SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _____ TO _____
Commission File No. 0-30321
QUESTAR MARKET RESOURCES, INC.
(Exact name of registrant as specified in its charter)
STATE OF UTAH 87-0287750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 45601, 180 East 100 South, Salt Lake City, Utah 84145-0601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 324- 2600
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes No X
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of October 31, 2000
Common Stock, $1.00 par value 4,309,427 shares
Registrant meets the conditions set forth in General Instruction
H(a)(1) and (b) of Form 10-Q and is filing this Form 10-Q with the
reduced disclosure format.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
QUESTAR MARKET RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
2000 1999 2000 1999
(In Thousands)
<S> <C> <C> <C> <C>
REVENUES $ 187,403 $ 129,000 $ 494,365 $ 359,068
OPERATING EXPENSES
Natural gas and other product purchases 90,923 64,478 234,606 174,729
Operating and maintenance 25,177 19,530 72,647 59,029
Depreciation and amortization 21,047 19,565 63,175 58,549
Other taxes 9,764 5,351 25,122 15,009
Wexpro settlement agreement - oil
income sharing 1,265 862 3,458 1,284
TOTAL OPERATING EXPENSES 148,176 109,786 399,008 308,600
OPERATING INCOME 39,227 19,214 95,357 50,468
INTEREST AND OTHER INCOME 3,624 459 6,667 3,106
MINORITY INTEREST (441) (441)
INCOME FROM UNCONSOLIDATED
AFFILIATES 827 411 2,132 349
DEBT EXPENSE (5,900) (4,219) (17,573) (12,772)
INCOME BEFORE INCOME TAXES 37,337 15,865 86,142 41,151
INCOME TAXES 13,329 4,557 29,903 11,158
NET INCOME $ 24,008 $ 11,308 $ 56,239 $ 29,993
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
QUESTAR MARKET RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31,
2000 1999
(Unaudited)
(In Thousands)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 25,424
Notes receivable from Questar Corp. 2,600 $ 4,000
Accounts receivable, net 122,260 75,823
Inventories, at lower of average
cost or market -
Gas and oil storage 3,630 8,863
Materials and supplies 1,888 2,390
Prepaid expenses and other 5,174 4,452
Total current assets 160,976 95,528
Property, plant and equipment 1,604,095 1,469,676
Less allowances for depreciation and amortization 837,485 778,695
Net property, plant and equipment 766,610 690,981
Investment in unconsolidated affiliates 15,208 13,301
Other assets
Cash held in escrow account 36,727
Other 10,474 11,354
10,474 48,081
$ 953,268 $ 847,891
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Checks outstanding in excess of cash balance $ 1,246
Short-term loans $ 31,500
Notes payable to Questar Corp. 11,700 24,500
Accounts payable and accrued expenses 132,785 92,278
Total current liabilities 175,985 118,024
Long-term debt 253,894 264,894
Other liabilities 11,938 14,674
Deferred income taxes 73,186 59,936
Minority interest 4,402 2,529
Common shareholder's equity
Common stock 4,309 4,309
Additional paid-in capital 116,027 116,027
Retained earnings 313,652 270,388
Other comprehensive loss (125) (2,890)
Total common shareholder's equity 433,863 387,834
$ 953,268 $ 847,891
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
QUESTAR MARKET RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
9 Months Ended
September 30,
2000 1999
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 56,239 $ 29,993
Depreciation and amortization 63,718 60,360
Deferred income taxes 5,548 1,194
(Income) loss from unconsolidated
affiliates, net of cash distributions (1,907) 281
Gain from sale of securities (1,573) (388)
Changes in operating assets
and liabilities (6,731) (1,458)
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 115,294 89,982
INVESTING ACTIVITIES
Capital expenditures
Property, plant and equipment (137,183) (67,085)
Other investments (23,379)
Total (137,183) (90,464)
Proceeds from disposition of property,
plant and equipment 2,359 1,638
Proceeds from sales of securities 9,478 1,214
NET CASH USED IN INVESTING
ACTIVITIES (125,346) (87,612)
FINANCING ACTIVITIES
Change in notes receivable from Questar Corp. 1,400 102,900
Change in notes payable to Questar Corp. (12,800) (179,900)
Checks outstanding in excess of cash balance (1,246)
Change in short-term loans 31,500
Cash released from escrow account 36,727
Long-term debt issued 39,791 210,000
Long-term debt repaid (48,432) (130,000)
Other 1,873
Payment of dividends (12,975) (12,450)
NET CASH PROVIDED FROM (USED IN)
FINANCING ACTIVITIES 35,838 (9,450)
Foreign currency translation adjustment (362) 47
CHANGE IN CASH AND
CASH EQUIVALENTS $ 25,424 $ (7,033)
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
QUESTAR MARKET RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
Note 1 - Basis of Presentation
The interim financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented.
