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INVESTOR PRESENTATION – Questar Corp

Questar Corp · Apr 6, 2015 · 84 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. INVESTOR PRESENTATION – Questar Corp – slide 1
    Investor Presentation April 2015 Making lives better by developing and delivering essential energy
  2. INVESTOR PRESENTATION – Questar Corp – slide 2
    CORPORATE DATA ANALYST CONTACT: Ticker symbol and stock exchange: STR-NYSE At April 1, 2015 Tony Ivins Vice President, Investor Relations Average daily trading volume (3 mos.): 1,013,000 shares & Corporate Treasurer Closing Price: 23.92…
  3. INVESTOR PRESENTATION – Questar Corp – slide 3
    Introduction and Overview Making lives better by developing and delivering essential energy
  4. INVESTOR PRESENTATION – Questar Corp – slide 4
    Western United States IDAHO Primarily Utah, WYOMING Wyoming and Idaho UTAH Wexpro develops low-cost natural gas for Questar Gas utility customers under the 1981 Wexpro Agreement Questar Pipeline transports and stores natural gas in…
  5. INVESTOR PRESENTATION – Questar Corp – slide 5
    Questar Corporation 2014 Earnings 226.5MM** 18.5% ROE / 6 billion enterprise value Wexpro 122.8 MM 54% QPC 60.6 MM Wexpro QGC 27% 55.2 MM 24% Questar Wexpro Questar Gas QPC Pipeline Earnings Per Share - 9.85% - 17.4% ROE -…
  6. INVESTOR PRESENTATION – Questar Corp – slide 6
    Questar Corporation (Consolidated) Achieved 1. Generate net income of 222MM // Adjusted net income was 226.4MM Questar Gas Achieved 1. Generate net income of 47MM // Adjusted net income was 55.1MM 2. Hold unit O&M expense to 149 per…
  7. INVESTOR PRESENTATION – Questar Corp – slide 7
    Public Utilities Fortnightly named Questar Corporation the 1 energy company in America for 2014 based on 4-year averages and rankings for: Profit margin (16.76%, 4); Dividend yield (3.17%, 49); Free cash flow (7.53%, 5); Return on…
  8. INVESTOR PRESENTATION – Questar Corp – slide 8
    Maintain and grow our vertically integrated business model Overall Strategy Develop and deliver essential energy to customers in the Western U.S. Manage commodity price exposure and earnings volatility Meet customers energy needs…
  9. INVESTOR PRESENTATION – Questar Corp – slide 9
    Craig Wagstaff President Making lives better by developing and delivering essential energy
  10. INVESTOR PRESENTATION – Questar Corp – slide 10
    Key Facts & Statistics Cities served 277 Customers 12/31/2014 962,225 Customer growth in 2014: 16,254 1.7% Deliveries (TTM 12/31/2014) 184 MMdth System miles (12/31/2014) 28,239 miles Rate base (12/31/2014) 1,121 MM Allowed Utah ROE (beg.…
  11. INVESTOR PRESENTATION – Questar Corp – slide 11
    Cross- functional corporate synergies Add Provide safe shareholder reliable service value Succession Questar Community planning Gas partner Execute Low cost regulatory provider strategy Top-ranked customer…
  12. INVESTOR PRESENTATION – Questar Corp – slide 12
    Meet customers natural gas energy needs Provide safe, reliable and high-value service Maintain gas prices among the lowest in the nation Maintain safety-first culture Continue and accelerate replacement of older infrastructure at…
  13. INVESTOR PRESENTATION – Questar Corp – slide 13
    25 20 15 US 12.95 UTAH 10.09 10 5 0 FL LA WV TX TN IL IA IN WI WY WA ID AZ SC VT AL RI NH DE NC CT VA KY PA KS AR SD DC NY US…
  14. INVESTOR PRESENTATION – Questar Corp – slide 14
    18 16 14 US 12 10 UTAH 8 6 4 2 National Avg UT Avg 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 per Mcf, 1990 through…
  15. INVESTOR PRESENTATION – Questar Corp – slide 15
