Questar Reports Third-Quarter 2012 Net Income of $33.8 Million

Questar Reports Third-Quarter 2012 Net Income of $33.8 Million

Wexpro investment base up 12%, cost-of-service price down 10% year-to-date

2012 guidance maintained, preliminary 2013 guidance provided

SALT LAKE CITY--(BUSINESS WIRE)-- Questar Corporation (NYS: STR) reported third-quarter 2012 net income of $33.8 million, or $0.19 per diluted share compared to third-quarter 2011 net income of $36.1 million, or $0.20 per diluted share. Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) for the quarter were up 1% to $109.7 million compared to $108.4 million in the year-ago period. Return on average common equity (ROE) was 19.7% for the 12 months ended September 30, 2012, compared to 20.3% at September 30, 2011.

^(a) Management defines Adjusted EBITDA as net income (loss) before gains and losses from asset sales, interest expense, depreciation, depletion and amortization, abandonments and impairments, other special items and income taxes. See computations on the last page of the attached financial statements.

"Questar's businesses continued to perform well in the third quarter," said Ronald W. Jibson, Questar chairman, president and CEO. "Net income was down about $2 million from the 2011 quarter, while for the year-to-date period, net income was $2 million higher than in 2011. Adjusted EBITDA in the 2012 third quarter was about $110 million, 1% higher than the same quarter in 2011. Questar Gas posted a seasonal loss, typical in the third quarter each year. Wexpro's net income rose by 3% while Questar Pipeline's income was 9% lower compared to 2011. Continuing low natural gas and liquids prices, higher pension costs and property taxes impacted earnings for the quarter and year-to-date, yet we remain confident in our current 2012 earnings guidance of $1.15 to $1.19 per diluted share."

Other highlights include:

• Questar Gas invested capital of $34.9 million in the quarter, up $9.7 million from the 2011 period. This included $13.3 million invested in its feeder-line-replacement program. Year-to date, Questar Gas invested $49.7 million in the replacement program compared to $36.1 million in the same period of 2011.

• Wexpro's average investment base grew by 11% over the past 12 months to $501.3 million, up from $449.9 million last year.

• Wexpro's gas and liquids production grew by 19% in the third quarter compared to the year-ago period, and by 20% year-to-date compared to 2011, further lowering cost-of-service gas costs to Questar Gas customers.

• Questar Gas's customer growth rate increased to 1.4%, up from 1.2% last year.

• The "Wexpro II" agreement was submitted for expedited hearing and review with the public service commissions of Utah and Wyoming.

• Questar spent an additional $18.8 million to repurchase 927,000 shares of its common stock in the quarter, bringing the outstanding share count to the target level of about 175 million shares.

Questar Gas

Questar Gas reported a seasonal loss of $9.3 million, typical for the third quarter, and generated $2.1 million of Adjusted EBITDA compared to a loss of $7.9 million and Adjusted EBITDA of $4.6 million for the third quarter of 2011. On a financial basis, Questar Gas earned a 10.0% ROE for the 12 months ended September 30, 2012. Changes in Questar Gas margin (revenues less cost of gas sold) are summarized in the following table:

As of September 30, 2012, Questar Gas served about 925,400 customers, an increase of nearly 13,000 customers, or 1.4% from the same time last year. Customer growth has risen in recent months. New customers increased margin by about $0.4 million for the quarter. Changes in margin from demand-side-management (DSM) cost-recovery revenues are offset by equivalent changes in the program's expenses. Combined operating and maintenance (O&M) and general and administrative (G&A) expenses, excluding DSM costs, were up 3% to $104.58 per customer for the nine months ended September 30, 2012, compared to $101.38 a year earlier, primarily due to higher employee-related and allocated corporate costs.

Questar Gas continued its multi-year infrastructure-upgrade program to replace aging high-pressure, large-diameter steel pipe. In the first nine months of 2012, Questar Gas spent $49.7 million to replace this pipe and expects to spend a total of $55 million on the program this year and a similar amount annually for years to come. In 2010, Utah regulators approved an infrastructure-cost-tracking mechanism for the replacement program, thus enabling the timely inclusion of related expenditures into rate base. Questar Gas recognized about $3.5 million of increased margin due to this program in the first nine months of 2012.

Wexpro

Wexpro's third-quarter 2012 net income rose 3% to $26.4 million, up from $25.6 million in the third quarter of 2011. Wexpro's growing investment base and higher production enabled it to generate $61.3 million of Adjusted EBITDA in the current quarter, 9% higher than last year. It earned a 19.9% after-tax return on average investment base for the 12 months ended September 30, 2012. Wexpro's investment base was $530.0 million at quarter-end, 14% higher than the prior-year level of $464.2 million and 12% higher than the 2011 year-end level of $474.4 million. Wexpro's efficient drilling program in the Vermillion Basin, with finding costs below $1.00 per Mcfe, has resulted in a 10% year-to-date reduction in cost-of-service prices per unit delivered. Wexpro increased natural gas liquids (NGL) and oil revenues by 26% in the quarter compared to the same period in 2011. NGL and oil revenues are shared with Questar Gas customers, thereby benefitting both customers and shareholders. Wexpro recovers its costs and earns an unlevered after-tax return of approximately 20% on its average investment base under the terms of the Wexpro Agreement, a long-standing agreement with the states of Utah and Wyoming. In recent years, Wexpro's natural gas production has provided more than half of the utility's annual gas-supply requirements. A summary of changes in Wexpro's investment base is provided below:

