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Questar Net Income Up 54% in Second Quarter 2008

Posted on: Monday, 28 July 2008, 18:00 CDT

Questar Corp. (NYSE:STR) net income grew 54% in the second quarter of 2008 to $172.6 million, or $0.98 per diluted share compared to $112.2 million, or $0.64 per diluted share, for the second quarter of 2007. For the first half of 2008, Questar net income was $358.4 million, or $2.03 per diluted share, compared to $263.3 million or $1.50 per diluted share for the 2007 period, a 36% increase.

NET INCOME (LOSS) BY SUBSIDIARY (in millions, except earnings per share) 3 Months Ended 6 Months Ended June 30, June 30, 2008 2007 Change 2008 2007 Change ------- ------- ------ ------- ------ ------ Market Resources Questar E&P $116.8 $66.7 75% $213.3 $143.9 48% Wexpro 18.8 14.7 28 35.0 28.6 22 Gas Management 21.7 14.9 46 40.2 27.3 47 Energy Trading and other 4.8 5.8 (17) 12.9 11.8 9 ------- ------- ------- ------ Market Resources Total 162.1 102.1 59 301.4 211.6 42 Questar Pipeline 12.7 10.0 27 28.6 21.2 35 Questar Gas (2.0) (1.1) (82) 28.6 28.0 2 Corporate (0.2) 1.2 (0.2) 2.5 ------- ------- ------- ------ QUESTAR CORPORATION TOTAL $172.6 $112.2 54% $358.4 $263.3 36% ======= ======= ======= ====== Earnings per diluted share $0.98 $0.64 $2.03 $1.50 Average diluted shares 176.3 175.9 176.3 175.7

"All Questar business units posted record net income in the first half of 2008," said Keith O. Rattie, Questar Chairman, President and CEO. "Questar E&P grew natural gas and oil-equivalent production 14% in the first half, driven by a 27% increase in Midcontinent production."

Second Quarter 2008 Highlights

-- Questar E&P grew natural gas, oil and natural gas liquids (NGL) production 14% to 40.6 billion cubic feet of natural gas equivalent (Bcfe) compared to 35.5 Bcfe for the 2007 period. Natural gas comprised 88% of reported production volumes.

-- Average realized natural gas prices at Questar E&P increased $1.49 per thousand cubic feet (Mcf), or 23%, and average realized crude oil and NGL prices increased $28.93 per barrel (bbl), or 57%. Natural gas hedges decreased reported revenues by $44.0 million, while oil hedges decreased revenues by $15.7 million.

-- Net mark-to-market gains on natural gas basis-only hedges increased net income $10.1 million in the 2008 quarter compared to a loss of $4.1 million in the year-earlier period.

-- Wexpro grew its investment base 30% to $346.4 million at June 30, 2008. Wexpro produced 10.9 Bcf of cost-of-service gas for delivery to affiliate Questar Gas compared to 10.2 Bcf in the 2007 quarter.

-- Gas Management net income grew 46%, driven by higher gathering and processing margins. Net processing revenues increased 40% to $24.0 million due to a 29% increase in fee-based processing volumes and higher keep-whole processing margins.

-- Energy Trading net income decreased 17% to $4.8 million as a result of reduced trading margins caused by narrower regional basis differentials and lower overall commodity-price volatility compared to the 2007 period. Gross marketing margin totaled $7.1 million compared to $9.3 million in the year-ago period.

-- Questar Pipeline grew net income 27% over the prior-year period, to $12.7 million, driven by higher transportation revenues from expansion projects completed in the fourth-quarter of 2007. One-time items combined to reduce net income $2.1 million after-tax in the quarter.

-- Questar Gas seasonal loss increased to $2.0 million. Higher operating and maintenance expense more than offset increased gross margin in the quarter.

-- Questar earned a 16.7% return on assets (ROA - defined as earnings before interest and income taxes divided by average total assets) for the trailing 12-month period ended June 30, 2008. Market Resources ROA was 20.2%; Questar Pipeline ROA was 9.9%; and Questar Gas ROA was 7.9%.

