Natural gas-focused energy company Questar Corporation (STR) reported mixed fourth-quarter 2012 results, owing to high rate of drilling success, partially offset by steeper depreciation, administrative and interest expenses.
Earnings per share (excluding retirement incentive costs) came in at 38 cents, up 11.8% from the profit of 34 cents earned in the prior-year quarter. The result surpassed the Zacks Consensus Estimate by 3 cents.
Total revenue came in at $343.0 million, failing to match the Zacks Consensus Estimate of $381.0 million. On a year-over-year basis, revenue slipped 3.3% from the year-ago level of $354.8 million due to weak performance by Questar Gas segment.
Segment Analysis
Questar Gas: The segment generated $281.0 million in revenue, down 5.6% from the prior year, hurt by soft residential and commercial sales of natural gas. The segment registered an income of $40.3 million, against an income of $37.5 million in the fourth quarter of 2011.
As of Dec 31, 2012, Questar Gas served 930,800 customers, up 11,500, or 1.3% year over year.
Wexpro: Consolidated sales increased 7.1% year over year to $9.0 million in the quarter. Segmental income from continuing operations also increased to $40.2 million from $37.4 million in the prior-year quarter, attributable to a higher average investment base.
Quarterly production of natural gas edged up 1.5% to 13.6 billion cubic feet (Bcf), up from 13.4 Bcf in the fourth quarter of 2011.
Questar Pipeline: Consolidated revenue of $53.0 million increased by 9.1% from the $48.6 million in the comparable quarter last year. Income from continuing operations came in at $28.8 million, reflecting a drop of 7.1% year over year. The quarter’s performance was impacted by less revenue in transportation and natural gas liquids along with a rise in depreciation, interest and G&A costs.
Total natural gas transportation volumes in the quarter were $227.4 million decatherms, up from the prior-year level of 200.8 decatherms.
Financials
As of Dec 31, 2012, Questar had long-term debt (including current portion) of $1,180.9 million, with a debt-to-capitalization ratio of 53.3%.
During 2012, the company bought back 4.6 million shares for $19.95 per share, netting $92 million.
Guidance
For 2013, Questar guides for earnings in the range of $1.12 to $1.20 per share. Questar expects that the significant cash flows that the company has generated from Wexpro and Questar Pipeline will favor for future and continued reinvestment in their business.
Stocks to Consider
Questar currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at other energy firms like Calumet Specialty Products Partners LP (CLMT), NGL Energy Partners LP (NGL) and Global Partners LP (GLP) as attractive investments. All these firms – sporting a Zacks Rank #1 (Strong Buy) – offer value and are worth accumulating at current levels.