Will Drill Up to 100 Additional Wells on Anticline – Readies Bakken

BY: GERRY MINICK

Questar Corporation plans to drill between 95 – 100 additional wells on Wyoming’s Pinedale Anticline, and is moving forward to separate off its exploration and production business from the regulated utility arm of the company pending approval of the Board of Directors.

CEO Keith Rattie said the split is intended to separate the regulated parts of the company that provide steady but conservative returns from the more volatile drilling business, which has grown rapidly in recent years.

The E & P unit accounted for about 34 percent of the company’s net income in 2009. Tentatively named E&P Co.,  the new entity would be comprised of the commodity businesses, Questar E&P, Questar Gas Management, and Questar Energy Trading.

After the spinoff, Questar Corp. would remain an integrated natural gas company, comprised of Wexpro, plus our regulated businesses, Questar Pipeline, and Questar Gas.

 “A separation of our high-growth E&P business from our regulated businesses may be a logical step in a long-term strategy that has served all Questar stakeholders well over the past decade,” Rattie said in the statement. “If consummated, we believe the spinoff would create two top-tier companies in their respective market segments.”

Shareholders would get an equal value of shares in both companies, Questar Corp. and would be headquartered in Denver.

Subject to Board approval and other conditions precedent, the spin could occur in the third or fourth quarter of this year.

“Bottom line, we think that a spinoff of our E&P business would create two top tier companies in their respective market segments. Over the past decade, you’ve seen what we’ve done to transform Questar by driving growth in our E&P business. We’ve transformed Questar E&P from what was once primarily a Rockies producer into a multi-basin growth company operating in several of the most economic natural gas plays in the country today. And in doing so, we’ve delivered double digit reserves and production growth while maintaining one of the lowest cost structures in the industry.  We think that E&P Co would continue to be one of America’s fastest growing E&P companies.”

The transaction would not require the approval of federal or state regulators.

By the Numbers:

Pinedale Anticline:

• 95-100 new completions forecast for 2010
• Completed well cost below $4.5 MM
• 6 Questar operated rigs in 2010

Bakken

• 7th operated well drilling
• 1 operated rig in 2010
• Three Forks Fm to be tested in 2010