Questar Raises 2008 Net Income Guidance

Questar now expects full-year 2008 net income to range from $3.50 to $3.60 per diluted share compared to previous guidance of $3.25 to $3.40 per diluted share. The company's revised guidance now assumes that the NYMEX/Rockies basis differential will range from $3.50 to $4.50 per MMBtu for the remainder of 2008, compared to $2.50 to $3.00 per MMBtu assumed in previous guidance. The guidance assumes the NYMEX natural gas price will range from $10.00 to $11.00 per MMBtu for currently unhedged 2008 production for the rest of the year, and the prompt-month NYMEX crude oil price will range from $120.00 to $130.00 per bbl for unhedged volumes. The company's guidance also excludes one-time items and assumes hedges in place on the date of this release. These and other assumptions are summarized in the table below:

Guidance Assumptions 2008 2008 Current Previous --------------- --------------- Earnings per diluted share $3.50-$3.60 $3.25-$3.40 Average diluted shares (millions) 177.1 176.2 Questar E&P production - Bcfe 166-169 166-169 Pinedale well completions 73-78 70-75 NYMEX gas price per MMBtu(a) $10.00-$11.00 $10.00-$11.00 NYMEX crude oil price per bbl(a) $120.00-$130.00 $105.00-$115.00 NYMEX/Rockies basis differential per MMBtu(a) $4.50-$3.50 $3.00-$2.50 NYMEX/Midcontinent basis differential per MMBtu(a) $3.00-$2.00 $1.60-$1.35 (a) On unhedged volumes for the remainder of 2008

-- Questar E&P has hedged about 79% of forecast natural gas and oil-equivalent production for the remainder of 2008 with fixed-price swaps. Additionally, the company has hedged about 2% of forecast remainder of 2008 production with natural gas basis-only swaps (see table at the end of this release).

-- The company estimates that a $1.00 per MMBtu change in the average NYMEX price of natural gas for the remainder of 2008 would result in about a $0.02 change in earnings per diluted share.

-- The company also estimates that a $10.00 per barrel change in the average NYMEX price of oil for the remainder of 2008 would result in about a $0.03 change in earnings per diluted share.

Questar E&P Net Income Increases 75% in Second Quarter, 48% for First Half of 2008

Questar E&P - a Market Resources subsidiary that acquires, explores for, develops and produces natural gas and oil - reported production of 40.6 Bcfe in the second quarter of 2008 compared to 35.5 Bcfe in the 2007 period, a 14% increase. Higher realized natural gas, crude oil and NGL prices and growing production more than offset a 25% increase in average production costs (primarily due to higher production tax and interest expense as detailed in the production cost table). Net mark-to-market gains on natural gas basis-only swaps increased net income $10.1 million in the 2008 quarter compared to a $ 4.1 million loss in the 2007 quarter. For the first half of 2008, Questar E&P net income rose 48% to $213.3 million compared to $143.9 million a year earlier, driven by a 14% increase in production, higher realized prices and increased net mark-to-market gains on NYMEX/Rockies natural gas basis swaps.

Questar E&P - Production by Region 3 Months Ended 6 Months Ended June 30, June 30, 2008 2007 Change 2008 2007 Change ---- ---- ------ ---- ---- ------ (Bcfe) (Bcfe) Pinedale Anticline 12.5 11.5 9% 25.8 23.6 9% Uinta Basin 6.1 6.6 (8) 12.8 12.6 2 Rockies Legacy 5.0 4.9 2 9.9 9.4 5 ---- ---- ---- ---- Subtotal - Rocky Mountains 23.6 23.0 3 48.5 45.6 6 Midcontinent 17.0 12.5 36 31.6 24.8 27 ---- ---- ---- ---- Total Questar E&P 40.6 35.5 14% 80.1 70.4 14% ==== ==== ==== ====

Questar E&P - Realized Prices and Hedging Impact 3 Months Ended 6 Months Ended June 30, June 30, 2008 2007 Change 2008 2007 Change ------- ------- ------ ------- ------- ------ Realized natural gas price ($ per Mcf) $7.94 $6.45 23% $7.43 $6.39 16% Natural gas hedging impact ($ per Mcf) (1.23) 1.94 (0.53) 1.46 Realized oil and NGL price ($ per bbl) $79.48 $50.55 57% $76.85 $49.63 55% Oil and NGL hedging impact ($ per bbl) (19.68) (2.13) (14.55) (0.52) Net mark-to-market gains (losses) on natural gas basis-only swaps ($ millions) Pre-tax $16.3 ($6.6) $30.0 $5.2 After-tax $10.1 ($4.1) $18.6 $3.3

