Questar Corporation (NYSE:STR)
Analyst & Investor Presentation in New York
May 16, 2013 12:20 pm ET
Anthony R. Ivins - Director of Investor Relations and Treasurer
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
Craig C. Wagstaff - Executive Vice President and Chief Operating Officer of Questar Gas
James R. Livsey - Executive Vice President and Chief Operating Officer of Wexpro
R. Allan Bradley - Executive Vice President, Chief Executive Officer Questar Pipeline and President of Questar Pipeline
Kevin W. Hadlock - Chief Financial Officer, Principal Accounting Officer and Executive Vice President
Anthony R. Ivins
My name is Tony Ivins. I oversee IR and Treasury for Questar. It's our great pleasure to have you with us today. I want to introduce Ron Jibson, who will give an overview and introduce the management team of Questar. So without further ado, please welcome Ron.
Ronald W. Jibson
Good afternoon. It's great to see you all. And this is certainly a tradition that we've enjoyed. We always love being here in New York. And it's a great opportunity for us to see many of you that we hopefully at least get to see at least once a year. It's even better when we see you more often than that, and that's only something that we look forward to in being in New York. And whoever is responsible for the weather today, we thank you. We know you've had a long, cold winter. It's been pretty nice out there today. And we probably jinxed ourselves because we were talking about how the weather has been lately every time we come to New York. So it's -- I'd also congratulate you on what a phenomenal thing in the city since the storm. I know one of the recent times we were here was the week after the storm. And to see what's taken place since then and the city coming together, just a phenomenal thing, and so we congratulate you with that.
We do appreciate this opportunity. I want to thank you for being with us. We know we've said before that you had a choice today of where to be at lunch, and I hope the food is well worth it, to begin with, but also we appreciate that you would take the time to come learn more about Questar and some of the things that we've got going in our story right now.
Let me just introduce some of the people that are with me today, all this people, but we brought a lot of our team out today. I'll try to go around as I can see them in the room. It looks like -- back here, Kevin, stand up. Kevin Hadlock, our Executive Vice President and Chief Financial Officer. Kevin's been with our company 2 years, and we appreciate Kevin's involvement in a lot of the investor relations areas. And many of you have seen him as we've gone around. Coming around, it looks like, at the front here, we've got 2 of our business unit leads, starting with Jim Livsey. Jim has been with our company 28 years, and he's actually headed up Wexpro for 15 years now. And the phenomenal growth that we've seen in Wexpro is attributable to Jim. He's our Executive Vice President and Chief Operating Officer of Wexpro Company. Next to him, Allan Bradley. Allan's been with us 8 years now, probably 38 or 40 years in the industry. I won't age you more than I should, Allan. But Allan's -- I joke about the fact that, I -- when I say 8 years with Questar, it just always seems way short because Allan has had so much experience in the industry and we're still trying to find somewhere in the world that Allan has not been or at least tried to run a pipeline through, and we haven't found that yet. But he heads up our pipeline team and, obviously, a lot of interest with our Southern Trails Pipeline, and we'll talk about that today.
Let's see, moving around, Craig Wagstaff. Craig is our Executive Vice President and Chief Operating Officer of Questar Gas Company. And Craig has been with our company for 29 years and continues to do a phenomenal job with our utility and has had the experience in all areas of the utility and now heads that up. And then Tony got up at first, but Tony Ivans, been with the company 31 years, and Tony continues to wear the hat of our corporate officer as and Corporate Treasurer and also manages our Investor Relations area. So it's a real pleasure for us to be with you and to talk about Questar today. And you'll hear from each of these members of the team as we go through.
I'm going to give just a brief, quick overview of a couple of areas. First of all, we talk about Questar being unique. And I think that that's from several different standpoints. From one aspect of this and as you look at our strategy, we're one of the few companies out there today who are fully integrated, and we believe that is a very good model. And you'll hear some examples today from our business unit leads on why that is so important to us, to be integrated with everything from the wellhead to the burner tip, to have the business units that cover all aspects of the value chain of natural gas.
We continue to be able to provide industry-leading returns. As you can see, 19.4% currently. We consistently have been above 18%. And on a consolidated basis, that's driven heavily by our Wexpro Company, with over 20% returns; and our business units of Questar Pipeline and Questar Gas continuing to earn at their allowed return levels.
We like to talk about constructive regulation, and Craig will cover this in more detail. But we're very pleased to be working in a very constructive forward-looking regulatory culture within the states of Utah and Wyoming. And I think that's evidenced from the recent decisions on Wexpro II and continued partnership with our regulators. And that's something that we don't take lightly. And we work very hard to create a very transparent, open relationship with our regulators, and I think that's certainly helping us as a company today.
We have good solid growth, 7% to 9% growth within our utility; 4% to 8% within Wexpro; and overall consolidated, we anticipate 4% to 6% growth over the 5-year plan, and you'll hear more detail on that. And then dividends: About 3 years ago -- well, not quite 3 years ago, but we -- as we came out after the restructuring of the company, we pledged to our owners and investors that we would grow the dividend 5% to 10% per year. Not quite 3 years, and we're close to 40% at this point as a result of the recent 6% increase in dividend that we announced at the end of last week. So again, we're very pleased with the unique model that we have, and we think it works very well for us.
The -- as far as location, we're strategically located in the Rockies. We're headquartered in Salt Lake City. And again, we're based on 3 key business units: Wexpro Company develops and produces natural gas on a cost-of-service basis, that's another unique aspect of our production. And it's all dedicated to our utility, Questar Gas, and has continued to see 20% returns over the last 32 years of the Wexpro Agreement. Questar Pipeline transports and is involved in storage for not only our utility, Questar Gas, but also for many other third-party shippers and has seen tremendous growth over the last 5 or 6 years and obviously is involved with some key strategic assets that are being reviewed currently. Questar Gas Company delivers natural gas to our utility customers, almost 1 million now in Utah, Wyoming and a small part of Idaho.
