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, 1995
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, 1995
Common Stock, without par value 40,630,383 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,
1995 1994 1995 1994 1995 1994
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C>
REVENUES $111,922 $110,431 $466,423 $469,137 $667,604 $652,134
OPERATING EXPENSES
Natural gas purchases 23,791 15,339 143,938 139,576 216,890 204,394
Operating and maintenance 43,246 44,210 135,451 129,848 179,683 171,953
Depreciation and amortization 22,201 23,531 71,434 69,655 94,816 94,148
Other taxes 6,551 9,656 24,151 30,656 29,510 38,422
TOTAL OPERATING EXPENSES 95,789 92,736 374,974 369,735 520,899 508,917
OPERATING INCOME 16,133 17,695 91,449 99,402 146,705 143,217
INTEREST AND OTHER INCOME 8,573 1,037 14,610 4,040 15,527 4,554
WRITE-DOWN OF INVESTMENT IN
NEXTEL COMMUNICATIONS (61,743)
DEBT EXPENSE (10,349) (9,869) (32,431) (28,229) (44,013) (36,928)
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 14,357 8,863 73,628 75,213 56,476 110,843
INCOME TAXES (CREDITS) 2,417 (170) 20,053 21,159 7,538 31,345
INCOME FROM CONTINUING
OPERATIONS 11,940 9,033 53,575 54,054 48,938 79,498
GAIN FROM SALE OF
DISCONTINUED OPERATIONS 38,126 38,126 38,126
NET INCOME $11,940 $47,159 $53,575 $92,180 $48,938 $117,624
EARNINGS PER COMMON SHARE
Income from continuing operations $0.29 $0.22 $1.31 $1.33 $1.19 $1.97
Gain from sale of discontinued
operations 0.95 0.95 0.95
Net income $0.29 $1.17 $1.31 $2.28 $1.19 $2.92
Dividends per common share $0.295 $0.285 $0.865 $0.845 $1.15 $1.12
Average common shares outstanding 40,588 40,328 40,522 40,263 40,600 40,226
</TABLE>
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994 1994
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments $2,702 $7,549
Accounts receivable 72,270 $85,565 143,081
Federal income taxes receivable 3,560 6,647
Inventories 31,610 33,171 30,098
Other current assets 13,549 12,101 12,397
Total current assets 123,691 137,484 193,125
Property, plant and equipment 2,308,645 2,218,843 2,263,170
Less allowances for depreciation
and amortization 1,014,313 939,725 955,536
Net property, plant and equipment 1,294,332 1,279,118 1,307,634
Securities available for resale,
approximates fair value 60,344 81,879 37,578
Other assets 47,851 49,940 47,238
$1,526,218 $1,548,421 $1,585,575
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Checks outstanding in excess
of cash balances $6,540
Short-term loans $41,200 88,900 $94,900
Accounts payable and
accrued expenses 93,483 108,780 108,243
Purchased-gas adjustments 16,537 6,262 17,071
Total current liabilities 151,220 210,482 220,214
Long-term debt 450,695 439,680 494,684
Other liabilities and
deferred credits 46,734 50,499 46,223
Deferred income taxes and
investment tax credits 175,470 184,202 164,541
Redeemable cumulative
preferred stock 6,211 7,524 6,324
Common shareholders' equity
Common stock 281,640 274,730 276,555
Retained earnings 420,053 417,724 401,577
Note receivable from ESOP (22,350) (25,650) (24,543)
Unrealized gain (loss)
on securities available
for resale, net of income taxes 16,545 (10,770)
Total common shareholders'
equity 695,888 656,034 653,589
$1,526,218 $1,548,421 $1,585,575
</TABLE>
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
9 Months Ended
September 30,
1995 1994
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $53,575 $92,180
Depreciation and amortization 75,077 72,940
Deferred income taxes and
investment tax credits 7,217 5,887
Gain from sale of securities,
net of income taxes (2,294)
Gain from sale of discontinued operations (38,126)
133,575 132,881
Change in operating assets and liabilities 42,273 14,033
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 175,848 146,914
INVESTING ACTIVITIES
Capital expenditures
Purchase of property, plant and equipment (65,845) (213,963)
Investment in discontinued operations (8,080)
Other investments (2,520) (830)
Total capital expenditures (68,365) (222,873)
Proceeds from disposition of property,
plant and equipment 4,108 11,806
Proceeds from the sale of securities 9,185
CASH USED IN INVESTING ACTIVITIES (55,072) (211,067)
FINANCING ACTIVITIES
Issuance of common stock 5,600 5,967
Common stock repurchased (515) (344)
Redemption of preferred stock (113) (1)
Issuance of long-term debt 2,000 93,000
Repayment of long-term debt (45,989) (25,033)
Increase (decrease) in short-term loans (53,700) 10,600
Checks outstanding in excess of
cash balances 6,540
Payment of dividends (35,438) (34,485)
Other 2,532 1,544
CASH (USED IN) PROVIDED FROM
FINANCING ACTIVITIES (125,623) 57,788
DECREASE IN CASH AND
SHORT-TERM INVESTMENTS ($4,847) ($6,365)
</TABLE>
The 1994 sale of Questar Telecom to Nextel Communications in exchange
for shares of Nextel Communications 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, 1995
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, 1995, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1995. 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, 1994.