    Key performance metrics: Return on equity Earns at or near allowed ROE Efficiency Among top 5% in lowest O&M/customer Customer rates Among the very lowest in the nation Customer growth 1.5% to 2.5% growth forecast Market penetration…
  16. INVESTOR PRESENTATION – Questar Corp – slide 16
    Key regulatory attributes: Return on equity 9.85% allowed ROE Revenue decoupling Protects profit margin / customer Conservation program Encourages energy efficiency Infrastructure upgrades Tracker avoids recovery lag Weather…
  17. INVESTOR PRESENTATION – Questar Corp – slide 17
    1980s: All cast iron pipe replaced 1990s: All bare steel pipe replaced 2000s: Focusing on replacement of reconditioned, high-pressure, large-diameter pipe and IHP belt mains Now: Investing about 65 million annually over the coming…
  18. INVESTOR PRESENTATION – Questar Corp – slide 18
    Expansion and upgrade of high-pressure Questar Gas natural gas feeder lines and IHP belt mains Rate-base forecast Infrastructure replacement and customer growth drives significant rate-base growth for many years to come Supports…
  19. INVESTOR PRESENTATION – Questar Corp – slide 19
    Jim Livsey EVP & COO Making lives better by developing and delivering essential energy
  20. INVESTOR PRESENTATION – Questar Corp – slide 20
    Wexpro develops cost-of-service reserves that help stabilize and maintain our gas utility rates among EBITDA ( millions) the lowest in the U.S. 300 285 259 Wexpro offers consistent growth with high returns 250 214 236 187 199…
  21. INVESTOR PRESENTATION – Questar Corp – slide 21
    Optimize Wexpro I development and performance Grow cost-of-service inventory of assets for future development through acquisitions (Wexpro II) Acquire producing properties with future drilling potential for 3rd party cost-of-service…
  22. INVESTOR PRESENTATION – Questar Corp – slide 22
    700-800 future development Big Horn locations 1.1 billion of future identified Wind River Pinedale investment 30 Locations WYOMING Annual investment driven by pace of field development, Moxa 140 Locations Green River…
  23. INVESTOR PRESENTATION – Questar Corp – slide 23
    Successful wells * Investment Base Wex II acquisitions Net Income (Millions) (Millions) Depletion Deferred taxes 649.0 122.8 589.7 110.6 531.1 103.9 95.2 456.6 474.4 88.1 431.9 80.7 2009 2010 2011 2012 2013 2014 2009 2010…
  24. INVESTOR PRESENTATION – Questar Corp – slide 24
    1000 100 900 90 2014 PDP Reserves Replacement 2014 R/P Ratio 59 Bcfe / 67 Bcfe = 88% 594 Bcfe / 67 Bcfe = 8.86 years 800 80 Production NRI Bcfe 700 70 Reserves NRI Bcfe 600 60 500 50 400 40 300 30 200 20 100…
  25. INVESTOR PRESENTATION – Questar Corp – slide 25
    8.00 1,750 Cumulative savings for Questar Gas customers (MM) 7.00 1,500 (Source: Wexpro records) Purchased 6.00 gas /Dth 1 Forward curve 1,250 5.00 1,000 4.00 750 3.00 500 2.00 1.00 250 Cost-of-service /Dth 2 0.00 0…
  26. INVESTOR PRESENTATION – Questar Corp – slide 26
    QEP Resources continues to operate Turn On in 2015 northern third of Pinedale Anticline 8 PA A wells forecast for 2015 30 PA C wells anticipated in 2016-2017 Average completed well cost 4MM Wexpro proved reserves of 171 Bcfe in…
  27. INVESTOR PRESENTATION – Questar Corp – slide 27
    Wexpro II Summary Key Provisions - Provides mechanism to acquire Rockies gas properties for future development - Modeled on provisions of original Wexpro Agreement - Properties purchased at Wexpros risk - Utah and Wyoming…
  28. INVESTOR PRESENTATION – Questar Corp – slide 28
