QEP Resources Reports Third Quarter Adjusted EBITDA of $353.7 Million and Production of 70.7 Bcfe
DENVER, Oct. 25, 2011 /PRNewswire/ — QEP Resources (NYSE: QEP) reported adjusted EBITDA (a non-GAAP measure) of $353.7 million for the third quarter of 2011 compared to $297.5 million in the 2010 period, a 19% increase. Factors driving QEP’s results included increased gathering and processing margins at QEP Field Services, 15% higher net production from QEP Energy, and higher net realized crude oil and NGL prices which more than offset net realized natural gas prices that were 14% lower than a year ago at QEP Energy.
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ADJUSTED EBITDA BY SUBSIDIARY
(in millions)
3 Months Ended 9 Months Ended
September 30, September 30,
2011 2010 Change 2011 2010 Change
---- ---- ------ ---- ---- ------
QEP
Energy $267.3 $246.0 9% $757.0 $683.8 11%
QEP
Field
Services 84.8 48.7 74 233.1 151.4 54
QEP
Marketing
and
other 1.6 2.8 (43) 6.0 6.8 (12)
--- --- --- ---
TOTAL(a) $353.7 $297.5 19% $996.1 $842.0 18%
(a) See attached schedule for a reconciliation of
adjusted EBITDA to net income.
QEP Resources net income from continuing operations for the third quarter was $101.5 million or $0.57 per diluted share, compared to $71.1 million or $0.40 per diluted share in the 2010 period. Excluding changes in unrealized gains and losses on natural gas basis-only swaps, gains and losses on non-core asset sales, separation costs and losses on early extinguishment of debt, QEP Resources adjusted net income from continuing operations (a non-GAAP measure) was $83.5 million or $0.47 per diluted share in the third quarter compared to $57.2 million or $0.32 per diluted share in the 2010 period.
NET INCOME BY SUBSIDIARY
(in millions, except earnings per share)
3 Months Ended 9 Months Ended
September 30, September 30,
2011 2010 Change 2011 2010 Change
---- ---- ------ ---- ---- ------
QEP
Energy $58.3 $58.6 (1%) $148.2 $165.0 (10%)
QEP
Field
Services(a) 42.0 21.0 100 114.2 68.5 67
QEP
Marketing
and
other 1.6 2.0 (20) 5.5 3.6 53
Separation
and
debt
extinguishment
costs (0.4) (10.5) - (0.4) (19.1) -
---- ----- ---- -----
Income
from
continuing
operations(a) $101.5 $71.1 43% $267.5 $218.0 23%
Discontinued
operations(b) - - - - 43.2 -
--- --- --- ----
NET
INCOME(a) $101.5 $71.1 43% $267.5 $261.2 2%
Earnings per
diluted
share
From
continuing
operations $0.57 $0.40 $1.50 $1.23
Total
earnings $0.57 $0.40 $1.50 $1.47
Weighted
average
diluted
shares 178.5 177.9 178.5 177.6
(a) Net income represents amounts attributable to QEP
Resources after deducting non-controlling interest.
(b) QEP Resources completed its tax-free spin-off from
Questar Corporation on June 30, 2010. In conjunction
with the spin-off, QEP Resources distributed the common
stock of its wholly-owned subsidiary, Wexpro Company, to
Questar. Accordingly, Wexpro's historical financial
results have been presented as discontinued operations in
this release.
“The third quarter of 2011 was another strong quarter for QEP Resources,” said Chuck Stanley, President and CEO. “QEP Energy production was up 15% from a year ago, driven by strong results from the Pinedale Anticline and Haynesville Shale plays, combined with significant contributions from new wells in our Woodford “Cana” Shale and Bakken/Three Forks plays. With 65% of our 2011 drilling capital directed to oil and liquids-rich gas plays, we grew oil and NGL production 44% year-to-date compared to the same period a year ago. Oil and NGL production accounted for 29% of QEP Energy net realized production revenues year-to-date and we expect that share to grow as we continue to allocate capital to our higher-margin liquids-rich resource plays. We also completed the successful early startup, commissioning and loading of Field Service’s new Blacks Fork II gas processing plant, which made a significant contribution to both QEP Energy and Field Services results during the quarter and should continue to do so for many years to come,” Stanley added.
Third Quarter 2011 Highlights
- QEP Energy grew natural gas, oil and NGL net production to 70.7 billion cubic feet of natural gas equivalent (Bcfe) compared to 61.7 Bcfe in the 2010 period. Crude oil and NGL comprised 15% of reported production volumes.
- QEP Energy adjusted EBITDA increased 9% compared to the 2010 period, driven by a 15% increase in production and increased net realized liquid prices – 31% for crude oil and 27% for NGL, partially offset by a 14% decrease in net realized natural gas prices.
- QEP Energy net realized natural gas prices averaged $4.00 per thousand cubic feet (Mcf), compared to $4.64 per Mcf in the 2010 period. Field-level natural gas prices in 2011 were $3.27 per Mcf compared to $3.37 per Mcf in 2010. Natural gas-related derivative settlements contributed $43.7 million in 2011 ($0.73 per Mcf) compared to $69.7 million in 2010 ($1.27 per Mcf).
- QEP Energy net crude oil and NGL revenues (including the settlement of crude oil-related derivatives) increased 86% compared to the third quarter of 2010 and represented 32% of net realized production revenues.
- Net realized crude oil prices averaged $82.44 per barrel, up 31% compared to the 2010 period. Oil related derivative settlements contributed $0.9 million in 2011 ($0.91 per bbl) compared to a loss of $1.4 million in 2010 ($1.80 per bbl).
- Net realized NGL prices at QEP Energy averaged $38.17 per barrel, up 27% compared to the 2010 period.
- QEP Field Services adjusted EBITDA increased 74% from the third quarter of 2010, driven by a 26% increase in gathering margin and a 127% increase in processing margin. Net income was $42.0 million – double the $21.0 million generated in the third quarter of 2010.
