverse effect if enacted.

COMPETITION

The oil and gas business is highly competitive. We face competition in all
aspects of our business, including acquiring reserves, leases, licenses and
concessions; obtaining goods, services and labor needed to conduct our
operations and manage our company; and marketing our oil and gas. Intense
competition occurs with respect to marketing and trading, particularly of
natural gas. Our competitors include multinational energy companies, other
independent producers and individual producers and operators, many of which have
greater financial and other resources than we do.

SEASONAL NATURE OF BUSINESS

Generally, but not always, the demand for natural gas decreases during the
summer months and increases during the winter months. Seasonal anomalies such as
mild winters sometimes lessen this fluctuation. In addition, pipelines,
utilities, local distribution companies and industrial users utilize natural gas
storage facilities and purchase some of their anticipated winter requirements
during the summer. This can also lessen seasonal demand fluctuations.

NATURAL GAS AND OIL MARKETING

We market substantially all of our own natural gas and oil production. The
revenues generated by our operations are highly dependent upon the prices of,
and demand for, oil and gas. The price we

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receive for our crude oil and natural gas depends upon numerous market factors,
the majority of which are beyond our control, including economic conditions in
the United States and elsewhere, the world political situation, OPEC actions and
governmental regulation. The fluctuation in world oil prices continues to
reflect market uncertainty regarding the balance of world demand for and supply
of oil and gas. The fluctuation of natural gas prices reflects the seasonal
swings of storage inventory, weather conditions, and increasing utilization of
natural gas for electric generation as it affects overall demand. Decreases in
the prices of oil and gas have had, and could have in the future, an adverse
effect on our development and exploration programs, proved reserves, revenues,
profitability and cash flow.

CUSTOMERS

We sell our gas production to a variety of customers including pipelines,
gas marketing firms, industrial users and local distribution companies. We use
existing gathering systems and interstate and intrastate pipelines to consummate
gas sales and deliveries. The principal customers for our crude oil production
are refiners, remarketers and other companies, some of which have pipeline
facilities near the producing properties. In the event pipeline facilities are
not conveniently available, crude oil is trucked to storage, refining or
pipeline facilities.

EMPLOYEES

As of October 1, 2000, we had 423 full-time employees. None of our employees
is represented by organized labor unions. We also engage from time to time
independent consulting petroleum engineers, environmental professionals,
geologists, geophysicists, landmen and attorneys on a fee basis.

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OUR RELATIONSHIP WITH QUESTAR

We are parties to several agreements with Questar and its affiliates which
govern different aspects of our relationship with Questar. The more significant
of these are described below.

TAX SHARING ARRANGEMENT WITH QUESTAR. We account for income tax expense on
a separate return basis. Pursuant to Internal Revenue Service Code regulations,
our operations are consolidated with those of Questar and its subsidiaries for
income tax purposes. The income tax arrangement between us and Questar provides
that the tax liability of the group shall be allocated to the several members of
the group on the basis of the percentage of the total tax which the tax of such
member if computed on a separate return would bear to the total amount of the
taxes for all members of the group so computed. We also receive payment for tax
benefits used in the consolidated tax return even if such benefits would not
have been usable had we filed a separate return.

WEXPRO SETTLEMENT AGREEMENT WITH QUESTAR GAS. Wexpro and Questar Gas are
parties to a settlement agreement which became effective August 1, 1981 and sets
forth the rights of Questar Gas' utility operations to share in the results of
Wexpro's operations. The agreement was approved by the Public Service
Commissions of Wyoming and Utah in 1981 and affirmed by the Supreme Court of
Utah in 1983. Major provisions of the settlement agreement include:

- Wexpro continues to hold and operate all oil-producing properties
(productive oil reservoirs) previously transferred from Questar Gas'
nonutility accounts. The oil production from these properties is sold at
market prices, with the revenues used to recover operating expenses and to
give Wexpro a return on its investment. The after tax rate of return is
adjusted annually and is approximately 13.7%. Any net income remaining
after recovery of expenses and Wexpro's return on investment is divided
between Wexpro and Questar Gas, with Wexpro retaining 46%.

- Wexpro conducts developmental oil drilling on productive oil reservoirs
and bears any costs of dry holes. Oil discovered from these properties is
sold at market prices, with the revenues used to recover operating
expenses and to give Wexpro a return on its investment in successful
wells. The after tax rate of return is adjusted annually and is
approximately 18.7%. Any net income remaining after recovery of expenses
and Wexpro's return on investment is divided between Wexpro and Questar
Gas, with Wexpro retaining 46%.

- Questar Gas uses the amounts it receives from sharing Wexpro's oil income
to reduce natural gas costs to utility customers.

- Wexpro conducts developmental gas drilling on productive gas properties
(productive gas reservoirs) and bears any costs of dry holes. Natural gas
produced from successful drilling is owned by Questar Gas. Wexpro is
reimbursed for the costs of producing the gas plus a return on its
investment in successful wells. The after tax return allowed Wexpro is
approximately 21.7%.

- Wexpro operates Questar Gas' natural gas properties and is reimbursed for
its costs of operating these properties, including a rate of return on any
investment Wexpro makes. This rate of return is currently 13.7%.

TRANSPORTATION AGREEMENTS WITH AFFILIATES. Questar Pipeline transports
natural gas produced from properties operated by Wexpro and owned by Questar
Gas. Questar Pipeline also transports volumes of natural gas marketed by Questar
Energy Trading.

TRANSFER OF GAS GATHERING ASSETS. In 1996, Questar Pipeline transferred
approximately $55 million of gas-gathering assets to Questar Gas Management,
which was at the time its subsidiary. Questar Gas Management was subsequently
transferred to us on July 1, 1996. The transaction was in the form of a stock
dividend payable to Questar, which then contributed the stock to us.