    Evaluating 3 basins and about 800 fields Acquisition analysis focused on fields that could provide cost- of-service gas at reasonable prices Recent Trail and Canyon Creek acquisitions are in the Green River Basin in…
  29. INVESTOR PRESENTATION – Questar Corp – slide 29
    Allan Bradley Transmission Storage President & CEO G&P Energy Services Making lives better by developing and delivering essential energy
  30. INVESTOR PRESENTATION – Questar Corp – slide 30
    Key Facts & Statistics Map of Operations Serves Questar Gas, other utilities and major export pipelines from four Rockies hubs WYOMING Questar Pipeline IDAHO Overthrust Pipeline Provides transportation and underground storage…
  31. INVESTOR PRESENTATION – Questar Corp – slide 31
    Maintain operational efficiency and effectiveness Provide safe and reliable best in class services Maintain flexibility to meet changing demands Sustain commercial excellence Fully-contracted Hub of the Rockies Reputation of trust,…
  32. INVESTOR PRESENTATION – Questar Corp – slide 32
    EBITDA ( millions) Average Deliveries (Mdth/d) 250 3500 3000 2891 200 2765 182 182 181 2635 176 177 177 2537 2450 165 2500 2178 150 2000 1711 1500 100 1000 50 500 330 309 307 320 293 327 318 0 0 2008 2009 2010 2011 2012…
  33. INVESTOR PRESENTATION – Questar Corp – slide 33
    2009 2010 2011 Weber Canyon - 2014 2015 Length 1.2 miles 9.3 miles 13 miles 3.3 Miles 1.5 Miles 16 API 5L PSL2 16 API 5L PSL2 16 API 5L PSL2 16 API 5L PSL2 16 API 5L PSL2 New Pipe Type 0.250 X-65 0.250 X-52 0.250 X-52 0.250 X-52…
  34. INVESTOR PRESENTATION – Questar Corp – slide 34
    Inland California Express Railroad System WEST HYNES New Pipeline RAIL TERMINAL Completed Tasks - Engineering analysis for pipeline re-commission and extension - 10% design for rail unloading facilities leading to rail…
  35. INVESTOR PRESENTATION – Questar Corp – slide 35
    NGV Market Development Improving lives by developing and delivering essential energy
  36. INVESTOR PRESENTATION – Questar Corp – slide 36
    Questar Gas Company is a leader in the U.S. in regulated NGV market development Invests in NGV / CNG refueling infrastructure in regulated territory Refuel border-to-border in Utah - Dozens of public, private and municipal stations…
  37. INVESTOR PRESENTATION – Questar Corp – slide 37
    Questar Fueling Company Established in March 2012 to meet needs of expanding market for compressed natural gas (CNG) for transportation. Provides consulting, design, packaging and installation of CNG fueling stations. Focus: Trucking…
  38. INVESTOR PRESENTATION – Questar Corp – slide 38
    Questar Fueling Update Questar Fueling was formed in 2012 to meet the needs of an expanding market for compressed natural gas (CNG) for transportation Industry Development - Cummins-Westport launched full production of 12-liter…
  39. INVESTOR PRESENTATION – Questar Corp – slide 39
    Location (proximity to customers, high-traffic areas, high- pressure gas lines, etc.) Preferred pricing agreements with customers Low price (accomplished through controlling costs on equipment and construction) Customer experience/…
  40. INVESTOR PRESENTATION – Questar Corp – slide 40
    Questar Fueling Stations Station Locations - Lower 48 states with national carriers and large fleets - High-traffic corridors STATIONS UNDER ESTIMATED DEVELOPMENT COMPLETION San Antonio, Texas 2Q-2015 Phoenix, Arizona 2Q-2015…
  41. INVESTOR PRESENTATION – Questar Corp – slide 41
    Locations Lower 48 states with national carriers and large fleets High-traffic corridors 41
  42. INVESTOR PRESENTATION – Questar Corp – slide 42
