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September 2015 Investor Presentation – Questar Corp

Questar Corp · Sep 28, 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. September 2015 Investor Presentation – Questar Corp – slide 1
    Investor Presentation September 2015* Making lives better by developing and delivering essential energy
  2. September 2015 Investor Presentation – Questar Corp – slide 2
    CORPORATE DATA ANALYST CONTACT: Ticker symbol and stock exchange: STR-NYSE At September 23, 2015 Tony Ivins Vice President, Investor Relations Average daily trading volume (3 mos.): 1,456,000 shares & Corporate Treasurer Closing Price:…
  3. September 2015 Investor Presentation – Questar Corp – slide 3
    Introduction and Overview Making lives better by developing and delivering essential energy
  4. September 2015 Investor Presentation – Questar Corp – slide 4
    Western United States IDAHO WYOMING Primarily Utah, Wyoming and UTAH Idaho COLORADO Wexpro develops low-cost natural gas for Questar Gas utility customers under the 1981 Wexpro Agreement Questar Pipeline transports and stores…
  5. September 2015 Investor Presentation – Questar Corp – slide 5
    Questar Corporation TTM 6/30/2015 Earnings 226.3MM** June 2015: 17.6% ROE / 5 billion enterprise value Wexpro 116.5 MM 53% QPC 58.3 MM Wexpro QGC 26% 59.9 MM 26% Questar Wexpro Questar Gas QPC Pipeline - 17.1% ROE Earnings…
  6. September 2015 Investor Presentation – Questar Corp – slide 6
    Public Utilities Fortnightly again named Questar Corporation the 1 energy company in America for 2015 based on 4-year averages and rankings for: Profit margin (17.2%, ); Dividend yield (3.1%, 50); Free cash flow (9.5%, 4); Return on…
  7. September 2015 Investor Presentation – Questar Corp – slide 7
    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…
  8. September 2015 Investor Presentation – Questar Corp – slide 8
    Craig Wagstaff President Making lives better by developing and delivering essential energy
  9. September 2015 Investor Presentation – Questar Corp – slide 9
    Key Facts & Statistics Cities served 278 Customers 6/30/2015 978,674 Customer growth TTM 6/2015: 24,864 2.6% Deliveries (TTM 6/30/2015) 174 MMdth System miles (YE 2014) 28,239 miles Rate base (YE 2014) 1,121 MM Allowed Utah ROE 9.85%…
  10. September 2015 Investor Presentation – Questar Corp – slide 10
    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…
  11. September 2015 Investor Presentation – Questar Corp – slide 11
    25 20 15 US 12.52 UTAH 10.39 10 5 0 TX FL TN LA WV WY IA WA WI AZ IL IN ID SC VT AR SD RI NH DE AL NC KY VA CT DC KS PA NV NY US CA NE…
  12. September 2015 Investor Presentation – Questar Corp – slide 12
    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…
  13. September 2015 Investor Presentation – Questar Corp – slide 13
    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…
  14. September 2015 Investor Presentation – Questar Corp – slide 14
    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…
  15. September 2015 Investor Presentation – Questar Corp – slide 15
    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…
  16. September 2015 Investor Presentation – Questar Corp – slide 16
    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…
  17. September 2015 Investor Presentation – Questar Corp – slide 17
    Brady Rasmussen EVP & COO Making lives better by developing and delivering essential energy
  18. September 2015 Investor Presentation – Questar Corp – slide 18
    Wexpro develops cost-of-service reserves that EBITDA ( millions) have historically help stabilize and maintain our 300 259 285 266 236 gas utility rates among the lowest in the U.S. 250 199 214 200 1981 Wexpro Agreement 150 100 -…
  19. September 2015 Investor Presentation – Questar Corp – slide 19
    Stimulate material development drilling program within Wexpro I and II in this low-price environment Grow cost-of-service inventory of assets for future development through acquisitions (Wexpro II) Acquire producing properties with…
  20. September 2015 Investor Presentation – Questar Corp – slide 20
    Submitted application to change certain terms of the Wexpro cost-of-service model Enables Wexpro to stimulate meaningful drilling program in 2016 Allows Wexpro to sustain and grow investment base Provides template for other…
  21. September 2015 Investor Presentation – Questar Corp – slide 21
    CURRENT PROPOSED 67% 43% Return on Finding Investment 32% Base 55% Cost Finding Cost 24% Depreciation 23% 13% Royalties 18% 8% G&A 11% 6% LOE 8% 6% Production 8% 21
  22. September 2015 Investor Presentation – Questar Corp – slide 22
    500-600 future cost-of-service Big Horn development locations 1.1 billion of future identified Wind River Pinedale investment 30 Locations WYOMING Annual investment driven by pace of field development, Moxa 240 Locations Green…
  23. September 2015 Investor Presentation – Questar Corp – slide 23
    Successful wells * Investment Base Wex II acquisitions Net Income (Millions) (Millions) Depletion Deferred taxes 649.0 629.5 122.8 589.7 116.5 110.6 531.1 103.9 95.2 456.6 474.4 88.1 2010 2011 2012 2013 2014 6/15 2010 2011…
  24. September 2015 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. September 2015 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. September 2015 Investor Presentation – Questar Corp – slide 26