Our portfolio of rate-base-driven companies continues to offer good growth, again, and strong returns. If you look at the profile of our companies today, we're a lot more balanced than we were a few years ago from a standpoint that our 3 business units all contribute in a very strong way to the whole. And you can see from this chart our net income for 2012 and some of the other rate-based numbers and investment-based numbers that we have within our business units.
So with that, before I front-run the business unit leads with all the information that they're going to tell you, I'm going to turn the time over to Craig Wagstaff. And again, I appreciate Craig and his involvement and leadership with our utility, Questar Gas.
Craig C. Wagstaff
Thanks, Ron. I appreciate it. And also, let me reiterate Ron's thank you to each of you for being here this afternoon. And hopefully, you'll have a takeaway from this that will be beneficial for you. But again, thanks for being here today.
But let's take a few minutes and talk a bit about the distribution utility Questar Gas. As Ron indicated, serving nearly 1 million customers now in Utah, Southwestern Wyoming and Southeastern Idaho. Right now, we are fortunate to continue to have strong economic growth within the state. We're seeing growth at about 1.5% right now. And as we speak with our friends over at the Economic Development Corporation of Utah, they continue to tell us that they are busier than they have been over the past decade. So things are going very well, things are moving along well. You may have seen recently, Forbes rated Utah as the #1 place to do business, as well as the #1 place for careers. This is the third year in a row Utah has received this, so many great indicators on economic growth taking place within our service area.
As we look at one of the reasons for this economic growth. Often cited is the low energy costs. You can see on this Chart #9, we continually have some of the lowest rates in the nation. This certainly is a contributor to strong economic growth and development within our service area. As you look at the price of gas compared nationally to Questar Gas' rates over the past several decades, by tenure, you'll see that we have been lower than the national average as you look back over this historical time period. Great, great thing, much attributable to Wexpro production, and Jim will certainly get in and talk a bit more about that.
So as Ron mentioned, we perceive ourselves as a top-performing utility. And a few metrics that we look at as we can talk about this, we've learned -- earned, excuse me, our allowed rate of return for the past 8 years. Our efficiencies are some of the best in the industry. American Gas Association has a survey that they do, and we are in the lowest 5% of O&M per customer. We've discussed the lowest rates in the nation, strong customer growth. Our market penetration, which is greater than 95%, which is defined as those customers within our service area that have the option to choose natural gas or not choose natural gas for the space and water heating, 95% choose to do so, and the national average on that would be about 60%.
So those metrics, along with very favorable customer satisfaction ratings. We do independent surveys each month, and we continue to see that we have a very favorable and favorable rating from our customers, as we move forward, for the past several months.
So one of the key items often asked from investors is, what type of regulatory environment do you have within your service area? And Ron puts it best, I think he states this as a constructive forward thinking. I would certainly say, an engaged regulatory environment. And some of the characteristics or items that came out of our most recent rate case is we went from a 10% allowed return to a 10.35% return. We were in test period for revenue decoupling. This was extended indefinitely, so a great thing for the customers, for the company and certainly for shareholders. And tied to decoupling is the ability for us to promote energy conservation. We will invest $25 million to $30 million this year on energy conservation programs, which is a great thing for our customers. The infrastructure tracker is what we refer to as another attribute that we have, that I'll get into on our next slide. If you take those components along with the other ones listed, you'll see that we do have a very reasonable regulatory environment in Utah. And certainly, this environment meets the needs of our customers. It ensures that have a safer distribution system and certainly allows for substantial growth within the utility.
Safety is our #1 priority at Questar Gas. And you can see from the slide here, in the '80s, we replaced of our cast-iron, pipe was replaced. In the '90s, our bare steel was replaced. Most recently, we've been focused on replacing our high-pressure feeder-line replacement. This is where our infrastructure tracker comes in. Our engagement and involvement in this program was not a result of a national incident that took place. We've been into this well over 5 years now. We've been very proactive with it. And what the infrastructure tracker will allow us to do is spend $55 million to $60 million in replacing key components of our system. And once that system is replaced and put into service, we can place that investment in a rate base, as opposed to waiting til the next rate case. So that's a key item here. Many folks think that we need to wait til our next rate case for us to receive the benefit of this investment. But actually, with the tracker, we have that ability to move forward once that system is put into place.
So you take feeder-line replacement, you take healthy customer growth, and you're going to see a growth rate of 7% to 9% for the utility, is what we see over the future here through 2018.
Another item that we certainly want to talk about today has been a hot topic nationally for the last couple of years, and that's natural gas for transportation. Certainly, it's a market that's transitioned substantially. Questar has been involved with natural gas vehicles for almost 30 years now. We have a high percentage of our fleet that operate on natural gas, and we have a large number of our customers that are benefiting from the low-cost clean fuel of -- utilizing natural gas for their needs. We have a -- governors in Wyoming and Utah both are very supportive, as well as the legislature. So we've had a very favorable environment in moving this forward; as well as our regulators, another area that they've been very forward looking as we've gone down the road with transportation for -- with natural gas.
So you can see on the map here that, currently, Questar owns and operates 30 public stations. Another development recently we've seen is, within the past 12 months, our public, private stations that are opening within Utah owned by other individuals, which is great to expand this infrastructure. But really, anywhere in Utah right now and the southwestern part of Wyoming that we serve, you can drive your natural gas vehicle and have the availability -- to have natural gas available to you.