    The Fuel price difference between petroleum products and natural gas products presents a significant opportunity. 42
  43. INVESTOR PRESENTATION – Questar Corp – slide 43
    Kevin Hadlock EVP & CFO Making lives better by developing and delivering essential energy
  44. INVESTOR PRESENTATION – Questar Corp – slide 44
    Investment Returns* Wexpro Questar Pipeline Questar Gas Questar Consolidated Return on equity Return on equity* Return on equity Return on equity** 25.0% 19.9% avg. 11.0% avg. 10.2% avg. 19.1% avg. 20.0% 18.5% 17.4% 15.0% 11.0%…
  45. INVESTOR PRESENTATION – Questar Corp – slide 45
    Total Capital* (MMs) 12/31/2014 2,877 43% equity 1,010 1,251 736 55% equity 48% equity 100% equity -138 Wexpro Pipeline Gas Consolidated Corp Equity Debt *Total debt + shareholders equity 45
  46. INVESTOR PRESENTATION – Questar Corp – slide 46
    600 500 15 Corporate 400 166 & Other 3 23 25 Questar 300 162 73 Gas 175 215 Questar 200 Pipeline 61 59 250* Wexpro 100 50 145 115* 80 - 2012 CAPEX 2013 CAPEX 2014 CAPEX 2015F CAPEX 371 Million 504 Million* 372 Million* 370…
  47. INVESTOR PRESENTATION – Questar Corp – slide 47
    Paid Dividend Growth Quarterly dividend increased 11% in February 2015 to 0.21 per share, 0.84 annualized 0.84 0.75 0.71 0.67 Dividend rate has increased 0.62 62% since the spinoff of QEP 0.54 Resources in 2010 Payout target…
  48. INVESTOR PRESENTATION – Questar Corp – slide 48
    Key Drivers: Questar Gas: - Compound annual earnings growth rate of 6-8% - Supported by infrastructure replacement spending with a tracker for up to 65 million per year 630 MM - Annual customer growth rate of 1.5% to 2.5% Wexpro:…
  49. INVESTOR PRESENTATION – Questar Corp – slide 49
    Invest in strategic growth opportunities to drive long-term Solid Operating compound annual earnings Results growth of 4% - 6% Strategic Strong Cash Growth Target consolidated FFO to Debt at Flows greater than 25% Strong…
  50. INVESTOR PRESENTATION – Questar Corp – slide 50
    Questar Gas Efficiently manage capital projects Refine strategy for transportation and storage Increase usage of cost-of-service gas Address loss of sales volume to transportation service Wexpro Identify opportunities to grow…
  51. INVESTOR PRESENTATION – Questar Corp – slide 51
    What makes Questar unique Create value across entire natural gas chain (wellhead to burner tip) STRATEGY Regulated business model with superior risk-adjusted returns Take advantage of unique growth opportunities 18.5% normalized…
  52. INVESTOR PRESENTATION – Questar Corp – slide 52
    Making lives better by developing and delivering essential energy 52
  53. INVESTOR PRESENTATION – Questar Corp – slide 53
    Public Utilities Fortnightly named Questar Corporation the 1 energy company in America for 2014 based on 4-year averages and rankings for: Profit margin (16.76%; 4) Dividend yield (3.17%; 49) Free cash flow (7.53%; 5) Return on equity…
  54. INVESTOR PRESENTATION – Questar Corp – slide 54
    Questar Gas received the highest ranking among utilities in the Western region according to the 2015 J.D. Power Gas Utility Business Customer Satisfaction Study. Overall satisfaction was measured by examining six factors: billing and…
  55. INVESTOR PRESENTATION – Questar Corp – slide 55
    Forbes magazine again ranks Utah as the 1 state for business and careers November 12, 2014 SALT LAKE CITY Utah again ranked 1st on Forbes magazine's 2014 list of Best States for Business and Careers after being in the 3 position for…
  56. INVESTOR PRESENTATION – Questar Corp – slide 56