- QEP Energy year-to-date capital investment (on an accrual basis) was $939.4 million comprised of $898.7 million in drilling and completion and other expenditures (including $0.5 million of dry hole exploration expense) and $40.7 million in property acquisition costs.
- QEP Field Services year-to-date capital investments (on an accrual basis) to expand capacity at its gathering, processing and treating facilities in western Wyoming, eastern Utah and the Haynesville/Cotton Valley area of northwest Louisiana totaled $68.1 million.
- Field Services introduced gas into the Blacks Fork II plant on July 14th. QEP Energy entered into a fee-based processing agreement with QEP Field Services under which Field Services provides cryogenic gas processing services for QEP Energy’s Pinedale production volumes at Blacks Fork II.
- Separation costs and losses on early extinguishment of debt reduced QEP Resources pre-tax income from continuing operations by $0.7 million in the quarter compared to $13.5 million in the 2010 period.
QEP raises 2011 adjusted EBITDA and Production Guidance
QEP now expects 2011 adjusted EBITDA to range from $1,315 to $1,350 million, compared to a previously forecast range of $1,275 to $1,325 million. QEP Energy expects 2011 production should range from 270 to 274 Bcfe, compared to a previously forecast range of 265 to 269 Bcfe.
The company’s guidance assumes hedge positions in place on the date of this release and other assumptions summarized in the table below:
Guidance and Assumptions 2011 2011
Current Previous
QEP Resources adjusted
EBITDA (millions) $1,315-$1,350 $1,275-$1,325
QEP Energy capital
investment (millions) $1,250 $1,173
QEP Field Services
capital investment
(millions) 95 125
QEP Marketing and Other
capital investment
(millions) 5 2
--- ---
Total QEP Resources
capital investment
(millions) $1,350 $1,300
QEP Energy production - 270 - 265 -
Bcfe 274 269
NYMEX gas price per
MMBtu(a) $3.50-$4.00 $4.00-$4.50
NYMEX crude oil price per
bbl(a) $80.00-$90.00 $90.00-$100.00
NYMEX/Rockies basis
differential per
MMBtu(a) $0.25-$0.10 $0.50-$0.30
NYMEX/Midcontinent basis
differential per
MMBtu(a) $0.25-$0.10 $0.30-$0.15
(a) For remaining 2011 un-hedged volumes
Approximately 72% of QEP Energy’s forecast natural gas production and 27% of forecast oil production for the remainder of 2011 is hedged with a combination of fixed price swaps and costless price collars. On a natural gas equivalent basis, the company has approximately 60% of its forecast production for the remainder of 2011 hedged. A table with details of the Company’s hedge positions is included at the end of this release.
QEP now forecasts 2011 total capital investment of $1,350 million, comprised of $1,250 million in QEP Energy, $95 million in QEP Field Services, and $5 million in QEP Marketing. The increase in forecasted capital investment in QEP Energy is due to: 1) an increase in the number of net completed Pinedale and Haynesville Shale wells by year-end due to continued drilling/completion efficiency gains; 2) increased completed well costs associated with non-operated Haynesville wells; 3) accelerated investment for a produced water gathering/disposal system in the Williston Basin; and 4) an increase in lease acquisition spending. Forecasted capital investment in QEP Field Services declined $30 million compared to the prior forecast due to actual costs associated with new plants being less than forecast and a change in timing of expenditures on certain other gathering and processing projects.
QEP Energy Results
QEP Energy’s third quarter production increased 15% to 70.7 Bcfe compared to 61.7 Bcfe in the 2010 period. The Southern Region (formerly the Midcontinent region) contributed 55% of current quarter production compared to 54% in the 2010 period.
QEP Energy - Production by Major Area (Bcfe)
3 Months Ended 9 Months Ended
September 30, September 30,
2011 2010 Change 2011 2010 Change
---- ---- ------ ---- ---- ------
Southern Region
---------------
Haynesville/
Cotton
Valley 26.6 22.0 21% 80.4 56.7 42%
Midcontinent 12.1 11.4 6 34.0 30.4 12
---- ---- ---- ----
Total
Southern
Region 38.7 33.4 16 114.4 87.1 31
Northern Region
---------------
Pinedale
Anticline 21.6 17.9 21 55.6 49.9 11
Uinta
Basin 4.8 5.3 (9) (a)16.2 15.9 2
Rockies
Legacy 5.6 5.1 10 15.1 14.0 8
--- --- ---- ----
Total
Northern
Region 32.0 28.3 13 86.9 79.8 9
Total QEP
Energy 70.7 61.7 15% 201.3 166.9 21%
(a) Includes 1.6 Bcfe in Q1 from prior periods due to a
change in ownership interest in a federal unit.
QEP Energy - Commodity Prices
3 Months Ended 9 Months Ended
September 30, September 30,
2011 2010 Change 2011 2010 Change
---- ---- ------ ---- ---- ------
Average field-
level natural
gas price ($
per Mcf) $3.27 $3.37 (3%) $3.34 (12%)
$3.80
Natural gas
hedging impact
($ per Mcf)
(a) 1.20 1.77 1.19 1.62
---- ---- ---- ----
Average revenue
($ per Mcf) 4.47 5.14 4.53 5.42
Realized losses
on basis-only
swaps ($ per
Mcf) (b) (0.47) (0.50) (0.50) (0.61)
----- ----- ----- -----
Net realized
natural gas
price ($ per
Mcf) $4.00 $4.64 (14%) $4.03 $4.81 (16%)
Average field-
level oil
price ($ per
bbl) $81.53 $64.85 26% $84.95 $67.31 26%
Oil hedging
impact ($ per
bbl) (a) 0.91 (1.80) 0.38 (2.42)
---- ----- ---- -----
Net realized
oil price ($
per bbl) $82.44 $63.05 31% $85.33 $64.89 31%
Average field-
level NGL
price ($ per
bbl) $38.17 $30.07 27% $40.48 $34.83 16%
(a) Reported in revenues in the
consolidated income statement.