All such adjustments are of a normal recurring nature. Due to the
nature of the business, the results of operations for the
three-and nine-month periods ended September 30, 2000, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 2000. For further information refer to
the financial statements and footnotes theretofore the year ended
December 31, 1999, included in the Company's report on Form 10
filed November 9, 2000.
Note 2 - Purchase of Canadian Gas and Oil Company
On January 26, 2000, a subsidiary of Questar Market Resources (QMR
or the Company) acquired 100% of the outstanding shares of Canor
Energy Ltd (Canor) from NI Canada ULC, a subsidiary of Northwest
Natural Gas Co for cash of $US 61 million plus the assumption of
$US 5.4 million of short-term debt. The transaction was accounted
for as a purchase. Canor owns and/or operates more than 800
wells located in Alberta, British Columbia and Saskatchewan
provinces of Canada. Canor's proven gas and oil reserves were
estimated at 61.1 billion cubic feet equivalent. Assets purchased
and liabilities assumed were as follows:
(In Thousands)
Cash $ 245
Other current assets 3,502
Property, plant and equipment 73,720
Other assets 282
Short-term debt (5,444)
Other current liabilities (4,356)
Deferred income taxes (4,976)
Other liabilities (1,989)
Total purchase price, including
acquisition costs $ 60,984
Note 3 - Financing
On April 12, 2000, QMR filed with the Securities and Exchange
Commission, a registration statement for a public debt offering.
Following effectiveness of such registration statement, QMR
intends to issue $150 million of notes and use the proceeds to
repay a portion of its outstanding debt.
In the third quarter of 2000, QMR initiated an unrated commercial
paper program with a $100 million capacity. Commercial paper
borrowings are limited to and supported by available capacity on
QMR's existing revolving credit facility. At September 30, 2000,
QMR had a commercial paper balance of $31.5 million.
5
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Note 4 - Operations By Line of Business
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
2000 1999 2000 1999
(In Thousands)
<S> <C> <C> <C> <C>
REVENUES FROM UNAFFILIATED CUSTOMERS
Exploration and production $ 64,786 $ 42,462 $ 171,709 $ 116,943
Wexpro - cost of service 4,378 3,056 11,302 5,919
Gathering, processing and marketing 96,999 66,425 246,712 179,572
$ 166,163 $ 111,943 $ 429,723 $ 302,434
REVENUES FROM AFFILIATED COMPANIES
Exploration and production $ 13 $ - $ 13 $ -
Wexpro - cost of service 17,929 14,782 53,162 44,971
Gathering, processing and marketing 3,298 2,275 11,467 11,663
$ 21,240 $ 17,057 $ 64,642 $ 56,634
DEPRECIATION AND AMORTIZATION EXPENSE
Exploration and production $ 16,102 $ 15,189 $ 48,787 $ 45,757
Wexpro - cost of service 3,451 3,151 10,355 9,172
Gathering, processing and marketing 1,494 1,225 4,033 3,620
$ 21,047 $ 19,565 $ 63,175 $ 58,549
OPERATING INCOME
Exploration and production $ 26,166 $ 10,063 $ 61,146 $ 23,856
Wexpro - cost of service 9,680 8,622 28,076 23,856
Gathering, processing and marketing 3,381 529 6,135 2,756
$ 39,227 $ 19,214 $ 95,357 $ 50,468
NET INCOME
Exploration and production $ 14,217 $ 5,540 $ 32,207 $ 12,906
Wexpro - cost of service 6,174 5,374 17,911 15,228
Gathering, processing and marketing 3,617 394 6,121 1,859
$ 24,008 $ 11,308 $ 56,239 $ 29,993
FIXED ASSETS - NET
Exploration and production $ 545,808 $ 501,828
Wexpro - cost of service 144,981 133,533
Gathering, processing and marketing 75,821 67,491
$ 766,610 $ 702,852
GEOGRAPHIC INFORMATION
REVENUES
United States $ 177,488 $ 125,705 $ 468,697 $ 350,372
Canada 9,915 3,295 25,668 8,696
$ 187,403 $ 129,000 $ 494,365 $ 359,068
FIXED ASSETS - NET
United States $ 662,765 $ 668,226
Canada 103,845 34,626
$ 766,610 $ 702,852
</TABLE>
6
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Note 5 - Comprehensive Income
Comprehensive income is defined as any nonowner change in common
equity. Generally, comprehensive income includes earnings
reported on the income statement plus changes in common equity
formerly reported on the balance sheet only. Other comprehensive
income included in this note is comprised of changes in the market
value of the investments in securities available for sale and
foreign currency translation adjustments. These transactions are
not the culmination of the earnings process, but result from
periodically adjusting historical balances to market value.
