Questar Lags Earnings, Tops Revenue

Zacks

Natural gas-focused energy company Questar Corporation (STR) reported weak first-quarter 2013 earnings.

Earnings per share came in at 41 cents, down 2.4% from the profit of 42 cents earned in the prior-year quarter, mainly due to higher depreciation and administrative expenses. The result also missed the Zacks Consensus Estimate by 2 cents.

Total revenue was $476.9 million, beating the Zacks Consensus Estimate of $470.0 million. Revenues also increased 12.0% from the year-ago level of $425.7 million due to increase in demand for natural gas as well as strong performances by Questar Gas and Wexpro segments.   

Segment Analysis

Questar Gas: The segment generated $418.3 million in revenues, up 14.3% from the prior year. This increase was favored by the growing demand for natural gas due to a dip in the temperature. The segment registered an income of $64.3 million, against an income of $61.8 million in the first quarter of 2012.

As of Mar 31, 2013, Questar Gas served 937,400 customers, representing a hike of 14,128 or 1.5% year over year as compared to a 1.0% hike in the previous year.

Wexpro: Consolidated sales increased 12.0% year over year to $10.3 million in the quarter. Segmental income from continuing operations also increased to $39.8 million from $37.2 million in the prior-year quarter, attributable to a higher average investment base.

Quarterly production of natural gas edged up 2.7% to 15.4 billion cubic feet (Bcf), up from 15.0 Bcf in the first quarter of 2012.

Questar Pipeline: Consolidated revenues of $48.3 million decreased by 4.4% from the $50.5 million in the comparable quarter last year. Income from continuing operations was $30.2 million, reflecting a drop of 5.0% year over year. The quarter’s performance was impacted by lesser revenues in natural gas liquids along with a rise in depreciation and amortization expenses.

The total natural gas transportation volumes in the quarter was $233.7 million decatherms, up from the prior-year level of 227.2 million decatherms.

Expenses

The general and administrative expenses for this quarter have increased by 16.2% to $33.8 million as compared to the year-ago period.

The depreciation, depletion and amortization expenses increased by 9.8% to $48.5 million in this quarter as compared to first-quarter 2012.  

Financials

As of Mar 31, 2013, Questar had long-term debt (including current portion) of $1,140.4 million, with a debt-to-capitalization ratio of 51.3%.

Guidance

For 2013, Questar has sustained its previous guidance for earnings in the range of $1.12 to $1.20 per share. Questar expects that the approval of Wexpro II by the regulators of Utah and the three agreements signed by Questar Fueling – an affiliate of Questar – for the production of compressed natural gas (:CNG) will generate significant cash flows for its shareholders in the future.

Questar estimated that its total investment of capital will be roughly $450 million in 2013.  

Stocks to Consider

Questar currently carries a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at other energy firms like EPL Oil & Gas Inc. (EPL), Tesco Corporation (TESO) and SemGroup Corporation (SEMG) as attractive investments. All these firms – sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on STR

Read the Full Research Report on TESO

Read the Full Research Report on SEMG

Read the Full Research Report on EPL

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