Questar Management Discusses Q4 2012 Results - Earnings Call Transcript

| About: Questar Corporation (STR)

Questar (NYSE:STR)

Q4 2012 Earnings Call

February 21, 2013 9:30 am ET


Kevin W. Hadlock - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Ronald W. Jibson - Chairman, Chief Executive Officer, President, Chief Executive Officer of Questar Gas Company, Chief Executive Officer of Wexpro, President of Questar Gas Company and President of Wexpro

R. Allan Bradley - Executive Vice President, Chief Executive Officer of Questar Pipeline and President of Questar Pipeline

Craig C. Wagstaff - Executive Vice President and Chief Operating Officer of Questar Gas


Timm Schneider - Citigroup Inc, Research Division

Kevin A. Smith - Raymond James & Associates, Inc., Research Division

Daniel M. Fidell - U.S. Capital Advisors LLC, Research Division

Christopher P. Sighinolfi - UBS Investment Bank, Research Division


Good morning. My name is Jeremy. I will be your conference operator today. At this time, I would like to welcome everyone to the Year-End 2012 Earnings Conference Call. [Operator Instructions] Thank you.

Kevin Hadlock, Executive Vice President and CFO of Questar Corp., you may begin your conference.

Kevin W. Hadlock

Thank you, Jeremy. Good morning, everyone, and thank you for joining us for Questar's Full Year 2012 Earnings Conference Call. I am Kevin Hadlock, Questar's Chief Financial Officer. With me today are Ron Jibson, Chairman, President and CEO of Questar Corporation; Jim Livsey, Executive Vice President and COO of Wexpro; Allan Bradley, President and CEO of Questar Pipeline; and Craig Wagstaff, Executive Vice President and COO of Questar Gas.

During this call, we will be referring to our full year 2012 earnings presentation that can be found on our website at

Moving to Slide 2. Before we begin, let me remind you that we will be making forward-looking statements during our call today, and actual results could differ from our estimates for a variety of reasons that we described in our SEC filings. Also, this call may reference non-GAAP financial measures. Our slides in the appendix of the presentation provides reconciliations to these measures.

Let's begin with a review of the full year on Slide 4. Yesterday, we reported full year 2012 net income of $212 million or $1.19 per diluted share. These results compared to net income of $207.9 million or $1.16 per diluted share in 2011.

Excluding the retirement incentive charge taken in the fourth quarter, adjusted net income was $215 million or $1.21 per diluted share. Operating cash flow was strong in 2012, totaling $525.8 million, an increase of about 9% compared to 2011.

On a consolidated basis, Questar's return on equity was 20.8%, excluding the retirement incentive charge. Capital investment for 2012 was $370.7 million, an increase of about 1% compared to the prior year.

We spent $92.3 million under our $100 million share repurchase program, achieving our target of 175 million common shares outstanding. The average purchase price was $19.95 per share, which compares favorably to recent trading levels.

Turning to Slide 5. All business units performed very well, with Questar Gas and Wexpro earning record net income in 2012. Consolidated net income was up $4.1 million or $0.03 per share versus 2011.

Moving to Slide 6. Questar Gas, our retail gas distribution utility, had an increase in gross margin to $328.9 million. Adjusted EBITDA was higher by $4 million and net income was up by $1 million compared to 2011. This increase was due to higher recovery of feeder-line replacement investment and customer growth, partially offset by increased employee-related and other costs.

Questar Gas' capital investment in 2012 was $162.1 million, an increase of $40.6 million over 2011, driven primarily by spending on system reinforcement and customer growth.

Turning to Slide 7. Wexpro, our cost-of-service natural gas development company, grew adjusted EBITDA to $236.1 million, up $22.2 million or about 10%, compared to 2011. Net income was up $8.7 million to $103.9 million, an increase of 9% over the prior year. These results were driven largely by a higher 12-month average investment base, which increased $58.1 million or nearly 13%.