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
2000 1999 2000 1999
(In thousands)
<S> <C> <C> <C> <C>
Comprehensive Income:
Net income $ 24,008 $ 11,308 $ 56,239 $ 29,993
Other comprehensive income (loss)
Unrealized gain on securities
available for sale 957 203 6,474 203
Foreign currency translation adjustment (763) (42) (2,323) (533)
Other comprehensive income (loss)
before income taxes 194 161 4,151 (330)
Income taxes on other
comprehensive income (loss) 7 62 1,386 (126)
Net other comprehensive income (loss) 187 99 2,765 (204)
Total comprehensive income $ 24,195 $ 11,407 $ 59,004 $ 29,789
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
QUESTAR MARKET RESOURCES, INC.
September 30, 2000
(Unaudited)
Operating Results
Questar Exploration and Production, Wexpro, Questar Gas Management
and Questar Energy Trading, collectively Questar Market Resources
(QMR or the Company), conduct exploration and production, gas
gathering and processing, and energy marketing operations.
Following is a summary of QMR's financial results and operating
information.
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
FINANCIAL RESULTS - (dollars in thousands)
Revenues
From unaffiliated customers $ 166,163 $ 111,943 $ 429,723 $ 302,434
From affiliates 21,240 17,057 64,642 56,634
Total revenues $ 187,403 $ 129,000 $ 494,365 $ 359,068
Operating income $ 39,227 $ 19,214 $ 95,357 $ 50,468
Net income 24,008 11,308 56,239 29,993
OPERATING STATISTICS
Production volumes
Natural gas (in million cubic feet) 17,361 15,557 51,985 45,946
Oil and natural gas liquids (in thousands
of barrels)
Questar Exploration & Production 562 576 1,679 1,770
Wexpro 126 151 395 419
Production revenue
Natural gas (per thousand cubic feet) $ 2.98 $ 2.03 $ 2.55 $ 1.94
Oil and natural gas liquids (per barrel)
Questar Exploration & Production $ 20.06 $ 15.40 $ 20.48 $ 13.18
Wexpro $ 29.06 $ 17.78 $ 26.63 $ 14.75
Wexpro investment base at Sept. 30, net of
deferred income taxes (in millions) $ 116.1 $ 106.3
Marketing volumes in energy equivalent
decatherms (in thousands of decatherms) 26,943 27,512 79,148 87,829
Natural gas gathering volumes (in
thousands of decatherms)
For unaffiliated customers 23,205 22,359 68,244 64,485
For Questar Gas 7,500 5,338 26,588 22,257
For other affiliated customers 6,476 4,964 18,154 14,083
Total gathering 37,181 32,661 112,986 100,825
Gathering revenue (per decatherm) $ 0.13 $ 0.15 $ 0.13 $ 0.15
</TABLE>
8
<PAGE>
Revenues
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 periods.
The average natural gas price per thousand cubic feet (Mcf)
increased 47% in the third quarter and 31% in the first nine
months of 2000 when compared with the same periods of 1999.
Double-digit gas production growth also contributed to the
increase in revenues in the 2000 periods. Oil and natural gas
liquids prices increased 30% in the third quarter and 55% per
barrel in the first nine months of 2000 (excluding Wexpro's oil
production).
The higher gas price realizations were the combined results of
hedging contracts on a portion of the gas produced and higher spot
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 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 benefited 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 billion cubic feet (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.