    SALT LAKE CITY Deseret News: Wednesday, Feb. 4 2015 The Beehive State ranked as the best overall performing state in economic growth for the second year in a row, according to a 2014 U.S. Chamber of Commerce Foundation study. While Utah…
  57. INVESTOR PRESENTATION – Questar Corp – slide 57
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Assets Current assets 366.4 224.1 122.4 (298.4) 414.5 Net PP&E 1,572.0 931.1 1,153.8 78.6 3,735.5 Other assets 30.6 25.7 35.5 7.9…
  58. INVESTOR PRESENTATION – Questar Corp – slide 58
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Revenues 960.9 385.9 263.9 (421.4) 1,189.3 Other income 5.9 1.1 1.2 (1.6) 6.6 Income from unconsol. affiliate - - 3.5 - 3.5…
  59. INVESTOR PRESENTATION – Questar Corp – slide 59
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Revenues 318.9 90.1 65.8 (101.6) 373.2 Other income 1.6 0.4 0.5 (0.9) 1.6 Income from unconsol. affiliate - - 0.8 - 0.8 Operating…
  60. INVESTOR PRESENTATION – Questar Corp – slide 60
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Operating cash flow 161.5 227.6 134.1 1.9 525.1 Changes in operating assets and liabilities (47.8) (13.5) (10.1) (10.1) (81.5)…
  61. INVESTOR PRESENTATION – Questar Corp – slide 61
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Operating cash flow 81.5 64.6 41.4 (7.2) 180.3 Changes in operating assets and liabilities (50.4) (15.6) (14.4) (18.8) (99.2) Net…
  62. INVESTOR PRESENTATION – Questar Corp – slide 62
    580.0 600 2015 Embedded Debt Cost QPC: 460.1M 5.50% 4.80% QGC: 534.5M 5.07% STR RC Corp: 250.0M 2.75% 500 750 375.0 400 5.72% 300 250.0 2.75% 5.84% 200 4.875% Coupon (6.66% effective) 100 25.1 14.5 6.45% 6.85% 0…
  63. INVESTOR PRESENTATION – Questar Corp – slide 63
    INTEGRATED COMPARABLES (Proxy) AGL Resources Atmos Energy Black Hills Laclede Group MDU Resources Group National Fuel Gas New Jersey Resources NW Natural ONE Gas Piedmont Nat Gas South Jersey Industries Southwest Gas…
  64. INVESTOR PRESENTATION – Questar Corp – slide 64
    Order Summary: Allowed ROE of 9.85% (previously 10.35%) Annual revenue increased by 7.6 million or 2.6% Expanded infrastructure-replacement programs tracker to 65 million annually, up from 55 million Transportation customer rate…
  65. INVESTOR PRESENTATION – Questar Corp – slide 65
    Determining Utility Revenue Requirement or Traditional Ratemaking: Decoupling: Volume-based Customer-based / Dth / Customer Rate X Dth of Customers X Revenue per Customer (Company collects as revenue) (Company collects as…
  66. INVESTOR PRESENTATION – Questar Corp – slide 66
    Gallons Cost/Gal. 600,000 4.00 500,000 3.50 3.00 400,000 2.50 300,000 2.00 200,000 1.50 1.00 100,000 0.50 0 0.00 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jul-07…
  67. INVESTOR PRESENTATION – Questar Corp – slide 67
    2.50 2.00 1.50 Commodity Cost 1.00 Taxes Core-Service Fee 0.50 - * Assumes that 1 GGE of CNG contains 125,000 Btu ** Numbers reflect average Questar Fueling Station 67
  68. INVESTOR PRESENTATION – Questar Corp – slide 68
    Vehicle Fuel Component *Clean Skies Foundation Report: Driving on Natural Gas Figure 17 68
  69. INVESTOR PRESENTATION – Questar Corp – slide 69
    1,539 CNG stations 52% public 171 planned 105 LNG stations 64% public 69 planned Source: NGVAmerica, as of Jan. 2015 69
  70. INVESTOR PRESENTATION – Questar Corp – slide 70
    A recent Navigant Research report* projects: - Approximately 200,000 heavy-duty natural gas powered trucks to be sold over the next nine years Approximately 85% of these trucks are projected to be CNG Westport is projecting a 5 year…
  71. INVESTOR PRESENTATION – Questar Corp – slide 71