Wexpro invested capital of $144.5 million in 2012, up $8.3 million compared to 2011.

Moving to Slide 8. Revenue at Questar pipeline, our interstate natural gas pipeline and storage business, was about $5.7 million in 2012, primarily due to gas received from Clay Basin customers to settle the shortfall between liquid revenues and the cost of conditioning gas. These additional revenues were partially offset by lower transportation and natural gas liquids revenues. Adjusted EBITDA was slightly lower due to the higher employee-related costs.

Questar pipeline earned net income of $64.7 million, down $3.2 million versus 2011, due to the higher interest cost and increased depreciation expense, partially offset by gains from asset sales.

Capital investment in 2012 was $60.6 million, which was $43.9 million lower than the prior year. This reflects the completion of several key projects in 2011.

Moving to Slide 9. With regard to cost, Questar's 2012 consolidated operating and maintenance costs were up $4.9 million compared to 2011, due largely to higher water disposal cost at Wexpro and higher well workover expenses at Wexpro and Questar pipeline.

General and administrative expenses were up by $2.9 million, primarily due to higher employee-related costs.

During the fourth quarter, we recognized $4.9 million in retirement incentive cost, which should reduce our ongoing employee-related expenses.

Reduction and other taxes were $4.6 million lower due to lower natural gas prices, partially offset by higher production volumes. Depreciation in 2012 was up $21.9 million -- sorry, $21.7 million compared to 2011, due to higher capital investments. Consolidated interest expense was $1.1 million higher as we replaced short-term borrowings with long-term debt.

Turning to Slide 10. The company continues to generate strong cash flow. For the full year of 2012, operating cash flow before working capital changes totaled about $525 million, an increase of 9% over 2011.

At the end of the year, Questar had net available liquidity of $254 million, comprised of about $17 million of cash and $237 million of unused commercial paper capacity.

From a capital markets perspective, Questar Gas issued $150 million of long-term debt in the fourth quarter to refinance about $134 million that matured in 2012 and early 2013.

With that, let me turn the time over to Ron to discuss operations and Questar's outlook.

Ronald W. Jibson

Well, thank you, Kevin, for that summary. And again, thanks to all of you for joining with us today. I'm very pleased with Questar's performance in 2012. The employees in our 3 business units and in all parts of the company delivered impressive results and reached important milestones despite a challenging economic environment.

Let's review some of these accomplishments beginning on Slide 12. First, for the eighth consecutive year, Questar Gas earned its authorized return on equity, evidence of both the supportive regulatory environment and solid execution by our Questar Gas employees.

Second, Wexpro continued to invest in development and grew its average investment base by 13% over the past 12 months to just over $514 million. In addition, we submitted the Wexpro II Agreement for review by the Utah and Wyoming commissions. This historic agreement would provide the potential for continued benefits to both Questar Gas customers and our shareholders.

During the fourth quarter, we announced the strategic review of certain Questar pipeline assets. I'll comment on the status of the review, a little later in the presentation.

From a financial perspective, we delivered strong earnings results in 2012. We reported consolidated earnings per share of $1.19, coming in at the very top of our earnings guidance range of $1.15 to $1.19 per share.

Excluding the retirement incentive that we announced in the fourth quarter of 2012, adjusted earnings per share were $1.21. Also during 2012, we increased the annual dividend by 5% to $0.68 per share.

Let's take a look at Questar Gas' highlights on Slide 13. Questar Gas continues to demonstrate strong, consistent performance, earning net income of $47.1 million. Excluding the retirement incentive, Questar Gas earned $48.6 million. Questar Gas' return on equity, calculated on a financial basis before the retirement incentive, was 10.5% for 2012.

Gross margin was higher, primarily due to feeder-line replacement cost recovery and customer growth. Over the past 12 months, we added about 11,500 new customers, representing a growth rate of about 1.3%. That's an uptick from the 1.1% in 2011.