(b) Reported below operating income
in the consolidated income
statement.
QEP Energy - Production Costs (per Mcfe)
3 Months Ended 9 Months Ended
September 30, September 30,
2011 2010 Change 2011 2010 Change
---- ---- ------ ---- ---- ------
Depreciation,
depletion and
amortization $2.47 $2.56 (4%) $2.60 $2.59 -%
Lease
operating
expense 0.54 0.54 - 0.53 0.55 (4)
General and
administrative
expense 0.33 0.29 14 0.35 0.33 6
Allocated
interest
expense 0.29 0.34 (15) 0.30 0.35 (14)
Production
taxes 0.37 0.30 23 0.37 0.35 6
---- ---- ---- ----
Total
Production
costs $4.00 $4.03 (1%) $4.15 $4.17 - %
- Depreciation, depletion and amortization expense per Mcfe (the DD&A rate) decreased in the third quarter of 2011 compared to 2010 primarily as the result of booking additional NGL reserves in Pinedale associated with the Blacks Fork II processing plant and the addition of lower cost reserves in the Haynesville/Cotton Valley area.
- Lease operating expense per Mcfe decreased in the year-to-date period compared to 2010 as a result of increased production volumes in lower operating cost areas. Growing production from new high-rate, low-operating cost wells in the Haynesville/Cotton Valley area and Pinedale coupled with declining production from higher cost areas lowered average per Mcfe lease operating expense. For the quarter, lease operating expenses per Mcfe were flat.
- General and administrative (G&A) expense per Mcfe increased in the three and nine months ended September 30, 2011, as the result of higher employee benefit plan related expenses, increased legal and outside professional services and higher insurance costs which were partially offset by increased production in the three and nine months ended September 30, 2011.
- Production taxes per Mcfe increased in the current year periods compared to 2010 as the result of increased field-level crude oil and NGL prices.
- QEP Energy total cash cost of production – lease operating expense plus general and administrative expense, allocated interest, and production taxes was $1.53 per Mcfe in the third quarter, compared to $1.47 per Mcfe in the 2010 period, a 4% increase.
QEP Energy Operations Update
Growth continues in the Haynesville Shale of NW Louisiana
Since the last update, QEP has completed 13 additional company-operated Haynesville wells, each with strong production rates and pressures. In 2011, QEP drill times have averaged 32 days from spud to total depth on company-operated Haynesville wells, down from 37 days in 2010. Improved drilling performance and completion efficiencies have allowed QEP to remain the lowest cost operator in its portion of the Haynesville play. QEP-operated gross completed well costs averaged $9.1 million in 2011 compared to $9.3 million in 2010. QEP has 7 wells waiting on completion or being completed and currently has 6 operated rigs working in the Haynesville play. The Company also participated in 14 outside-operated Haynesville wells that were completed and turned to sales since the last operations update. Working interest in these wells ranged from less than 1% to 38%. QEP has interests in 8 outside-operated Haynesville wells that are waiting on completion. Slides with maps and other supporting materials referred to in this release are posted on the Company’s website www.qepres.com – please refer to slides 3 and 4 for additional information on QEP’s Haynesville activities.
During the third quarter of 2011, the company’s Haynesville net production averaged approximately 238 MMcfd and Cotton Valley/Hosston net production averaged approximately 50 MMcfd. QEP net production from the Haynesville play continues to be impacted by the Company’s decision to restrict the flowing rate of Haynesville wells to decrease near-wellbore pressure drawdown. The Company continues to restrict flow rates to minimize reservoir and propped fracture damage which should lead to increased ultimate recoverable reserves.
QEP on track to deliver 100 to 105 new Pinedale well completions in 2011
QEP has completed and turned to sales 89 new wells at Pinedale since resuming completion operations in mid-March 2011. The company suspends completion operations at Pinedale during the coldest months of the winter. QEP currently has 16 operated wells drilled and cased and waiting on completion. Drilling and completion efficiencies have allowed QEP to maintain its industry leading Pinedale completed well costs which were approximately $3.8 million per well in the third quarter. The average drill time from spud to total depth is 13.8 days in 2011 compared to 17 days in 2010. The company has 4 rigs currently working at Pinedale. During the third quarter of 2011, QEP’s Pinedale net production averaged approximately 235 MMcfed. As a result of a new fee-based processing agreement between QEP Energy and QEP Field Services, QEP Energy average net equivalent production for the third quarter included a significant contribution from liquids (193 MMcf/day, 1,621 Bbl Oil/day and 5,315 Bbl NGL/day). The new fee-based processing agreement was effective August 1. Slides 5 and 6 provide additional details on QEP’s Pinedale activity.
Strong industry activity continues in the Woodford “Cana” Shale play
QEP has completed and turned to sales 4 new QEP-operated Woodford “Cana” Shale wells in western Oklahoma. QEP has 2 operated wells currently being drilled and one operated well waiting on completion. The company currently operates 22 producing wells and has a non-operated working interest in 169 producing wells across the play. The company also has interests in 7 wells currently being drilled and 18 wells waiting on completion that are operated by others. During the third quarter of 2011, QEP net production from the play averaged approximately 45 MMcfed. Slide 7 shows QEP’s acreage and additional details on the Cana play.
Bakken/Three Forks production grows on company’s 90,000 acre North Dakota leasehold
QEP has completed and turned to sales 3 additional Bakken Formation operated wells in the Williston Basin of North Dakota. QEP has 4 operated wells currently being completed and 6 operated wells waiting on completion in the play. QEP also has interests in 8 outside-operated wells currently being drilled and 9 outside-operated wells waiting on completion. The company operates 20 producing wells in the play and has a working interest in 79 producing wells that are operated by others. During the third quarter of 2011, QEP’s Bakken/Three Forks net production averaged approximately 4,100 Boepd. Gross costs for recently completed QEP-operated long lateral Bakken/Three Forks (10,000′ average lateral length) wells have averaged $9.7 million, up over $1 million from early 2011. Slide 8 shows QEP’s acreage and activity in the Bakken/Three Forks play.