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS
September 30, 1995
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,
1995 1994 1995 1994 1995 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $62,523 $59,207 $187,954 $197,622 $244,896 $255,724
From affiliates 14,126 20,362 45,207 58,708 63,848 77,851
Total revenues $76,649 $79,569 $233,161 $256,330 $308,744 $333,575
Operating income $10,091 $14,115 $32,638 $45,283 $46,649 $58,769
Net income 8,352 9,688 25,100 31,134 34,182 41,261
OPERATING STATISTICS
Production volumes -
Natural gas (in million
cubic feet) 7,029 10,113 24,738 28,413 33,984 36,846
Oil and natural gas liquids
(in thousands of barrels) 590 629 1,850 1,779 2,513 2,295
Production revenue
Natural gas (per thousand
cubic feet) $1.21 $1.68 $1.33 $1.88 $1.37 $1.88
Oil and natural gas liquids
(per barrel) $15.78 $15.79 $15.95 $14.53 $15.80 $14.52
Gas marketing volumes (in
thousands of decatherms) 32,383 21,141 80,962 65,939 103,964 83,076
</TABLE>
Revenues were lower in the 1995 periods when compared with the same
periods in 1994 primarily because of lower selling prices for natural
gas. Revenues from the production and sales of natural gas were about
$20.6 million lower in the nine-month period of 1995 as compared with
the same period in 1994. In response to the low selling prices, Celsius
Energy, which operates in the Rocky Mountain region, has shut in
production amounting to 20 to 25 million cubic feet per day. This
represents about 50% of Celsius' gas production and is the primary
reason for the lower gas production volumes in the 1995 periods. Most
of Celsius' remaining production qualifies for tight-sands income tax
credits. An abundance of cheap hydroelectric power and availability of
Canadian gas have reduced demand causing gas prices to drop.
Gas marketing activities have picked up, especially during the third
quarter. The E&P group is purchasing low-cost gas on the open market
and delivering it to fulfill fixed-price contracts. Gas marketing
volumes were higher in the periods ended September 30, 1995, when
compared with the same periods of 1994.
Revenues from the sale of oil and natural gas liquids were higher in the
9-and 12-month periods of 1995 presented due to higher selling prices
and increased production volumes. However, revenues for the third
quarter of 1995 were lower because of a 6% decrease in the volumes of
oil and natural gas liquids produced.
For the 1995 - 1996 heating season, between 70 and 80% of Rocky Mountain
gas production is covered under price-hedging contracts. In the
Mid-Continent production region, 15 to 30% of gas production is under
hedge contracts. In addition, the E&P group has contracts in place
through the end of 1995 that hedge the price of 1,300 bbl of oil
production per day at an average price of $17.31 per bbl.
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,
1995 1994 1995 1994 1995 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $10,118 $12,251 $32,262 $30,452 $42,222 $42,739
From affiliates 18,361 15,697 55,617 54,665 76,148 71,489
Total revenues $28,479 $27,948 $87,879 $85,117 $118,370 $114,228
Operating income $12,705 $12,729 $38,441 $38,276 $53,043 $52,070
Net income 5,889 6,097 17,974 18,474 25,329 25,130
OPERATING STATISTICS
Natural gas volumes (in thousands
of decatherms)
Transportation
For unaffiliated customers 36,580 39,225 114,127 96,893 146,484 120,115
For Mountain Fuel 10,888 9,371 55,640 52,583 78,998 84,050
For other affiliated customers 10,941 11,060 27,300 32,176 40,217 40,197
Total transportation 58,409 59,656 197,067 181,652 265,699 244,362
Gathering
For unaffiliated customers 10,069 10,639 29,816 30,725 38,891 40,184
For Mountain Fuel 5,083 3,022 21,943 21,224 32,817 33,057
For other affiliated customers 1,173 3,430 4,268 10,251 6,102 15,469
Total gathering 16,325 17,091 56,027 62,200 77,810 88,710
Natural gas revenues (per decatherm)
Transportation $0.26 $0.28 $0.24 $0.26 $0.24 $0.25
Gathering 0.31 0.28 0.29 0.28 0.29 0.26
</TABLE>
Revenues reported in the 1995 periods were higher than the amounts
reported in the 1994 periods primarily because of increased storage
activities. Storage revenues improved as a result of increased firm
commitments at Clay Basin following expansion of the underground storage
reservoir, which began with May 1994 billings. The latest increase in
service started in May 1995 and adds about $208,000 to revenues each
month. Storage services for the 46.3 billion cubic feet of working gas
capacity at Clay Basin are fully subscribed.