In addition, our employees have worked hard to achieve our highest customer satisfaction ever. The long-term outlook for growth at Questar Gas remains strong. However, with higher cost and timing of the 2013 rate case, we are expecting 2013 earnings to be flat relative to 2012.

After 2013, we project compound annual rate base and earnings growth of 7% to 9% over the 5-year planning horizon. This growth rate reflects customer growth expectations of about 1.5%, increasing to more than 2% over the 5-year plan.

We plan to spend between $55 million and $60 million annually on the infrastructure replacement program over the planned horizon. For 2013, we are forecasting total capital spending at Questar Gas of $195 million. Questar Gas is required to file a general rate case in Utah in the first half of 2013, which will review the infrastructure replacement tracker.

Any increase in revenue would primarily affect results after 2013.

Turning to Slide 14. Last March, we formed Questar Fueling to meet the needs of an expanding market for compressed natural gas for transportation. We have begun to see success in our efforts. Last month, Questar Fueling announced that it had signed an agreement to build and own and operate a CNG fueling facility in Houston, Texas that will serve up to 200 natural gas powered trucks operated by Swift Transportation and Central Freight Lines. These trucks are projected to use about 5 million gallon equivalents of natural gas per year.

Part of this facility will also offer public refueling to other CNG-powered vehicles. Questar Fueling is currently in contract negotiations for other national locations with several large private and public fleets. While not expected to make meaningful earnings or cash flow contributions in the early years, we are excited about Questar Fueling's long-term growth potential as the use of natural gas per transportation expands.

Let's move to Slide 15. Wexpro delivered record results in 2012. The Wexpro model has created tremendous benefits for Questar Gas customers over the years and provides a long-term hedge against natural gas price volatility.

For the full year of 2012, Wexpro provided net income of $103.9 million. Wexpro's investment base at the end of the year rose to $531 million, an increase of $56.7 million compared to the end of 2011. Operational improvements in 2012 continued to reduce drilling times in the Vermillion Basin, resulting in finding costs under $1 per Mcfe. Wexpro's production in 2012 was 57.5 billion cubic feet equivalent, an increase of 14% over the prior year. This higher production volume, combined with the low finding cost of our current drilling program in Vermillion, resulted in an 8% reduction in the cost of Wexpro gas delivered to Questar Gas customers in 2012 versus 2011.

Overall, Wexpro's return on equity was 20.5% for the 12 months ended December 31, 2012. Wexpro's outlook remains strong. Wexpro continues to project compound annual earnings growth of 4% to 8% through the 5-year planning horizon.

As we've previously indicated, a sustained low gas price environment could result in a growth rate towards the lower end of that range. In 2013, we will be transitioning our drilling capital from Vermillion to Pinedale, which is operated by a third party. Pinedale finding costs should be comparable to the Vermillion results achieved in 2012.

We plan to invest between $450 million and $600 million in capital through 2017, including $140 million for 2013. Note that the 2013 capital forecast includes no Wexpro II investment. If regulatory approvals are obtained and attractive acquisition opportunities arise, we could invest more than the baseline forecast to $140 million.

Turning to Slide 16. Over the past year, we have been working closely with Utah and Wyoming regulators to create a mechanism that would allow Wexpro to add new properties for the future benefit of Questar Gas customers. Given the current low natural gas price environment, we believe this is the right time to add new assets for future development. We would not expect that adding properties in Wexpro would materially change our current 5-year drilling plan, but it would accomplish our objective of extending the life of cost-of-service production.

The proposed agreement is modeled on provisions of the original Wexpro Agreement. Wexpro would earn the utilities cost of capital on the upfront investment. All successful post-acquisition development costs would earn Wexpro's after-tax return on its investment base. Wexpro would evaluate and purchase properties at its own risk and submit these properties for inclusion on a case-by-case basis.

Questar Gas applied for expedited approval of the Wexpro II Agreement with the Utah and Wyoming public service commissions on September 17, 2012, which included the supporting signatures of the Utah Division of Public Utilities and the Wyoming Office of Consumer Advocate.