So what has taken place in the last few years as we've been working with key customers? Some of them have approached us on the ability to provide infrastructure with their fueling needs outside of our service territory. So about a year ago, we formed a company called Questar Fueling. And the focus of this company is to provide consulting, design packaging and installation of natural gas fueling stations. And recently, we've had a few contracts that you may have seen the announcements on. To give you a feel of what type of customers we're looking at here: We have Swift Trucking, as well as Central Freight, have signed contracts with Questar. And Swift -- Central Freight has been an absolute leader in transitioning this market forward, certainly on the heavy-duty side. And then also on the map here, we'll lay out that the most recent contract we had with Central Freight and Swift is located in Houston. We have partnered also with Frito-Lay in Topeka, Kansas; and Killingly, Connecticut. As you well know, those folks that are familiar with Frito-Lay, they've been a leader when it comes to environmental conscientiousness for the past decade. And this is another movement that you'll see from Frito-Lay as they utilize their large vehicles on natural gas.
Well, certainly, a great movement in this market. As we look at the transition that we've talked in the past about the availability of engines, this market is much driven around the infrastructure, availability to fill the vehicles as well as the vehicles available to run on natural gas. And you can see that September 2013 date is a key date where 12-liter engines will be available, coming off the assembly line for production and available to end users. So we're just starting to see this movement. The 9-liter engines were -- have been available for a few years. We were told that 60% of the trash trucks sold last year in this nation were natural gas, so that market has already begun well into a transition period. We'll continue to see transition on the 12-liter and 15-liter engine.
So it's absolutely key, as we look at opportunities, what this can do for, certainly, our country, certainly from an investment perspective; the impact that natural gas can have. And this certainly is about infrastructure crossing the United States and ensuring that individuals have locations to fill their vehicles. So the focus certainly is less dependency on the foreign oil. This is about jobs, this is about fewer emissions, less pollution and certainly a substantial savings to the end-use customers.
And that's -- that would be kind of the summary of Questar Fueling. With that, I'll turn the time over to Jim Livesey, who heads Wexpro, to talk about Wexpro.
James R. Livsey
Thank you, Craig. I'm pleased to be here and provide an update on Wexpro.
We're now almost 32 years, as Ron mentioned, into operating Wexpro pursuant to the Wexpro Agreement. We're also pleased that our regulators saw fit to approve the Wexpro II arrangement over the last few months in both Utah and Wyoming. That allows us now to add properties to Wexpro. But let me just very quickly recap the primary provisions of the Wexpro arrangement. As a reminder, our company has always had a E&P, gas-directed exploration and production, company, if you will, since our origin in 1935 when Mountain Fuel was incorporated. And that operated well and continuously up until the 1970s where a significant oil discovery was found in nearest Rock Springs, Wyoming. And that ushered in a dispute as to who would now own the valuable oil proceeds, shareholder or customer, I should say, or who should have the benefit. And that dispute was resolved in 1981 with what we call the Wexpro Agreement. Primary resolution of the oil sharing dispute would be that 54% of the proceeds would go to reduce gas costs, 46% would go to the shareholder. That arrangement also called for how future development would occur and specify this contract that's worked well for us now for almost 32 years.
So Wexpro has an economic model similar to utility. That is to say we deliver all of our gas to Questar Gas, and we're in a return on investment. We're not subject to commodity price exposure, rather we receive a return on the successful investment coming through our drilling program. It doesn't require a rate case mechanism. It's self-governing. As we incur costs, we receive reimbursement in the subsequent month. And the arrangement is, for the life of the properties, primary provision of most interest to the shareholder would be the 20% after-tax return on successful investment in gas-producing properties.
Wexpro provides strong cash flow to the corporation. You could see the chart on the top right of this slide that depicts the EBITDA growth over the last few years.
This next chart depicts just the relationship between investment base and net income. We've successfully grown investment base and net income over the last few years primarily as the result of our capital program. This year and in recent years, we're spending about $140 million. To the extent that, that results in successful drilling, we are allowed to add that to investment base. Dry holes or noncommercial wells go to the shareholder without reimbursement. We have about $85 million of depletion or depreciation that we have to cover in the current year, less deferred taxes. The remainder there is that -- is the addition to investment base, subject to the 20% after-tax return. So you can see how both net income grows ratably with investment base over time.
This next chart depicts the properties and how resilient and productive they've been. I think the founders of the Wexpro Agreement in 1981 had no idea that these properties will continue to produce in a manner that they are but, much like the gas industry in this country, has experienced technological advancements. We've also been able to employ those in these reservoirs that have been with us for decades. And you can see that, the blue bars, which represent reserves, we started out as about a 1/2 Tcf of reserves when the arrangement was entered into in 1981. We're now up to 750 Bcf or 3/4 of a TCF. But then, as the red line depicts, we're producing more gas than we ever had, so really an amazing set of properties that have benefited both the shareholder and the customer over time.
Finding cost is the ratio of well investment divided by the reserves, and that's the single most important metric associated with cost of service for our customers. So we're focused on that. You can see over the last decade that we experienced rising cost infrastructure, just like the rest of the industry when the gas prices significantly increased over the last decade. That resulted in higher finding costs. Good news, over the last few years, I think, with our efficiencies and redirecting our drilling program to our most efficient areas, we've been able to lower that finding cost to levels that existed prior to 2006. And that's allowed us to remain competitive with cost of service in a lower gas price environment.
The other -- our overall cost structure is very competitive, again by virtue of operating in these low-risk development areas that have been with the company for decades. As we compare ourself to 12 industry peers at $2.80, and again these are integrated, primarily, gas companies, our cost structure compares very favorably to those out there that we metric ourself against. And so this includes production taxes, lease operating expenses, depreciation, G&A and any associated interest charges. Through that, you'll have the return. And our cost of service is in the mid-$4 level when the return with tax reimbursement is considered.
