Questar Earnings Call Nuggets: Infrastructure Tracker and Southern Trails
Questar Corp (NYSE:STR) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.
Michael Bates – DA Davidson: Can you walk us through your expectations as to how the infrastructure tracker will be addressed in the upcoming rate case?
Ronald W. Jibson – Chairman, President and CEO: You bet. We’re looking forward to that. The model has worked exceptionally well in the past, and I’ll ask Craig Wagstaff, who heads up Questar Gas company, to brief you on that as far as our upcoming case.
Craig C. Wagstaff – EVP and COO-Questar Gas: As indicated, we’ve been – the test period on this, the review period on this, all indications are in discussions that we’ve had with regulators to-date have been very positive. Likely we’ll certainly pursue extension of this, and we’re also potentially looking at a slight enhancement of it as well for other infrastructure that we (indiscernible) as well. So at this point it appears from the customers’ perspective, the regulators perspective and the company’s perspective that it’s favorable.
Michael Bates – DA Davidson: Do you see much potential for pushback as the mechanism is evaluated?
Craig C. Wagstaff – EVP and COO-Questar Gas: To-date, right now we’ve not seen any reason for pushback on that at all, Michael.
Michael Bates – DA Davidson: One other thing is that, as we look at the increase in corporate costs in the quarter, can you walk us through what happened there and give us a feel for what should be recurring as opposed to one-time impact in the quarter?
Ronald W. Jibson – Chairman, President and CEO: Michael, we appreciate that question and anticipated that. I’d ask Kevin if he will review that with you.
Kevin W. Hadlock – EVP and CFO: Really the two large items, one is related to state tax issue and the way that we are structured corporately with activities in states like Wyoming that has zero state tax, and how Utah looks at that state tax issue through the apportionment factor. Given that we just moved our refining to move out of an NOL position to become a tax payer. This issue has been highlighted as we look at paying taxes in the state of Utah going forward. This will be – looks to be a larger item moving from that NOL position. We are evaluating other ways to reduce the tax itself, or potentially seek recovery in certain circumstances to reduce that burden. But that was approximately half of the increase. The other half is related to the recent move-up in Questar stock price. There are number of deferred comp plans that look at that stock price, and because of that move we had to incur some costs related to that mark-to-market. Of course, that’s going to be harder to forecast. It’s an issue where if the stock price moves up, will recognize a larger mark-to-market. But a portion of the state tax issue with little bit of a catch-up from what we needed to book and will be moving forward at a slightly lower rate than what we saw in the catch-up in the first quarter…
Michael Bates – DA Davidson: Then just two quick questions on Wexpro, if I could. Do you have any expectation at this point as to how long it might take to secure a commission approval for an intended property purchase?
Ronald W. Jibson – Chairman, President and CEO: Well, obviously with the approval of the Wexpro II in both Utah and Wyoming, our endeavor now will be to find those properties. We’ve been working on those prior to the approval and maybe, Jim, you could give some update on where we are at those.
James R. Livsey – EVP and COO-Wexpro: The language in the Wexpro II agreement calls for a 60-day turnaround from the Commission once we submit an application for property approval, so we negotiated that to give us a pretty quick decision that way and so as we bring something forth we will work our way through that.
Michael Bates – DA Davidson: Finally, as those looking at Wexpro’s investment base, it looks like capital attributable to successful development wells has trended significantly lower over the last 12 months. So, can you talk to us a little about what’s driving that trend?
James R. Livsey – EVP and COO-Wexpro: That’s a bit of a timing issue and as we transition from two rigs to one rig in Vermilion, it’s just more or less the timing associated with closing the investment. On an overall basis, we see comparable capital this year and it’s just when we end up closing those wells.
Timm Schneider – Citigroup: Hey, quick question on Southern Trails. I realize you guys are somewhat limited as to what you can say, I’m assuming, but just from a macro perspective, there has been a lot of talk about rail. There has been talk of a competing project. I was just wondering if you guys think there’s enough capacity for both these potential projects to coexist, and for Southern Trails to potentially coexist with rail?
Craig C. Wagstaff – EVP and COO-Questar Gas: I’ll ask Allan Bradley if he’ll give you that update…
R. Allan Bradley – EVP and CEO-Questar Pipeline: I think the answer is yes to all your questions, quite simply. As Ron said, we moved into round two. Round two is the final marketing phase and bidders are actively in the data room. Because of large range of proposals, all those issues are being evaluated, which is about all I can say. Remember that market of Southern California is over 1 million barrels a day. Our view is that there is enough interest that certainly the projects that you’re referring to are not mutually exclusive. Everything we see suggests that the attributes that Southern Trails has in that market are very strategic, solid, and put us on a good path going forward and we are doing everything we can to manage the project to maintain that 2016 in-service date.
Timm Schneider – Citigroup: I think initially you guys had – the number of proposals you had was quite large that you were going to narrow it down. Are you guys at a stage yet where you maybe have it narrowed down to four or five different things, and then you’ll have the final decision by kind of mid-year? Are there still maybe ten proposals up in the air and you’re still going through everything?
R. Allan Bradley – EVP and CEO-Questar Pipeline: Well, I’m not going to comment on the number of proposals. We’re still on track our original schedule to have a decision, as Ron said in his remarks, by the end of June. The bidders were selected based on the quality of their first round bids, and quite frankly their ability to add strategic value to the project going forward.