Last month, the Utah Public Service Commission held hearings on a public comment day. Final briefs were filed last week, and we are awaiting the final order from the Utah Commission, which is expected in the coming weeks. The process in Wyoming is progressing as expected, with hearings scheduled for April. We will remain optimistic that we will have a favorable regulatory conclusion in the first half of 2013. As such, we have begun to dedicate resources in Wexpro to review potential property acquisition in or near the areas where we currently operate.

Moving to the Questar Pipeline on Slide 17. Despite low natural gas and natural gas liquids prices and flat Rockies production, Questar Pipeline, our natural gas, transportation and storage business, performed better than expected. Questar Pipeline earned $64.7 million in 2012. Excluding the retirement incentive, Questar Pipeline's adjusted net income was $65.3 million. Pipeline saw a 9% increase in NGL production volumes, which dampened the impact of a 17% decline in liquids prices. Questar Pipeline was able to maintain O&M and G&A cost of $0.10 per decatherm transported.

During the year, Questar Pipeline completed several key projects and reached important milestones. Questar Pipeline re-contracted 6 billion cubic feet of Clay Basin storage capacity for an additional 3 years.

Next, we completed the construction of facilities for the Uinta basin IBTU gas transportation project. And also in 2012, Questar Pipeline completed the extension of Main Line 103. Finally, Pipeline entered into a 30-year agreement to provide firm gas transportation to Lake Side 2, a new gas-fired power generation plant in Utah.

We are expecting lower Questar Pipeline earnings in 2013, returning to 2012 earning levels toward the end of the 5-year plan. The lower 2013 forecast is due to lower liquid volumes, higher cost and lower rates on Southern Trails Pipeline. We continue to look for opportunities to provide value-added services to customers.

For 2013, we have revised Questar Pipeline's forecast capital investment to $85 million to fund maintenance capital and system expansions to serve Uinta Basin producers and the Lake Side 2 project.

Turning to Slide 18. Before I leave Questar Pipeline, I want to provide an update on the strategic review of Pipeline's noncore asset. This review is focused on 2 assets: Southern Trails Pipeline and Overthrust pipeline. Initially, the strategic review was focused on the Southern Trails Pipeline, which appears to offer compelling economics if converted back to its original purpose as a crude oil pipeline.

Earlier this month, we received a number of very compelling, non-binding indications of interests in the first round of proposal. Because we put few limitations on bidders and partners, we received a wide range of potential transaction structures and proposals, which will take some time for us to review and evaluate. We are focused on identifying the options that will create the most value for our shareholders, including efforts to de-risk the project.

Last quarter, we also commenced an internal strategic review of Overthrust Pipeline's integration and importance to the operation of other Questar Pipeline assets. It has become apparent that Overthrust provides clear, strategic and critical operational support to the Questar Pipeline system.

Accordingly, we expect to maintain status quo with Overthrust as a subsidiary of Questar pipeline. This decision does not preclude us from pursuing future opportunities to enhance the value to shareholders through other transactions.

Let's move to Slide 19. Questar's return on equity continues to be industry-leading. For the 12 months ended December 31, 2012, we delivered a consolidated Return on Equity of 20.8%. Excluding the impact of the retirement incentive charge, this superior return is supported by Wexpro, which provided an ROE of 25.5%. Questar Pipeline delivered an ROE of 10.8%, which is near its authorized return. And on a financial basis, Questar Gas' Return on Equity was 10.5%.

Moving to Slide 20. Looking at 2013, we remained confident in our guidance range in spite of continued low natural gas and liquids prices and higher pension costs and property taxes. We expect net income could range from $1.12 to $1.20 per diluted share. Our business units have sustained growth opportunities, allowing us to invest about $450 million in 2013. These growth opportunities should help us maintain a compound annual growth rate averaging 4% to 6% over the planning horizon. We are targeting a long-term dividend payout ratio of about 60%, which means we still have room to grow the dividend faster than earnings near term.