Transportation revenues from customers paying interruptible rates were
lower in 1995 due to decreasing volumes. Questar Pipeline's
interruptible transportation service competes with a higher quality
service offered as released capacity from firm transportation customers.
The amount of gas volumes gathered decreased in the 1995 periods
primarily in reaction to unusually low gas selling prices at the
well-head. The low prices reduced the incentive for producers to sell
gas or develop production facilities. In addition, gathering revenues in
1994 include a one-time $1,335,000 upward adjustment from a gathering
contract that was approved by the Federal Energy Regulatory Commission
(FERC).
Tenneco Gas, a subsidiary of Tenneco, has entered into an agreement to
sell its 50 percent interest in the Kern River gas pipeline for $226
million to Questar Pipeline. The company hopes to close the transaction
by year-end 1995. Questar Pipeline currently is responding to the
Federal Trade Commission's request for more information on the
transaction.
Questar Pipeline filed a general rate case with the FERC on July 31,
1995, seeking a $23.3 million increase in revenues. The request for
additional revenues is intended to recover the costs of enhanced service
to customers, meet regulatory requirements and collect the costs
associated with employee postretirement benefits. Questar Pipeline
asked for a 14.5% return on equity. Included in the filing are requests
to recover $2.8 million of transition costs associated with FERC Order
No. 636, $1.6 million for employee postretirement and long-term
disability costs and $1 million of increased labor costs. By order
issued August 31, 1995, Questar Pipeline's rate filing was accepted with
an effective date of February 1, 1996, subject to refund.
Questar Pipeline concurrently filed a plan with the FERC to transfer
100% or about $60 million of gathering assets, net of accumulated
depreciation, to Questar Gas Management Company, a wholly-owned
subsidiary. Questar Pipeline requested an effective date of January 1,
1996, for the transaction.
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,
1995 1994 1995 1994 1995 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $38,842 $38,594 $244,649 $240,294 $378,595 $352,477
From affiliates 989 1,272 3,293 3,472 3,841 4,180
Total revenues $39,831 $39,866 $247,942 $243,766 $382,436 $356,657
Operating income (loss) ($7,494) ($9,890) $17,797 $12,891 $44,227 $29,166
Net income (loss) (4,925) (5,748) 8,288 5,501 26,139 14,841
OPERATING STATISTICS
Natural gas volumes (in thousands
of decatherms)
Residential and commercial sales 6,826 5,969 50,339 45,875 78,697 68,331
Industrial sales 1,736 1,743 6,989 5,652 10,219 7,744
Transportation for industrial
customers 13,585 12,031 45,146 35,322 61,206 49,457
Total deliveries 22,147 19,743 102,474 86,849 150,122 125,532
Natural gas revenue (per decatherm)
Residential and commercial sales $4.57 $4.92 $4.25 $4.59 $4.20 $4.55
Industrial sales 2.27 2.56 2.48 2.85 2.50 2.91
Transportation for industrial
customers 0.10 0.12 0.10 0.12 0.10 0.12
Heating degree days
Actual 77 24 3,189 2,854 5,625 4,720
Normal 110 110 3,594 3,594 5,801 5,332
Warmer than normal 30% 78% 11% 21% 3% 11%
Number of customers at end of
period 579,352 558,734
</TABLE>
Revenues were higher in the 9- and 12-month periods of 1995 when
compared with the 1994 periods because of colder temperatures, a 3.7%
increase in the number of customers, and increased sales and
transportation to industrial customers. The colder temperatures,
although warmer than normal for the 1995 periods ended September 30,
1995, caused an increase in the volumes of gas sold to residential and
commercial customers, primarily for space heating purposes. Revenues
were flat in a comparison of third quarter 1995 with the third quarter
of 1994 as lower gas costs in rates offset an 11% increase in the
volumes sold.
Volumes of gas delivered to industrial customers increased 27% in the
first nine months of 1995 compared with the same period of 1994
resulting in $1,717,000 more revenues. Natural gas demand was higher
for customers in the chemical, metals and electric generation
industries. Margins from gas delivered to industrial customers are
substantially lower than from gas sold to residential and commercial
customers.