Questar may enter into derivative transactions on up to 100% of forecast production from proved reserves to lock in acceptable returns on invested capital and to protect cash flow and net income from a decline in commodity prices. The company uses natural gas basis-only swaps to protect cash flows and net income from widening natural gas-price basis differentials that may result from capacity constraints on regional gas pipelines.

Questar E&P production costs (the sum of depreciation, depletion and amortization expense, lease operating expense, general and administrative expense, allocated interest expense, and production taxes) per unit of gas-equivalent production increased 25% compared to the 2007 second quarter due primarily to increased production taxes and higher allocated interest expense.

Questar E&P - Production Costs 3 Months 6 Months Ended Ended June 30, June 30, (per Mcfe) (per Mcfe) 2008 2007 Change 2008 2007 Change ----- ----- ------ ----- ----- ------ Depreciation, depletion and amortization $1.88 $1.71 10% $1.85 $1.70 9% Lease operating expense 0.74 0.62 19 0.73 0.61 20 General and administrative expense 0.40 0.44 (9) 0.38 0.40 (5) Allocated interest expense 0.40 0.18 122 0.33 0.18 83 Production taxes 0.79 0.41 93 0.73 0.43 70 ----- ----- ----- ----- Production costs $4.21 $3.36 25% $4.02 $3.32 21% ===== ===== ===== =====

-- Production volume-weighted average depreciation, depletion and amortization per Mcfe (the DD&A rate) increased due to higher costs for drilling, completion and related services, increased cost of steel casing, other tubulars and wellhead equipment. The DD&A rate also increased due to the ongoing depletion of older, lower-cost reserves and the increasing component of Questar E&P production derived from recently acquired, higher-cost fields in the Midcontinent.

-- Lease operating expense per Mcfe increased due to higher costs of materials and consumables, increased produced-water disposal costs and increased well-workover activity.

-- General and administrative expense per Mcfe decreased as production growth outstripped increases in expenses.

-- Allocated interest expense per unit of production increased primarily due to financing costs related to the first quarter 2008 acquisition of significant natural gas development properties in northwest Louisiana.

-- Production taxes per Mcfe were higher due to higher natural gas and oil sales prices in the 2008 period. Production taxes are based on a percentage of sales prices, before the impact of hedges.

Wexpro Net Income Up 28% in Second Quarter, 22% for First Half of 2008

Wexpro - a Market Resources subsidiary that develops and produces cost-of-service reserves for affiliate Questar Gas - reported net income of $18.8 million compared to $14.7 million in the prior-year period, a 28% increase. Wexpro results benefited from a higher average investment base compared to the prior-year period. Wexpro investment base at June 30, 2008, was $346.4 million compared to $267.2 million a year ago, a 30% increase. For the first half of 2008, Wexpro net income was $35.0 million compared to $28.6 million for the prior-year period, a 22% increase, primarily due to a higher investment base.

Under a long-standing agreement with the states of Utah and Wyoming, Wexpro recovers its costs and earns an unlevered after-tax return of about 19 to 20% on its investment base - the investment in commercial wells and related facilities, adjusted for working capital and reduced for deferred income taxes and accumulated depreciation.

Gas Management Net Income Up 46% in Second Quarter, 47% for the First Half of 2008

Questar Gas Management (Gas Management) - Market Resources' gas-gathering and processing-services business - reported net income of $21.7 million compared to $14.9 million in the prior-year period, a 46% increase, driven by higher gathering and processing margins. Net processing revenues increased 40% to $24.0 million due to increased processing volumes and a higher frac spread. Gas Management grew fee-based gas-processing volumes 29% in the second quarter to 43.2 million MMBtu. Fee-based gas-processing revenues grew 31% compared to the year-ago quarter, while the frac-spread for keep-whole processing increased 44% or $5.2 million. Approximately 72% of Gas Management net operating revenue (total revenue less processing plant-shrink) was derived from fee-based contracts compared to 74% in the 2007 period. For the first half of 2008, Gas Management net income increased 47% to $40.2 million compared to $27.3 million in the 2007 period, driven by higher gathering and processing margins.