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DESCRIPTION OF THE NOTES

GENERAL

We will issue the notes as a series of debt securities under an indenture
dated as of , 2000, between us and Bank One Trust Company, NA, as
trustee. The following description is only a summary of the material provisions
of the indenture. We urge you to read the indenture because it, and not this
description, defines your rights as holders of the notes. A copy of the proposed
form of indenture is available upon request made to us or to the underwriters.
When we refer to securities, we refer to all debt securities that we have issued
or may issue in the future under the indenture and include the notes.

RANKING

In addition to the notes we are offering in this prospectus, the indenture
provides for the issuance of additional securities in one or more series,
without limitation as to aggregate principal amount. As a holding company with
subsidiaries, the claims of creditors of our subsidiaries will have priority
over the claims of holders of these notes. At the present time we have no debt
that would be considered senior to these notes. The notes will be our unsecured
obligations and will rank equally with our other unsecured indebtedness. Other
than a limitation on liens covenant, the indenture does not contain restrictive
covenants which would require us to maintain certain financial ratios or
restrict our ability to incur additional indebtedness. The covenants contained
in the indenture would not necessarily afford holders of the notes protection if
a highly-leveraged transaction involving us were to adversely affect holders.

We are a subholding company of Questar and our only material asset is the
capital stock of our subsidiaries. Our operations are conducted through our
subsidiaries and our cash flow will be derived principally from dividends on the
capital stock of our subsidiaries.

DENOMINATIONS AND INTEREST

The notes are being issued in an aggregate principal amount of $150,000,000
and will mature on , 20[ ]. The notes will be issued in fully registered
form in denominations of $1,000 and any amount which is an integral amount
multiple of $1,000.

Interest at the annual rate for the notes set forth on the cover page of
this prospectus is payable semi-annually on and of each
year, commencing , 2001. We will make each interest payment to the
persons who are registered holders of the notes at the close of business on the
preceding and , respectively. Interest will be computed on the basis
of a 360-day year of twelve months of 30 days each. Interest will begin to
accrue on , 2000. If any interest payment date, maturity date or
redemption date falls on a day that is not a business day, the payment will be
made on the next business day and no interest will accrue for the period from
and after such interest payment date, maturity date or redemption date.

OPTIONAL REDEMPTION

The notes may be redeemed in whole or in part at our option at any time or
from time to time upon not less than 30 nor more than 60 days' notice at a
redemption price equal to the greater of (i) 100% of the principal amount of the
notes to be redeemed and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest on the notes to be redeemed (not
including any portion of such payments of interest accrued as of the redemption
date) discounted to the redemption date on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus [ ]
basis points, plus in each case accrued interest on the notes to the date of

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redemption (provided that interest payments due on or prior to the redemption
date will be paid to the record holders of such notes on the relevant record
date).

"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.

"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of a comparable maturity to the
remaining term of the notes.

"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the trustee after consultation with us.

"Comparable Treasury Price" means, with respect to any redemption date, (A)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.

"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 3:30 p.m. New York
time on the third business day in The City of New York preceding such redemption
date.

"Reference Treasury Dealer" means at least five primary U.S. Government
securities dealers in The City of New York as we shall select.

Unless we default in payment of the redemption price, on and after the
redemption date interest will cease to accrue on the notes or portions thereof
called for redemption. If less than all of the notes are to be redeemed, the
trustee will select the notes to be redeemed by such method as the trustee shall
deem fair and appropriate.

MANDATORY REDEMPTION; SINKING FUND

There is no sinking fund or mandatory redemption obligation applicable to
the notes.

BOOK-ENTRY SYSTEM

The notes will be issued in the form of a single global security. The notes
will be deposited with the trustee as custodian for The Depositary Trust
Company, or DTC, on behalf of DTC and for so long as DTC or its nominee is the
registered owner of the notes, DTC or its nominee, as the case may be, will be
considered the sole holder of the notes for all purposes under the indenture.
Except as set forth below, a security may not be transferred except as a whole
by DTC to a nominee of DTC or by a nominee of DTC.

Upon our issuance of the notes, DTC or its nominee will credit the accounts
of persons holding through it on its book-entry registration and transfer system
with the respective principal amounts of the notes represented by the global
security. The accounts to be credited will be designated by the applicable
underwriter of such notes. Ownership of beneficial interests in the global
security will be limited to persons who have accounts with DTC, called
participants, or persons that hold interests through participants. Ownership of
beneficial interests by participants in the global security will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by DTC

31
<PAGE>

or its nominee for the global security. Ownership of beneficial interest in a
global security by persons that hold interests through participants will be
shown on, and the transfer of ownership will be effected only through, records
maintained by such participant. The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to transfer beneficial
interest in a global security.

Except as provided below, owners of beneficial interests in notes
represented by a global security will not be entitled to have notes represented
by the global security registered in their names, will not receive or be
entitled to receive physical delivery of notes in definitive form, known as
certificated notes, and will not be considered the owners or holders of such
notes under the indenture.

Notes represented by a global security will be exchangeable for certificated
notes only if:

- DTC or its nominee notifies us that it is unwilling or unable to continue
as depositary for the global security or we become aware that DTC has
ceased to be a clearing agency registered under the Exchange Act and we
have not appointed a successor depositary within 90 days after we receive
such notice or become aware of such ineligibility or

- we, in our sole discretion, determine to discontinue use of the system of
book-entry transfer and to exchange the global security for certificated
notes

Upon any such exchange, the certificated notes will be registered in the
names that DTC or its nominee holding the global security may direct.

We will make principal, premium and interest payments on the global security
to DTC or its nominee, as the case may be, as the sole registered owner and the
sole holder of the notes represented thereby for all purposes under the
indenture. DTC's practice is to credit participants' accounts on the applicable
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on such date.
We expect that payments by participants to owners of beneficial interests in a
global security held through such participants will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participant and not of DTC, the trustee or
us, subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal, premium and interest to DTC is our
responsibility and that of the trustee, disbursement of such payments to
participants is the responsibility of DTC, and disbursement of such payments to
the owners of beneficial interests in a global security held through such
participants is the responsibility of such participants. Neither we, the
trustee, the Paying Agent or the Security Registrar will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of a global security representing any
notes or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.

