Natural gas-focused energy company Questar Corporation (STR) reported adjusted first quarter 2014 earnings of 48 cents per share, in line with the Zacks Consensus Estimate.
However, the bottom line increased over 17% from the prior-year level of 41 cents. Improvement in the company’s Wexpro and Questar Gas segments aided the results, supported by a decline in operating expenses.
Questar reported first quarter revenues of $456.9 million, down 4.2% from the year-ago quarter. The top line also failed to meet the Zacks Consensus Estimate of $547.0 million. Lower sales volume from the Questar Gas and Questar Pipeline segments prompted the miss.
Questar Gas: The segment generated $396.3 million in revenues, down 5.3% from the prior year quarter, owing to a decrease in natural gas sales. However, segment operating income of $69.8 million increased from $64.3 million reported in the first quarter of 2013. Questar’s cost control measures led to the improvement.
As of Mar 31, 2014, Questar Gas served 952,500 customers, up 1.6% from the year-ago quarter.
Wexpro: Segment revenues increased 19.4% year over year to $12.3 million in the quarter. Segmental income from continuing operations also increased to $48.5 million from $39.8 million in the prior-year quarter. The outperformance can be attributed to the increase in production volume and higher price realizations.
Quarterly production of natural gas increased 20.1% to 18.5 billion cubic feet (Bcf) from 15.4 Bcf.
Questar Pipeline: The segment reported revenues of $48.0 million compared with $48.3 million in the comparable quarter last year. Income from continuing operations came in at $30.1 million against $30.2 million in first quarter 2013. A decline in transportation volumes and a drop in NGL sales and realization can be blamed for the decrease. It was, however, partially offset by higher transportation revenues.
Total natural gas transportation volumes were $215.9 million decatherms, down from the prior-year level of 233.7 million decatherms.
The general and administrative expenses for the quarter decreased 6.8% from the prior-year period to $31.5 million, while depreciation, depletion and amortization costs increased 14.0% to $55.3 million. Total operating expense – at $308.6 million – decreased 10.7% from the first quarter of 2013 primarily due to a significant drop in cost of sales.
As of Mar 31, 2014, Questar had long-term debt (including current portion) of $1,285.6 million, with a debt-to-capitalization ratio of 50.6%.
For 2014, Questar reiterated earnings guidance in the range of $1.18 to $1.28 per share on the back of a robust first quarter.
Zacks Rank & Stocks to Consider
Questar currently holds a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked players from the industry such as AGL Resources Inc. (GAS), Delta Natural Gas Company, Inc. (DGAS) and New Jersey Resources Corp. (NJR). All these firms currently sport a Zacks Rank #1 (Strong Buy).