Questar Pipeline Net Income Up 27% in Second Quarter, 35% for First Half of 2008

Questar Pipeline - which provides interstate natural gas transportation and storage services - reported net income of $12.7 million compared to $10.0 million in the prior-year period, a 27% increase, primarily from system expansions placed in service late in 2007. Revenues increased $12.3 million or 25%, driven by higher transportation services, while operating, maintenance, general and administrative expenses increased $1.2 million or 7% due to additional operating costs for new transportation and gas processing facilities. One-time items combined to reduce net income $2.1 million after-tax in the quarter. A $6.8 million after-tax loss on the impairment of investment in an underground gas storage project was partially offset by a $2.4 million after-tax gain on the sale of a non-core asset and a $2.3 million after-tax gain on collection of a note receivable. Questar Pipeline net income was $28.6 million in the first half of 2008 compared to $21.2 million in the year-ago period. Net income rose primarily from system expansions placed in service late in 2007.

Questar Gas Seasonal Net Loss of $2.0 Million in Second Quarter, Net Income Up 2% for First Half of 2008

Questar Gas - which provides retail natural gas distribution services in Utah, Wyoming and Idaho - reported a $2.0 million net loss in the quarter, a $0.9 million increase in its seasonal net loss over the year-ago period. Higher operating and maintenance expenses, primarily bad debt costs, more than offset an increase in gross margin.

Questar Gas net income was $28.6 million in the first half of 2008, 2% higher than the year-earlier period, primarily as a result of customer growth. Operating, maintenance, general and administrative expenses totaled $71 per customer in the first half of 2008 compared to $69 per customer in the 2007 period. At June 30, 2008, Questar Gas served 881,500 customers, up 19,400 or 2.3% from June 30, 2007.

Second Quarter 2008 Earnings Teleconference

Questar management will discuss second quarter 2008 results and the outlook for the remainder of 2008 in a conference call with investors Tuesday, July 29, beginning at 9:30 a.m. EDT. The call can be accessed on the company Internet site at www.questar.com.

About Questar

Questar Corp. (NYSE:STR) is a natural gas-focused energy company with an enterprise value of about $12 billion. Questar finds, develops, produces, gathers, processes, transports, stores and distributes 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. Such statements are based on management's current expectations, estimates and projections, which are subject to a wide range of uncertainties and business risks. Factors that could cause actual results to differ from those anticipated are discussed in the company's periodic filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2007. Questar 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 Questar's Internet site at: www.questar.com.

Hedge Positions - July 28, 2008 Time Rocky Rocky Periods Mountains Midcontinent Total Mountains Midcontinent Total ---------------------------------------------------------------------- Estimated Average price per Mcf, net to Gas (Bcf) fixed-price swaps the well 2008 Second half 40.2 26.3 66.5 $7.06 $8.32 $7.56 2009 First half 32.7 29.5 62.2 $7.24 $8.12 $7.66 Second half 33.3 30.0 63.3 7.24 8.12 7.66 ---------------------------- 66.0 59.5 125.5 7.24 8.12 7.66 2010 First half 6.7 26.2 32.9 $6.88 $8.09 $7.84 Second half 6.8 26.6 33.4 6.88 8.09 7.84 ---------------------------- 12 months 13.5 52.8 66.3 6.88 8.09 7.84 Estimated Average basis per Mcf vs. Gas (Bcf) basis-only swaps NYMEX 2008 Second half 1.7 1.7 $1.83 $1.83 2009 First half 11.0 1.7 12.7 $2.68 $1.08 $2.47 Second half 11.2 1.7 12.9 2.68 1.08 2.47 ---------------------------- 12 months 22.2 3.4 25.6 2.68 1.08 2.47 2010 First half 30.2 1.7 31.9 $3.39 $0.94 $3.27 Second half 30.7 1.7 32.4 3.39 0.94 3.27 ---------------------------- 12 months 60.9 3.4 64.3 3.39 0.94 3.27 2011 First half 45.3 45.3 $2.29 $2.29 Second half 46.1 46.1 2.29 2.29 ---------------------------- 12 months 91.4 91.4 2.29 2.29 Hedge Positions - July 28, 2008 Time Rocky Rocky Periods Mountains Midcontinent Total Mountain Midcontinent Total ---------------------------------------------------------------------- Estimated Average price per Bbl, net to Oil (Mbbl) fixed-price swaps the well 2008 Second half 423 221 644 $67.39 $70.77 $68.55 2009 First half 217 145 362 $60.55 $66.55 $62.95 Second half 221 147 368 60.55 66.55 62.95 --------- ------------ ----- 12 months 438 292 730 60.55 66.55 62.95