The notes will be issued as fully registered securities registered in the
name of Cede & Co., DTC's partnership nominee. DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold the securities of its
participants and to facilitate the clearance and settlement among participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in participants'
accounts, thus eliminating the need of physical movement of securities
certificates. Direct participants of DTC include securities brokers and dealers,
including the underwriters, banks, trust companies, clearing corporations and
certain other organizations. DTC is owned by a number of its direct participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of

32
<PAGE>

Securities Dealers, Inc. Access to DTC's system is also available to others,
known as indirect participants, such as securities brokers and dealers, banks
and trust companies that clear through or maintain a direct or indirect
custodial relationship with a direct participant, either directly or indirectly.
The rules applicable to DTC and its participants are on file with the Securities
and Exchange Commission.

Purchases of notes under DTC's system must be made by or through direct
participants, which will receive a credit for such notes on DTC's records. The
ownership interest of each actual purchaser, or beneficial owner, of each note
represented by a global security is in turn to be recorded on the records of
direct participants and indirect participants. Beneficial owners will not
receive written confirmation from DTC of their purchase, but beneficial owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
participants or indirect participants through which such beneficial owner
entered into the transaction. Transfer of ownership interests in the global
security are to be accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners of the global security
will not receive certificated notes representing their ownership interests in
the global security, except in the limited circumstances described above.

To facilitate subsequent transfers, the global security deposited with, or
on behalf of, DTC is registered in the name of DTC's nominee, Cede & Co. The
deposit of the global security with, or on behalf of, DTC and its registration
in the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual beneficial owners of the global security; DTC's records
reflect only the identity of the direct participants to whose accounts notes are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.

Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.

Neither DTC nor Cede & Co. will consent or vote with respect to the notes.
Under its usual procedures, DTC mails an omnibus proxy to us as soon as possible
after the applicable record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants to whose account the
notes are credited on the applicable record date (identified in a listing
attached to the omnibus proxy).

If applicable, redemption notices will be sent to Cede & Co. If less than
all of the notes are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each direct participant in such issue to be redeemed.

No service charge will be made for the registration of transfer or exchange
of notes, but we may require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection therewith. Notes may be
surrendered for registration of transfer or exchange at our offices or agencies
maintained for such purpose, which shall initially be the Corporate Trust Office
of the trustee in Chicago, Illinois. In the event that certificated notes are
issued or if DTC shall so require, we will be required to appoint a paying agent
and security registrar in The City of New York. We may appoint additional paying
agents and security registrars and may change any paying agent or security
registrar, subject to our obligation under the indenture to maintain a paying
agent and security registrar in Chicago, Illinois and, in the event that
certificated notes are issued or if DTC shall so require, The City of New York.
At our option, payment of interest on certificated notes may be made by check
mailed to the addresses of the persons entitled thereto as they appear on the
security register.

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<PAGE>
LIMITATIONS ON LIENS

Subject to certain exceptions, we will not, and will not permit any
Subsidiary to, create, assume or suffer to exist, otherwise than in favor of us
or a Subsidiary, any mortgage, pledge, lien, encumbrance, or security interest
(collectively, "Liens") upon any of our properties or assets or upon any income
or profits therefrom unless the notes shall be equally and ratably secured. This
prohibition will not apply to:

- Liens existing as of the date of the indenture;

- any purchase money mortgage or Lien created to secure all or part of the
purchase price of any property (or to secure a loan made to us or any
Subsidiary to enable it to acquire such property), provided that such Lien
shall extend only to the property so acquired, improvements thereon,
replacements thereof and the income or profits therefrom;

- Liens on any property at the time of the acquisition thereof, whether or
not assumed by us or a Subsidiary; provided that such Lien shall extend
only to the property so acquired, improvements thereon, replacements
thereof and income or profits therefrom;

- Liens on property or any contract for the sale of any product or service,
or any rights thereunder or any proceeds therefrom, acquired or
constructed by us or a Subsidiary and created within one year after the
later of:

- the completion of such acquisition or construction, or

- the commencement of operation of the property, provided that such Lien
shall extend only to the property so acquired or constructed,
improvements thereon, replacements thereof and income or profits
therefrom;

- Liens on the property or assets of Subsidiaries outstanding at the time
they become Subsidiaries;

- Liens created or assumed by us or a Subsidiary on coal, geothermal, oil,
natural gas, inert gas, other hydrocarbon or mineral properties owned or
leased by us or a Subsidiary to secure loans to us or a Subsidiary, for
the purpose of developing such properties;

- Liens on any investment (as defined in the indenture) of ours or that of a
Subsidiary of ours in any Person other than a Subsidiary or on any
security representing any investment of ours or a Subsidiary of ours;

- any Lien not otherwise permitted by the indenture, provided that after
giving effect to such Lien the sum of all indebtedness of us and our
Subsidiaries secured by Liens not otherwise permitted by the indenture and
all Attributable Debt of us and our Subsidiaries (to the extent not
included in indebtedness secured by Liens not otherwise permitted) does
not exceed 10% of Consolidated Capitalization;

- any refunding or extension of maturity, in whole or in part, of any
obligation or indebtedness secured by certain permitted Liens, provided
that the principal amount of the obligation or indebtedness secured by
such refunding or extension shall not exceed the principal amount of the
obligation or indebtedness then outstanding and shall be limited in lien
to the same or substituted property and after-acquired property that
secured the refunded or extended obligation or indebtedness;

34
<PAGE>
- Liens upon any office equipment, data processing equipment or any motor
vehicles, tractors or trailers;

- Liens of or upon or in current assets of ours or a Subsidiary of ours
created or assumed to secure indebtedness incurred in the ordinary course
of business;

- any Lien which is payable, both with respect to principal and interest,
solely out of the proceeds of natural gas, oil, coal, geothermal
resources, inert gas, hydrocarbons or minerals to be produced from the
property subject thereto and to be sold or delivered by us or a Subsidiary
of ours;

- Liens to secure indebtedness incurred to finance advances made by us or
any Subsidiary of ours to any third party for the purpose of financing
oil, natural gas, hydrocarbon, inert gas or other mineral exploration or
development, provided that such Liens shall extend only to our receivables
or that of such Subsidiary in respect of such advances; and

- any rights reserved in others to take or reserve any part of the natural
gas, oil, coal, geothermal resources, inert gas, hydrocarbons or minerals
produced at any time on any property of ours or a Subsidiary of ours.

