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, 1994
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. 1-8796
QUESTAR CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF UTAH 87-0407509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 45433, 180 East First South, Salt Lake City, Utah 84145-0433
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 534-5000
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 X No
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, 1994
Common Stock, without par value 40,370,195 shares
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 12 Months Ended
September 30, September 30, September 30,
1994 1993 1994 1993 1994 1993
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C>
REVENUES $112,193 $100,240 $470,899 $477,433 $653,896 $652,319
OPERATING EXPENSES
Natural gas purchases 15,339 14,759 139,576 159,682 204,394 217,359
Operating and maintenance 45,972 42,038 131,610 126,730 173,715 167,175
Depreciation and amortization 23,531 21,209 69,655 62,265 94,148 83,206
Other taxes 9,656 7,521 30,656 24,277 38,422 30,412
TOTAL OPERATING EXPENSES 94,498 85,527 371,497 372,954 510,679 498,152
OPERATING INCOME 17,695 14,713 99,402 104,479 143,217 154,167
INTEREST AND OTHER INCOME 1,037 1,420 4,040 3,118 4,554 4,874
DEBT EXPENSE (9,869) (8,304) (28,229) (25,285) (36,928) (35,365)
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 8,863 7,829 75,213 82,312 110,843 123,676
INCOME TAXES (CREDITS) (170) 859 21,159 23,292 31,345 35,217
INCOME FROM CONTINUING
OPERATIONS 9,033 6,970 54,054 59,020 79,498 88,459
DISCONTINUED OPERATIONS
Gain from sale 38,126 38,126 38,126
Loss from operations (1,110) (2,772) (3,272)
NET INCOME $47,159 $5,860 $92,180 $56,248 $117,624 $85,187
EARNINGS PER COMMON SHARE
Income from continuing operation $0.22 $0.17 $1.33 $1.46 $1.97 $2.20
Gain from sale of discontinued o 0.95 0.95 0.95
Loss from discontinued operation (0.03) (0.07) (0.08)
Net income $1.17 $0.14 $2.28 $1.39 $2.92 $2.12
Dividends per common share $0.285 $0.275 $0.845 $0.815 $1.12 $1.08
Average common shares outstanding 40,328 40,052 40,263 39,951 40,226 39,829
</TABLE>
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<PAGE>
September 30, December 31,
1994 1993 1993
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments $3,213 $6,365
Accounts receivable $85,565 72,325 138,866
Federal income taxes receivable 6,647
Inventories 33,171 29,224 29,928
Other current assets 12,101 14,399 11,384
Total current assets 137,484 119,161 186,543
Property, plant and equipment 2,218,843 1,955,629 2,024,394
Less allowances for depreciation
and amortization 939,725 855,651 871,734
Net property, plant
and equipment 1,279,118 1,099,978 1,152,660
Securities available-for-resale,
approximates fair value 81,879
Investment in discontinued
operations 29,498 29,498
Other assets 49,940 43,198 48,986
$1,548,421 $1,291,835 $1,417,687
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Checks outstanding in excess
of cash balances $6,540
Short-term loans 88,900 $44,000 $78,300
Accounts payable and
accrued expenses 108,780 82,189 119,064
Purchased-gas adjustments 6,262 25,592 25,727
Total current liabilities 210,482 151,781 223,091
Long-term debt 439,680 362,482 371,713
Other liabilities and
deferred credits 50,499 13,100 45,632
Deferred income taxes and
investment tax credits 184,202 170,827 167,784
Redeemable cumulative
preferred stock 7,524 8,725 7,525
Common shareholders' equity
Common stock 308,901 301,825 303,503
Retained earnings 417,724 345,246 359,637
Treasury stock, at cost (34,171) (34,553) (34,396)
Note receivable from ESOP (25,650) (27,598) (26,802)
Unrealized loss on securities,
net of income taxes (10,770)
Total common
shareholders' equity 656,034 584,920 601,942
$1,548,421 $1,291,835 $1,417,687
</TABLE>
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
9 Months Ended
September 30,
1994 1993
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $92,180 $56,248
Depreciation and amortization 72,940 65,561
Deferred income taxes and
investment tax credits 5,887 3,583
Gain from sale of
discontinued operations (38,126)
Loss from discontinued operations 2,772
132,881 128,164
Change in operating assets
and liabilities 14,033 20,867
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 146,914 149,031
INVESTING ACTIVITIES
Capital expenditures
Purchase of property, plant
and equipment (213,963) (83,024)
Investment in discontinued
operations (8,080) (5,300)
Other investments (830) (264)
Total capital expenditures (222,873) (88,588)
Proceeds from disposition of property,
plant and equipment 11,806 5,033
CASH USED IN INVESTING ACTIVITIES (211,067) (83,555)
FINANCING ACTIVITIES
Issuance of common stock 5,967 8,661
Purchase of treasury stock (344) (1,928)
Redemption of preferred stock (1) (1)
Issuance of long-term debt 93,000 118,000
Repayment of long-term debt (25,033) (136,112)
Increase (decrease) in short-term loans 10,600 (26,000)
Checks outstanding in excess
of cash balances 6,540
Payment of dividends (34,485) (33,115)
Other 1,544 1,244
CASH PROVIDED FROM (USED IN)
FINANCING ACTIVITIES 57,788 (69,251)
DECREASE IN CASH AND
SHORT-TERM INVESTMENTS ($6,365) ($3,775)
</TABLE>
The sale of Questar Telecom to Nextel Communications in exchange for
shares of Nextel was a noncash transaction excluded from the
Statement of Cash Flows.
