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Investor Presenatation – Questar Corp

Questar Corp · Nov 30, 2013 · 79 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 Presenatation – Questar Corp – slide 1
    Investor Presentation *November 2014* Making lives better by developing and delivering essential energy
  2. Investor Presenatation – Questar Corp – slide 2
    CORPORATE DATA ANALYST CONTACT: Ticker symbol and stock exchange: STR-NYSE At November 12, 2014 Tony Ivins Vice President Investor Relations Average daily trading volume (3 mos.): 984,000 shares & Corporate Treasurer Closing Price:…
  3. Investor Presenatation – Questar Corp – slide 3
    Introduction and Overview Making lives better by developing and delivering essential energy
  4. Investor Presenatation – 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 Presenatation – Questar Corp – slide 5
    TTM 9/30/2014 Earnings 232.1MM* Wexpro - 17.5% earned ROE (TTM 9/30/2014) Wexpro - 100% equity capitalization 121.4 MM - 675 MM investment base (June 2014) 52% QPC* 62.1 MM Wexpro QGC 27% Questar Pipeline (QPC) 53.2 MM 23% -…
  6. Investor Presenatation – Questar Corp – slide 6
    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…
  7. Investor Presenatation – Questar Corp – slide 7
    Maintain and grow our vertically integrated business model Overall Strategy Develop and deliver essential energy in the western U.S. Manage commodity-price exposure and earnings volatility Meet customers energy needs through safe,…
  8. Investor Presenatation – Questar Corp – slide 8
    Craig Wagstaff EVP & COO Making lives better by developing and delivering essential energy
  9. Investor Presenatation – Questar Corp – slide 9
    Key Facts & Statistics Cities served 277 Customers 9/30/2014 954,754 Customer growth TTM 9/2014: 16,186 1.7% Deliveries (TTM 9/30/2014) 189 MMdth System miles (12/31/2013) 27,861 miles Rate base (12/31/2013) 1,042 MM Allowed Utah ROE…
  10. Investor Presenatation – 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 up to…
  11. Investor Presenatation – Questar Corp – slide 11
    25 20 US 15 12.69 UTAH 9.57 10 5 0 LA FL IN ID TX IL TN WV IA WA WI WY AZ AL RI SC VT NH NC CT DC VA PA KY KS AR UT GA DE MO OK…
  12. Investor Presenatation – Questar Corp – slide 12
    18.00 16.00 14.00 US 12.00 10.00 UTAH 8.00 6.00 4.00 2.00 National Avg UT Avg 0.00 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012…
  13. Investor Presenatation – 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. Investor Presenatation – Questar Corp – slide 14
    Key regulatory attributes: Return on equity 9.85% (effective 3/1/2014) Revenue decoupling Protects profit margin / customer Conservation program Encourages energy efficiency Infrastructure upgrades Tracker avoids recovery lag Weather…
  15. Investor Presenatation – 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 up to 65 million annually over the coming…
  16. Investor Presenatation – 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. Investor Presenatation – Questar Corp – slide 17
    Jim Livsey EVP & COO Making lives better by developing and delivering essential energy
  18. Investor Presenatation – Questar Corp – slide 18
    Wexpro develops cost-of-service reserves that help stabilize and maintain our gas utility rates among EBITDA ( millions) the lowest in the U.S. 300 292 Wexpro offers consistent growth with high returns 250 236 259 199 214 200…
  19. Investor Presenatation – Questar Corp – slide 19
    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…
  20. Investor Presenatation – Questar Corp – slide 20
    700-800 future development Big Horn locations 1.1 billion of future identified Wind River Pinedale investment 40 Locations WYOMING Annual investment driven by pace of field development, Moxa 140 Locations Green River…
  21. Investor Presenatation – Questar Corp – slide 21
    Successful wells * Investment Base Wex II acquisitions Net Income (Millions) (Millions) Depletion 664.6 Deferred taxes 121.4 589.7 110.6 531.1 103.9 95.2 456.6 474.4 88.1 431.9 80.7 2009 2010 2011 2012 2013 9/14 2009 2010…
  22. Investor Presenatation – Questar Corp – slide 22
    1000 100 900 90 2013 Reserves Replacement 2013 R/P Ratio 800 177 Bcfe / 64 Bcfe = 276% 845 Bcfe / 64 Bcfe = 13 years 80 Production NRI Bcfe 700 70 Reserves NRI Bcfe 600 60 500 50 400 40 300 30 200 20 100 10 0…
  23. Investor Presenatation – Questar Corp – slide 23
    8.00 Wexpros TTM Q2-2014 total cost structure versus 11 E&P peers* (LOE + production taxes + G&A + interest + DDA) 7.00 Peer Average 6.00 Wexpro 4.08/Mcfe 2.98/Mcfe* 5.00 (Excl. 20% AT return) 4.00 3.00 2.00 1.00 0.00 Low costs…
  24. Investor Presenatation – Questar Corp – slide 24
