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Natural gas-focused energy company, Questar Corporation (STR - Analyst Report) reported adjusted second-quarter 2014 earnings of 23 cents per share, in line with the Zacks Consensus Estimate. The bottom line, however, was higher than the year-ago quarter level of 22 cents per share. Improvement in the company’s Wexpro and Questar Pipeline segments aided the results.


Questar reported second-quarter revenues of $201.3 million, up about 3% from the year-ago quarter. However, quarterly revenues failed to meet the Zacks Consensus Estimate of $286 million. Lower liquid linked sales from the Wexpro segment led to the miss.

Segment Analysis

Questar Gas: The segment generated $145 million in revenues, up 3.5% from the prior year quarter, owing to higher natural gas sales and better realizations. However, segment operating income of $0.3 million fell significantly from $2.2 million reported in the second quarter of 2013.

As of Jun 30, 2014, Questar Gas served 953,800 customers, up 1.6% from the year-ago quarter.    

Wexpro: Segment revenues decreased 8.2% year over year to $7.8 million in the quarter due to lower liquid production volumes. However, segmental income from continuing operations increased to $45.8 million from $41.4 million in the prior-year quarter on the back of lower operating and maintenance expenses.   

Quarterly production of natural gas increased 20% to 17.7 billion cubic feet (Bcf) from 14.8 Bcf.

Questar Pipeline: The segment reported revenues of $48.1 million against $47 million in the comparable quarter last year. Income from continuing operations came in at $30.4 million versus $28.1 million in second-quarter 2013. Higher transportation volumes and NGL realizations aided the results.

Total natural gas transportation volumes were $205.9 million decatherms, up from the prior-year level of 204.8 million decatherms.

Expense Summary

The general and administrative expenses for the quarter decreased 4.7% from the prior-year period to $30.5 million, while depreciation, depletion and amortization costs increased 19.6% to $56.8 million. Total operating expense of $124.9 million marked a marginal increase from the year-ago period level of $124.5 million.  

Financials

As of Jun 30, 2014, Questar had long-term debt (including current portion) of $1,284.9 million, with a debt-to-capitalization ratio of 50.3%.  

Guidance

For 2014, Questar reiterated earnings guidance in the range of $1.18 to $1.28 per share. However, the company reported that the 2014 capital expenditure forecast has been lowered to $400 million from $440 million.

Zacks Rank & Stocks to Consider

Questar currently holds a Zacks Rank #4 (Sell). Meanwhile, one can consider better-ranked players from the industry such as WGL Holdings Inc. (WGL - Snapshot Report), AGL Resources Inc. (GAS - Analyst Report) and Atmos Energy Corporation (ATO - Snapshot Report). While WGL Holdings sports a Zacks Rank #1 (Strong Buy), AGL Resources and Atmos Energy have a Zacks Rank #2 (Buy).

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