    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…
  27. September 2015 Investor Presentation – Questar Corp – slide 27
    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 Wyoming…
  28. September 2015 Investor Presentation – Questar Corp – slide 28
    Transmission Storage Micheal Dunn G&P Energy Services President Making lives better by developing and delivering essential energy
  29. September 2015 Investor Presentation – Questar Corp – slide 29
    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…
  30. September 2015 Investor Presentation – Questar Corp – slide 30
    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,…
  31. September 2015 Investor Presentation – Questar Corp – slide 31
    EBITDA ( millions) Average Deliveries (Mdth/d) 250 3500 3000 2891 200 182 182 181 2765 2635 177 177 174 2537 2614 165 2450 2500 2178 150 2000 100 1500 1000 50 500 309 307 320 293 327 318 294 0 0 2009 2010 2011 2012 2013…
  32. September 2015 Investor Presentation – Questar Corp – slide 32
    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…
  33. September 2015 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. September 2015 Investor Presentation – Questar Corp – slide 34
    Total: 11,994 MW NAUGHTON - 637 MW BRIDGER 2,119 MW Coal Fired: 9,647 MW Natural Gas Fired: 2,347 MW Questar Served: 2,347 MW GADSBY - 475 MW CRAIG 1,274 MW KENNECOTT - 275 MW HEBER - 30 MW HAYDEN - 446 MW LAKESIDE - 1182 MW…
  35. September 2015 Investor Presentation – Questar Corp – slide 35
    ANETH BLANCO NAVAJO BISTI CUSHING NATION HOPI SAN JUAN BASIN PALM SPRINGS WEST HYNES PERMIAN BASIN Southern Trails Pipeline Existing Crude Pipelines 16 Navajo Nation Oil & Gas Company Crude Pipeline (underutilized) 16…
  36. September 2015 Investor Presentation – Questar Corp – slide 36
    NGV Market Development Making lives better by developing and delivering essential energy
  37. September 2015 Investor Presentation – Questar Corp – slide 37
    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…
  38. September 2015 Investor Presentation – Questar Corp – slide 38
    Focused on growth driven by the class 6, 7 and 8 vehicle market EIA's Forcasted GGE's Per Year EIA's Forcasted GGE's by Scenario Reference Case 7,000,000,000 6,000,000,000 6,000,000,000 5,000,000,000 5,000,000,000 10.3% Annual…
  39. September 2015 Investor Presentation – Questar Corp – slide 39
    U.S. Fuel Prices 40
  40. September 2015 Investor Presentation – Questar Corp – slide 40
    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…
  41. September 2015 Investor Presentation – Questar Corp – slide 41
    Location (proximity to customers, high-traffic areas, high-pressure gas lines, etc.) Low price (accomplished through controlling costs on equipment and construction) Customer experience/ quality of fill (specific design criteria to…
  42. September 2015 Investor Presentation – Questar Corp – slide 42
    Spacious area for easy access and maneuvering 3,000 to 4,000+ SCFM in compression A legitimate 10 GGE/min fill for customers filling simultaneously Three dual-hose dispensers with both type 1 & 2 nozzles Open 24/7 with remote…
  43. September 2015 Investor Presentation – Questar Corp – slide 43
    Questar Fueling Stations Station Locations - Lower 48 states with national carriers and large fleets - High-traffic corridors STATIONS UNDER ESTIMATED DEVELOPMENT COMPLETION Denver, Colorado 1Q - 2016 Bakersfield, California…
  44. September 2015 Investor Presentation – Questar Corp – slide 44
    Kevin Hadlock EVP & CFO Making lives better by developing and delivering essential energy
  45. September 2015 Investor Presentation – Questar Corp – slide 45
    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%…
  46. September 2015 Investor Presentation – Questar Corp – slide 46
    Total Capital* (MMs) 6/30/2015 2,819 46% equity 1,008 1,214 653 55% equity 51% equity 100% equity -56 Wexpro Pipeline Gas Consolidated Equity Debt Corp *Total debt + shareholders equity 47
  47. September 2015 Investor Presentation – Questar Corp – slide 47
    600 500 15 Corporate 400 166 & Other 3 23 25 Questar 300 162 73 Gas 175 Questar 200 215 Pipeline 61 59 250* Wexpro 100 145 115* 50 - 30 2012 CAPEX 2013 CAPEX 2014 CAPEX 2015F CAPEX 371 Million 504 Million* 372 Million* 320…
  48. September 2015 Investor Presentation – Questar Corp – slide 48
    Paid Dividend Growth Quarterly dividend increased 11% in February 2015 to 0.21 0.84 per share, 0.84 annualized 0.75 0.71 0.67 0.62 Dividend rate has increased 0.54 62% since the spinoff of QEP Resources in 2010 Payout target…
  49. September 2015 Investor Presentation – Questar Corp – slide 49
    Invest in strategic growth Solid opportunities to drive long-term Operating compound annual earnings Results growth Strategic Strong Cash Growth Target consolidated FFO to Debt at Flows greater than 25% Strong Returns and…
  50. September 2015 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 Reduce incremental cost-of-service gas…
  51. September 2015 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 17.6% consolidated…
  52. September 2015 Investor Presentation – Questar Corp – slide 52
    Making lives better by developing and delivering essential energy
  53. September 2015 Investor Presentation – Questar Corp – slide 53
    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…
