Salt Lake-based Questar Corp. may spin off its gas, oil exploration, production business

SALT LAKE CITY — Questar Corp. said Wednesday that it is considering a possible spinoff of the company's natural-gas and oil exploration and production business.

If approved by the board of directors, the new company would consist of Questar subsidiaries Questar E&P Co., Questar Gas Management and Questar Energy Trading and would be based in Denver, according to Keith Rattie, Questar chairman, president and chief executive officer.

Questar Corp. would remain an integrated natural gas company consisting of subsidiaries Questar Gas Co., Questar Pipeline and Wexpro Co., with corporate headquarters remaining in Salt Lake City.

"If we go forward, the transaction may happen sometime in the second half of this year," Rattie told the Deseret News. "Both companies will have separate boards and separate management teams."

Questar Corp. had a 42 percent year-over-year decline in profits in 2009, and the company cited lower prices for natural gas, crude oil and natural gas liquids.

The parent company of Utah's largest natural gas utility reported net income in 2009 of $393.3 million, or $2.23 per share, compared with $683.8 million, or $3.88 per share, in 2008. Questar's net income was $150 million, or 85 cents per share, in the fourth quarter of 2009, up 24 percent from $121.2 million, or 69 cents per share, in the same period a year before.

In 2009, the three companies proposed to be spun off produced net income totaling $212.8 million, including $94.6 million in the fourth quarter. Questar E&P alone contributed $135 million of the corporation's net income in 2009 and $70.6 million of the fourth-quarter 2009 net income. The other three produced net income totaling $180.5 million in 2009, including $55.8 million in the fourth quarter.

Questar Gas provides natural gas service to nearly 900,000 homes and businesses in Idaho, Utah and Wyoming.

Rattie said the reason for the proposal is to separate two distinctly different entities that have very different business missions.

"The E&P business … is basically a commodity business," he said. "They are high-growth but also very volatile."

Investors in the E&P business understand and accept the high-risk, high-reward nature of that industry, while investors in Questar Gas are more comfortable in the low-risk, consistent return potential of the utility, Rattie said. By separating the two entities, the companies would be better able to serve the needs of both investor groups, he said.