So this Page 29 depicts what the arrangement has done for our customer since 1981. On the left side, you see the blue bar represents cost of service. About 50% to 60% of the utility's gas supply is sourced from Wexpro, the balance being purchased on the open market. The red line represents what that remainder was purchased at over this period of time. And as a result, we've been able to provide the customer over $1.3 billion in savings by virtue of having this long-term hedge in place since 1981.
The outlook for remaining Wexpro investment is strong. We see $450 million to $600 million of capital to be spent over the next 5 years in Wexpro. The -- that will be dependent upon partner desires and gas prices. In total, we see $1.3 billion of future spending out ahead of us. That compares to about $1.2 billion that's occurred since 1981. So we have the same level of spending, 800 to 900 wells yet to be drilled from the existing property set, still available to us for development going forward, primarily in southwestern Wyoming, northwestern Colorado and a little bit in Uinta Basin.
This year, our spending is primarily on the Pinedale area and on one of the lower cost gas plays in the Rockies. And most of our capital, $120 million or so, $140 million, is being spent as part of the overall Pinedale development. We have 3 areas of ownership. The lowermost or southernmost area that you see in the right-hand side of the map has largely been developed. We just finished up our last program of wells. Now we're moving to our center rectangle of ownership. I think Page 65 in your appendix shows where we sit with our ownership with 3 blue rectangles versus the total Pinedale Anticline. Good news for us, as we move forward to see lower finding cost, better-performing wells, and that's going to allow us to remain competitive in this relatively lower gas price environment.
This is a quick snapshot as to show you how important finding cost again. That metric that comes forth from drilling new wells is to the overall cost of service. Almost 70% of cost of service is finding cost related, that is to say the return with tax reimbursement and depreciation, biggest single component. So that's why we're so focused on efficient drilling in low-cost areas.
Finally, in conclusion, I just want to talk about the Wexpro II arrangement, maybe most of you have heard about. But until the last few months, we were pleased to get approval of that by Utah and Wyoming Public Service Commissions. Essentially, this methodology emulates the Wexpro I agreement and allows us now to add properties for continual development into Wexpro [indiscernible] limited to those producing areas that existed in 1981. The value proposition that our regulators saw fit to approve is that in this environment now is the good time to go out and buy out out of favored gas assets that can benefit the customer down the future. So this template was approved. And as we go forward and buy properties at our own risk, we'll take them to both Utah and Wyoming for specific approval, but it allows us a mechanism there on the model and -- to try and replenish the Wexpro inventory, if you will, as we go forward.
Just in closing, a quick snapshot as to how that would work with a $50 million capital acquisition. The first -- the initial acquisition capital under this new arrangement we'll earn the utility's cost of capital, 8.42%. So any leasehold cost for properties that are already producing that don't have a risk associated with further development will earn the cost of capital, and as we develop for gas properties, we would earn a 20% return that mirrors the arrangement that we have on the Wexpro I arrangement. But with a $50 million hypothetical finance by debt, you would see that, that would be accretive $0.01 to $0.02 per share and less than 1% increase to gas cost for the customer.
With that, let me turn the time over to Allan Bradley, President and CEO of Questar Pipeline.
R. Allan Bradley
Thank you, Jim, and it's great to be here this afternoon as well in New York. Questar Pipeline, as you know, is strategically located in the heart of the Rockies. We touch 6 basins, 3 major basins, the Greater Green, Uinta and Piceance Basin; up right in the tri-state area, Utah, Colorado, Wyoming.
More importantly over the last 10 years, we've really stepped up our visibility as a market center in this region, starting with the buildout of our northern system, Overthrust. We have a 4-hub system, Opal, Wamsutter on the north, Overthrust has been very strategic to that buildout. It also serves northern city gates of Questar Gas through a transportation -- I'm sorry, through a transportation contract the Questar Pipeline holds on Overthrust. On the southern system, the same thing, we were able to build out Questar Pipeline system creating 2 hubs. At either end, Goshen is our big delivery point to Kern River. And then most recently, White River Hub is a joint venture with Enterprise Products, moving over 1.5 Bcf in this hub and virtually applying gas to every major export pipeline out of the region.
Also most importantly, one of our strategic assets is Clay Basin in the heart of our system. Clay Basin is the largest storage facility in the Rockies, 54 Bcf of working gas. We recently expanded it by 3 Bcf. When the market gives us a chance, we have another 8 Bcf expansion we're gearing up to go out with open season on.
Turning a little bit about Questar's operation, where we've been, over the last 6 years, we've delivered strong cash flows to Questar and with an EBITDA of about $180 million. Average deliveries, you can see, have really grown as shown in blue. Those are the export pipeline deliveries. That's where our growth has been achieved through our hub strategy.
Questar Gas base loads on Questar Pipeline. Our throughput has been flat over this period of time. But we like the way our system's positioned and, I think, gives us a lot of flexibility with bidirectional flows between those hubs.
So as you think about the market dynamics with flat production in the Rockies, still surplus takeaway capacity, what's important to us is to remain competitive at the margin. And these bidirectional flows keep our fuel costs down, variable costs low. We've been very successful recontracting with customers. In many cases, we're getting higher rates with the flexibility to chase higher valued markets. At the same time, we have seen some narrowing of terms, where we used to get 15, 20-year terms, single digit, but they still support very attractive projects on our system, manage Questar Pipeline to stay out of a rate case. Obviously, maintaining our storage leadership position, growing our unregulated field services business in the wake of the spinoff of QEP Resources has been a goal of ours.
