Questar to Spin off E&P Biz - Analyst Blog

Natural gas-focused energy firm, Questar Corp. (STR) announced plans to separate its unregulated exploration and production (E&P) business from its regulated utility business, thereby creating two independent companies.
 
The spin-off, which could happen in the second half of 2010 subject to certain precedent conditions and board approval, will see the formation of a new as-yet-unnamed E&P company. It will include Questar subsidiaries Questar E&P Company, Questar Gas Management, and Questar Energy Trading.
 
The remaining business will continue as an integrated natural gas company under the ‘Questar Corp.’ name and comprise subsidiaries - Wexpro Company, Questar Pipeline, and Questar Gas Company.
 
The spin-off is proposed to be tax-free to shareholders of Questar. Post separation, current stockholders of Questar will get equal value of shares in each company. Questar Corp. will remain in Salt Lake City, while the new company is likely to be headquartered in Denver.
 
Questar’s move to split itself in two is seen as an attempt to focus on its regulated natural gas pipelines and distribution businesses. Questar also reasoned that it has become difficult to raise capital for an $8 billion company combining two different businesses – the high-growth, volatile E&P business, and the low-risk, consistent-return regulated natural gas business. 
 
We remain positive on the outlook for new Questar post-split, as it holds the promise of unlocking significant value. Creation of two separate companies will allow both of them to pursue great opportunities in their respective market segments without the constraints of the parent company and better serve the needs of both investor groups.

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