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1994
Note A - Basis of Presentation
The interim financial statements furnished 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 seasonal nature of the
business, the results of operations for the three- and nine-month
periods ended September 30, 1994, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1994. For
further information refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 1993.
Note B - Discontinued Operations
In October 1993, Questar reached an agreement with Nextel Communications
to sell Questar's entire interest in Questar Telecom for 3,875,950
shares of Nextel common stock. This sale was completed August 4, 1994,
and resulted in a pretax gain of $61,743,000 ($38,126,000 after-tax).
Since Telecom represented all of Questar's specialized mobile radio
operations, these operations were disclosed as discontinued on Questar's
financial statements. Prior financial statements were reclassified to
present the discontinued operations as a single line on both the income
statement and balance sheet. Losses subsequent to September 1993 were
deferred until the sale was recorded.
The closing price of Nextel's common stock on August 4, 1994, was
$25.625 per share. The Company's investment in Nextel Communications has
subsequently been adjusted to reflect a $21.125 per share closing price
on September 30, 1994, which resulted in recording an unrealized loss in
market value of $10,770,000, net of income tax benefits.
Note C - Acquisitions of Oil and Gas Properties
The Company completed three acquisitions in 1994 adding oil and natural
gas reserves, related equipment and facilities, and liquids extraction
plants for a total cost of $113,000,000. The acquisitions increased
natural gas and oil reserves by 119 billion cubic feet equivalent (Bcfe)
for a cost of $100,400,000 or $.84 per Mcfe. These acquisitions were
primarily funded with proceeds from an expansion of an existing
production-based credit facility.
Note D - Accounting for Postemployment Benefits
Effective January 1, 1994, the Company recorded a liability for
postemployment disability and health care benefits in compliance with
the Statement of Financial Accounting Standards No. 112. The effect on
net income was not significant since the majority of the $3,268,000
liability was offset with a regulatory asset because both Questar
Pipeline and Mountain Fuel expect to include these costs in future
rates.
Note E - Financing
During the second quarter of 1994, Mountain Fuel issued $17,000,000 of
30-year notes at an 8.12% interest rate. Mountain Fuel used proceeds
from these notes for capital expenditures and operations. In August
1994, the exploration and production (E&P) group expanded its
production-based credit facility from $65,000,000 to $135,000,000. The
proceeds of this revolving loan were used to repay a bridge loan used to
finance the E&P group's 1994 property acquisitions and also provide
financing for future capital expenditures.
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS
September 30, 1994
Exploration and Production Operations --
Celsius Energy, Universal Resources and Wexpro (E&P group) conduct the
Company's exploration and production operations. Following is a summary
of financial results and operating information.