Also excepted from the general prohibition are various other liens, such as
mechanics' or materialmen's liens, certain governmental liens, leases, certain
judgment liens, and certain liens arising in connection with leases, easements
and rights-of-way.

DEFINITIONS

Certain terms used in the indenture are defined and are used in this
prospectus as follows:

"Attributable Debt" means, as of the date of determination, the present
value of net rent for the remaining term of a capital lease, determined in
accordance with generally accepted accounting principles in the United States
("GAAP"), which is part of a Sale and Leaseback Transaction (as defined),
including any periods for which the lessee has the right to renew or extend the
lease. For purposes of the foregoing, "net rent" means the sum of capitalized
rental payments required to be paid by the lessee, other than amounts required
to be paid by the lessee for maintenance, repairs, insurance, taxes,
assessments, energy, fuel, utilities and similar charges. In the case of a
capital lease which is terminable by the lessee upon the payment of a penalty,
such net amount shall also include the amount of such penalty, but no rent shall
be considered to be required to be paid under such lease subsequent to the first
date upon which it may be so terminated.

"Consolidated Capitalization" means, without duplication, the sum of:

- the principal amount of our Consolidated Funded Debt and that of our
Subsidiaries at the time outstanding,

- the total capital represented by our capital stock and that of our
Subsidiaries at the time outstanding based, in the case of stock having
par value, upon its par value, and in the case of stock having no par
value, upon the value stated on our books,

- the total amount of (or less the amount of any deficit in) our retained
earnings and paid-in capital and that of our Subsidiaries,

- reserves for deferred federal and state income taxes arising from timing
differences, and

- Attributable Debt, all as shown on a consolidated balance sheet of us and
our Subsidiaries prepared in accordance with GAAP; provided that in
determining the consolidated retained earnings and paid-in capital of us
and our Subsidiaries no effect shall be given to any unrealized write-up
or write-down in the value of assets or any amortization thereof, except
for

35
<PAGE>
accumulated provisions for depreciation, depletion, amortization and
property retirement which shall have been created by charges made by us or
any of our Subsidiaries on our or their books.

"Consolidated Funded Debt" means our Funded Debt and that of our
Subsidiaries, consolidated in accordance with GAAP.

"Funded Debt" means all Indebtedness that will mature, pursuant to a
mandatory sinking fund or prepayment provision or otherwise, and all
installments of Indebtedness that will fall due, more than one year from the
date of determination. In calculating the maturity of any Indebtedness, there
shall be included the term of any unexercised right of the debtor to renew or
extend such Indebtedness existing at the time of determination.

"Indebtedness" means all items of indebtedness for borrowed money (other
than unamortized debt discount and premium) which would be included in
determining total liabilities as shown on the liability side of a balance sheet
prepared in accordance with GAAP as of the date as of which Indebtedness is to
be determined, and shall include indebtedness for borrowed money (other than
unamortized debt discount and premium) with respect to which we or any
Subsidiary of ours customarily pays interest secured by any mortgage, pledge or
other lien or encumbrance of or upon, or any security interest in, any
properties or assets owned by us or any Subsidiary of ours, whether or not the
Indebtedness secured thereby shall have been assumed, and shall also include
guarantees of Indebtedness of others; provided that in determining our
Indebtedness or that of any of our Subsidiaries there shall be included the
aggregate liquidation preference of all outstanding securities of any Subsidiary
senior to its Common Stock that are not owned by us or a Subsidiary of ours; and
provided, further, that Indebtedness of any Person shall not include the
following:

- any indebtedness evidence of which is held in treasury (but the subsequent
resale of such indebtedness shall be deemed to constitute the creation
thereof); or

- any particular indebtedness if, upon or prior to the maturity thereof,
there shall have been deposited with a depository (or set aside and
segregated, if permitted by the instrument creating such indebtedness), in
trust, money (or evidence of such indebtedness as permitted by the
instrument creating such indebtedness) in the necessary amount to pay,
redeem or satisfy such indebtedness; or

- any indebtedness incurred to finance oil, natural gas, hydrocarbon, inert
gas or other mineral exploration or development to the extent that the
issuer thereof has outstanding advances to finance oil, natural gas,
hydrocarbon, inert gas or other mineral exploration or development, but
only to the extent such advances are not in default; or

- any indebtedness incurred without recourse to us or any of our
Subsidiaries; or

- any indebtedness incurred to finance advance payments for gas (pursuant to
take-or-pay provisions or otherwise), but only to the extent that such
advance payments are pursuant to gas purchase contracts entered into in
the normal course of business; or

- any amount (whether or not included in determining total liabilities as
shown on the liability side of a balance sheet prepared in accordance with
GAAP) representing capitalized rent under any lease; or

- any indirect guarantees or other contingent obligations in respect of
indebtedness of other Persons, including agreements, contingent or
otherwise, with such other Persons or with third parties with respect to,
or to permit or assure the payment of, obligations of such other Persons,
including, without limitation, agreements to purchase or repurchase
obligations of such other Persons, to advance or supply funds to, or to
invest in, such other Persons, or to pay for property, products or
services of such other Persons (whether or not conveyed, delivered or
rendered); demand charge contracts, through-put, take-or-pay, keep-well,
make-whole or

36
<PAGE>
maintenance of working capital or similar agreements; or guarantees with
respect to rental or similar periodic payments to be made by such other
Persons.