    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…
  25. Investor Presenatation – Questar Corp – slide 25
    QEP Resources continues to operate Spud in 2014, Turn On in 2014 northern third of Pinedale Anticline Spud in 2014, Turn On in 2015 Spud in 2015, Turn On in 2015 18 PA A wells forecast for 2014-2015 24 PA C wells anticipated in…
  26. Investor Presenatation – 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. Investor Presenatation – 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 27
  28. Investor Presenatation – Questar Corp – slide 28
    Allan Bradley President & CEO Transmission Storage G&P Energy Services Making lives better by developing and delivering essential energy
  29. Investor Presenatation – 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. Investor Presenatation – 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. Investor Presenatation – Questar Corp – slide 31
    EBITDA ( millions) Average Deliveries (Mdth/d) 250 3500 3000 2891 200 182 182 181 2765 2677 176 177 178 2537 165 2450 2500 2178 150 2000 1711 100 1500 1000 50 500 330 309 307 320 293 327 337 0 0 2008 2009 2010 2011 2012…
  32. Investor Presenatation – Questar Corp – slide 32
    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 0.250…
  33. Investor Presenatation – Questar Corp – slide 33
    Inland California Express Railroad System WEST HYNES New Pipeline RAIL TERMINAL Completed Tasks - Engineering analysis for pipeline re-commission and extension - 10% design for two rail unloading facilities leading to rail…
  34. Investor Presenatation – Questar Corp – slide 34
    NGV Market Development Improving lives by developing and delivering essential energy
  35. Investor Presenatation – Questar Corp – slide 35
    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…
  36. Investor Presenatation – Questar Corp – slide 36
    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…
  37. Investor Presenatation – Questar Corp – slide 37
    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…
  38. Investor Presenatation – Questar Corp – slide 38
    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/…
  39. Investor Presenatation – Questar Corp – slide 39
    Questar Fueling Stations Station Locations - Lower 48 states with national carriers and large fleets - High-traffic corridors STATIONS UNDER ESTIMATED CONSTRUCTION COMPLETION San Antonio, Texas 2014/2015 Salt Lake City, Utah…
  40. Investor Presenatation – Questar Corp – slide 40
    Locations Lower 48 states with national carriers and large fleets High-traffic corridors 40
  41. Investor Presenatation – Questar Corp – slide 41
    The Fuel price difference between petroleum products and natural gas products presents a significant opportunity. 41
  42. Investor Presenatation – Questar Corp – slide 42
    Kevin Hadlock EVP & CFO Making lives better by developing and delivering essential energy
  43. Investor Presenatation – Questar Corp – slide 43
    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. 10.4% avg. 19.4% avg. 19.9% 20.0% 17.5% 15.0% 11.2%…
  44. Investor Presenatation – Questar Corp – slide 44
    Total Capital* (MMs) 9/30/2014 2,798 46% equity 1,011 1,203 723 55% equity 48% equity 100% equity -138 Wexpro Pipeline Gas Consolidated Corp Equity Debt *Total debt + shareholders equity 44
  45. Investor Presenatation – Questar Corp – slide 45
    600 500 15 Corporate 400 166 & Other 3 30 300 Questar 162 73 Gas 170 200 Questar 61 Pipeline 250* 70 100 Wexpro 145 100 - 2012 CAPEX 2013 CAPEX 2014F CAPEX 371 Million 504 Million* 370 Million * NOTE: Wexpros 2013…
  46. Investor Presenatation – Questar Corp – slide 46
    Paid Dividend Growth Quarterly dividend increased 6% in May 2014 to 0.19 per share, 0.75 0.76 annualized 0.71 0.67 0.62 60% payout achieved 0.54 Future dividend growth to approximate earnings growth 2010 2011 2012 2013…
  47. Investor Presenatation – Questar Corp – slide 47
    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 595 MM - Annual customer growth rate of 1.5% to 2.5% - Utah…
  48. Investor Presenatation – Questar Corp – slide 48
    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 19.9% normalized…
  49. Investor Presenatation – Questar Corp – slide 49
    Making lives better by developing and delivering essential energy 49
  50. Investor Presenatation – Questar Corp – slide 50
    Forbes magazine again ranks Utah as a top state for business and careers September 30, 2013 SALT LAKE CITY Utah ranked 3rd on Forbes magazine's 2013 list of Best States for Business and Careers behind Virginia and North Dakota, after…
  51. Investor Presenatation – Questar Corp – slide 51