Following the completion of our 100 million share repurchase program in 2012, the Board of Directors recently approved an ongoing share repurchase program of up to 1 million shares per year. The focus on this ongoing program is to maintain a constant outstanding share count of about 170 million shares.

Wrapping up on Slide 21. In conclusion, I want to emphasize Questar's unique strengths. Our integrated operations span the entire natural gas value chain from wellhead to burner tip. Our constructive regulatory relationships produce appropriate risk-adjusted returns. Questar has an attractive, organic growth outlook, and we're excited about the new opportunities for Questar Pipeline, Wexpro II and Questar Fueling.

Finally, our conservative balance sheet supports our earnings growth, dividend and share repurchase program. With that, we'd be happy to take your questions. Jeremy?

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of Timm Schneider of Citigroup.

Timm Schneider - Citigroup Inc, Research Division

First question, I guess. Any more color you guys can provide on the Southern Trails kind of strategic review across, maybe -- I understand, it's somewhat sensitive because it's first round of proposals, with what kind of parties have been interested. What kind of -- maybe just some of the stipulations around that.

Ronald W. Jibson

Yes, Timm, I appreciate the question, and you're right, it is a little sensitive, obviously, right now at the first round. Let me just say that we are very positive about some very compelling proposals that were made and I'll let Allan maybe give you a little more color on his view on that.

R. Allan Bradley

About all I can say is we're very pleased with the breadth of participation and sort of the wide range of opportunities that we're currently evaluating. I can't really get into, obviously, details. But as you recall, when we first announced our strategic review, options included the -- repurchasing the line ourselves, included outright sale, included joint ventures, we really had a broad list out there and to be back quite frank, we got proposals in every one of those categories. So it's going to take us probably 3, 4 weeks, we're moving quickly, but we want to get through them. At the same time, we're working to continue to develop and de-risk the project, as Ron spoke in his remarks. So I'm very optimistic. I'm excited about the opportunity for Southern Trails, so just stay tuned. And as we can, we will update you. But right now, we're still on a confidentiality period and I don't want to do anything that would jeopardize that.

Timm Schneider - Citigroup Inc, Research Division

Yes, yes, yes, sure, I understand. So just kind of based on what you guys obviously announced Q4 strategic review, are you guys surprised at the level of interest you've seen in this project?

R. Allan Bradley

Yes, I think I was and I'm pleasantly surprised if I didn't indicate that earlier. And we recognized back in the 5-year plan that the Southern Trails was certainly our most important project in 2013, as Ron said, and I'll echo, we're going to work diligently to try to reach a decision by midyear, and that's the track we're on.


[Operator Instructions] Your next question comes from the line of Kevin Smith of Raymond James.

Kevin A. Smith - Raymond James & Associates, Inc., Research Division

Just a little bit on the lines of that and last questions and I get that it's very sensitive. But you may not be able to answer this, but if we think about, if you do make a decision by midyear, kind of what's the earliest time frame that you think is a reasonable the Southern Trails could be reversed? I mean, are we talking a first half of 2015 story? Or is it really more back half of 2015?

R. Allan Bradley

Kevin, this is Allan Bradley. Thank you for the question. The earliest sort of we see it as Questar is 2016. As you probably know or could surmise, this is public data, we do have existing contracts to keep this line in natural gas service through the middle of 2015. Those are 2 primary contracts. And we have a small contract with the utility that takes us through about November 2015. So we've kind of geared our schedule around that time frame. And so 2016, sort of first half, and we're really targeting the first quarter of 2016, certainly seems achievable.

Kevin A. Smith - Raymond James & Associates, Inc., Research Division

Okay. So as I think about that, does that mean you can't really start work until November 2015?