"Sale and Leaseback Transaction" means an arrangement in which we or one of
our Subsidiaries sells any of our or their property which was placed into
service more than 120 days prior to such sale to a Person and leases it back
from that Person within 180 days of the sale.

CONSOLIDATION, MERGER AND SALE OF ASSETS

Nothing contained in the indenture or in any of the notes will prevent any
consolidation or merger of us with or into any other Person (whether or not
affiliated with us), or successive consolidations or mergers in which we or our
successor shall be a party, or will prevent any conveyance, transfer or lease of
our property as an entirety or substantially as an entirety, to any other Person
(whether or not affiliated with us); provided, however, that:

- in case of such a transaction, the entity formed by such consolidation or
into which we are merged, or the Person which acquires or leases our
properties and assets substantially as an entirety shall be a corporation,
partnership, limited liability company, association, company or business
trust organized under the laws of the United States of America, any state
thereof or the District of Columbia and shall expressly assume the due and
punctual payment of the principal of, premium, if any, and interest on all
the notes and the performance of every other covenant of the indenture;

- immediately after giving effect to such transaction, no event which, after
notice or lapse of time, would become an Event of Default, shall have
occurred and be continuing; and

- each of us and the successor Person shall have delivered to the trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
transaction complies with the requirements in the previous two bullets,
and that all conditions precedent relating to such transaction have been
complied with.

EVENTS OF DEFAULT

The following are Events of Default under the indenture with respect to any
notes:

- failure to pay the principal of, or premium, if any, on any note when due;

- failure to pay any interest installment on any note when due, in each
case, continued for 30 days;

- failure to perform any of our other covenants, continued for 90 days after
written notice as provided in the indenture;

- the occurrence of an event of default in other indebtedness of ours
(including securities other than the notes) which results in indebtedness
in excess of $10,000,000 principal amount being due and payable prior to
maturity, and such acceleration is not rescinded or annulled or such
indebtedness is not discharged after written notice as provided in the
indenture; and

- certain events of bankruptcy, insolvency or reorganization.

If an Event of Default with respect to notes at the time outstanding shall
occur and be continuing, then and in every such case, unless the principal of
all the notes has already become due and payable, the trustee or the holders of
at least 33 1/3% in principal amount of the outstanding notes may declare, by a
notice in writing to us, and to the trustee if given by holders, the entire
principal amount of all the outstanding notes to be due and payable immediately.
At any time after such declaration of acceleration has been made, but before a
judgment or decree for payment of the money due has been

37
<PAGE>

obtained by the trustee, the holders of a majority in principal amount of the
outstanding notes, by written notice to us and the trustee, may, in certain
circumstances, rescind and annul such declaration.

No holder of any notes will have any right to institute any proceeding with
respect to the indenture or for any remedy under the indenture, unless such
holder previously shall have given to the trustee written notice of a continuing
Event of Default and unless also the holders of at least 25% of the aggregate
principal amount of outstanding notes shall have made written request to and
have offered reasonable indemnity upon, the trustee, to institute such
proceeding, and the trustee shall not have received direction inconsistent with
such request in writing by the holders of a majority in principal amount of
outstanding notes and shall have neglected or refused to institute such
proceeding within 60 days. However, the rights of any holder of any notes to
enforce the payment of principal, premium, if any, and interest due on such
notes on or after the dates expressed in such notes may not be impaired or
affected.

We must furnish the trustee within 120 days after the end of each fiscal
year a statement signed by one of certain of our officers stating that a review
of our company's activities during that year and our performance under the
indenture and the terms of the notes has been made, and, to the best of the
knowledge of the signatory, based on such review, we have complied with all
conditions and covenants of the indenture, or, if we are in default, specifying
the default.

WAIVER, MODIFICATION AND AMENDMENT

The holders of a majority in principal amount of the outstanding notes may
waive certain past defaults, except a default in the payment of the principal
of, premium, if any, or interest on any note or in respect of any covenant or
provision in the indenture which under the terms of the indenture cannot be
modified without the consent of all holders of outstanding notes. The holders of
a majority in aggregate principal amount of outstanding notes may waive our
compliance with certain restrictive provisions.

We and the trustee may modify and amend the indenture with the consent of
the holders of a majority in aggregate principal amount of the outstanding notes
provided that no such modification or amendment may, without the consent of the
holder of each note affected thereby:

- change the Stated Maturity of the principal of, or any installment of
principal of, or interest on, any note;

- reduce the principal of, premium, if any, or interest on, or any premium
payable upon the redemption of, any note;

- change the Place of Payment or change the currency of payment of
principal, premium, if any, or interest on, any note;

- impair the right to institute suit for the enforcement of any payment on
or with respect to any note;

- reduce the percentages of holders of outstanding notes specified in this
or the preceding paragraph; or

- effect certain other modifications or amendments described in the
indenture.

In the case of provisions of the indenture affecting other series of
securities as well as the notes, the holders of the notes will be treated as a
separate class of securities for purposes of determining whether consent or
waiver of a majority of holders has been obtained.

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<PAGE>
DEFEASANCE AND COVENANT DEFEASANCE

The indenture provides that we may elect either:

- to defease and be discharged from any and all obligations with respect to
the notes ("defeasance"), or

- to be released from our obligations with respect to such notes described
above under "Limitations on Liens" and "Consolidation, Merger and Sale of
Assets" ("covenant defeasance"), upon the irrevocable deposit with the
trustee, in trust for such purpose, of money and/or U.S. Government
Obligations (as defined in the indenture) which through the payment of
principal and interest in accordance with their terms will provide money,
in an amount sufficient to pay the principal of, premium, if any, and
interest on such notes on the scheduled due date therefor. Defeasance and
covenant defeasance are each conditioned upon our delivery to the trustee
of an Opinion of Counsel to the effect that the holders of the notes will
have no federal income tax consequences as a result of such deposit.