On August 11, 1995, the Public Service Commission of Utah approved a
settlement of Mountain Fuel's general rate case. Mountain Fuel received
a $3.7 million increase in revenues. The settlement, which became
effective September 1, allows the Company to implement a weather
normalization adjustment, provides about $2 million in additional
revenues through a new-premise fee and adds about $1.7 million from
sharing capacity-release revenues. The settlement does not specify an
authorized return on equity, but Mountain Fuel's allowed return on rate
base increased from 10.08% to between 10.22% and 10.34%. These rate
changes did not have a material effect on year-to-date 1995 revenues.
Mountain Fuel has closed four regional offices and reduced functions at
six other offices in an effort to consolidate and restructure
operations. In addition, the Company's offer of early retirement was
accepted by 109 employees effective April 30, 1995. The labor savings
are expected to average $400,000 per month. The Company predicts that
its investment in customer information system technology will continue
to enable it to increase efficiency in serving customers.
Consolidated Results of Operations --
Consolidated revenues for the third quarter of 1995 were 1% higher than
consolidated revenues reported for the same period in 1994 primarily as
a result of increased gas marketing activities. Consolidated revenues
for the nine-month period of 1995 were lower when compared with the same
period of 1994 primarily because of lower gas selling prices and a
decrease in quantities of gas produced. Consolidated revenues for the
twelve months ended September 30, 1995 were 2% higher than the revenues
reported in the same period of the prior year primarily because of
increased natural gas distribution sales and higher oil selling prices
and production.
Natural gas purchases were higher in the 1995 periods because the effect
of an increase in quantities purchased more than offset lower gas prices
at the wellhead.
Operating and maintenance expense was 2% lower in the third quarter of
1995 when compared to the same period of 1994 primarily due to lower
labor costs resulting from an early retirement program. Operating and
maintenance expenses were 4% higher in both 9- and 12-month periods of
1995 when compared with the same periods in the prior year resulting
from a gain in the number of properties owned by the E&P group through
its 1994 acquisition and drilling programs, increased labor and
volume-related costs from the natural gas transmission segment, and
higher costs associated with serving a growing number of natural gas
distribution customers.
Lower production of gas and oil in the third quarter of 1995 resulted in
lower depreciation expense when compared with the third quarter of 1994.
Depreciation and amortization increased in the 9- and 12- month periods
ended September 30, 1995, because of increased investment in property,
plant and equipment by all lines of business. Other taxes were lower in
the 1995 periods compared with the1994 periods because of lower revenues
from the production of natural gas.
Interest and other income was higher in the 1995 periods as a result of
several transactions. Cash received for buy-out of gas-sales agreements
added about $4.3 million of pretax earnings. The settlements improved
earnings equally in the second and third quarters of 1995. Sales of
investments in technology securities, primarily Nextel Communications,
improved 1995 pretax earnings by $4.1 million mostly in the third
quarter of 1995. In the nine-month period of 1994, FuelMaker, an
unconsolidated affiliated company of Questar, reported a $1.7 million
loss from operations. Interest and other income for the 12 months ended
September 30, 1995 includes a $5.6 million pretax increase in earnings
from a one-time adjustment in Mountain Fuel's purchased gas costs.
In the third quarter of 1994, Questar Corporation sold Questar Telecom
to Nextel Communications in exchange for 3.9 million shares of Nextel
common stock and reported a $38,126,000 after-tax gain from the sale.
At year-end 1994, the Company wrote down its investment in Nextel
Communications by $61,743,000. This amounted to $38,126,000, or $.95 per
share, after income taxes.
Debt expense was higher in the 3-, 9- and 12-month periods of 1995
compared with the 1994 periods because of higher interest rates on
variable rate debt.
The effective income tax rate for the first nine months was 27.2% in
1995 and 28.1% in 1994. The effective income tax rate was lower than
the statutory income tax rate primarily due to income tax credits. The
Company recognized $6,836,000 of tight-sands income tax credits in the
1995 period and $8,438,000 in the 1994 period.
Liquidity and Capital Resources --
Operating Activities:
Net cash provided from operating activities was $175,848,000 for the
first nine months of 1995 compared with $146,914,000 for the same period
of 1994. The increase was due to higher sources of cash from changes in
working capital accounts, primarily from the collection of accounts
receivable and lower natural gas purchase prices.