Granite Wash and Atoka Wash horizontal development in the Texas Panhandle
Since the last operations update, the company has completed and turned to sales 2 additional QEP operated Atoka Wash horizontal wells and one additional Caldwell zone horizontal well in Wheeler County, Texas. QEP has a 100% working interest in all three newly completed wells. The company currently has one Caldwell zone horizontal well and one Cherokee zone horizontal well waiting on completion. QEP is also participating in one outside-operated well currently being drilled. QEP has approximately 38,900 net acres in the “Wash” plays in the western Anadarko Basin including 25,300 acres in the Texas Panhandle. QEP has a working interest in a total of 50 producing horizontal Granite Wash/Atoka Wash wells in the Texas Panhandle. During the third quarter of 2011, net production from this play (vertical and horizontal wells) averaged approximately 38 MMcfed. Slide 9 shows QEP’s acreage position and the location of the QEP-operated wells completed in the play since the last operations update and the two operated wells that are waiting on completion.
QEP Field Services Adjusted EBITDA Up 74%; Fee-based processing volumes up 11%; NGL sales volume up 32%
QEP Field Services (Field Services) – a QEP subsidiary that provides gas gathering and processing services – third quarter adjusted EBITDA increased 74% to $84.8 million compared to $48.7 million in the 2010 period. The increase was the result of higher gathering and processing margins.
- Gathering margin (total gathering revenues less gathering related operating expenses) increased 26%, or $ 9.9 million compared to the third quarter of 2010, driven primarily by increased other gathering revenue related to a third party processing arrangement for certain gas volumes in the Northern Region and a 6% increase in the average gathering rate. Total system throughput volume for the quarter averaged 1.4 million MMBtu per day.
- Processing margin (total processing plant revenues less plant operating expenses and shrinkage) increased 127%, or $24.1 million compared to the third quarter of 2010, driven primarily by keep-whole processing margins that were 126% higher. The increased keep-whole processing margin was primarily the result of a 52% increase in NGL prices and a 32% increase in NGL volumes.
- Approximately 72% of Field Services’ third quarter net operating revenue was derived from fee-based gathering and processing activities compared to 81% in the 2010 period.
- QEP Field Services gathering volumes totaled 126.9 million MMBtu for the third quarter of 2011 compared to 126.6 million MMBtu for the third quarter of 2010.
- Fee-based processing revenues increased 73% compared to the third quarter 2010, due to a 11% increase in fee-based processing volumes to 63.8 million MMBtu and a 50% increase in the average processing fee rate to $0.24 per MMBtu.
- NGL sales volumes totaled 34.0 million gallons during the 2011 quarter compared to 25.8 million gallons during the 2010 quarter, a 32% increase.
- The new 420 MMcfd Blacks Forks II cryogenic gas processing plant in southwest Wyoming was completed on July 14th, well ahead of schedule and within budget. Blacks Fork II generated $9.6 million of processing margin for QEP Field Services during the third quarter. With the completion of Blacks Fork II, QEP Field Services owns and operates processing plants in the Northern (Rocky Mountain) Region with an aggregate processing capacity of 1.37 Bcfd of natural gas. Slides 10 and 11 show the location of QEP Field Services assets and the new Blacks Fork II plant.
Financing Activities
During the third quarter, QEP entered into a new $1.5 billion, 5-year, unsecured revolving credit agreement with a group of 19 financial institutions. The credit facility replaces the $1.0 billion credit facility that was scheduled to mature in March of 2013. The new credit facility provides for borrowings at short-term interest rates and contains customary covenants and restrictions. The agreement also contains provisions which would allow for the amount of the facility to be increased to $2.0 billion and for the maturity date to be extended for two additional one-year periods. QEP expensed $0.7 million of deferred financial costs associated with the old credit facility in the period.
Third Quarter 2011 Results Conference Call
QEP Resources management will discuss third quarter 2011 results in a conference call on Wednesday, October 26, beginning at 11:00 a.m. ET. The call can be accessed at www.qepres.com. A replay of the teleconference will be available on the website and from October 26 to November 9 by dialing (855) 859-2056 in the U.S. or Canada and (404) 537-3406 for international calls, and then entering passcode 17043271. In addition, updated maps showing QEP’s leasehold and current activity for key operating areas discussed in this release can be found on the company’s website.
About QEP Resources
QEP Resources, Inc. (NYSE:QEP) is a leading independent natural gas and oil exploration and production company with operations focused in the Rocky Mountain and Midcontinent of the United States. QEP Resources also gathers, compresses, treats, processes and stores natural gas.
Forward-Looking Statements
This release includes forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933, as amended, and Section 21(e) of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by words such as “anticipates,” “believes,” “forecasts,” “plans,” “estimates,” “expects,” “should,” “will” or other similar expressions. Such statements are based on management’s current expectations, estimates and projections, which are subject to a wide range of uncertainties and business risks. These forward-looking statements include statements regarding: forecasted adjusted EBITDA, production and capital investment for 2011 and related assumptions for such guidance; percentage of net realized production revenues attributed to oil and NGL production; number of rigs planned in operating areas; changes in lease operating expenses; the effects of restricting the flowing rate at the Haynesville Shale; and the capacity of the Blacks Fork II plant and the timing of such plant being fully operational. Actual results may differ materially from those included in the forward-looking statements due to a number of factors, including, but not limited to: the availability of capital; changes in local, regional, national and global demand for natural gas, oil and NGL; shortages of oilfield equipment, services and personnel; operating risks such as unexpected drilling conditions; weather conditions; changes in maintenance and construction costs; the availability and cost of credit; and the other risks discussed in the Company’s periodic filings with the Securities and Exchange Commission, including the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. QEP Resources undertakes no obligation to publicly correct or update the forward-looking statements in this news release, in other documents, or on the Web site to reflect future events or circumstances. All such statements are expressly qualified by this cautionary statement.