Expenses
Operating and maintenance expenses were higher in the three- and
nine-month periods of 2000 when compared with the corresponding
1999 periods primarily because of the increase in the number of
producing properties including the acquisition of a Canadian gas
and oil company 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 thousand cubic
feet equivalent (Mcfe) of production 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 periods presented when compared
with the 1999 periods 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 periods. 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 income statement. Debt expense was higher in
the 2000 periods presented because of increased borrowings and
higher floating 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 tax rates are higher.
The Company recognized $3,332,000 of nonconventional credits in
the 2000 period and $3,992,000 in the 1999 period.
Other income
Other income was substantially higher in the third quarter and
first nine months of 2000. The Company recorded $1.9 million of
capitalized finance costs (AFUDC) on its gas storage facility, of
which $476,000 was attributable to its partner in the project.
Operation of the underground gas storage facility began in
September 2000. The remainder of the year-to-date increase was
the result of a $1.6 million pretax gain from the sale of
securities and interest earned on the cash collateral deposited in
commodity trading accounts with brokers.
9
<PAGE>
Net income
QMR's third quarter net income increased $12.7 million
representing a 112% improvement over the third quarter of 1999.
Net income for the first nine months of 2000 was 88% higher
compared with the same period of 1999. 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. Wexpro develops gas reserves on
behalf of affiliated company, Questar Gas, which is a
rate-regulated distributor of natural gas. In addition, higher
oil and NGL prices contributed to Wexpro's improved earnings.
Gathering, processing and marketing operations reported a $4.3
million increase of 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 QMR's
share of AFUDC recorded on a storage facility.
Liquidity and Capital Resources
Operating Activities
Net cash provided from operating activities in the first nine
months of 2000 of $115.3 million was $25.3 million more than was
generated in the first nine months of 1999. The increase in cash
flow from operating activities resulted from 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 balance sheet.
Investing Activities
Capital expenditures were $137.2 million in 2000, which includes a
$66.1 million cash payment, net of cash received, for the purchase
of a Canadian company. Capital expenditures for calendar year
2000 are estimated at $189.1 million.
Financing Activities
QMR financed capital expenditures, including the acquisition of a
Canadian company, through borrowings from Questar and from an
existing long-term debt arrangement, from net cash provided from
operating activities, from cash released from an escrow account
and issuance of commercial paper. In the third quarter of 2000,
QMR initiated an unrated commercial paper program with a $100
million capacity. Commercial paper borrowings are limited to and
supported by available capacity on QMR's existing revolving credit
facility. At September 30, 2000, QMR had a commercial paper
balance of $31.5 million.
On April 12, 2000, QMR filed with the Securities and Exchange
Commission a registration statement covering a planned $150
million public debt offering. Proceeds of the debt offering will
be used to repay a portion of debt outstanding. QMR intends to
finance remaining 2000 capital expenditures through net cash
provided from operations, borrowings from Questar and borrowings
under an existing long-term debt facility.
Pinedale Drilling Program
Test results from four wells drilled in the Pinedale Anticline in
western Wyoming tend to validate and may enhance earlier estimates
of the field's productive potential. In evaluating the new wells,
the Company compared them with two other Questar Pinedale
10
<PAGE>
Anticline wells completed in the first quarter of 2000. The four
wells were evaluated as if flow-tested in the same manner as the
earlier wells. The two earlier wells had initial production rates
of slightly more than 11 million cubic feet of gas and between 89
and 113 barrels of condensate per day. The four new wells are
expected to have comparative initial production rates between 7
and 11 million cubic feet per day. The data supports our
estimation of 135-150 potential well locations, based on 80-acre
spacing. If 40-acre spacing is determined to be appropriate, the
potential well locations and reserves could double. Based on
short-term testing, pressures in the new wells have generally been
higher than previously modeled, which tends to confirm estimates
of a potential average 5 to 6 Bcfe of reserves per well. However,
short-term tests are insufficient to determine estimated reserves.
Market Risk
The Company's primary market-risk exposures arise from
commodity-price changes for natural gas, oil and other
hydrocarbons and changes in floating interest rates. The Company
has an investment in a foreign operation that may subject it to
exchange-rate risk. QMR also has reserved certain volumes of
pipeline capacity for which it is obligated to pay $3 million
annually for the next seven years, whether or not it is 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.
Market Resource bears a majority of the risk associated with
changes in commodity prices. A primary objective of energy-price
hedging is to protect product sales from adverse changes in energy
prices. The Company does not enter into derivative contracts for
speculative purposes.
