Questar Corp had a slight drop in net income last year with earnings of $25.85 million or $1.28 per share in 1988 compared with $25.93 million or $1.33 per share for 1987.
The Salt Lake-based energy company, parent company of Mountain Fuel Supply Co., said 1988 results include an after-tax write-down of oil and gas properties of $19.9 million or $1.03 per share, blamed on falling energy prices. The 1987 net income figure included after-tax write-downs of $19.9 million or $1.07 per share.Despite the lower earnings, Questar chairman R.D. Cash was upbeat, saying the corporation ended the year with "excellent cash flow, a strong balance sheet, a competitive dividend and a positive outlook."
The earnings figures and Cash's annual "letter to shareholders" were released this week, an unusual preview of the company's annual report that won't be published until April 1.
Questar spokesman R. Curtis Burnett said the move was not normal policy but information was being disclosed early because Questar management is on the East Coast this week attending an energy industry conference in which a number of companies will be making presentations to portfolio managers. Burnett said the company's financial disclosures could not be made at just the one meeting, thus the early release of financials.
Natural gas is "on the threshold of a strong growth period," Cash says in the letter. Gas usage nationally rose 11 percent in the past two years, the largest two-year increase since 1970. Cash cites the fuel's "positive environmental qualities" along with abundant supplies and competitive prices for the positive outlook.
Cash, who is also president and chief executive officer of Questar, said natural gas, because of its clean-burning properties, is being substituted for other fuels for power generation and other uses to reduce harmful emissions. He also contends natural gas-powered vehicles are "gaining acceptance."
Regarding the 1988 performance of Questar's subsidiary companies, the 1988 annual report will show that:
- Mountain Fuel Supply Co., Questar's gas distribution subsidiary, had higher income and continued above-average customer growth in 1988. Net income for the year was $20.43 million compared with a year-earlier total of $17.64 million.
Colder weather, along with a 2 percent increase in the number of customers, increased residential and commercial deliveries 7 percent for the year. Industrial deliveries rose 23 percent, principally from the return to operation of two major industrial customers: Kennecott and Geneva Steel.
- Questar Pipeline Co., the interstate natural gas transmission subsidiary, increased its total system "throughput" by 7 percent in 1988, including a 15 percent increase in volumes transported for others.
But price discounting, said to be required by increased competition, affected the pipeline's 1988 financial performance. Questar Pipeline had net income of $19.46 million in 1988, slightly below 1987's $19.95 million.
- Questar's exploration and production affiliates sustained a $12.11 million loss in 1988, primarily, the company said, because of the write-down in oil and gas properties. Average oil prices declined 14 percent while production was 10 percent lower. Gas prices were 2 percent below year-earlier levels and production dropped 3 percent.
As of Dec. 31, Questar had 99.4 billion cubic feet of non-cost-of-service gas reserves, compared with 105.9 billion cubic feet a year earlier. Non-cost-of-service oil reserves at the end of 1988 were 13.9 million barrels compared with a year-earlier total of 14.7 million barrels.
Finding costs, including reserve revisions and acquisitions, were $8.72 per barrel equivalent in 1988 and $10.29 per barrel equivalent for the 1984-1988 period. The finding cost figure included cost-of-service and noncost-of-service activities.
With reduced drilling because of low prices, Questar spent $7 million in 1988 to acquire 1 million barrels of oil and 1.7 billion cubic feet of gas.
Despite the challenges facing the business, Cash remains upbeat. "I feel more confident about the corporation's outlook than I have in several years," he tells shareholders.