  54. September 2015 Investor Presentation – Questar Corp – slide 54
    Public Utilities Fortnightly named Questar Corporation the 1 energy company in America for 2015 based on 4-year averages and rankings for: Profit margin (17.2%; 3) Dividend yield (3.1%; 50) Free cash flow (9.5%; 4) Return on equity…
  55. September 2015 Investor Presentation – Questar Corp – slide 55
    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…
  56. September 2015 Investor Presentation – Questar Corp – slide 56
    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…
  57. September 2015 Investor Presentation – Questar Corp – slide 57
    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…
  58. September 2015 Investor Presentation – Questar Corp – slide 58
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Assets Current assets 214.4 157.1 116.7 (286.4) 201.8 Net PP&E 1,655.5 903.1 1,145.8 80.3 3,784.7 Other assets 29.0 26.4 35.0 8.0…
  59. September 2015 Investor Presentation – Questar Corp – slide 59
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Revenues 936.1 358.6 261.3 (397.0) 1,159.0 Other income 5.6 1.5 1.2 (1.8) 6.5 Income from unconsol. affiliate - - 3.6 - 3.6…
  60. September 2015 Investor Presentation – Questar Corp – slide 60
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Revenues 141.7 85.7 64.3 (92.4) 199.3 Other income 1.2 0.4 0.2 (0.3) 1.5 Income from unconsol. affiliate - - 1.0 - 1.0 Operating…
  61. September 2015 Investor Presentation – Questar Corp – slide 61
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Operating cash flow 165.3 210.3 131.6 6.7 513.9 Changes in operating assets and liabilities (0.7) (11.8) (32.2) (8.2) (52.9) Net…
  62. September 2015 Investor Presentation – Questar Corp – slide 62
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Operating cash flow 13.2 48.3 29.6 3.1 94.2 Changes in operating assets and liabilities 15.0 11.7 (12.1) (31.0) (16.4) Net cash…
  63. September 2015 Investor Presentation – Questar Corp – slide 63
    580.0 600.0 2015 Embedded Debt Cost 4.80% QPC: 460.1M 5.50% QGC: 534.5M 5.07% STR RC Corp: 250.0M 2.75% 500.0 750 375.0 400.0 5.72% 300.0 250.0 2.75% 5.84% 200.0 4.875% Coupon (6.66% effective) 100.0 25.1 14.5 6.45%…
  64. September 2015 Investor Presentation – Questar Corp – slide 64
    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…
  65. September 2015 Investor Presentation – Questar Corp – slide 65
    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…
  66. September 2015 Investor Presentation – Questar Corp – slide 66
    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…
  67. September 2015 Investor Presentation – Questar Corp – slide 67
    Locations Lower 48 states with national carriers and large fleets High-traffic corridors 68
  68. September 2015 Investor Presentation – Questar Corp – slide 68
    Questar Fueling Stations Expansion 69
  69. September 2015 Investor Presentation – Questar Corp – slide 69
    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-13 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-14 Jan-15 Jul-07 Jul-08…
  70. September 2015 Investor Presentation – Questar Corp – slide 70
    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 71
  71. September 2015 Investor Presentation – Questar Corp – slide 71
    Vehicle Fuel Component *Clean Skies Foundation Report: Driving on Natural Gas Figure 17 72
  72. September 2015 Investor Presentation – Questar Corp – slide 72
    1,539 CNG stations 52% public 171 planned 105 LNG stations 64% public 69 planned Source: NGVAmerica, as of Jan. 2015 73
  73. September 2015 Investor Presentation – Questar Corp – slide 73
    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…
  74. September 2015 Investor Presentation – Questar Corp – slide 74
    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 -…
  75. September 2015 Investor Presentation – Questar Corp – slide 75
    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…
  76. September 2015 Investor Presentation – Questar Corp – slide 76
    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…
  77. September 2015 Investor Presentation – Questar Corp – slide 77
    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…
  78. September 2015 Investor Presentation – Questar Corp – slide 78
    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 2017-2019 Average completed well cost 3.5MM Wexpro proved reserves of 171 Bcfe in…
  79. September 2015 Investor Presentation – Questar Corp – slide 79
    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…
  80. September 2015 Investor Presentation – Questar Corp – slide 80
    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. 81
  81. September 2015 Investor Presentation – Questar Corp – slide 81
    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…
  82. September 2015 Investor Presentation – Questar Corp – slide 82
    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…
  83. September 2015 Investor Presentation – Questar Corp – slide 83
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  84. September 2015 Investor Presentation – Questar Corp – slide 84
    Excess export capacity exists in the Rockies due to decreased drilling Forecast 6 Bcf/d of Open Rockies Export Capacity 14.00 14.00 Bcf/d 12.00 12.00 10.00 10.00 /MMBtu 8.00 8.00 6.00 6.00 4.00 4.00 2.00 2.00…

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