CONCERNING THE TRUSTEE

Bank One Trust Company, NA is the trustee under the indenture and is an
affiliate of Banc One Capital Markets, Inc. The indenture contains certain
limitations on the rights of the trustee, should it become a creditor of ours,
to obtain payment of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. The trustee will
be permitted to engage in other transactions with us; however, if it acquires a
conflicting interest it must eliminate such conflict or resign or otherwise
comply with the Trust Indenture Act of 1939, as amended. The indenture also
provides that we will indemnify the trustee against loss, liability or expense
incurred without negligence or bad faith on the part of the trustee arising out
of or in connection with the trust under the indenture. The trustee is an
affiliate of Bank One, NA, which (1) participates in our $300 million Credit
Agreement, (2) is a creditor of our parent company, Questar, and (3) performs
routine banking functions for us.

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<PAGE>
UNDERWRITING

We intend to offer the notes through the underwriters named below. Subject
to the terms and conditions contained in a purchase agreement between us and the
underwriters, we have agreed to sell to the underwriters and the underwriters
severally have agreed to purchase from us, the principal amount of the notes
listed opposite their names below.

<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................... $
Banc of America Securities LLC..............................
Banc One Capital Markets, Inc.
TD Securities...............................................
------------
Total............................................ $150,000,000
============
</TABLE>

The underwriters have agreed to purchase all of the notes sold pursuant to
the purchase agreement if any of these notes are purchased. If an underwriter
defaults, the purchase agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated.

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect of those liabilities.

The underwriters are offering the notes, subject to prior sale, when, as and
if issued to and accepted by them, subject to approval of legal matters by their
counsel, including the validity of the notes, and other conditions contained in
the purchase agreement, such as the receipt by the underwriters of officer's
certificates and legal opinions. The underwriters reserve the right to withdraw,
cancel or modify offers to the public and to reject orders in whole or in part.

COMMISSIONS AND DISCOUNTS

The underwriters have advised us that they propose initially to offer the
notes to the public at the public offering price on the cover page of this
prospectus, and to dealers at that price less a concession not in excess of %
of the principal amount of the notes. The underwriters may allow, and the
dealers may reallow, a discount not in excess of % of the principal amount of
the notes to other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.

The expenses of the offering, not including the underwriting discount, are
estimated to be $565,000 and are payable by us.

The table below sets forth the compensation we will pay each underwriter in
the form of an underwriting discount on the notes. We have not granted an
over-allotment option to the underwriters.

<TABLE>
<CAPTION>
UNDERWRITING
UNDERWRITER DISCOUNT
----------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................
Banc of America Securities LLC..............................
Banc One Capital Markets, Inc.
TD Securities...............................................
------------
Total............................................ $ 975,000
============
</TABLE>

40
<PAGE>

NO SALES OF SIMILAR SECURITIES

We have agreed, with exceptions, not to sell or transfer any debt securities
for 30 days after the date of this prospectus without first obtaining the
written consent of Merrill Lynch. Specifically we have agreed not to directly or
indirectly:

- offer, pledge, sell, or contract to sell any debt securities,

- sell any option or contract to purchase any debt securities,

- purchase any option or contract to sell any debt securities,

- grant any option, right or warrant for the sale of any debt securities,

- file a registration statement for any debt securities, or

- lend or otherwise dispose of or transfer any debt securities.

This lockup provision applies to debt securities and to any securities
convertible into or exercisable or exchangeable for debt securities.

NEW ISSUE OF NOTES

The notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the notes on any national securities
exchange or for quotation of the notes on any automated dealer quotation system.
We have been advised by the underwriters that they presently intend to make a
market in the notes after completion of the offering. However, they are under no
obligation to do so and may discontinue any market-making activities at any time
without any notice. We cannot assure the liquidity of the trading market for the
notes or that an active public market for the notes will develop. If an active
public trading market for the notes does not develop, the market price and
liquidity of the notes may be adversely affected.

NASD REGULATIONS

Affiliates of Banc One Capital Markets, Inc., Banc of America Securities LLC
and TD Securities (USA) Inc. are lenders on our commercial bank term debt and,
upon application of the net proceeds of this offering, will receive their
proportionate share of the amount of this debt to be repaid. See "USE OF
PROCEEDS." Because more than ten percent of the net proceeds of the offering may
be paid to members or affiliates of members of the National Association of
Securities Dealers, Inc. participating in the offering, the offering will be
conducted in accordance with NASD Conduct Rule 2710(c)(8).

OTHER RELATIONSHIPS

Merrill Lynch has been a named agent for the sale of medium-term notes of
Questar Gas and Questar Pipeline, and is a commercial paper issue agent for
Questar.

LEGAL MATTERS

Certain legal matters will be passed upon for us by Connie C. Holbrook, Vice
President, General Counsel and Corporate Secretary of Questar, 180 East 100
South Street, Salt Lake City, Utah 84111, and by Skadden, Arps, Slate,
Meagher & Flom LLP, Four Times Square, New York, New York 10036. Brown & Wood
LLP, 555 California Street, San Francisco, California 94104, will act as counsel
for the underwriters. In rendering their opinion, Brown & Wood LLP may rely upon
the opinion of Ms. Holbrook as to all matters governed by Utah law. As of
September 30, 2000, Ms. Holbrook beneficially owned 232,358 shares of common
stock of Questar (including currently exercisable options to purchase 133,525
shares of common stock of Questar).

41
<PAGE>
EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1999 and 1998 and for each of the three
years in the period ended December 31, 1999 included in our Amendment No. 1 to
our registration statement on Form 10/A dated November 9, 2000, as set forth in
their report, which is incorporated by reference in this prospectus and
elsewhere in the registration statement. Our consolidated financial statements
are incorporated by reference in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing.

