Questar Corp. (STR), a natural gas-focused energy company, reported adjusted fourth-quarter earnings of 35 cents per share, lagging the Zacks Consensus Estimate by 3 cents. The bottom line was also lower than the year-ago quarter level of 39 cents per share. Lower natural gas production and transportation volumes pulled down the results, in addition to a substantial decline in liquids realizations.
 

Questar reported fourth-quarter revenues of $373.2 million, down 6.2% from a year ago. Moreover, quarterly revenues failed to meet the Zacks Consensus Estimate of $478 million.

However, in some good news for investors, the utility raised its quarterly dividend by 11% to 21 cents per share (or 84 cents per share annualized).

Segment Analysis

Questar Gas: The segment generated $318.9 million in revenues, down 5.5% from the prior-year quarter, owing to lower natural gas transportation volumes. Despite this, the segment reported operating income of $48.8 million, slightly above the year-ago quarter profit of $46.6 million. This was possible due to solid customer growth, the effects of cost-containment measures, and higher general rates.

As of Dec 31, 2014, Questar Gas served 962,200 customers, up 1.7% from the year ago.     

Wexpro: Segment revenues decreased 53.4% year over year to $6.1 million in the quarter. Lower production volumes led to the decline. Segmental operating income from continuing operations also fell to $41.8 million from $45.8 million in the prior-year quarter, hamstrung by sharply lower liquids realizations.   

Quarterly production of natural gas was down 24.2% to 11.9 billion cubic feet (Bcf) from 15.7 Bcf.

Questar Pipeline: The segment reported revenues of $46.8 million against $47.2 million in the comparable quarter last year. Deterioration in transportation volumes adversely affected the result. Income from continuing operations came in at $28.3 million versus $29.8 million reported in the fourth quarter of 2013.

Total natural gas transportation volumes were $208.6 million decatherms, compared with 225.9 million decatherms in the fourth quarter of 2013.

Expense Summary

The general and administrative expenses for the quarter increased 29.6% from the prior-year period to $39.9 million, while depreciation, depletion and amortization costs fell 1.2% to $50.8 million. Total operating expense of $261.1 million marked a decline from the year-ago period level of $275 million owing to lower cost of sales in the reported quarter.  

Financials

As of Dec 31, 2014, Questar had long-term debt (including current portion) of $1,283.6 million, with a debt-to-capitalization ratio of 50.7%.   

2015 Guidance

For 2015, Questar projects earnings per diluted share in the range of $1.20–$1.30, while fixing a capital budget of $370 million.

Zacks Rank

Questar currently carries a Zacks Rank #3 (Hold).

Stocks that Warrant a Look

Better-ranked natural gas distributors like Chesapeake Utilities Corp. (CPK), Northwest Natural Gas Co. (NWN) and WGL Holdings Inc. (WGL) are worth consideration. All these stocks sport a Zacks Rank #2 (Buy).