For more information, visit QEP Resources’ website at: www.qepres.com.
QEP Energy Hedge Positions - October 25, 2011
Time Periods Northern Southern Total Northern Southern Total
Region Region Region Region
Estimated
Average price per Mcf, net to the
Gas (Bcf) fixed-price swaps well
2011 remaining 20.6 13.2 33.8 $4.09 $4.88 $4.40
2012 46.9 73.2 120.1 $5.27 $4.09 $4.55
2013 50.3 - 50.3 $5.44 - $5.44
Estimated
Average price per Mcf, net to the
Gas (Bcf) costless collars well
Floor - Floor - Floor -
Ceiling Ceiling Ceiling
2011 remaining 3.6 3.7 7.3 $3.01 - $5.25 $5.05 - $6.66 $4.04 - $5.97
Average price per bbl, net to the
Oil (Mbbl) fixed-price swaps well
2011 remaining 46.0 - 46.0 $98.00 - $98.00
2012 1,464.0 183.0 1,647.0 $86.10 $108.00 $88.53
2013 - 182.5 182.5 - $103.80 $103.80
Estimated
Average price per Bbl, net to the
Oil (Mbbl) costless collars well
Floor - Floor - Floor -
Ceiling Ceiling Ceiling
2011 remaining 216.2 59.8 276.0 $51.38 - $99.98 $53.00 - $109.75 $51.73 - $102.10
Time Periods Propane (MM gallons) Average price per gallon
fixed-price swaps
2012 7.7 $1.28
Time Periods Ethane (MM gallons) Average price per gallon
fixed-price swaps
2012 7.7 $0.59
QEP Field Services Hedge Positions - October 25, 2011
Time Periods Propane (MM gallons) Average price per gallon
fixed-price swaps
2011 remaining 3.9 $1.45
2012 15.3 $1.36
Time Periods Ethane (MM gallons) Average price per gallon
fixed-price swaps
2012 7.7 $0.59
QEP RESOURCES,
INC.
CONSOLIDATED
STATEMENTS OF
INCOME
(Unaudited)
3 Months Ended September 9 Months Ended September
30, 30,
2011 2010 2011 2010
(in millions, except per share amounts)
REVENUES
Natural gas
sales $266.7 $283.2 $795.8 $808.4
Oil sales 76.1 49.9 218.4 139.5
NGL sales 34.1 9.3 67.8 27.4
Gathering,
processing
and other 118.7 76.4 340.1 238.7
Purchased gas
and oil sales 356.8 145.8 810.6 460.4
-------------- ----- ----- ----- -----
Total Revenues 852.4 564.6 2,232.7 1,674.4
OPERATING
EXPENSES
Purchased gas
and oil
expense 352.7 143.6 803.3 455.4
Lease
operating
expense 37.0 32.8 104.1 89.7
Gathering,
processing
and other 27.0 19.5 79.4 62.6
General and
administrative 28.7 24.7 89.1 75.6
Separation
costs - 0.2 - 14.2
Production and
property
taxes 27.7 19.7 78.5 61.6
Depreciation,
depletion and
amortization 189.0 170.5 566.4 469.5
Exploration
expense 2.4 2.9 7.5 9.2
Abandonment
and
impairment 5.7 12.2 16.4 29.1
----------- --- ---- ---- ----
Total
Operating
Expenses 670.2 426.1 1,744.7 1,266.9
Net gain
(loss) from
asset sales 1.2 10.8 1.4 12.3
------------ --- ---- --- ----
OPERATING
INCOME 183.4 149.3 489.4 419.8
Interest and
other income
(loss) (0.7) 1.6 (0.5) 4.4
Income from
unconsolidated
affiliates 2.3 1.1 4.5 2.5
Loss from
early
extinguishment
of debt (0.7) (13.3) (0.7) (13.3)
Interest
expense (22.8) (22.6) (67.0) (62.8)
-------- ----- ----- ----- -----
INCOME FROM
CONTINUING
OPERATIONS 161.5 116.1 425.7 350.6
BEFORE INCOME
TAXES
Income taxes (59.1) (44.2) (156.0) (130.5)
------------ ----- ----- ------ ------
INCOME FROM
CONTINUING
OPERATIONS 102.4 71.9 269.7 220.1
Discontinued
operations,
net of income
tax - - - 43.2
-------------- --- --- --- ----
NET INCOME 102.4 71.9 269.7 263.3
Net income
attributable
to non-
controlling
interest (0.9) (0.8) (2.2) (2.1)
------------- ---- ---- ---- ----
NET INCOME
ATTRIBUTABLE
TO QEP $101.5 $71.1 $267.5 $261.2
============= ====== ===== ====== ======
EARNINGS PER
COMMON SHARE
-
ATTRIBUTABLE
TO QEP
Basic from
continuing
operations $0.58 $0.40 $1.52 $1.24
Basic from
discontinued
operations - - - 0.25
Basic total $0.58 $0.40 $1.52 $1.49
===== ===== ===== =====
Diluted from
continuing
operations $0.57 $0.40 $1.50 $1.23
Diluted from
discontinued
operations - - - 0.24
Diluted total $0.57 $0.40 $1.50 $1.47
===== ===== ===== =====
Weighted-
Average
Common Shares
Outstanding
Used in basic
calculation 176.6 175.4 176.5 175.2
Used in
diluted
calculation 178.5 177.9 178.5 177.6
QEP RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2011 2010
---- ----
(in millions)
ASSETS
Current Assets
Accounts receivable, net $355.3 $269.9
Fair value of derivative contracts 225.4 257.3
Inventories, at lower of average
cost
Gas oil and NGL 16.1 16.4
Materials and supplies 87.1 65.4
Prepaid expenses and other 35.6 45.2
--------------------------
Total Current Assets 719.5 654.2
-------------------- ----- -----
Property, Plant and Equipment
(successful efforts
method for gas and oil properties)
Proved Properties 7,780.8 6,874.3
Unproved properties, not being
depleted 326.3 322.0
Midstream field services 1,430.6 1,360.5
Marketing and other 47.8 44.5
------------------- ---- ----
Total Property, Plant and Equipment 9,585.5 8,601.3
