October 31, 2001
(N)
NYSE: STR
01-24

Contact: R. Curtis Burnett
Business: (801) 324-5647

QUESTAR REPORTS THIRD-QUARTER, NINE-MONTH EARNINGS

– Chairman Cites Continuing Growth of Non-Regulated Businesses
– Recurring Earnings Exceed First Call Consensus

SALT LAKE CITY — Questar Corp. (NYSE:STR) today reported net income of $21.8 million, or $.27 per share, for the three months ended Sept. 30, 2001, compared with $26.4 million, or $.33 per share, for the comparable year-earlier period. Excluding securities transactions, the diversified natural gas company earned $.28 per share in both periods.

Questar Chairman and CEO R.D. Cash said, "We benefited once again from our integrated mix of regulated and nonregulated energy businesses. The continuing strong performance of our nonregulated Market Resources group, including oil and gas exploration and production, and improved results from our interstate transmission and storage operations allowed us to surpass expectations." The $.27 per share for the 2001 period exceeded the First Call consensus estimate of $.24 per share.

In third-quarter 2001, earnings from interstate gas-transmission and storage increased 10% to $7.2 million. Questar's Market Resources segment equaled the year-earlier quarterly earnings of $23.1 million despite declining natural gas prices. The company's price-hedging program helped stabilize results as wellhead gas prices in the company's core Rocky Mountain operations at one point during the quarter fell below $1 per thousand cubic feet (Mcf).

Questar's Corporate and Other operations lost $1.3 million during the 2001 quarter compared with a $4.6 million year-earlier gain. The current-year loss included a $500,000 pre-tax restructuring charge associated with a Web-hosting business. Questar recorded a $4.1 million after-tax gain ($.05 per share) from security transactions in the 2000 quarter compared with a $900,000 loss ($.01 per share) in the current-year period.

Questar's net income was 17% higher for the first nine months of 2001 compared with a year earlier. The company earned $115.6 million, or $1.42 per diluted share, in the first nine months of this year versus $99.1 million, or $1.23 per diluted share, in 2000. Excluding stock transactions, Questar's nine-month net income was $116.5 million, or $1.43 per share, in 2001 and $84.8 million, or $1.05 per share, in the 2000 period – a 37% improvement. Stock transactions in the 2000 period produced a $14.3 million gain ($.18 per share) compared with the $900,000 ($.01 per share) after-tax loss in 2001. After-tax losses for the Web-hosting subsidiary totaled $5.4 million for the 2001 period.

There was an average of 81.6 million shares outstanding during the nine months ended Sept. 30, 2001, compared with 80.6 million a year earlier.

THIRD-QUARTER PERFORMANCE

Questar elected to convert to the successful efforts accounting method for all exploration and production subsidiaries effective July 1. Previously reported results were restated and did not change significantly due to the conversion. The change was prompted by the recent acquisition of a privately held exploration and production company, SEI,  that uses the successful efforts method. A subsidiary, Wexpro Co., has always employed the successful efforts method. The company noted that standardizing on the successful efforts method will reduce the potential for future write-downs caused by temporary declines in the price of gas and oil. In addition, the new accounting method conforms with the company's exploration and production strategy, which emphasize development drilling, leveraged exploration and acquisitions.

Excluding Wexpro, Questar Market Resources' exploration and production operations had net income of $13.1 million in the 2001 quarter compared with $13.4 million a year earlier. Natural gas production increased 6% over year-earlier levels to 18.5 billion cubic feet (Bcf), while the average selling price declined $.04 to $2.94 per thousand cubic feet (Mcf). Oil and natural-gas liquids production rose 27% to 715,000 barrels. Gas and oil-production increases resulted from the acquisition of SEI on July 31, 2001.

Wexpro increased third-quarter earnings by $1.2 million to $7.4 million, reflecting the company's growing investment base . Wexpro develops gas reserves owned by Questar's gas-distribution utility and receives a return on its investment in successful wells. Gas gathering and processing and energy trading earned a combined $2.6 million in the 2001 quarter, $1 million lower than a year earlier.