QUESTAR CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) 3 Months Ended 6 Months Ended June 30, June 30, 2008 2007 2008 2007 ------------------------------------- (in millions, except per share amounts) REVENUES Market Resources $654.4 $384.6 $1,264.6 $818.5 Questar Pipeline 43.3 30.4 88.0 62.1 Questar Gas 159.5 141.7 549.7 548.2 ------------------------------------- Total Revenues 857.2 556.7 1,902.3 1,428.8 OPERATING EXPENSES Cost of natural gas and other products sold (excluding operating expenses shown separately) 258.0 119.6 706.6 512.0 Operating and maintenance 92.1 72.7 181.8 150.4 General and administrative 43.5 42.1 84.0 79.3 Production and other taxes 49.3 27.2 90.1 57.0 Depreciation, depletion and amortization 115.2 92.6 225.9 183.7 Exploration 3.8 3.1 7.3 5.1 Abandonment and impairment 14.2 2.1 16.8 4.1 ------------------------------------- Total Operating Expenses 576.1 359.4 1,312.5 991.6 Net gain from asset sales 3.5 0.1 3.4 0.5 ------------------------------------- Operating Income 284.6 197.4 593.2 437.7 Interest and other income 8.3 2.9 10.3 5.9 Minority interest (2.1) (4.5) Income from unconsolidated affiliates 0.2 2.2 0.4 4.4 Net mark-to-market gain (loss) on basis-only swaps 16.3 (6.6) 30.0 5.2 Interest expense (32.5) (17.7) (58.1) (35.7) ------------------------------------- Income Before Income Taxes 274.8 178.2 571.3 417.5 Income taxes 102.2 66.0 212.9 154.2 ------------------------------------- Net Income $172.6 $112.2 $358.4 $263.3 ===================================== EARNINGS PER COMMON SHARE Basic $1.00 $0.65 $2.08 $1.53 Diluted 0.98 0.64 2.03 1.50 Weighted-Average Common Shares Outstanding Basic 172.7 172.0 172.6 171.8 Diluted 176.3 175.9 176.3 175.7 Dividends Per Common Share $0.1225 $0.1225 $0.245 $0.24

QUESTAR CORPORATION OPERATIONS BY LINE OF BUSINESS (Unaudited) 3 Months Ended 6 Months Ended June 30, June 30, 2008 2007 2008 2007 ----------------------------------- (in millions) Revenues from Unaffiliated Customers Questar E&P $349.4 $239.0 $649.1 $468.8 Wexpro 8.5 4.9 16.8 11.4 Gas Management 72.2 49.4 135.3 93.4 Energy Trading and other 224.3 91.3 463.4 244.9 ----------------------------------- Market Resources total 654.4 384.6 1,264.6 818.5 Questar Pipeline 43.3 30.4 88.0 62.1 Questar Gas 159.5 141.7 549.7 548.2 ------- -------- --------- -------- $857.2 $556.7 $1,902.3 $1,428.8 =================================== Revenues from Affiliated Companies Wexpro $52.3 $42.1 $98.7 $82.8 Gas Management 5.5 4.1 11.3 8.4 Energy Trading and other 226.4 133.3 408.1 289.3 ----------------------------------- Market Resources total 284.2 179.5 518.1 380.5 Questar Pipeline 18.7 19.3 38.2 39.9 Questar Gas 2.3 2.1 4.3 3.2 ----------------------------------- $305.2 $200.9 $560.6 $423.6 =================================== Operating Income Questar E&P $186.8 $119.9 $338.8 $237.0 Wexpro 28.2 22.5 53.6 43.9 Gas Management 37.8 22.8 70.9 41.6 Energy Trading and other 7.1 7.9 19.3 16.1 ----------------------------------- Market Resources total 259.9 173.1 482.6 338.6 Questar Pipeline 23.6 21.4 56.1 45.2 Questar Gas 1.1 1.9 54.5 52.8 Corporate 1.0 1.1 ----------------------------------- $284.6 $197.4 $593.2 $437.7 =================================== Net Income (Loss) Questar E&P $116.8 $66.7 $213.3 $143.9 Wexpro 18.8 14.7 35.0 28.6 Gas Management 21.7 14.9 40.2 27.3 Energy Trading and other 4.8 5.8 12.9 11.8 ----------------------------------- Market Resources total 162.1 102.1 301.4 211.6 Questar Pipeline 12.7 10.0 28.6 21.2 Questar Gas (2.0) (1.1) 28.6 28.0 Corporate (0.2) 1.2 (0.2) 2.5 ----------------------------------- $172.6 $112.2 $358.4 $263.3 ===================================