----------------------------------- ------- -------
Less Accumulated Depreciation,
Depletion and Amortization
Exploration and production 2,963.6 2,454.4
Midstream field services 283.7 244.6
Marketing and other 14.0 12.3
------------------- ---- ----
Total Accumulated Depreciation,
Depletion and 3,261.3 2,711.3
------------------------------- ------- -------
Amortization
------------
Net Property, Plant and Equipment 6,324.2 5,890.0
--------------------------------- ------- -------
Investment in unconsolidated
affiliates 44.1 44.5
Goodwill 59.5 59.6
Fair value of derivative contracts 116.4 120.8
Other noncurrent assets 33.2 16.2
----------------------- ---- ----
TOTAL ASSETS $7,296.9 $6,785.3
============ ======== ========
LIABILITIES AND EQUITY
Current Liabilities
Checks outstanding in excess of
cash balances $26.7 $19.5
Accounts payable and accrued
expenses 455.3 332.2
Production and property taxes 40.4 18.9
Interest payable 6.2 28.1
Fair value of derivative contracts 39.8 139.3
Deferred income taxes 20.7 27.8
Current portion of long-term debt - 58.5
--------------------------------- --- ----
Total Current Liabilities 589.1 624.3
------------------------- ----- -----
Long-term debt, less current
portion 1,582.7 1,472.3
Deferred income taxes 1,535.0 1,377.7
Asset retirement obligations 160.2 148.3
Fair value of derivative contracts - 0.3
Other long-term liabilities 103.3 99.3
EQUITY
Common Stock 1.8 1.8
Treasury Stock (11.6) (3.8)
Additional paid-in capital 423.9 398.0
Retained earnings 2,677.2 2,420.0
Accumulated other comprehensive
income 184.4 194.3
------------------------------- ----- -----
Total Common Shareholders' Equity 3,275.7 3,010.3
Non-controlling interest 50.9 52.8
------------------------ ---- ----
Total Equity 3,326.6 3,063.1
------------ ------- -------
TOTAL LIABILITIES AND EQUITY $7,296.9 $6,785.3
============================ ======== ========
QEP RESOURCES, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(Unaudited)
9 Months Ended September
30,
2011 2010
---- ----
(in millions)
OPERATING ACTIVITIES
Net income $269.7 $263.3
Discontinued operations, net of
income tax - (43.2)
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation, depletion and
amortization 566.4 469.5
Deferred income taxes 155.9 206.3
Abandonment and impairment 16.4 29.1
Share-based compensation 16.5 11.3
Amortization of debt issuance
costs and discounts 2.4 1.8
Dry exploratory well expense 0.5 -
Net (gain) from asset sales (1.4) (12.3)
(Income) from unconsolidated
affiliates (4.5) (2.5)
Distributions from unconsolidated
affiliates and other 7.6 2.1
Loss on early extinguishment of
debt 0.7 13.3
Unrealized (gain) loss on basis-
only swaps (86.7) (90.0)
Changes in operating assets and
liabilities 12.2 (80.7)
------------------------------- ---- -----
Net Cash Provided By Operating
Activities Of 955.7 768.0
------------------------------ ----- -----
Continuing Operations
---------------------
INVESTING ACTIVITIES
Property acquisitions (40.7) (94.1)
Property, plant and equipment,
including dry exploratory well
expense (957.7) (941.8)
Proceeds from disposition of
assets 7.4 25.4
Change in notes receivable - 52.9
-------------------------- --- ----
Net Cash Used In Investing
Activities Of (991.0) (957.6)
-------------------------- ------ ------
Continuing Operations
---------------------
FINANCING ACTIVITIES
Checks outstanding in excess of
cash balances 7.2 -
Long-term debt issued 280.0 819.3
Long-term debt issuance costs
paid (10.5) (18.1)
Current Portion Long-term debt
repaid (58.5) (91.5)
Repayments of notes payable - (39.3)
Long-term debt repaid (170.0) (721.5)
Long-term debt extinguishment
costs - (4.9)
Equity contribution - 250.0
Other capital contributions 1.6 1.4
Dividends paid (10.6) (3.5)
Distribution from Questar 0.2 (15.7)
Distribution to noncontrolling
interest (4.1) (3.7)
------------------------------ ---- ----
Net Cash Provided from (Used In)
Financing Activities Of 35.3 172.5
-------------------------------- ---- -----
Continuing Operations
---------------------
CASH USED IN CONTINUING OPERATIONS $- (17.1)
---------------------------------- --- -----
Cash provided by operating
activities of discontinued
operations - 68.6
Cash used in investing activities
of discontinued operations - (39.9)
Cash used by financing activities
of discontinued operations - (26.9)
Effect of change in cash and cash
equivalents of discontinued
operations - (1.8)
--------------------------------- --- ----
Change in cash and cash
equivalents - (17.1)
Beginning cash and cash
equivalents - 19.3
----------------------- --- ----
Ending cash and cash equivalents $- $2.2
================================ === ====
QEP RESOURCES, INC.