Certain information with respect to our oil and gas reserves has been
derived from the reports of Ryder Scott Company, LP, H.J. Gruy and
Associates, Inc., Netherland Sewell & Associates, Inc., Malkewicz Hueni
Associates, Inc., and Gilbert Laustsen Jung Associates Ltd., independent
petroleum engineers, and has been included and incorporated by reference in this
prospectus upon the authority of such firms as experts with respect to matters
covered by such reports and in giving such reports.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We will file annual, quarterly and special reports and other information
with the Securities and Exchange Commission. You may read and copy any document
we file at the public reference facilities of the SEC located at 450 Fifth
Street N.W., Washington, D.C. 20549. You may obtain information on the operation
of the SEC's public reference facilities by calling the SEC at 1-800-SEC-0330.
You can also obtain copies of this material from commercial retrieval services
and electronically at the SEC's Internet web site at http://www.sec.gov.

This prospectus is part of a registration statement (Registration
No. 333-34640) we filed with the SEC. The SEC permits us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents filed with the
SEC. The information incorporated by reference is considered to be part of this
prospectus, and information that we file with the SEC after the date of this
prospectus will automatically update and supersede this information. This
prospectus incorporates by reference the documents set forth below that we have
filed with the SEC. These documents contain important information about our
operations.

<TABLE>
<CAPTION>
FILING PERIOD
------------------------------------- -------------------------------------
<S> <C>
Registration Statement on Form 10 Filed on April 12, 2000

Amendment No. 1 to Registration Filed on November 9, 2000
Statement on Form 10/A

Quarterly Report on Form 10-Q Quarter ended June 30, 2000

Quarterly Report on Form 10-Q Quarter ended September 30, 2000
</TABLE>

We also incorporate by reference any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, until we sell all of the notes being registered or until this offering
is otherwise terminated.

If you request a copy of any or all of the documents incorporated by
reference, then we will send to you the copies you requested at no charge.
However, we will not send exhibits to the documents unless exhibits are
specifically incorporated by reference in those documents. You should direct
requests for copies to: Corporate Secretary, Questar Market Resources, Inc., 180
East 100 South Street, Salt Lake City, Utah 84111; telephone number
(801) 324-5202.

42
<PAGE>

GLOSSARY OF COMMONLY USED OIL & GAS TERMS

"Bbl" means barrel. One barrel is the equivalent of 42 standard U.S.
gallons.

"Bcf" means billion cubic feet, a common unit of measurement of natural gas.

"Bcfe" means billion cubic feet of natural gas equivalents. Oil volumes are
converted to natural gas equivalents using the ratio of one barrel of crude oil
to six million cubic feet of natural gas.

"Btu" means British thermal unit, measured as the amount of energy required
to raise the temperature of one pound of water one degree Fahrenheit.

"Completion" means the installation of permanent equipment for the
production of oil or natural gas, or in the case of a dry hole, the reporting of
abandonment to the appropriate agency.

"Development well" means a well drilled into a known producing formation in
a previously discovered field.

"Dry hole" means a well found to be incapable of producing hydrocarbons in
sufficient quantities such that proceeds from the sale of such production exceed
production expenses and taxes.

"Dth" means decatherm or ten therms. One decatherm equals one million Btu.

"Exploratory well" means a well drilled into a previously untested geologic
structure to determine the presence of oil or gas.

"Gross" natural gas and oil wells or "gross" acres equals the number of
wells or acres in which we have an interest.

"MBbls" means thousand barrels.

"Mcf" means thousand cubic feet.

"Mcfe" means thousand cubic feet of natural gas equivalents.

"MDths" means thousand decatherms.

"MMBbls" means million barrels.

"MMBtu" means million British thermal units.

"MMcf" means million cubic feet.

"MMDth" means million decatherms.

"Net" gas or oil wells or "net" acres are determined by multiplying gross
wells or acres by our working interest percentage in those wells or acres.

"NGL" means natural gas liquids.

"Proved reserves" means those quantities of natural gas and crude oil,
condensate, and natural gas liquids on a net revenue basis, which geological and
engineering data demonstrate with reasonable certainty to be recoverable under
existing economic and operating conditions. "Proved developed reserves" are
proved developed producing reserves and proved developed behind-pipe reserves.
"Proved developed producing reserves" are only those reserves expected to be
recovered from existing completion intervals on existing wells. "Proved
undeveloped reserves" are those reserves expected to be recovered from new wells
on proved undrilled acreage or from existing wells where a relatively major
expenditure is required for recompletion.

"Reservoir" means a porous and permeable underground formation containing a
natural accumulation of producible natural gas and/or oil that is confined by
impermeable rock or water barriers and is separate from other reservoirs.

"Working interest" means an interest that gives the owner the right to
drill, produce, and conduct operating activities on a property and receive a
share of any production.

43
<PAGE>

Through and including , 2001, all dealers effecting transactions
in these securities, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.

$150,000,000

QUESTAR MARKET RESOURCES, INC.

% NOTES DUE 20[ ]

PROSPECTUS

MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
TD SECURITIES

, 2000

44
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the fees and expenses payable by us in
connection with the offering of the notes registered hereunder. All such fees
and expenses other than the Securities and Exchange Commission Registration Fee
are estimated.

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 39,600
Printing Expenses........................................... 20,000
Legal Fees and Expenses..................................... 265,000
Accounting Fees and Expenses................................ 160,000
Blue Sky Fees and Expenses.................................. 5,000
Trustee's Fees and Expenses................................. 6,000
Rating Agency Fees.......................................... 65,000
Miscellaneous............................................... 4,400
--------
Total....................................................... $565,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Reference is made to Section 16-10a-901 through 16-10a-909 of the Utah
Revised Business Corporation Act, which provides for indemnification of
directors and officers in certain circumstances.