Investing Activities:
Capital expenditures of $68,365,000 in the first nine months of 1995, were
$154,508,000 lower than for the same period a year ago due largely to E&P
reserve and property acquisitions amounting to $109,500,000 in 1994. A
comparison of capital expenditures for the first nine months of 1995 and
1994 plus estimates for calendar years 1995 and 1996 is below. The 1995
capital expenditure estimate of $232 million does not include the $226
million purchase of an interest in the Kern River pipeline. However, the
forecast includes a $72 million exception fund that can be applied to either
oil and gas reserve acquisitions or the Kern River pipeline acquisition. If
the purchase transaction for the Kern River pipeline closes in 1995 and
there are no oil and gas reserve acquisitions, 1995 capital expenditures
could reach the $390 million range.
<TABLE>
<CAPTION>
Actual Estimate
Nine Months Ended 12 Months Ended
September 30, December 31,
1995 1994 1995 1996
(In Thousands)
<S> <C> <C> <C> <C>
Exploration and production $16,974 $136,414 $69,000 $96,000
Natural gas transmission 17,624 42,065 30,000 41,000
Natural gas distribution 30,505 33,072 50,000 55,000
Other operations 3,262 11,322 83,000 43,000
$68,365 $222,873 $232,000 $235,000
</TABLE>
Financing Activities:
Financing activities in 1995 have largely been focused on repayment of
debt from the proceeds of cash flows from operations. Short-term debt
decreased $53,700,000 and long-term debt decreased $43,989,000 in the
first nine months of 1995. The $67,967,000 increase in long-term debt
and the $10,600,000 increase in short-term in 1994 were primarily the
result of capital spending.
Short-term borrowings at September 30, consisted of the following:
1995 1994
(In Thousands)
Commercial paper $31,200 $83,900
Short-term bank loans 10,000 5,000
$41,200 $88,900
Questar Corporation had borrowed $10,000,000 on an uncommitted bank line
at September 30, 1995. Inorder to meet seasonal borrowing demands,
commercial paper capacity will increase from $100,000,000 to
$135,000,000 on October 1, 1995. Questar and its affiliates had the
capacity to borrow an additional $64,700,000 through credit lines with
banks at September 30. In October 1995, Mountain Fuel redeemed the
remaining balance of $1.2 million of its 8.625% preferred stock.
Questar plans to finance 1995 capital expenditures, excluding the Kern
River pipeline acquisition, through cash flow from operations, receipts
from the sale of Nextel shares and proceeds from its dividend
reinvestment plan. The Company plans to fund Questar Pipeline's
purchase of a 50% interest in the Kern River pipeline by borrowing about
70% of the purchase price through debt offerings at the Questar Pipeline
level, which includes about $45 million of tax deductible preferred
stock, with the remaining 30% to be provided from an equity offering at
the Questar Corporation level. Questar Pipeline has received a
commitment from a bank to borrow up to $240 million for a term of 18
months to finance this purchase until permanent financing can be put in
place.
As a result of the Kern River transaction, Moody's and Standard's & Poor
plan to reevaluate Questar Pipeline's and Mountain Fuel's unsecured debt
ratings, and Questar Corporation's commercial paper rating.
PART II
OTHER INFORMATION
Item 5. Other Information.
As previously reported, Questar Pipeline Company (Questar Pipeline), a
wholly owned subsidiary of Questar Corporation, signed a Stock Purchase
Agreement, on September 8, 1995, to purchase Kern River Corporation, which is
a wholly owned subsidiary of Tennessee Gas Pipeline Company (Tennessee Gas)
and which is one of two equal partners in the Kern River Gas Transmission
Company (Kern River). Under the terms of the agreement, Questar Pipeline is
obligated to pay a purchase price of $226.2 million.
Williams Western Pipeline Company (Williams), the entity within The
Williams Company, Inc., that is the second partner in Kern River, did not
exercise its right to match the offer made by Questar Pipeline. Questar
Pipeline and Williams have reached an agreement to operate Kern River through
a jointly owned operating company. Such agreement will not become effective
unless Questar Pipeline's Kern River acquisition receives the necessary
clearance under the Hart-Scott-Rodino Antitrust Improvements Act. Both
Questar Pipeline and Tennessee Gas are responding to requests from the Federal
Trade Commission for additional information. Questar Pipeline hopes to close
the transaction by December 31, 1995.
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, 1995 /s/ R. D. Cash
(Date) R. D. Cash
Chairman of the Board,
President and Chief
Executive Officer
November 10, 1995 /s/ W. F. Edwards
(Date) W. F. Edwards
Senior Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following schedule contains summarized financial information extracted
from the Questar Corporation Statements of Income and Balance Sheet for the
nine-month period ended September 30, 1995, and is qualified in its entirety
by reference to such unaudited financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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0
6,211
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</TABLE>