OPERATIONS BY LINE OF
BUSINESS
(Unaudited)
3 Months Ended September 9 Months Ended
30, September 30,
2011 2010 2011 2010
(in millions)
Revenues
QEP Energy $590.6 $343.5 $1,456.5 $979.0
QEP Field
Services 116.3 75.3 331.6 234.1
QEP Marketing
and other 145.5 145.8 444.6 461.3
------------- ----- ----- ----- -----
Total $852.4 $564.6 $2,232.7 $1,674.4
===== ====== ====== ======== ========
Operating Income
QEP Energy $113.9 $112.2 $297.1 $317.0
QEP Field
Services 68.4 35.3 188.0 111.9
QEP Marketing
and other 1.1 2.0 4.3 5.1
Separation
costs - (0.2) - (14.2)
---------- --- ---- --- -----
Total $183.4 $149.3 $489.4 $419.8
===== ====== ====== ====== ======
Net Income (Loss) from Continuing
Operations Attributable to QEP
Resources
QEP Energy $58.3 $58.6 $148.2 $165.0
QEP Field
Services 42.0 21.0 114.2 68.5
QEP Marketing
and other 1.6 2.0 5.5 3.6
Separation and
early debt
extinguishment
costs (0.4) (10.5) (0.4) (19.1)
--------------- ---- ----- ---- -----
Total $101.5 $71.1 $267.5 $218.0
===== ====== ===== ====== ======
QEP RESOURCES,
INC.
SELECTED OPERATING
STATISTICS
(Unaudited)
3 Months Ended September 9 Months Ended
30, September 30,
2011 2010 2011 2010
---- ---- ---- ----
QEP Energy
production
volumes
Natural gas (Bcf) 59.8 55.0 175.9 149.2
Oil (Mbbl) 922.6 790.1 2,559.2 2,149.5
NGL (Mbbl) 894.4 310.7 1,675.0 786.9
Total production
(Bcfe) 70.7 61.7 201.3 166.9
Average daily
production
(MMcfe) 767.7 670.3 737.2 611.2
QEP Energy average
net realized
price
Natural gas (per
Mcf) $4.00 $4.64 $4.03 $4.81
Oil (per bbl) $82.44 $63.05 $85.33 $64.89
NGL (per bbl) $38.17 $30.07 $40.48 $34.83
Oil and NGL (per
bbl) $60.65 $53.74 $67.58 $56.83
Production by
Major Area
-------------
QEP Energy -
Natural Gas (Bcf)
Haynesville/
CottonValley 26.6 21.9 80.2 56.4
Midcontinent 8.9 8.8 24.7 23.6
Pinedale Anticline 17.8 17.1 50.2 47.5
Uinta Basin 3.6 3.8 11.8 11.2
Rockies Legacy 2.9 3.4 9.0 10.5
-------------- --- --- --- ----
Total 59.8 55.0 175.9 149.2
===== ==== ==== ===== =====
QEP Energy -Oil
(Mbbl)
Haynesville/
CottonValley 8.8 13.8 32.8 49.8
Midcontinent 187.0 163.4 543.5 488.3
Pinedale Anticline 149.2 147.1 419.0 401.9
Uinta Basin 198.6 236.5 657.3 706.5
Rockies Legacy 379.0 229.3 906.6 503.0
-------------- ----- ----- ----- -----
Total 922.6 790.1 2,559.2 2,149.5
===== ===== ===== ======= =======
QEP Energy -NGL
(Mbbl)
Haynesville/
CottonValley - - - -
Midcontinent 348.3 252.3 1,013.1 622.7
Pinedale Anticline 489.0 - 489.0 -
Uinta Basin 23.6 31.6 83.1 89.3
Rockies Legacy 33.5 26.8 89.8 74.9
-------------- ---- ---- ---- ----
Total 894.4 310.7 1,675.0 786.9
===== ===== ===== ======= =====
QEP Production by
Major Area (Bcfe)
Haynesville/
CottonValley 26.6 22.0 80.4 56.7
Midcontinent 12.1 11.4 34.0 30.4
Pinedale Anticline 21.6 17.9 55.6 49.9
Uinta Basin 4.8 5.3 16.2 15.9
Rockies Legacy 5.6 5.1 15.1 14.0
-------------- --- --- ---- ----
Total 70.7 61.7 201.3 166.9
===== ==== ==== ===== =====
QEP Field Services
Gathering Margin
Gathering $41.9 $38.9 $120.0 $113.3
Other Gathering 16.5 7.1 59.2 25.7
Gathering
(expense) (11.0) (8.5) (35.3) (27.1)
---------- ----- ---- ----- -----
Gathering Margin $47.4 $37.5 $143.9 $111.9
================ ===== ===== ====== ======
Operating
Statistics
Natural gas
gathering volumes
(millions of
MMBtu)
For unaffiliated
customers 66.3 74.3 193.4 210.0
For affiliated
customers 60.6 52.3 173.6 144.5
-------------- ---- ---- ----- -----
Total gathering 126.9 126.6 367.0 354.5
=============== ===== ===== ===== =====
Gathering revenue
(per MMBtu) $0.33 $0.31 $0.33 $0.32
QEP Field Services
Processing Margin
NGL Sales $41.6 $20.9 $115.3 $70.6
Processing (fee
based) 15.4 8.9 37.6 26.2
Other Processing
fees 1.7 - 1.7 -
Processing
(expense) (3.1) (2.8) (8.9) (8.8)
Processing plant
shrinkage
(expense) (12.5) (8.0) (34.1) (25.9)
---------------- ----- ---- ----- -----
Processing Margin $43.1 $19.0 $111.6 $62.1
================= ===== ===== ====== =====
Frac spread (NGL
sales -
Processing $29.1 $12.9 $81.2 $44.7
plant shrinkage)
Operating
Statistics
NGL sales (MMgal) 34.0 25.8 98.2 77.3
NGL sales price
(per gal) $1.23 $0.81 $1.17 $0.91
Fee-based
processing
(millions of
MMBtu)
For unaffiliated
customers 31.9 29.4 96.4 87.9
For affiliated
customers 31.9 28.2 84.7 80.5
--------------
Total fee-based
processing
volumes 63.8 57.6 181.1 168.4
=============== ==== ==== ===== =====
Fee-based
processing (per
MMBtu) $0.24 $0.16 $0.21 $0.16
QEP Marketing gas
and oil marketing
volumes 108.5 60.4 254.4 170.1
(millions of
MMBtu)
QEP RESOURCES, INC.