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Assets Current assets 254.1 163.2 105.2 (245.4) 277.1 Net PP&E 1,544.7 888.1 1,161.1 73.2 3,667.1 Other assets 23.7 25.6 36.3 8.1…
  52. Investor Presenatation – Questar Corp – slide 52
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Revenues 979.4 388.5 267.2 (421.1) 1,214.0 Other income 5.6 1.5 1.3 (2.7) 5.7 Income from unconsol. affiliate - - 3.6 - 3.6…
  53. Investor Presenatation – Questar Corp – slide 53
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Revenues 100.7 91.7 65.0 (99.5) 157.9 Other income 1.7 0.3 0.3 (0.3) 2.0 Income from unconsol. affiliate - - 0.9 - 0.9 Operating…
  54. Investor Presenatation – Questar Corp – slide 54
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Operating cash flow 128.9 223.6 124.6 (2.7) 474.4 Changes in operating assets and liabilities (40.6) 17.4 - (10.6) (33.8) Net…
  55. Investor Presenatation – Questar Corp – slide 55
    Questar Wexpro Questar Parent/Other & Consolidated in millions Gas Companies Pipeline Eliminations Questar Operating cash flow 14.0 46.5 31.5 6.6 98.6 Changes in operating assets and liabilities (45.3) (16.9) (11.9) 54.2 (19.9) Net cash…
  56. Investor Presenatation – Questar Corp – slide 56
    580.0 600 2014 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…
  57. Investor Presenatation – Questar Corp – slide 57
    INTEGRATED COMPARABLES (Proxy) AGL Resources Atmos Energy EQT Energen MDU Resources Group National Fuel Gas New Jersey Resources Nisource NW Natural Piedmont Nat Gas South Jersey Resources Southwest Gas Vectren WGL…
  58. Investor Presenatation – Questar Corp – slide 58
    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…
  59. Investor Presenatation – Questar Corp – slide 59
    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…
  60. Investor Presenatation – Questar Corp – slide 60
    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 Jul-09 Jul-07…
  61. Investor Presenatation – Questar Corp – slide 61
    3.00 2.50 2.00 Commodity Cost 1.50 Taxes 1.00 Compression, Land, G&A, Operating 0.50 Expenses, Return - 4/ MMBtu 5/ MMBtu 6/ MMBtu 7/ MMBtu 8/ MMBtu * Assumes that 1 GGE of CNG contains 125,000 Btu ** Numbers…
  62. Investor Presenatation – Questar Corp – slide 62
    Vehicle Fuel Component *Clean Skies Foundation Report: Driving on Natural Gas Figure 17 62
  63. Investor Presenatation – Questar Corp – slide 63
    1,263 CNG stations 618 public 645 private 112 planned 81 LNG stations 42 public 39 private 66 planned Source: NGVAmerica, as of Nov. 2013 63
  64. Investor Presenatation – Questar Corp – slide 64
    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…
  65. Investor Presenatation – Questar Corp – slide 65
    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 -…
  66. Investor Presenatation – Questar Corp – slide 66
    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…
  67. Investor Presenatation – Questar Corp – slide 67
    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…
  68. Investor Presenatation – Questar Corp – slide 68
    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…
  69. Investor Presenatation – Questar Corp – slide 69
    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% 69
  70. Investor Presenatation – Questar Corp – slide 70
    140,000 120,000 100,000 41% 51% 48% 49% 49% 32% 80,000 MDth 60,000 40,000 68% 59% 49% 51% 51% 52% 20,000 - 2008 2009 2010 2011 2012 2013 Equity Purchased 70
  71. Investor Presenatation – Questar Corp – slide 71
    Finding Costs 1.80 1.81 1.80 1.82 1.66 1.44 1.35 1.08 2006 2007 2008 2009 2010 2011 2012 2013 * NOTE: Includes Wexpro-operated and non-operated development wells and recompletions. 71
  72. Investor Presenatation – Questar Corp – slide 72
    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…
  73. Investor Presenatation – Questar Corp – slide 73
    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…
  74. Investor Presenatation – Questar Corp – slide 74
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  75. Investor Presenatation – Questar Corp – slide 75
    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…
  76. Investor Presenatation – Questar Corp – slide 76
    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…
  77. Investor Presenatation – Questar Corp – slide 77
    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 -…
  78. Investor Presenatation – Questar Corp – slide 78
    78 Project Name: PacifiCorp Lake Side 2 Questar Pipeline Contracted Capacity 90,000 dth/d CLAY QGC High Pressure Line BASIN Investment 19.7 MM Rate (/dth) 0.14 KERN RIVER Revenue (Annual) 4.6 MM PacifiCorp Lake Side…
  79. Investor Presenatation – Questar Corp – slide 79
    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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