Questar Corp. took a $20 million third period loss as lower oil prices required a write-down of its oil and gas properties, which also reduced results for the first nine months of 1988.
The diversified energy company said oil prices during the third quarter were approximately 22 percent below year-earlier levels. Under the full-cost accounting rules, Questar's exploration and production affiliates took a write-down of $19.9 million, or $1.03 per share, after taxes."We were concerned at mid-year about the possibility of weaker oil prices and their continued decline made a write-down unavoidable," R.D. Cash, Questar's chairman and chief executive officer, said.
"The write-down, which does not affect cash flow or the company's overall financial position, obscures the continuing fundamental strength of our gas distribution and transmission operations."
Including the write-down, Questar reported a loss of $20.99 million or $1.10 per share, during the third quarter of 1988, compared with a loss of $3.4 million, or 24 cents per share, for the comparable 1987 period.
Questar's nine-month results, again including the write-down, were net income of $11.69 million, or 56 cents per share, for 1988, compared with year-earlier totals of $20.89 million, or $1.09 per share.
Excluding the write-downs, Questar had a net loss of $1.06 million, or 7 cents per share, in the third quarter of 1988 and net income of $31.62 million, or $1.59 per share, for the first nine months of the year.
A year earlier, Questar had a loss of $3.40 million, or 24 cents per share, during the third quarter and net income of $29.89 million, or $1.57 per share, for the nine-month period.
The 1987 results included a $9 million, or 48 cents pershare, after-tax write-down of oil and gas properties in the first quarter.
With the $19.9 million after-tax write-down, Questar's three exploration and production affiliates recorded an $18.79 million loss during the third quarter of 1988 and a $14 million loss for the year to date.
A year earlier, the companies had net income of $2.69 million for the quarter and a $971,000 loss for the first nine months, including the $9 million first quarterwrite-down.
During the third quarter of 1988, combined oil production declined 10 percent, from 757,000 to 678,000 barrels. The average price fell 22 percent to $13.46 per barrel. Gas production was 32 percent below year-earlier levels because of wells that were shut-in. The average price dropped 4 percent to $1.76 per thousand cubic feet.
Year-to-date oil production was 9 percent lower and selling prices were 8 percent below 1987 levels, while gas production was 5 percent lower and selling prices were 3 percent lower.
Questar's retail natural gas distribution operations, conducted by Mountain Fuel Supply Co., reported a $3.42 million loss during the third quarter of 1988 compared with a year-earlier $3.32 million loss.
For the first nine months of this year, Mountain Fuel's net income was $13.42 million compared with year-earlier results of $11.73 million.
The year-to-date improvement reflected 13 percent colder weather, a 3.1 percent increase in customers and 14 percent higher deliveries. The return of two large customers helped boost industrial deliveries by 29 percent.
Questar's interstate natural gas transmission subsidiary, Questar Pipeline Co., had net income of $1.24 million during the third quarter compared with a $1.96 million loss for the comparable year-earlier period. The higher quarterly net income resulted primarily from a new rate structure that went into effect Nov. 1, 1987.
Under prior rates, certain demand and commodity charges were collected during the November-to-April winter heating season. The charges now are collected over a 12-month period. This lowered the pipeline's earnings during the first four months of 1988, but increased them beginning in May and through the third quarter, a spokesman said.
For the first nine months of 1988, Questar Pipeline had net income of $13.26 million compared with $12.19 million for the comparable 1987 period. Questar Pipeline's total system throughput as of Sept. 30, 1988, was 120.6 million decatherms, 6 percent higher than a year earlier. Total transportation increased 12 percent to 80.8 million decatherms.
Transportation for the pipeline's marketing affiliates, Questar Energy Co. and Westar Marketing Co., increased 102 percent to 5.2 million decatherms.
Other Questar operations had a consolidated loss of $16,000 during the third quarter of 1988 after recording a quarterly loss of $816,000 a year earlier.
For the year to date, they lost $994,000 compared with a $2,062,000 loss during the first nine months of 1987.
The improved results were due to lower corporate debt expense and reduced losses by Questar's brick-manufacturing operations.