Natural gas-focused energy company
) reported mixed third-quarter 2012 results, owing to better gas
and liquids production, partially offset by steeper operating and
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Earnings per share came in at 19 cents, down 5.0% from the profit
of 20 cents earned in the prior-year quarter. The result,
however, surpassed the Zacks Consensus Estimate by a penny.
Total revenue came in at $141.8 million, failing to match the
Zacks Consensus Estimate of $157.0 million. On a year-over-year
basis, revenue dropped 3.3% from the year-ago level of $146.7
million due to weak performance by certain segments.
The segment generated $82.5 million in revenue, down 8.1% from
the prior year, hurt by soft residential and commercial sales of
natural gas. The segment registered a loss of $10.7 million,
against a loss of $7.9 million in third quarter 2011.
As of September 30, 2012, Questar Gas served 925,400 customers,
up 13,000, or 1.4% year over year.
Consolidated sales upped 42.0% year over year to at $9.8 million
in the quarter. Segmental income from continuing operations also
increased to $41.0 million from $37.7 million in the prior-year
quarter, attributable to a higher average investment base.
Quarterly production of natural gas also jumped 15.9% to 14.6
billion cubic feet (Bcf), up from 12.6 Bcf in third quarter 2011.
Consolidated revenue of $49.5 million declined slightly from the
$50.0 million in the comparable quarter last year. Income from
continuing operations came in at $32.6 million, reflecting a drop
of 3.8% year over year. The quarter's performance was impacted by
less revenue in transportation and natural gas liquids along with
a rise in interest rates.
Total natural gas transportation volumes in the quarter were
219.6 million decatherms, up from the prior-year level of 188.5
As of September 30, 2012, Questar had long-term debt (including
current portion) of $1,098.1 million, with a
debt-to-capitalization ratio of 51.4%.
During the quarter, the company bought back 927,000 shares for
$20.24 per share, netting $18.8 million. Questar intends to
conduct more repurchases in the coming months.
Management reiterated its 2012 earnings guidance in the range of
$1.15 to $1.19 per average diluted share. Total spending on
capital programs for the year is expected to reach about $350
For 2013, Questar guides for earnings in the range of $0.12 to
$1.20 per share, while capital expenditure will be likely $445
Questar expects to register strong growth in the next year with
growth in investment base at Wexpro, enhanced production and
earnings plus multi-year pipeline-replacement program and
increase in customer level.
We maintain our long-term Neutral recommendation on the stock.
Questar, which competes with
AGL Resources Inc.
), currently holds a Zacks #3 Rank, implying a short-term Hold
rating for a period of one to three months.