R. Allan Bradley

We're working now. Believe me, we're -- we continue to enhance supply and market visibility around an ultimate rate that is yet to be determined. We're working hard to complete the scope of work of our front-end detailed design engineering study. We're working hard on -- right of way, on negotiations, permitting strategies. So while this process goes along internally, we're still moving forward to keep this project on schedule.

Kevin A. Smith - Raymond James & Associates, Inc., Research Division

Okay, got you. And I get that Wexpro II is still going through the process. But I assume right now, there's nothing in the budget for acquiring any sort of E&P properties? Or maybe how should we think about kind of what your appetite would be once Wexpro II gets fully approved?

Ronald W. Jibson

Yes, Kevin, I appreciate that question and we're -- I know we've been talking about Wexpro II for a while now, but we're very encouraged, we filed back in September of last year. And at that point, we've become part of the regulatory calendar. But the hearings went well, the briefs have gone well. We're optimistic. And as I mentioned, we're going to start pursuing those opportunities as a Wexpro team. And so I'll let Kevin -- I'll ask Kevin if he'll address kind of how we're viewing the capital for that.

Kevin W. Hadlock

Kevin, you're right, in the capital plan that we've put out, we have not earmarked any of those dollars for potential Wexpro II property acquisition. That being said, as Jim and his team have embarked on evaluation of various properties, we certainly have the capital in the balance sheet to fund whatever work that they might come upon. From the perspective of gauging despite those potential acquisitions, it could be lumpy or it could be some years where we have more than a single acquisition, it could be years with no acquisitions. But I think somewhere in the neighborhood of $25 million to $50 million would be the sweet spot for us that wouldn't preclude us from looking at slightly larger opportunities, but hopefully that gives you some guidance.


Your next question comes from the line of Timm Schneider of Citigroup.

Timm Schneider - Citigroup Inc, Research Division

Just a quick follow-up on Wexpro II and then on natural gas vehicles, if I may. So first, on Wexpro II, saw the Utah Division of Public Utilities obviously supported the agreement. I'm just wondering, are all the documents into the commission, at this point, is it just kind of up to them to make a decision now? Or is there anything else that needs to be filed from either you or any intervening parties?

Ronald W. Jibson

Great question, Timm. And yes, everything is filed now. There are no pending documents that need to be filed. We filed our final brief about 10 days ago and I think [indiscernible]. So we're just awaiting that decision at this point. We have, again, I'll reiterate, we asked for expedited treatment on this. And so we're anticipating something fairly soon here from Utah. The calendar put us in Wyoming in April and early April, and so it's going to be at least until then in Wyoming, but I would reiterate that we have had a very positive dialogue in Wyoming, and we feel very optimistic about that also.

Timm Schneider - Citigroup Inc, Research Division

Got it. Then, real quick on the natural gas vehicles side. I guess when you're going in and bidding for these projects, what's the competitive landscape like? And do you guys feel like, especially in your area of the country, kind of have a first mover advantage here versus some of the other guys that are coming in?

Ronald W. Jibson

Yes, appreciate the question, Timm. I'm going to ask Craig Wagstaff, the head of our Utility Questar Gas and who has been heading up our -- any effort on the Questar Fuel, if he'll address your question.

Craig C. Wagstaff

Timm, again, thanks for the question. The competitive environment is very strong. There's a fair number of other participants typically coming to the table when we're responding on a request. One particular request had 69 respondents on the request. We do feel comfortable on our competitiveness of how our bids have been coming in, we're hearing good feedback from the potential end users of our bids. So with the 12 liter engine coming to fruition from Cummins this year, I really think you're going to see this market moving forward. So keeping in mind the locations that we are drilling after are locations that have anchor tenants tied to them that have commitments on vehicle purchases. So we were definitely not in the market of just building a facility and hoping the trucks will come. So we definitely focus on the usage at specific sites.

Timm Schneider - Citigroup Inc, Research Division

Got it. And then the contract structure, I'm assuming this is all at the unregulated business, right, the Questar -- Questar Fueling? How did the contract structures usually work? Is this kind of a cost plus or is this index on a kind of diesel price, or how do you guys think about that?