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 12 Months Ended
September 30, September 30, September 30,
1994 1993 1994 1993 1994 1993
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $59,207 $50,476 $197,622 $159,567 $255,724 $211,883
From affiliates 20,362 13,721 58,708 39,635 77,851 59,092
Total revenues $79,569 $64,197 $256,330 $199,202 $333,575 $270,975
Operating income $14,115 $12,253 $45,283 $35,901 $58,769 $52,692
Net income 9,688 8,928 31,134 26,198 41,261 36,898
OPERATING STATISTICS
Production volumes -
Natural gas (in million
cubic feet) 10,113 8,284 28,413 23,866 36,846 31,748
Oil and natural gas liquids
(in thousands of barrels) 629 527 1,779 1,459 2,295 2,056
Production revenue
Natural gas (per thousand
cubic feet) $1.68 $1.80 $1.88 $1.84 $1.88 $1.83
Oil and natural gas liquids
(per barrel) $15.79 $16.16 $14.53 $17.45 $14.52 $17.92
Gas marketing volumes (in
thousands of decatherms) 21,141 15,765 65,939 48,006 83,076 57,260
</TABLE>
Natural gas reserve acquisitions and colder weather in the eastern
United States led to increased natural gas production in the 3-, 9-, and
12-month periods ended September 30, 1994 compared with the
corresponding 1993 periods. The Company completed three acquisitions in
1994 with a total cost of $113,000,000, adding 119 Bcfe of natural gas
and oil reserves, related equipment and facilities, and liquids
extraction plants. These properties produced about 6.1 Bcf of natural
gas and 304,000 barrels of oil and natural gas liquids in the first nine
months of 1994. Colder weather in the eastern United States caused
increased demand from the mid-continent producing area.
The E&P group received revenue of $1.88 per Mcf of gas production in the
first nine months of 1994 compared with $1.84 for the same period of
1993. While the price of natural gas increased in the first half of
1994 because of strong demand for gas throughout the eastern United
States, prices fell dramatically in the third quarter. Early in 1994,
the E&P group pre-sold part of its production at prices above current
market levels, which helped retain an average price of $1.68 per Mcf
during the third quarter of 1994. About 85% of Rocky Mountain gas
production was under contract through September 1994 at an average price
of $1.95 per Mcf.
Oil and natural gas liquids production was higher in the periods ended
September 30, 1994 due primarily to the previously mentioned
acquisitions of reserves and liquids extraction plants, and completion
of two liquids extraction plants that were not on line for part of 1993.
The increased production largely offsets lower oil and natural gas
liquid prices. Prices averaged 17% lower in the first nine months of
1994 when compared with the same period in the prior year.
Gas marketing volumes increased 37% in the first nine months of 1994
over the first nine months of 1993 because marketing activities were
expanded to include the mid-western section of the United States.
The E&P group recognized $4,214,000 of tight sands income tax credits in
the first nine months of 1994, up from $3,940,000 for the same period of
1993.
The E&P group enters into swaps, futures contracts or option agreements
to hedge its exposure to price fluctuations in connection with marketing
of its own production of natural gas and oil, and to secure a known
margin for the purchase and resale of gas in the E&P group's marketing
activities. The E&P group feels that there is a high degree of
correlation of such contracts because timing of production and the hedge
contracts are closely matched, and hedge prices are established in the
areas of the E&P group's operations. Recognized gains and losses on
hedge transactions are matched and reported during the same time period
as the related physical transactions. The E&P group's hedging
transactions do not have a material effect on its operating results or
financial position.
Natural Gas Transmission Operations --
Questar Pipeline conducts the Company's natural gas transmission,
gathering and storage operations. Following is a summary of financial
results and operating information.
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 12 Months Ended
September 30, September 30, September 30,
1994 1993 1994 1993 1994 1993
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $12,251 $9,221 $30,452 $29,067 $42,739 $45,043
From affiliates 15,697 20,096 54,665 113,450 71,489 164,849
Total revenues $27,948 $29,317 $85,117 $142,517 $114,228 $209,892
Operating income $12,729 $10,341 $38,276 $35,457 $52,070 $51,170
Net income 6,097 4,459 18,474 16,619 25,130 24,780
OPERATING STATISTICS
Natural gas volumes (in thousands
of decatherms)
Transportation
For Mountain Fuel 10,369 10,557 62,433 33,594 93,900 47,105
For other customers 49,287 37,538 119,219 117,945 150,462 163,685
Total transportation 59,656 48,095 181,652 151,539 244,362 210,790
Sales for resale to 24,337 39,235
Mountain Fuel
Total system throughput 59,656 48,095 181,652 175,876 244,362 250,025
Gathering
For Mountain Fuel 3,514 5,329 19,716 32,599 31,549 50,643
For other customers 13,577 14,260 42,484 33,659 57,161 42,860
Total gathering 17,091 19,589 62,200 66,258 88,710 93,503
Natural gas revenues (per
decatherm)
Transportation $0.28 $0.26 $0.26 $0.24 $0.25 $0.22
Sales for resale 3.36 3.24
Gathering 0.28 0.22 0.28 0.22 0.26 0.22
</TABLE>
Questar Pipeline began operating under Federal Energy Regulatory
Commission (FERC) Order 636 effective September 1, 1993. As of that
date Questar Pipeline unbundled its transportation, gathering and
storage services and eliminated its sales-for-resale function. Under the
Order 636 operating environment, firm-transportation volumes do not have
a significant impact on current operating results since 96% of the cost
of service is recovered in the reservation component of rates equally
each month using the straight fixed-variable rate design. As a result
of Order 636, no sales-for-resales revenues were collected during the 9-
and 12- month periods of 1994.