QUESTAR CORPORATION SELECTED OPERATING STATISTICS (Unaudited) 3 Months Ended 6 Months Ended June 30, June 30, 2008 2007 2008 2007 -------------------------------- MARKET RESOURCES Questar E&P production volumes Natural gas (Bcf) 35.8 30.9 70.6 61.8 Oil and natural gas liquids (MMbbl) 0.8 0.7 1.6 1.4 Total production (Bcfe) 40.6 35.5 80.1 70.4 Average daily production (MMcfe) 446.4 389.9 440.1 389.1 Questar E&P average realized price, net to the well (including hedges) Natural gas (per Mcf) $7.94 $6.45 $7.43 $6.39 Oil and NGL (per bbl) $79.48 $50.55 $76.85 $49.63 Wexpro investment base at June 30, net of depreciation and deferred income taxes (millions) $346.4 $267.2 Natural gas processing volumes NGL sales (MMgal) 24.8 20.2 46.2 38.0 NGL sales price (per gal) $1.41 $0.95 $1.32 $0.92 Fee-based processing (millions of MMBtu) (1) For unaffiliated customers 17.7 12.1 42.4 20.7 For affiliated customers 25.5 21.3 51.0 43.3 -------------------------------- Total fee-based processing volumes 43.2 33.4 93.4 64.0 ================================ Fee-based processing (per MMBtu) $0.15 $0.15 $0.14 $0.15 Natural gas gathering volumes (millions of MMBtu) (1) For unaffiliated customers 54.7 44.3 106.0 83.9 For affiliated customers 38.0 31.4 75.3 68.9 -------------------------------- Total gathering 92.7 75.7 181.3 152.8 ================================ Gathering revenue (per MMBtu) (1) $0.31 $0.32 $0.31 $0.31 Natural gas and oil marketing volumes (MMdthe) For unaffiliated customers 20.0 24.4 46.5 50.0 For affiliated customers 25.4 23.6 52.5 50.9 -------------------------------- Total marketing 45.4 48.0 99.0 100.9 ================================ QUESTAR PIPELINE Natural gas transportation volumes (MMdth) For unaffiliated customers 157.7 84.0 287.5 160.9 For Questar Gas 30.1 25.4 73.3 67.5 For other affiliated customers 1.5 3.9 2.4 8.6 -------------------------------- Total transportation 189.3 113.3 363.2 237.0 ================================ Transportation revenue (per dth) $0.23 $0.28 $0.24 $0.26 Firm-daily transportation demand at June 30, (Mdth) 3,124 2,240 Natural gas processing NGL sales (MMgal) 1.5 1.4 4.0 3.9 NGL sales price (per gal) $2.24 $1.20 $1.85 $1.05 QUESTAR GAS Natural gas volumes (MMdth) Residential and commercial 19.2 15.1 69.1 61.0 -------------------------------- Industrial 0.5 0.4 0.9 0.8 Transportation for industrial customers 13.4 11.0 29.4 20.9 -------------------------------- Total industrial 13.9 11.4 30.3 21.7 -------------------------------- Total deliveries 33.1 26.5 99.4 82.7 ================================ Natural gas revenue (per dth) Residential and commercial sales $7.41 $8.51 $7.50 $8.53 Industrial 6.92 5.88 6.75 6.39 Transportation for industrial customers $0.16 $0.21 $0.15 $0.22 Temperatures - warmer (colder) than normal normal 31% (16%) 16% Temperature-adjusted usage per customer (dth) 16.4 16.8 65.6 65.4 Customers at June 30, (thousands) 881.5 862.1 (1) one MMBtu = one dth