Craig C. Wagstaff

Typically, this is -- there will be a cost plus on this. Certainly, we're going for contracts greater than 5 years, contracts we would prefer would be more in the 7- to 10-year period of time and then we'll ask what our returns are on this. We will certainly say our returns are greater than the regulated side of the business. But you are correct, Timm, that this is all unregulated.


Your next question comes from the line of Dan Fidell of U.S. Capital Advisors.

Daniel M. Fidell - U.S. Capital Advisors LLC, Research Division

Just a couple of quick questions from me. I guess, first, if you could maybe just touch again on Overthrust and kind of where you see things going with that, just a little bit more color on the plan there. And then secondarily, just as a separate question. You've mentioned the board authorizing up to $1 million share buyback per year. Can you talk about whether that's going to be kind of a committed part of your plan or if that's more of an opportunistic opportunity each year?

R. Allan Bradley

Dan, this is Allan Bradley. Just to make it clear on Overthrust, Overthrust isn't going anywhere, it's going to stay part of the Questar Pipeline consolidated family. Just a little color, back in October, we really didn't have time with the board to do a deep dive into Overthrust. We did it at our last board meeting. As many of you know, we operate our interstate pipelines with the same operating staff, so Overthrust and Questar Pipeline really operate as partners. We have a Questar Pipeline contract on Overthrust that provides benefits to Questar Pipeline. And this common operatorship really keeps our cost low between the 2 pipelines for our shippers. And as we continue to look at that, we just didn't want to disturb that structure that was working well. Overthrust is a very different asset than Southern Trails. It is fully-contracted, it is showing some growth and quite frankly, when Rockies production picks up, and I tend to be optimistic, we like to see that sooner rather than later and it's probably going to take one LNG project on the West Coast that pick prices up, bring rigs back into Rockies. Overthrust is nicely positioned to participate in that future growth. So ultimately, all of the stars lined up where the right decision for our shareholders was to keep the Overthrust as part of Pipeline.

Ronald W. Jibson

Good. And Kevin, maybe you could address the share buyback.

Kevin W. Hadlock

Yes, we did seek and obtain approval from our Board of Directors, to repurchase up to 1 million shares a year. This is really focused on halting any dilution due to direct issuance of stock after direct purchases or benefit plans or compensation. It really is focused on maintaining a share count at about 175 million shares. We'll be opportunistic in the market on how we go about repurchasing those shares. It won't be sort of a very specific program per se, but we do have that ongoing authorization as really an antidilution approach to share repurchases.

Daniel M. Fidell - U.S. Capital Advisors LLC, Research Division

Understood. So on an annual basis, we shouldn't just sort of factor in 1 million shares buyback, it could be a little bit less than that, just sort of depending on the year and being opportunistic about it?

Kevin W. Hadlock

Yes. I would focus on 175 million shares, as your share counts.


Your next question comes from the line of Chris Sighinolfi of UBS.

Christopher P. Sighinolfi - UBS Investment Bank, Research Division

Actually, Dan, Dan just hit on it. I was curious about Overthrust and the share repurchases, so I'm all set.

Ronald W. Jibson

Jeremy, do you want to see if there's any more questions?


There are no further questions at this time. I now turn the call back over to the presenters.

Ronald W. Jibson

All right. Thank you, Jeremy. And again, thanks to all of you for participating on our call this morning. Again, our commitment is to you. It's a plan of execution. And we are very optimistic about some of our core strengths, but at the same time, some of these areas of Wexpro II, and at Questar Fueling and certainly, our Questar Pipeline reviews that we're doing, our opportunities there, we're very optimistic. And looking forward to getting out on the road soon to be with many of you. And please feel free to call us if you have any further questions. Again, thanks for your time today.


This concludes today's conference call. You may now disconnect.

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