    Questar Gas retained production from existing gas wells - Future production from productive gas reservoirs delivered at cost-of-service Established oil revenue sharing mechanism - 54% of oil profits credited to utility customers -…
  72. INVESTOR PRESENTATION – Questar Corp – slide 72
    Wexpro earns a specified return on successful wells - Includes recovery of income taxes - Producing wells existing at the date of the Wexpro Agreement earn at utility cost of capital - currently 7.64% - New Wexpro investment earns at…
  73. INVESTOR PRESENTATION – Questar Corp – slide 73
    Primary oversight assigned to - Utah Division of Public Utilities - Staff of the WY PSC - Agreement provides for two independent monitors Hydrocarbon Monitor (David Evans) Accounting Monitor (Eide Bailly) Arbitration procedures…
  74. INVESTOR PRESENTATION – Questar Corp – slide 74
    Major Provisions Capital Expenditures Operating Costs Successful wells & Dry holes non-drilling costs Questar Gas reimburses costs Excluded from Wexpro receives a return on No profit component investment base - investment base…
  75. INVESTOR PRESENTATION – Questar Corp – slide 75
    Production Tax 7% LOE 6% G&A 7% Royalties 13% Depreciation 24% 67% Finding Cost Return On Investment Driven With Fed+St. Tax Reimbursement 43% 75
  76. INVESTOR PRESENTATION – Questar Corp – slide 76
    140,000 119,497 121,578 116,547 115,567 120,000 112,448 103,700 100,000 41% 33% 48% 49% 49% 32% 80,000 MDth 60,000 40,000 59% 67% 68% 51% 51% 52% 20,000 - 2009 2010 2011 2012 2013 2014 Equity Purchased…
  77. INVESTOR PRESENTATION – Questar Corp – slide 77
    1.80 1.81 1.80 1.82 1.66 1.69 1.44 1.35 1.08 2006 2007 2008 2009 2010 2011 2012 2013 2014 * NOTE: Includes Wexpro-operated and non-operated development wells and recompletions. 77
  78. INVESTOR PRESENTATION – Questar Corp – slide 78
    WEXPRO Bonus Deprec. 100% 50% 0% Incremental Investment 10,000,000 10,000,000 10,000,000 Incremental MACRS Deprec. (1,600,000) (1,600,000) (1,600,000) Incremental Deferred Taxes (2,940,000) (1,440,000) 60,000 Addition to Investment…
  79. INVESTOR PRESENTATION – Questar Corp – slide 79
    Bits - Fewer bit replacements = faster drilling Top drive - Fewer joint connections = faster drilling Directional drilling equipment - Better accuracy = faster drilling Skid package - Less time moving = more time drilling…
  80. INVESTOR PRESENTATION – Questar Corp – slide 80
    80
  81. INVESTOR PRESENTATION – Questar Corp – slide 81
    Excess export capacity exists in the Rockies due to decreased drilling Forecast 6 Bcf/d of Open Rockies Export Capacity 14 14 12 12 10 10 Volumes (Bcf/d) /MMBtu 8 8 6 6 4 4 2 2 - 0 Exports Predicted…
  82. INVESTOR PRESENTATION – Questar Corp – slide 82
    O&M/dth includes Storage and 50% of WRH without QPC Contract 6,000,000 25.00 5,000,000 20.00 Contract 4,000,000 Demand 15.00 O&M/dth 3,000,000 10.00 2,000,000 5.00 1,000,000 0 0.00 2006 2007 2008 2009 2010 2011 2012…
  83. INVESTOR PRESENTATION – Questar Corp – slide 83
    Total: 11,000 MW NAUGHTON - 637 MW BRIDGER 1,412 MW Coal Fired: 8,640 MW Natural Gas Fired: 2,360 MW Questar Served: 2,360 MW LITTLE MOUNTAIN - 14 MW GADSBY - 475 MW CRAIG 1,274 MW KENNECOTT - 275 MW HEBER - 30 MW HAYDEN -…
  84. INVESTOR PRESENTATION – Questar Corp – slide 84
    A Rockies-Based Integrated Natural Company Questar Corporation is a natural gas-focused energy company with core operations in the Rockies. We produce, transport, store and distribute clean, abundant and affordable American natural gas.…

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