Questar Pipeline, which conducts interstate gas-transmission and storage, earned $7.2 million in third-quarter 2001, a $600,000 year-to-year improvement. Transportation volumes were 16% above year-earlier levels, reflecting growing gas demand for power generation and increased production from the company's core Rocky Mountain region.

Questar Gas, which provides retail gas-distribution service in Utah and portions of Idaho and Wyoming, reported a seasonal quarterly loss of $7.8 million, virtually the same as a year earlier. The utility's customer base expanded by 3.6% during the past 12 months, including 10,600 customers obtained through the acquisition of small distribution companies in eastern Utah and southwestern Wyoming.

Net income from regulated activities was boosted by a $963,000 pre-tax gain from the sale of a home-security business.

NINE-MONTH PERFORMANCE

Questar Market Resources' nine-month earnings increased 59% to $82 million on the strength of higher natural gas prices and expanded Wexpro gas-development drilling. Average realized gas prices were 35% higher than in the first nine months of 2000. Nonregulated gas production declined 4% due, in part, to a planned shift in expenditures to cost-of-service drilling by Wexpro. Oil and natural gas-liquids production increased 3%. The company's earnings increased by $2.5 million with expanding investment in successful gas-development wells.

Net income from regulated businesses increased 18% to $36.1 million in the first nine months of 2001 versus a year earlier. Questar Gas earned $13.4 million compared with $9.5 million for the 2000 period, reflecting a general rate increase implemented during the third-quarter of 2000. Questar Pipeline earned $21.7 million, approximately $900,000 ahead of last year. Both regulated subsidiaries benefited from an early-retirement program instituted in the fourth quarter of 2000 and other cost-cutting measures.

Corporate and Other Operations lost $2.5 million in the first nine months of 2001 compared with a $16.9 million gain in 2000, including $13.3 million from stock transactions.

OUTLOOK

Questar Chairman Cash said the company is comfortable with the current First Call earnings estimate of $1.88 per share for 2001, based on continuation of current natural gas price levels. He also estimated that 2002 earnings could range between $1.95 and $2.05 per share, assuming current forward-price curves. Cash said the company's projections anticipate a 10%-15% increase in 2002 equivalent oil and gas production if current price levels are sustained.

Cash also detailed the company's price-hedge positions on future gas and oil production. For the fourth quarter of 2001, Questar has now hedged 62% of its expected production at an average net-to-the-well price of $2.90 per Mcf, and approximately 65% of expected oil production at an average net-to-the-well price of $20.19 per barrel.

Cash also noted that the company has taken advantage of recent volatility to lock in significantly higher prices for 2002. For the first half of 2002, approximately 35% of natural gas production is hedged at an average of $3.51 per Mcf, net to the wellhead. For the second half of 2002, approximately 29% of gas production is hedged at an average net-to-the-well price of $3.40 per Mcf. About 40% of Questar's oil production in 2002 is hedged at an average of $24.45 per barrel, net to the wellhead.

Questar is a $2.9 billion diversified natural gas company headquartered in Salt Lake City. Through subsidiaries, it engages in energy development and production; gas gathering and processing; wholesale gas, electricity and liquids trading; retail energy services; interstate gas transmission and storage; retail gas distribution; and information systems and technologies.

ForwardLooking Statements:

This release contains statements expressing expectations of future plans, objectives and performance that constitute forwardlooking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements based on future expectations rather than on historical facts are forwardlooking statements that are dependent on certain events, risks and uncertainties that could cause actual results to differ materially from those anticipated. A discussion of risks and uncertainties, which could affect future results of Questar and its subsidiaries, is included in the company's periodic reports filed with the Securities and Exchange Commission. 

Attachment 1: Consolidated Statements of Income

VISIT QUESTAR'S INTERNET SITE at: http://www.questar.com. For more information, see Company News On-Call: http://www.prnewswire.com.