Our Bylaws provide that we may voluntarily indemnify any individual made a
party to a proceeding because he is or was our director, officer, employee or
agent against liability incurred in the proceeding, but only if we have
authorized the payment in accordance with the applicable statutory provisions of
the Utah Revised Business Corporation Act (Sections 16-10a-902, 16-10a-904 and
16-10a-907) and a determination has been made in accordance with the procedures
set forth in such provision that such individual conducted himself in good
faith, that he reasonably believed his conduct, in his official capacity with
us, was in its best interests and that his conduct, in all other cases, was at
least not opposed to our best interests, and that he had no reasonable cause to
believe his conduct was unlawful in the case of any criminal proceeding. The
foregoing indemnification in connection with a proceeding by or in our right is
limited to reasonable expenses incurred in connection with the proceeding, which
expenses may be advanced by us. Our Bylaws provide that we may not voluntarily
indemnify our director, officer, employee or agent in connection with a
proceeding by or in our right in which such individual was adjudged liable to us
or in connection with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity, in which he was
adjudged liable on the basis that personal benefit was improperly received by
him.

Our Bylaws provide further that we shall indemnify our director, officer,
employee or agent who was wholly successful, on the merits or otherwise, in
defense of any proceeding to which he was a party because he is or was such a
director, officer, employee or agent, against reasonable expenses incurred by
him in connection with the proceeding.

Our Bylaws further provide that no director shall be personally liable to us
or our stockholders for monetary damages for any action taken or any failure to
take any action, as a director, except liability for (a) the amount of a
financial benefit received by a director to which he is not entitled; (b) an
intentional infliction of harm on us or our shareholders; (c) any action that
would result in liability of the director under the applicable statutory
provision concerning unlawful distributions; or (d) an intentional violation of
criminal law.

45
<PAGE>

Our parent maintains an insurance policy on behalf of our officers and
directors pursuant to which (subject to the limits and limitations of such
policy) the officers and directors are insured against certain expenses in
connection with the defense of actions or proceedings, and certain liabilities
which might be imposed as a result of such actions or proceedings, to which any
of them is made a party by reason of being or having been a director or officer.

Reference is made to Sections 6 and 7 of the Purchase Agreement, the
form of which is filed as Exhibit 1.01 hereto, for the description of the
indemnification and contribution arrangements for this offering.

ITEM 16. EXHIBITS

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <C> <S>
*1.01 -- Form of Purchase Agreement.
*4.01 -- Form of Indenture, dated as of , 2000, between us and
Bank One Trust Company, NA, as Trustee, relating to our debt
securities.
4.02 -- Form of Note.
*5.01 -- Opinion of Connie C. Holbrook, Esq.
*5.02 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
*12.01 -- Statement of Computation of Ratio of Earnings to Fixed
Charges.
23.01 -- Consent of Ernst & Young LLP.
*23.02 -- Consent of Connie C. Holbrook, Esq. (included in
Exhibit 5.01).
*23.03 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.02).
23.04 -- Consent of Ryder Scott Company, LP
23.05 -- Consent of H.J. Gruy and Associates, Inc.
23.06 -- Consent of Netherland Sewell & Associates, Inc.
23.07 -- Consent of Malkewicz Hueni Associates Ltd.
23.08 -- Consent of Gilbert Laustsen Jung Associates Ltd.
*24.01 -- Form of Power of Attorney (included on signature page to the
Registration Statement).
*25.01 -- Statement of Eligibility of Trustee on Form T-1.
</TABLE>

------------------------

* Previously filed

ITEM 17. UNDERTAKINGS

A. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions of Utah law and the
registrant's bylaws, a summary of which is set forth in Item 15 hereof,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such

46
<PAGE>
liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.

C. The undersigned registrant hereby undertakes that:

1. For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it
was declared effective.

2. For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

47
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Salt Lake, State of Utah,
on the th day of November, 2000.

<TABLE>
<S> <C> <C>
QUESTAR MARKET RESOURCES, INC.

By: /s/ G.L. NORDLOH
-----------------------------------------
G.L. Nordloh
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
*
--------------------------------- Chairman of the Board and Director
R.D. Cash

* President and Chief Executive
--------------------------------- Officer; Director (Principal
G.L. Nordloh Executive Officer)

* Vice President, Treasurer and Chief
--------------------------------- Financial Officer (Principal
S.E. Parks Financial Officer)

*
--------------------------------- Manager, Accounting (Principal
B. Kurtis Watts Accounting Officer)

*
--------------------------------- Director
Teresa Beck

*
--------------------------------- Director
Patrick J. Early

*
--------------------------------- Director
Clyde M. Heiner
</TABLE>

48
<PAGE>

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
*
--------------------------------- Director
William N. Jones
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ G.L. NORDLOH
----------------------------
G.L. Nordloh November 15, 2000
AS ATTORNEY-IN-FACT
</TABLE>

49
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <C> <S>
*1.01 -- Form of Purchase Agreement.
*4.01 -- Form of Indenture, dated as of , 2000, between
us and Bank One Trust Company, NA, as Trustee, relating to
our debt securities.
4.02 -- Form of Note.
*5.01 -- Opinion of Connie C. Holbrook, Esq.
*5.02 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
*12.01 -- Statement of Computation of Ratio of Earnings to Fixed
Charges.
23.01 -- Consent of Ernst & Young LLP.
*23.02 -- Consent of Connie C. Holbrook, Esq. (included in
Exhibit 5.01).
*23.03 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.02).
23.04 -- Consent of Ryder Scott Company, LP
23.05 -- Consent of H.J. Gruy and Associates, Inc.
23.06 -- Consent of Netherland Sewell & Associates, Inc.
23.07 -- Consent of Malkewicz Hueni Associates Ltd.
23.08 -- Consent of Gilbert Laustsen Jung Associates Ltd.
*24.01 -- Form of Power of Attorney (included on signature page to the
Registration Statement).
*25.01 -- Statement of Eligibility of Trustee on Form T-1.
</TABLE>

------------------------

* Previously filed