QUESTAR CORPORATION PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 2008 31, (Unaudited) 2007 ---------------------- (in millions) ASSETS Current Assets Cash and cash equivalents $14.2 Accounts receivable, net $421.7 417.8 Fair value of derivative contracts 4.2 78.1 Inventories 115.7 115.0 Prepaid expenses and other 42.9 33.8 Purchased-gas adjustment 12.0 Deferred income taxes - current 194.5 ---------------------- Total Current Assets 791.0 658.9 ---------------------- Property, Plant and Equipment 9,172.2 7,741.9 Accumulated depreciation, depletion and amortization (2,847.7) (2,643.3) ---------------------- Net Property, Plant and Equipment 6,324.5 5,098.6 ---------------------- Investment in unconsolidated affiliates 27.3 52.8 Goodwill 70.7 70.7 Fair value of derivative contracts 7.8 Other noncurrent assets, net 84.7 55.4 ---------------------- Total Assets $7,298.2 $5,944.2 ====================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Checks outstanding in excess of cash balances $14.4 Short-term debt 151.1 $260.6 Accounts payable and accrued expenses 545.8 564.5 Fair value of derivative contracts 457.6 9.3 Purchased-gas adjustment 58.1 Deferred income taxes - current 4.9 Current portion of long-term debt 58.3 101.3 ---------------------- Total Current Liabilities 1,227.2 998.7 ---------------------- Long-term debt, less current portion 1,920.9 1,021.2 Deferred income taxes 998.6 942.4 Fair value of derivative contracts 275.2 22.1 Other long-term liabilities 447.9 381.9 Minority interest 29.4 Common Shareholders' Equity 2,399.0 2,577.9 ---------------------- Total Liabilities and Common Shareholders' Equity $7,298.2 $5,944.2 ======================

QUESTAR CORPORATION PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 6 Months Ended June 30, 2008 2007 ------------------- (in millions) OPERATING ACTIVITIES Net income $ 358.4 $ 263.3 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation, depletion and amortization 229.7 187.0 Deferred income taxes 152.2 88.6 Share-based compensation 8.5 6.2 Abandonment and impairment 16.8 4.1 Net (gain) from asset sales (3.4) (0.5) Minority interest 4.5 (Income) from unconsolidated affiliates (0.4) (4.4) Distributions from unconsolidated affiliates 0.2 3.2 Net mark-to-market (gain) on basis swaps (30.0) (5.2) Changes in operating assets and liabilities (56.3) 9.8 ------------------- Net Cash Provided From Operating Activities 680.2 552.1 ------------------- INVESTING ACTIVITIES Capital expenditures (1,433.2) (593.5) Cash used in disposition of assets (3.0) (0.8) Proceeds from disposition of assets 33.3 5.8 ---------- -------- Net Cash Used In Investing Activities (1,402.9) (588.5) ------------------- FINANCING ACTIVITIES Common stock (11.0) (2.4) Long-term debt issued, net of issuance costs 1,491.6 Long-term debt repaid (643.0) Change in short-term debt (109.5) 22.5 Checks outstanding in excess of cash balances 14.4 23.5 Other (3.8) Dividends paid (42.4) (41.4) Excess tax benefits from share-based compensation 12.2 9.6 ------------------- Net Cash Provided From Financing Activities 708.5 11.8 ------------------- Change in cash and cash equivalents (14.2) (24.6) Beginning cash and cash equivalents 14.2 24.6 ------------------- Ending Cash and Cash Equivalents $ - $ - ===================

Source: Business Wire

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