NON-GAAP MEASURES
(Unaudited)
This release contains references to a non-GAAP measure of
earnings per diluted share from continuing operations
excluding gains and losses from asset sales, unrealized
gains and losses on basis-only swaps, separation costs
and loss on early extinguishment of debt. Management
believes earnings per diluted share excluding asset sales,
unrealized basis-only swaps, separation costs and loss on
early extinguishment of debt is an important measure of
the Company's operational performance relative to other
gas and oil producing companies.
The following table calculates earnings per diluted share
excluding gains and losses on assets sales, unrealized
gains and losses on basis-only swaps, separations costs
and loss on early extinguishment of debt:
3 Months Ended 9 Months Ended
September 30, September 30,
2011 2010 2011 2010
---- ---- ---- ----
(in millions, except earnings per share)
Net income
attributable to
QEP Resources $101.5 $71.1 $267.5 $261.2
Less:
Discontinued
operations - - - (43.2)
--- --- --- -----
Net Income from
continuing
operations
attributable to
QEP $101.5 $71.1 $267.5 $218.0
Resources
Exclusion of net (gain)
loss from assets sales,
unrealized (gain) loss on
basis-only swaps,
separation costs and loss
on early extinguishment of
debt from net income
Net (gain) loss
from asset sales (1.2) (10.8) (1.4) (12.3)
Income taxes on
net (gain) loss
on asset sales 0.4 3.9 0.5 4.5
Unrealized (gain)
loss on basis-
only swaps (27.9) (27.9) (86.7) (90.0)
Income taxes on
unrealized
(gain) loss on
basis-only
swaps 10.3 10.4 32.2 33.4
Separation costs - 0.2 - 14.2
Income taxes on
separation costs - 2.1 - (3.3)
Loss from early
extinguishment
of debt 0.7 13.3 0.7 13.3
Income taxes on
loss from early
extinguishment
of debt (0.3) (5.1) (0.3) (5.1)
After-tax (gain)
loss on assets
sales,
unrealized
(gain) loss on
basis-only
swaps,
separation costs
and loss from
early
extinguishment
of debt (18.0) (13.9) (55.0) (45.3)
----------------- ----- ----- ----- -----
Net income
attributable to
QEP Resources
excluding (gain)
loss from
assets sales,
unrealized
(gain) loss on
basis-only
swaps,
separation costs
and loss from
early
extinguishment
of debt $83.5 $57.2 $212.5 $172.7
================= ===== ===== ====== ======
EARNINGS PER COMMON SHARE FROM CONTINUING
OPERATIONS ATTRIBUTABLE TO QEP RESOURCES
Diluted $0.57 $0.40 $1.50 $1.23
Diluted after-
tax (gain) loss
from asset
sales,
unrealized
(gain) (0.10) (0.08) (0.31) (0.26)
---------------- ----- ----- ----- -----
loss on basis-only swaps,
separation costs and loss
from early
--------------------------
extinguishment of debt
----------------------
Earnings per
diluted share
attributable to
QEP Resources
excluding asset
sales,
unrealized
(gain) loss on
basis only
swaps,
separation costs
and loss from
early
extinguishment
of debt $0.47 $0.32 $1.19 $0.97
================= ===== ===== ===== =====
Weighted-Average Common
Shares Outstanding
Diluted 178.5 177.9 178.5 177.6
This release also contains references to a non-GAAP measure
of adjusted EBITDA. Management defines adjusted EBITDA as
net income before the following items: discontinued
operations, unrealized gains and losses on basis-only swaps,
gains and losses from asset sales, interest and other income,
income taxes, interest expense, separation costs, loss on
early extinguishment of debt, depreciation, depletion, and
amortization, abandonment and impairment, and exploration
expense. Management believes adjusted EBITDA is an important
measure of the Company's cash flow and liquidity and an
important measure for comparing the Company's financial
performance to other gas and oil producing companies.
The following table
reconciles QEP
Resources' net
income to adjusted
EBITDA:
3 Months Ended 9 Months Ended
September 30, September 30,
2011 2010 2011 2010
---- ---- ---- ----
(in millions)
Net income
attributable to QEP
Resources $101.5 $71.1 $267.5 $261.2
Net income
attributable to
non-controlling
interest 0.9 0.8 2.2 2.1
---------------- --- --- --- ---
Net Income 102.4 71.9 269.7 263.3
Discontinued
operations, net of
tax - - - (43.2)
------------------- --- --- --- -----
Income from
continuing
operations 102.4 71.9 269.7 220.1
Unrealized (gain)
loss on basis-only
swaps (27.9) (27.9) (86.7) (90.0)
Net (gain) loss from
asset sales (1.2) (10.8) (1.4) (12.3)
Interest and other
income 0.7 (1.6) 0.5 (4.4)
Income taxes 59.1 44.2 156.0 130.5
Interest expense 22.8 22.6 67.0 62.8
Separation costs - 0.2 - 14.2
Loss from early
extinguishment of
debt 0.7 13.3 0.7 13.3
Depreciation,
depletion and
amortization 189.0 170.5 566.4 469.5
Abandonment and
impairment 5.7 12.2 16.4 29.1
Exploration 2.4 2.9 7.5 9.2
Adjusted EBITDA $353.7 $297.5 $996.1 $842.0
=============== ====== ====== ====== ======
SOURCE QEP Resources, Inc.