Substantially all of Questar Pipeline's transportation capacity has been
reserved by firm-transportation customers. Roughly 98% of
firm-transportation contracts have remaining terms of at least five
years. Mountain Fuel has reserved transportation capacity from Questar
Pipeline of approximately 800,000 decatherms per day, or about 85% of
total reserved daily transportation capacity.
Transportation for other customers was higher in the 3- and 9-month
periods of 1994 reflecting transportation of volumes under capacity
release arrangements.
In April 1994, the FERC approved a gathering agreement between Questar
Pipeline and Mountain Fuel retroactive to September 1, 1993, which
allocates 60% of gathering costs to the reservation component of rates
and 40% to the usage component. Gathering revenues were increased
$1,335,000 in the second quarter of 1994, to retroactively reflect the
FERC approved gathering agreement. Gathering for Mountain Fuel
represented 73% of the revenues from gathering gas in the first nine
months of 1994.
Questar Pipeline expanded firm storage service at Clay Basin from 31 to
41.8 Bcf working gas capacity in mid-May 1994, which added quarterly
revenues of about $1,500,000. After additional investment in cushion
gas, storage capacity will be increased to 46.3 Bcf by the 1995-96
heating season.
Natural Gas Distribution --
Mountain Fuel conducts the Company's natural gas distribution
operations. Following is a summary of financial results and operating
information.
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 12 Months Ended
September 30, September 30, September 30,
1994 1993 1994 1993 1994 1993
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $38,594 $40,284 $240,294 $288,042 $352,477 $394,440
From affiliates 1,272 156 3,472 1,458 4,180 3,475
Total revenues $39,866 $40,440 $243,766 $289,500 $356,657 $397,915
Operating income (loss) ($9,890) ($8,940) $12,891 $30,234 $29,166 $47,773
Net income (loss) (5,748) (6,886) 5,501 15,729 14,841 27,010
OPERATING STATISTICS
Natural gas volumes (in thousands
of decatherms)
Residential and commercial
sales 5,969 6,478 45,875 56,913 68,331 77,588
Industrial sales 1,743 1,320 5,652 4,422 7,744 6,055
Transportation for industrial
customers 12,031 10,132 35,322 38,970 49,457 53,499
Total deliveries 19,743 17,930 86,849 100,305 125,532 137,142
Natural gas revenue (per
decatherm)
Residential and commercial $4.92 $4.96 $4.59 $4.57 $4.55 $4.59
Industrial sales 2.56 3.00 2.85 3.45 2.91 3.44
Transportation for industrial
customers 0.12 0.11 0.12 0.11 0.12 0.11
Heating degree days
Actual 24 90 2,854 4,207 4,720 6,078
Normal 110 62 3,594 4,065 5,332 5,803
Actual as a percentage
of normal 22% 145% 79% 103% 89% 105%
Customer count at end of period 558,734 537,174
</TABLE>
Natural gas volumes sold to residential and commercial customers
decreased in the 3-, 9- and 12-month periods of 1994 as a result of
unseasonably warm weather and a change in the method of recording
revenues from the retail sale of natural gas. These two factors were
also largely responsible for the significantly lower earnings reported
in the first nine months of 1994. Temperatures in the first nine months
of 1994 were 21% warmer than normal compared with 3% colder than normal
weather in the same period of 1993. The effects of warmer weather and
the change in recording revenues was partially offset by a 4.0% increase
in the number of customers.
Mountain Fuel's allowed return on equity for Utah operations was reduced
from 12.1% to 11% effective January 1, 1994, by the Public Service
Commission of Utah (PSCU) in a general rate case order. Also as a
result of actions taken by the PSCU, the Company changed the way that
revenues for residential and commercial customers are recorded from an
"as-billed" to an "as-delivered" basis. This had the effect of shifting
approximately $5 million of net income from the first half of 1994 to
the fourth quarter. The PSCU has not issued an order with respect to the
issues raised by Mountain Fuel on rehearing of the 11% rate of return
and the proper handling of unbilled revenues for ratemaking purposes.