And 2 recent items we've added obviously, our strategic review of Southern Trails, and with the growing interest in LNG as a transportation fuel, an alternative to diesel in the Rockies. We've also seen a shortage of LNG supply. So don't worry, this is not an LNG export facility, merely a small facility that would take advantage of market's need for additional LNG for heavy-duty mining trucks, drilling rigs and as many of you have seen -- saw Warren Buffett's announcement about LNG for a locomotive fuel. So we're getting inquiries on all those fronts. So stay tuned.
Looking at some of the projects, I'll go quickly through them, but to me it really reinforces the benefit of our integrated strategy. Vermillion has been a very strong growth play for us as a pipeline. We realize we needed to get more capacity out of Vermillion area, much of which was related to the success of Wexpro. So we expanded our Simon compressor station. It allowed us to risk capacity on that system we called Main Line 22 about 63,000 decatherms a day. Now for an open season, Questar Gas contracted for the bulk of it in order to access receipt points back into Vermillion, take advantage of that low-cost Vermillion production. We still have an expansion this year that will add up to 9,000 decatherms a day that's on market, and we see that as a growth play going forward.
Looking at what's happening in the Uinta basic, another smaller project but an important one, this is a vibrant crude oil development play in the central basin, and with crude oil comes associated gas. And what we've been able to do, stay ahead of that production growth on the wet gas side, isolate this section of our system and move that wet gas to cryogenic processing near Fidlar. These are very attractive projects, short-haul, max rates, and we are getting long-term contracts, contracts 10 years or greater. And it's a great way to optimize the use of our system. Once the producers get on our system, they'll stay on our system to hubs. Very good business. And we have an open season going on today for the third phase, which will be an extension of JL47 up to Myton, ultimately result in a complete looping of JL47.
Another example of integration with Questar Pipeline, Questar Gas is the successful effort that went on last year to capture the transportation service for Lake Side 2, new combined cycle in our plant that -- at Questar Pipeline with a little bit of compression and boost its deliveries to Questar Gas. Questar Gas has a new feeder line that was put a few years back. Together, we put a very competitive service in to supply gas to PacifiCorp Lake Side 2. That's a 2014 project, 30-year contract, a nice ride [ph] to slight discount below our $0.17 recourse rate or max rate.
But looking at really what's exciting on the pipeline these days is our strategic review of Southern Trails. If you recall back in October, we announced a strategic review of both pipelines, Overthrust and Southern Trails, very different pipelines. Overthrust is fully contracted long term. It is in the heart of the Rockies, and it is central to our integrated strategy. We did an internal review of what Questar might look like. And there's various scenario and outright sale joint venture. As we got through that analysis, it was clear that Overthrust belong with Questar Pipeline. We weren't going to save any operating costs because same operators operated Questar Pipeline and Overthrust. We just push more cost back on Questar Pipeline. At the end of the day, we've got a lot of flexibility serving those cold winter days in Salt Lake because we could utilize that transportation contract that Questar Pipeline has in Overthrust to actually increase the delivery to those northern city gates. And when temperatures remain cold, believe me, we had about 3 weeks of subzero temperature in the system work indiscernible] this winter.
And then finally, I don't think anybody relished the thought of having competitor lose in the heart of our market. So at the end of the day, the decision was made to maintain the status quo. For us, it will be -- continue to be a subsidiary of Questar Pipeline.
Southern Trails is a very different animal, an interesting animal. The standpoint that it was originally built back in the late '50s to move crude oil from the San Juan Basin to the L.A. Long Beach refining complex, 16-inch line. We did expand a small section to 20-inch, and we're building it out for natural gas. We had a vision of expanding that pipeline beyond the 16-inch line back when the California markets were growing. Supply was short, there was a big basis differential, about $0.50 in those days. Well, some things don't always work out as planned. We only got the east zone at 485 miles from San Juan, the Four Corners area into the California border into gas service. Still a 16-inch line, it's 81,000 decatherms a day. It is fully utilized at a high availability. It's not big enough to garner any attention on the part of LDCs [ph] and California. So as a result, when contracts expire, we would end up basically taking what the market would give us. Basis differential started to decline from $0.50 to $0.35. Our most recent contracts came up for renewal at 18. Today, that basis differential is probably 14. But the opposite was happening on the crude side, much like the Rockies 10 years ago. Basis differential between WTI and Brent is widening. And if you think about all of the new crude supplies moving into Oklahoma and Texas from very prolific fields in the Mid-Continent, WTI was actually declining at a time, where Long Beach took most of their incremental oil supplies from international markets [indiscernible]. And as a result, it traded more like Brent. So as our business development folks looked at this opportunity, it was giving us about a $15 to $20 barrel differential, and we started pursuing the idea of putting it back, repurposing it to its original use, which was as a crude line. And we started down this path and presented in October to the board, it's a very exciting opportunity. To the board's credit, they looked at a bunch of gas guys and said "What do you know about the oil business?" And it is very different than natural gas. So we took a little time to execute this strategic review. We didn't put any bounce on the strategic review. It was launched in January, we invited a wide range of participants. By that, I mean mid-stream, crude oil players, liquid players, producers, refiners. We didn't limit it just to San Juan or Permian, there were players ahead, reloading facilities, unloading facilities, pipelines and other areas. Their shippers all saw the value uplift of creating a transportation system to move additional crude into Palm Beach, L.A. to back out foreign source crude. We were pleasantly surprised by the interest in our first phase, which was a nonbinding indicative bid process. There were some -- obviously, some compelling proposals. They exceeded our expectation, finished our analysis, 1st of April. We are now in the second phase where things get a lot more interesting. It's a firm binding phase. We haven't taken any options off the table, outright sale, joint venture, asset swaps, MLPs. We can always keep the status quo and continue to develop it as Questar Pipeline. So everything's on the table and everyone has been active in the data room. We have a virtual data room. We have a physical data room, management presentations, Q&As and continues to be a lot of excitement.