At September 30, 2000, Questar Market Resources held hedge
contracts covering the price exposure for about 49.8 million
decatherms of gas and 1.3 million barrels of oil. The hedging
contracts exist for a significant share of QMR-owned gas and oil
production and for a portion of gas-marketing transactions. Hedge
contracts at September 30, 2000, had terms extending through
October 2002, with about 22% of those contracts expiring by the
end of 2000.
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. 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
calculation used energy prices posted on the NYMEX from the last
trading day of September 2000. The sensitivity calculations do
not consider the effect of gains or losses on the associated
physical side of these transactions, which should largely offset
the change in value.
Interest-Rate Risk Management: As of September 30, 2000, the
Company owed $297.1 million of variable rate debt. The book value
of variable-rate debt approximates fair value.
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 as of September 30, 2000.
Foreign Currency Risk Management: The Company does not hedge the
foreign currency exposure of its foreign operation's net assets
and long-term debt. Long-term debt held by the foreign operation,
amounts to $58.9 million (U.S.), and is expected to be repaid from
future operations of the foreign company.
11
<PAGE>
New Accounting Standards
The Company is required to adopt the accounting provisions of
Statement of Financial Accounting Standard (SFAS) 133 "Accounting
for Derivative Instruments and Hedging Activities" as amended by
SFAS 138, by January 2001. The new accounting rules require that
the fair value of derivative instruments be measured and recorded
as either assets or liabilities in the balance sheet. The
Statement requires that changes in the derivatives fair value must
be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying
hedges allows derivatives' gains and losses to offset related
results on the hedged items in the income statement. Companies
must formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting treatment.
The Company is evaluating its derivatives and how the new
accounting standards apply. The Company believes its derivatives
to be highly effective and would qualify as hedges under
SFAS 133 as amended by SFAS 138. If any portion of the hedge
instrument is deemed to be ineffective, as defined, changes in the
value of that portion would be reflected in the income statement.
The Company is currently evaluating its derivatives for
ineffectiveness, as defined in the standards.
Revenue Recognition Guideline Issued by the Securities and
Exchange Commission
In December 1999, the SEC issued Staff Accounting Bulletin (SAB)
101, "Revenue Recognition in Financial Statements." The SAB raised
issues concerning the timing of recording revenues given that
sales transactions may contain some conditions allowing customers
to return products or receive refunds. The SEC expects companies
that make conditional sales to postpone fully recognizing revenues
until the earnings process is completed. The Company records
revenues when services are provided or products are delivered. The
pronouncement is effective for Questar Market Resources beginning
with the fourth quarter of 2000 and is not expected to cause a
change in the method used to record revenues.
Forward-Looking Statements
The 10-Q contains forward-looking statements about future
operations, capital spending, regulatory matters and expectations
of Questar Market Resources. According to management, these
statements are made in good faith and are reasonable
representations of the Company's expected performance at the time.
Actual results may vary from management's stated expectations and
projections due to a variety of factors.
Important assumptions and other significant factors that could
cause actual results to differ materially from those discussed 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 for exploration and other factors
beyond the control of the Company. These other factors include
the rate of inflation, the effect of accounting policies issued
periodically by accounting standards setting bodies, volatility of
quoted prices of securities available for sale and adverse changes
in the business or financial condition of the Company.
These factors are not necessarily all of the important factors
that could cause actual results to differ significantly from those
expressed in any forward-looking statements. Other unknown or
unpredictable factors could also have a significant adverse effect
on future results. The Company does not undertake an obligation to
update forward-looking information contained herein or elsewhere
to reflect actual results, changes in assumptions or changes in
other factors affecting such forward-looking information.
12
<PAGE>
Part II
Other Information
Item 6. Exhibits and Reports on Form 8-K
a. The following exhibit has been filed as part of this report.
Exhibit no. Exhibit
12. Ratio of earnings to fixed charges.
b. The Company did not file a Current Report on Form 8-K during
the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
QUESTAR MARKET
RESOURCES, INC.
(Registrant)
November 10, 2000 /s/G. L. Nordloh
(Date) G. L. Nordloh
President and Chief
Executive Officer
November 10, 2000 /s/S. E. Parks
(Date) S. E. Parks
Vice President, Treasurer and
Chief Financial Officer
13
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EXHIBIT INDEX
Exhibit
Number Exhibit
12. Ratio of earnings to fixed charges.
14
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