Volumes delivered to industrial customers decreased 6% in the first nine
months of 1994 compared with the same period of 1993. Natural gas usage
by several major metal and chemical customers was lower during 1994.
Tight sands income tax credits amounted to $4,224,000 in 1994 compared
with $4,411,000 in 1993. Credits attributable to prior years'
production totaled $1,742,000 in 1994 and $1,117,000 in 1993.
Discontinued Operations -
In October 1993, Questar reached an agreement with Nextel Communications
to sell Questar's entire interest in Questar Telecom for 3,875,950
shares of Nextel common stock. This sale was completed August 4, 1994,
and resulted in a pretax gain of $61,743,000 ($38,126,000 after-tax).
Since Telecom represented all of Questar's specialized mobile radio
operations, these operations were disclosed as discontinued on Questar's
financial statements. Prior financial statements were reclassified to
present the discontinued operations as a single line on both the income
statement and balance sheet. Losses subsequent to September 1993 were
deferred until the sale was recorded.
The closing price of Nextel's common stock on August 4, 1994, was
$25.625 per share. The Company's investment in Nextel Communications has
subsequently been adjusted to reflect a $21.125 per share closing price
on September 30, 1994, which resulted in recording an unrealized loss in
market value of $10,770,000, net of income tax benefits.
Consolidated Results of Operations --
Consolidated revenues were higher in the third quarter of 1994 compared
with the third quarter of 1993 due to increased exploration and
production revenues from natural gas production and marketing, oil and
natural gas liquids production, and due to increased natural gas
transmission revenues from gas storage fees and collection of the
firm-transportation reservation charges. Consolidated revenues for the
nine months ended September 30, 1994, were lower than during the same
period of 1993 primarily because reduced deliveries by natural gas
distribution more than offset the increase reported by the exploration
and production segment. Consolidated revenues increased in the 12
months ended September 30, 1994, compared with the prior year period
primarily because of increased natural gas production and prices by the
E&P group.
Natural gas purchases were lower in the 9- and 12- month periods of 1994
compared with the same periods of 1993 because of less quantities of gas
sold to residential and commercial customers by Mountain Fuel. The
increase in third quarter 1994 gas purchases reflects expanded natural
gas marketing activities.
Operating and maintenance expenses were higher in the 3-, 9- and
12-month periods primarily due to increased production volumes and costs
from the additional gas and oil properties being operated as a result of
the property acquisitions. Another cause for higher expenses was the
above-average growth in the number of distribution customers. Partially
offsetting the increase was credit received by the E&P group from the
recovery of injected gas in the Powell field and lower variable natural
gas transmission costs.
Depreciation and amortization increased in the periods ended September
30, 1994, because of increased natural gas and oil production and
increased investment in property, plant and equipment by all lines of
business. Other taxes were higher in the periods ended September 30,
1994, because of the increased production volumes.
Interest and other income was higher in the 1994 nine-month period
largely due to a working-gas carrying charge earned by Mountain Fuel as
allowed by the PSCU beginning January 1994. In the 3- and 12- month
periods of 1994, this increase was more than offset by higher losses
from FuelMaker, an unconsolidated affiliate. Debt expense increased in
the 1994 periods because of higher debt balances and short-term interest
rates.
The effective income tax rate for the nine months was 28.1% in 1994 and
28.3% in 1993. The Company recognized $8,438,000 of tight-sands gas
production tax credits in the 1994 period and $8,351,000 in the 1993
period. The Company expects to recognize about $10,000,000 of tax
credits in 1994 compared with $11,026,000 in 1993.
Effective January 1, 1994, the Company recorded a liability for
postemployment disability and health care benefits in compliance with
the Statement of Financial Accounting Standards No. 112. The effect on
net income was not significant since the majority of the $3,268,000
liability was offset with a regulatory asset because both Questar
Pipeline and Mountain Fuel expect to include these costs in future
rates.
In the first half of 1994, the Company through an affiliate, converted
$6,758,000 of loans receivable from FuelMaker to common equity resulting
in an increase in ownership to 40% from 33%. FuelMaker reported losses
of $1,725,000 in for the nine months ended September 30, 1994 and
$1,067,000 for the same period in 1993.
Liquidity and Capital Resources --
Operating Activities:
Net cash provided from operating activities was $146,914,000 for the
first nine months of 1994 compared with $149,031,000 for the same period
of 1993. The decrease was primarily due to lower income from continuing
operations and lower sources of cash from changes in the purchased gas
cost balancing account.