Our plan is to call for final bids by mid- to late June with a period to evaluate them, and we will look out for our shareholders from the standpoint. It's all about optimizing shareholder value around the most attractive of the proposals. So stay tuned on that exciting time for Questar Pipeline.
And now I'd like to introduce our CFO, Kevin Hadlock. Kevin?
Kevin W. Hadlock
Thanks, Allan, and thanks for joining us today. I'll just cover a few financial highlights and then turn the presentation back over to Ron and Q&A. One of the highlights for Questar is certainly our return on equity, which is industry leading. Hankered by Wexpro, which earns the contractual 2.4%, we've been able to earn just above that amount on a trailing 12-month basis. Questar Pipeline, Questar Gas, very near. They are authorized levels. Then again, on a consolidated basis back up to near 20%. The higher consolidated ROE relative to sort of the sum of the parts is really a consequence of some of the negative equity that we see at the parent company as you see on Slide 46. That was the nature of the Wexpro agreement. Wexpro is 100% equity financed. Questar Pipeline, which has an authorized level of equity at about 54%, is a little bit rich today. As we dividend some of that out, Questar Pipeline, they used to grow, you'll see that equity levels settle back into around that 54% level. Questar Gas at 49% is seasonably low. Normally, we're closer to the 52%, coming off a very cold first quarter and a little bit more short-term debt. You see that number a little bit lower than normal.
At the corporate, you mentioned the negative equity, as well as about $250 million of corporate debt that sits at the parent, gives us a combined equity ratio of about 45%. From a credit rating perspective, reviewed by the agencies as having very strong credit, Questar Pipeline and Questar Gas are both rated at the A level at S&P, A3 at Moody's, at the corporate level, rated A-, A3.
When you look at our capital program going forward, you'll see an uptick in our capital spending. We had been averaging about $370 million over the last 2 years. In 2013, we'll see an uptick, which is about $450 million. Wexpro has been very consistent right around that $140 million level. You'll see Questar Pipeline picked up a little bit from last year, as Allan walked you through 3 of the key projects that they're working on, that shows a little bit of an increase from the $61 million last year.
The largest consumer of capital right now is Questar Gas. A lot of that is driven by a ramp-up again in customer growth. And as Craig mentioned, we're about 1.5% today, forecasting that to grow, of course, [ph] to the 2%. We're also seeing an increase in the infrastructure replacement program that was originally down around $40 million, $45 million. We're now seeing that number closer to $55 million, $60 million going forward. In addition, there's some system reinforcement projects. We should see Questar Gas spending about $200 million a year each year for the 5-year plan, down cumulatively to about $1 billion in the next 5 years. And you'll also see a little bit of capital at corporate that is driven by some of the expectations around Questar Fueling growth. Corporate is where we account for the Questar Fueling opportunity that Craig discussed with you earlier.
Moving to our dividend, the announced 6% increase in the dividend last Friday, if you go back to the restructuring that took place in July of 2010. Our dividend is up nearly 40% in that point in time. For management team, the dividend is important for us. We will see that increase over time and certainly to the Board of Directors, and we have delivered on that commitment to see that moved up to a competitive level, looking at a payout ratio of about 60%. The retaining 40% of that net income provides efficient capital for us to continue to grow the business at the 4% to 6% target that we discussed. We're approaching that 60% payout ratio with the most recent increase. And as we hit that target, we will see dividends grow in line with earnings in the future.
We completed a $100 million share repurchase program authorization last year purchasing about $92 million worth of our stock. The intent of this program really was to get our share count down to the 175 million level from the time of the restructuring. Ongoing, we have a 1 million share authorization in place to ensure that our share count stays at approximately 175 million as we see some dilution from benefit plans and compensation each year.
And so to summarize in a financial perspective, we expect 4% to 6% EBITDA and net income growth, hankered by Questar Gas's growth, where we're seeing 7% to 9% is really driven by the customer growth forecast, as well as the infrastructure replacements, capital spending that we see. As Craig mentioned also, we are anticipating filing a rate case here at the request of the commission from that past settlement around July 1. With Wexpro, we are seeing sustained growth at 4% to 8% with a cumulative 5-year capital program of $450 million to $600 million.
Questar Pipeline looks for some moderate growth as we see soft prices and flat production in the Rockies to the extent we see firming in prices and producers come back to the Rockies. Certainly, we'll see opportunities for expanded growth within Questar Pipeline. It is continuing to show great cash flow out of that business. And is now I mentioned the key project for us is getting through the Southern Trails strategic review.
With that, I'll turn it back to Ron.
Ronald W. Jibson
Well, thank you, Kevin, and thanks to the rest of the team for those overviews.
Let me just summarize by saying why invest in Questar. Obviously, Wexpro is a key component of our company. It's unique, and it's great to have a development and production company that is not subject to commodity risk and at the same time, has given the customer of Questar Gas who takes that gas to cost of service and yet continues to return -- tremendous returns to our shareholders and at the same time rate savings to our customer base. Add that to, again, the other 2 components of our story with Questar Gas and Questar Pipeline, we feel like we can offer you very high returns with strong growth and again, a low-risk play by taking a lot of the risks out of our businesses that we've been able to do through regulation and the attributes that we have within our utility and the regulatory model that we have there, and also obviously with Wexpro company.