Questar Pipeline

Questar Pipeline generated third-quarter 2012 net income of $17.1 million, down from $18.8 million a year ago. Questar Pipeline generated $44.7 million of Adjusted EBITDA in the 2012 quarter and earned an 11.2% ROE for the 12 months ended September 30, 2012. The drop in net income was primarily due to lower revenues from transportation and NGLs as well as higher interest and G&A costs. NGL revenues were down 23% in the third quarter of 2012 compared to the prior-year period, reflecting lower NGL prices that more than offset higher NGL sales volumes. Lower NGL revenues were partially offset by gas received from Clay Basin storage facility customers. This gas is part of an agreement that allows Questar Pipeline to recover any shortfall between the NGL revenues and the cost of service for conditioning gas at Clay Basin to meet pipeline gas-quality specifications. The value of gas received represents most of the "other" revenue in the table below. Questar Pipeline's combined O&M and G&A costs were up 13% for the recent quarter when compared to the same quarter in 2011. However, with higher transportation volumes in the third quarter of 2012, O&M and G&A expenses remained at $0.10 per decatherm transported, the same as the third quarter of 2011. A summary of changes in Questar Pipeline revenues is provided below:

At September 30, 2012, Questar Pipeline held net firm-transportation contracts totaling 4,946 thousand decatherms (Mdth) per day, essentially unchanged from 4,983 Mdth per day at September 30, 2011. The modest decrease in transportation revenues was primarily from lower interruptible volumes and reduced rates on some contract renewals.

Wexpro II progresses to hearing phase

On September 17, 2012, Questar Gas filed an application and proposed agreement with the public service commissions of Utah and Wyoming to enable Wexpro to acquire additional oil and gas properties for future development. The goal is to perpetuate the current program of providing cost-of-service production for Questar Gas customers in Utah and Wyoming. This agreement, referred to as "Wexpro II," is patterned after the terms of the original 1981 Wexpro Agreement, which has resulted in less volatile natural gas prices and savings of about $1.3 billion to Questar Gas customers over the past three decades. Perpetuating this successful model benefits both the customer and company with expected lower price volatility and gas rates over the productive life of the developed properties. Questar Gas filed for expedited reviews with the goal of receiving affirmative orders from both commissions in the coming months.

Share repurchases continued

During the third quarter of 2012, Questar repurchased an additional 927,000 shares of its common stock for about $18.8 million, an average of $20.24 per share. In total, the company has repurchased about 3.9 million shares at a total cost of $78 million, averaging $19.99 per share under the program, which is authorized to repurchase up to $100 million of common stock through the end of 2012. The goal of the repurchase program was to bring the outstanding share count to its current level of about 175 million shares. Additional repurchases may occur during the remainder of the year to prevent share dilution.

2012 EPS guidance maintained; preliminary 2013 EPS and capital guidance provided

Questar management maintained its 2012 guidance range for earnings of $1.15 to $1.19 per diluted share, unchanged from previous guidance. Consolidated capital investment for 2012 is expected to be about $350 million. For 2013, the company provided preliminary EPS guidance of $1.12 to $1.20 per diluted share and established an initial 2013 capital investment forecast of about $445 million. Investment capital has been allocated to its lines of business as follows:

"We reiterate confidence in our 2012 earnings guidance in spite of continuing challenges with the economy and certain expense headwinds," Jibson said. "Looking forward, there are a number of uncertainties that could materially impact earnings, particularly in 2013. These include critical economic and tax variables, pension and benefits issues, and interest rates, some of which could have greater clarity by year-end. As a result, our preliminary 2013 earnings guidance is between $1.12 and $1.20 per diluted share. We will update guidance in February as part of our 2012 year-end review. In the future, the timing and range of earnings guidance may vary as we evaluate circumstances at that time.

"We plan to continue investing in the long-term growth of Questar and expect to maintain an industry-competitive growth rate over the 5-year planning horizon. Wexpro continues to demonstrate an ability to grow its investment base, production and earnings and we expect to perpetuate that model under the proposed Wexpro II agreement. At Questar Gas, improving customer growth and the feeder-line-replacement program should continue to promote long-term earnings growth. And, given the current outlook for Questar Pipeline, we have begun a strategic review of non-core assets. This review is evidence of our commitment to strategically and profitably reinvest in and grow our businesses, while delivering both superior service to our customers and superior returns to our shareholders."

Third-Quarter 2012 earnings teleconference

Questar management will discuss third-quarter 2012 results and the outlook for the remainder of 2012 in a conference call with investors Wednesday, October 31, beginning at 9:30 a.m. ET. The call can be accessed on the company website at www.questar.com.

About Questar Corporation

Questar is a Rockies-based integrated natural gas company with an enterprise value of about $4.9 billion, operating through three principal subsidiaries:

• Questar Gas Company provides retail natural gas distribution in Utah, Wyoming and Idaho;

• Wexpro Company develops and produces natural gas from cost-of-service reserves for Questar Gas customers; and

• Questar Pipeline Company operates interstate natural gas pipelines and storage facilities in the western U.S. and provides other energy services.

Forward-Looking Statements

This document may contain or incorporate by reference information that includes or is based upon "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. Any or all forward-looking statements may turn out to be wrong. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. Actual results could differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to the following:

• general economic conditions, including the performance of financial markets and interest rates;

• changes in energy commodity prices;

• changes in industry trends;

• changes in laws or regulations; and

• other factors, most of which are beyond Questar's control.

Questar undertakes no obligation to publicly correct or update the forward-looking statements in this document, in other documents, or on the website to reflect future events or circumstances. All such statements are expressly qualified by this cautionary statement.

For more information, visit Questar's website at www.questar.com