Investing Activities:
Capital expenditures of $222,873,000 in the first nine months of 1994,
were $134,285,000 higher than for the same period a year ago due largely
to E&P property acquisitions. A comparison of capital expenditures for
the first nine months of 1994 and 1993 plus an estimate for the calendar
year 1994 are as follows:
<TABLE>
<CAPTION>
Estimated
Actual 12 months
Nine months Ended Ended
September 30, Dec. 31,
1994 1993 1994
(In Thousands)
<S> <C> <C> <C>
Exploration and production $136,414 $29,305 $160,000
Natural gas transmission 42,065 25,994 57,000
Natural gas distribution 33,072 25,944 51,000
Other operations 11,322 7,345 15,000
$222,873 $88,588 $283,000
</TABLE>
Capital expenditures in 1994 included purchases of oil and gas reserves
and related properties by the E&P group as follows:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
Purchase of properties from Petroleum Inc. $22,000
Purchase of Amax Oil and Gas Northern Division
properties from Union Pacific Resources Corporation 74,500
Purchase of properties from BCO Inc. 13,000
$109,500
</TABLE>
Financing Activities:
The E&P group increased its borrowing by $51,000,000 to $95,000,000,
mainly to fund 1994 property acquisitions. The proceeds were supplied
from the existing production-based credit facility, which was expanded
to $135,000,000. That borrowing arrangement was structured with a
capacity of $100,000,000 long-term and $35,000,000 short-term.
Mountain Fuel also borrowed $17,000,000 of 30-year notes with an
interest rate of 8.12% in 1994.
Questar plans to finance the remaining 1994 capital expenditures with
cash flow from operations, short-term debt, and borrowings under the
expanded production-based credit facility. In addition, Questar may
issue common stock, or sell or monetize a portion of its investment in
Nextel common stock to fund capital expenditures.
Short-term borrowings at September 30, consisted of the following:
<TABLE>
<CAPTION>
1994 1993
(In Thousands)
<S> <C> <C>
Commercial paper $83,900 $36,000
Short-term bank loans 5,000 8,000
$88,900 $44,000
</TABLE>
The Company had the capacity at September 30, 1994, to borrow an
additional $51,100,000 under commercial paper agreements. Its
affiliates had the capacity to borrow an additional $30,700,000
through short-term credit lines with banks.
<PAGE>
PART II
OTHER INFORMATION
Item 5. Other Information.
During October of 1993, onsite remediation activities began
on the Wasatch Chemical property owned by Entrada Industries,
Inc. (Entrada) in Salt Lake City, Utah. Entrada is a wholly-
owned subsidiary of Questar Corporation (Questar or the Company).
The Wasatch Chemical property was the location of chemical
operations conducted by Entrada's Wasatch Chemical division,
which ceased operation in 1978. A portion of the property is
located on the national priorities list, commonly referred to as
the "Superfund" list. The remediation activities involve an in
situ vitrification process that has been approved by local and
federal agencies. The Company anticipates that the vitrification
procedure will be completed by year-end 1995.
Entrada has recorded all costs spent on the Wasatch Chemical
problem and has accounted for all settlement proceeds, accruals,
and insurance claims. It has received cash settlements from
other parties, which together with accruals and insurance
receivables, should be sufficient for future clean-up costs.
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 CORPORATION
(Registrant)
November 10, 1994 /s/W. F. Edwards
(Date) W. F. Edwards
Senior Vice President and Chief
Financial Officer (Duly authorized
officer and principal financial
officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summarized financial information extracted from the
Questar Corporation Statements of Income and Balance Sheet for the period
ended September 30, 1994, and is qualified in its entirety by reference to
such unaudited financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 92,212
<ALLOWANCES> 0
<INVENTORY> 33,171
<CURRENT-ASSETS> 137,484
<PP&E> 2,218,843
<DEPRECIATION> 939,725
<TOTAL-ASSETS> 1,548,421
<CURRENT-LIABILITIES> 210,482
<BONDS> 439,680
<COMMON> 308,901
7,524
0
<OTHER-SE> 347,133
<TOTAL-LIABILITY-AND-EQUITY> 1,548,421
<SALES> 0
<TOTAL-REVENUES> 470,899
<CGS> 0
<TOTAL-COSTS> 271,186
<OTHER-EXPENSES> 100,311
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,229
<INCOME-PRETAX> 75,213
<INCOME-TAX> 21,159
<INCOME-CONTINUING> 54,054
<DISCONTINUED> 38,126
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,180
<EPS-PRIMARY> 2.28
<EPS-DILUTED> 2.28
</TABLE>
