Natural gas-focused energy company Questar Corporation (STR) reported mixed fourth-quarter 2013 results as strong performance by all its segments were partially offset by steeper operating expenses.
Adjusted earnings per share of 39 cents were up 8.3% from 36 cents earned in the prior-year quarter. The bottom line also surpassed the Zacks Consensus Estimate by 2 cents.
Total revenue came in at $397.9 million, higher than the year-ago quarter level of $343.0 million, but below the Zacks Consensus Estimate of $433.0 million. A substantial drop in natural gas liquid (NGL) sales, which affected the Questrar Pipeline segment revenues, could be the reason for the miss.
For 2013, Questar reported adjusted earnings per share of $1.21, in line with the Zacks Consensus Estimate and higher than $1.19 in 2012. Revenues of $1,220.0 million surpassed the year-ago level of $1,089.9 million but failed to meet the Zacks Consensus Estimate of $1,512.0 million.
Segment Analysis
Questar Gas: The segment generated $337.4 million in revenues, up 20.1% from the prior year, owing to an increase in natural gas sales. The segment registered an income of $46.6 million against $40.3 million in the fourth quarter of 2012.
As of Dec 31, 2013, Questar Gas served 946,000 customers, up 1.6% from 931,000 a year ago.
Wexpro: Consolidated sales increased 45.6% year over year to $13.1 million in the quarter. Segmental income from continuing operations also increased to $45.8 million from $40.2 million in the prior-year quarter, attributable to an increase in production volumes and higher price realizations.
Quarterly production of natural gas increased 15.4% to 15.7 billion cubic feet (Bcf) from 13.6 Bcf.
Questar Pipeline: Consolidated revenue of $47.2 million decreased 10.9% from the $53.0 million in the comparable quarter last year. Income from continuing operations came in at $29.8 million against $28.8 million in fourth quarter 2012. The improvement could be attributable to higher realizations, partially offset by a drop in NGL sales.
Total natural gas transportation volumes in the quarter were $225.9 million decatherms, down from the prior-year level of 227.4 million decatherms.
Expense Summary
The general and administrative expenses for the quarter decreased 6.1% from the prior-year period to $30.8 million, while depreciation, depletion and amortization costs increased 11.7% to $51.4 million. Total operating expense – at $275.0 million – increased 17.3% from the fourth quarter of 2012.
Financials
As of Dec 31, 2013, Questar had long-term debt (including current portion) of $1,286.4 million, with a debt-to-capitalization ratio of 51.8%.
Guidance
For 2014, Questar guides for earnings in the range of $1.18 to $1.28 per share. The company plans to invest about $440 million in 2014, with a major portion ($190 million) of the investment allocated to the Questar Gas segment. Expenditure projections for Wexpro and Questar Pipeline are $100 million and $120 million respectively.
Stocks to Consider
Questar currently carries a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can also consider other energy sector firms like Helmerich & Payne, Inc. (HP), Matador Resources Company (MTDR) and Clayton Williams Energy, Inc. (CWEI). All these firms sport a Zacks Rank #1 (Strong Buy).
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