Salt Lake-based energy company Questar Corp. said Monday that while second-quarter earnings will match year-ago figures, the total will fall short of Wall Street expectations.
The company, which will release quarterly results July 30, said earnings in the quarter should be between 31 and 35 cents per share, compared with 33 cents per share a year ago.
On a recurring-earnings basis, that would represent an increase between 15 percent and 30 percent over the prior-year's 27-cents-per-share figure. The First Call consensus estimate, however, is 37 cents per share.
The company's stock price was down 8 percent early Tuesday, compared with Monday's close. It was at $22.20, down $1.93. In the past year, it has ranged from $18.87 to $33.75.
R.D. Cash, Questar chairman and chief executive officer, attributed the failure to meet market expectations to a recent weakness in natural-gas prices. Lower-than-expected short-term demand has caused some financial analysts to reduce their 12-month targets for gas prices.
"Seasonal price weakness notwithstanding, natural-gas fundamentals remain strong, and Questar's basic long-term strategies are on track," Cash said.
"Natural-gas demand will grow significantly over the next few years, and the Rocky Mountains will be an increasingly critical supply source," Cash said. "Questar is well positioned with a growing exploration and production operation and strategically located pipeline and storage systems to benefit from strong fundamentals in Western natural gas and electric-power markets."
Cash said new pipeline-expansion projects and the construction of natural gas-fired power generation plants will require development of new reserves.
That should put Questar in an enviable position. Recent "open seasons" indicated strong market support for expansion of the company's core pipeline system, as well as development of a new salt-cavern storage project.
While second-quarter gas production totals will be on par with first-quarter volumes, Questar expects production to increase in the second half of the year. That's due in part to results from drilling in a gas field at Pinedale, Wyo.
The Pinedale site has 135 to 140 attractive well locations if based on spacing of 80 acres. That could double if the company is able to reduce spacing to 40 acres.
The company said Pinedale is on target to reach previous production estimates of 70 million to 80 million cubic feet of gas and 700 to 750 barrels of oil by year-end.
Questar's outlook is based on the assumption that gas prices will be between $3 and $3.50 per thousand cubic feet. The company has hedged about 61 percent of its second-half 2001 gas production between $2.99 and $3.28 per thousand cubic feet. About 10 percent of its 2002 production is hedged at a price between $3.88 and $4.18.
"We recognize that gas prices will be highly volatile, and we can continue to grow and be successful at the more realistic prices we are seeing today," Cash said. "We expect prices to trend upward as demand increases, especially for power generation, and with the approach of the traditional winter heating season."