So we like to -- again, we're committed to the dividend, we'll continue to drive that, be at that 60% payout level. And we'll make that commitment to you as we go forward. Our story is one of execution and providing you the returns and the value that you would expect from us and that you've grown to expect from us for many years. Again, it's nice to look out over this audience and see so many that we've worked with for so many years and also new faces. And we look forward to getting to know all of you on that same basis as we go forward.
So with that, we'd like to open this up to questions. And we'd be happy to take questions and hear you or your aspect of the business. I think we've got a mic there, Jeff.
Just curious on your natural gas vehicle program, which seems like it should start expanding, you're getting more customers onboard. How much are you planning to invest, because it's still a very small amount, and what kind of leverage can you get? And are there logistic issues when you go nationwide outside your territories when you have new customers? And how big can that be in the next couple of years?
Ronald W. Jibson
Great question. Let me just say with that, we're very excited to see where this whole industry has gone in regards to natural gas for transportation. I'll give a kind of an overview on that aspect to drill down on the detail. But a few years ago, we were getting asked a lot why are we in this business, why are we continuing to build infrastructure, where is the return to the company for that? And at that time, we weren't exactly sure where it was going to go, but we felt like it would move and that we would find an opportunity to see a return from this business. I think that it goes without saying that recently with the core foundation of medium-sized vehicles in either waste hauling trucks, the buses, shuttle vehicles at airports and so forth, they're really creating the foundation of natural gas in transportation, that's expected that by -- in about 3 years, you'll see 70% of the waste hauling trucks in the nation running on natural gas. We've certainly seen that in our area. We've continued to build 2 models, and I think this is important. We've been involved in natural gas in vehicles for about 25 years, building the in-state infrastructure to allow, for what Craig explained, vehicles to travel throughout Utah. But as a result of that need, we now have Questar Fueling, which gives us our opportunity to grow outside of the state of Utah. That investment is about $25 million is what we would anticipate per year. We're drilling slowly, but also very quickly. We've been in business for about a year. And at Questar Fueling, we've anchored 3 very solid contracts with major companies. And this is just the start. I think that there's a lot of opportunity. We still see about $25 million level per year going forward. That could increase substantially over that. We're trying to be conservative on our speculation with this. It will be contract driven. And when we have the contracts, we'll build the facilities and that will create the good returns that we're anticipating there. Craig, why don't you talk a little more about what you see as far as current investment this year and going forward?
Craig C. Wagstaff
Thanks for the question again, and Ron hit it right on. That's about $25 million, it's what we would project right now. Now certainly we can throw a lot more capital at this. There are some companies investing in this market very aggressively. We're making the assumption that the trucks are going to come. We're a bit more conservative in the sense that we are looking for anchor tenants before we launch out a specific location. So we won't just throw a location out there without something backing that or behind that. So the logistics of us installing these is an excellent question. The arena for this market nationally is actually somewhat small. We've known the key players in this market for a couple of decades now. Tied to some excellent consultants, we're tied to some excellent contractors. For us to execute this project, we feel very good about the partners that we begin with. We don't have a substantial or a large staff at Questar working at this. I mean, we do have resources dedicated from Questar. As you can imagine projects aren't going to -- going to fluctuate in timing, but it would not be prudent for us to staff up substantially for us to do install. So we more or less partnered. Ron's right. And so what would change that capital spend? We come across projects, customers are willing to make that commitment, and they sign a contract and so forth, then we will certainly [indiscernible]. The commitments aren't there or the potential use is not there, we will not be making the assessment. The nice things about the 2 locations we have talked about, those 2 have public access as well, have received a fair number of calls from other trucking companies. At this point, they're planning on using those facilities as well to fuel their vehicles.
Ronald W. Jibson
Let me just say with that -- I would not anticipate this in the near term to be a fourth leg of the stool. But at the same time, we're not putting any boundaries around what this could do in the future. I think that the nation is -- if you look at what's changed just in the last year, I think people are looking at this as truly the way to get energy independence in this country and to utilize the vast resource of natural gas that we have. So we're excited about the possibilities and it will have an impact and a growth opportunity for us as a business.
I wanted to follow up on the pipeline. With respect to the Southern Trails opportunities that you're seeing, could you give us a flavor for just sort of maybe to quantify what sort of potential from an earnings perspective that actually might provide? And is that actually in the 5-year projection of being flat to moderate that you guys outlined I think on Slide 50, is it?
Ronald W. Jibson
I'll answer the second question and then ask Alan to address the tougher one. But this is not included in that projection of what we see us far as our economic plan going -- financial plan in the 5-year plan. So it would be accretive to that. But Alan, you want to cover the...
R. Allan Bradley
[indiscernible] be able to answer that first question in about 2 months. Quite frankly, wide range of outcome [indiscernible] so much depend [indiscernible].
Ronald W. Jibson
I think the real key there obviously with -- right in the mix of looking at all of these options, it's very difficult to say this is where it's going to be because that would pretty well lay out what we're --
I was just wondering if you can give us bookends maybe, because I mean you've got some indicative. Now obviously, I got to send a caution in that like it'd be nice to see something firm. But I'm just wondering just any sort of sense as to sort of just -- I mean not to hold you anything, I'm just trying to get a sense as to what. Because it does sound -- sounds intriguing in terms of what this pump facility might be. I mean -- intriguing.
R. Allan Bradley
Oh, absolutely it's [indiscernible] waiting for better results.
Ronald W. Jibson
We're sorry we've had to hedge you on that. It's tough, believe me, because we'd like to see a lot more of it. Let's just say I think on Southern Trails, we were very pleased with the wide range of options that came through in phase 1 as we move in to the second phase here and second step of getting to a binding bed-type opportunity. We're very encouraged by the compelling options that are out there and we're -- the #1 objective. And we will model this and we'll do everything we can to make the best decision we can, is to create shareholder value, and the greatest shareholder value, not just in the short-term but long-term with this decision. And so, I can promise you that once that decision is made, we'll come out, we'll be very open of how we plan to use that capital throughout the business and we'll be able to talk a lot more about how that will play into our long-term strategy.
Okay. And then just Craig mentioned sort of the competitive throughout the pipeline with respect to it. But you said you're signing up customers at relatively high rate, it sounded like, but at narrowed terms. I was just hoping if you could just elaborate a little more on the competitive environment and sort of the challenges and how you guys are dealing with them and a little more flavor on that. And with respect to any sort of update on any contracts that might be sort of lucrative now but expiring and what have you? I mean, just anything we should be thinking about there.
R. Allan Bradley
Like I said, [indiscernible] aren't that certain [indiscernible] high gas paid. It look out and the contract [indiscernible] trend toward shorter terms. What we are seeing is, seeing an ability to repackage contract with -- receive points that may add higher value.
What points could you --
R. Allan Bradley
Received points. So, for example, if a shipper has the price in Utah and had his contracts at Baron Basin [ph], [indiscernible] miles over to Goshen, all the gas supply now is originating in Fidlar, that flexibility to take those receipt points [indiscernible] where production is declining.
these kinds of contract tweaks that add value.
And so you feel like you're going to be able to continue to do that with -- okay. Okay, and then just finally, the ROEs on regulated on Slide 45, are those the same as the regulated ROEs? I mean is there any substantial difference between -- I guess, particularly, on the pipeline but more specifically the gas, the Questar Gas?
Ronald W. Jibson
Jim, you want to?
James R. Livsey
Yes, these are our financial calculation but the regulated ROEs are going to be slightly different. There are carve outs and [indiscernible].
They're roughly the same, you say?
James R. Livsey
The regulated ROE is going to be slightly higher, typically, but not substantially. They're a good indication of the regulated ROE.
And then just finally, on the Southern Trails, just what's the timing in terms of those being able to -- when you think you'll be able to give us a load down on that?
Ronald W. Jibson
Right. Yes, we'll have those -- those bids will be in by the end of June. And then we'll take July to essentially bid the options. Our plan would be that during July, maybe the end of July, but right in that timeframe would be when we'd come out with an announcement of where we're going. And we're holding firm to those dates. We're going to push that schedule on and try to stay right on schedule with that. Appreciate the questions, very good questions. Additional questions? Eric?
First of all, let me thank you for the stewardship of our investor assets. I think you guys have done a great job. I mean, obviously, looking forward to your prudent process going forward. I kind of have a couple of questions, kind of maybe going from left to right. Jim, on the Wexpro II, congratulations to your team as well. Maybe you can talk a little bit about the financial impact and timing of the financial impact of the results of Questar. And for Alan, can you talk a little bit about this so-called gas relationship and the ownership and how that's going to maybe impact the timing and the process. And a little bit of a loose end for Alan, but your relationship with Swift, that was a little surprise. It wouldn't fit the natural profile of the customer that you might have -- kind of central distribution versus long-haul trucking on the gas side?
Ronald W. Jibson
Great. So we'll start with the Wexpro II, and let me just say that we're very excited about this decision. We've been working through a process that, in looking back, I think we'd do just about exactly what we did. It took a little longer than we had anticipated, but the process I think worked well in that we worked with the regulatory groups and worked up an agreement that when we filed it, had a lot of sport. And to have the decisions in both Utah and Wyoming come out with no changes, basically the agreement as verbatim as it was filed, made us feel very good about, again, that opportunity. Obviously, we can revel in that and feel very good about that outcome for about 10 minutes and then the next question is, okay, now, where are the assets, and what are we going to be looking at, and how can we grow those from that standpoint? So Jim, you want to cover kind of what your team is doing as far as looking at assets?
James R. Livsey
Yes, so the first priority would be obviously, fields we're already producing in. As most of you know, we have partners in most of our areas, so that would be the natural first place to look to, those areas that we already know and have expertise in. As we've said before, we have $450 million to $600 million to spend over the next 5 years with the Wexpro I property base. So we do have a good inventory available to us just with Wexpro I. I do think there's a window of receptivity with both commissions now that they've approved the agreement that we got some goodwill. I think we can capitalize on it. We can find a good match. So anything we do would be additive to that $450 million to $600 million, but we'll just have to stay tuned and work our way through that.
Just as a follow up. The second phase, can you give us a sense first phase versus second phase? I mean, obviously you have pretty big reserves in Wexpro I. Can you kind of walk us through timing?
James R. Livsey
Well, if I'm understanding the question correctly, you're speaking to the $1.3 billion that we've already identified with Wexpro I...
No, I'm thinking more of the acquisition of asset versus actual production, when you move, within the ROE.
James R. Livsey
Yes, it's conceivable we could buy an asset yet not develop it for a period of time. And with that lower carrying cost of 8.42%, it's not a big impact to the customer. That's one of the reasons we've designed it that way. And we could buy an asset yet wait a number of years before we develop that. And that's one of the things we pointed out, that really the things we're enjoying now to decades, to put together back in the 30s, 40s and 50s. And it's long-term play and I think our regulator has an understanding of that and sympathy of that.
Ronald W. Jibson
I think that's really the significance of this decision, is that we're not in a panic mode or a crisis mode to have to go out and just acquire assets, maybe pay more than we should for them. We've talked about a window of opportunity. That window is still there. In fact, if anything, it's been strengthened because of some increase in commodity prices. That would give current producers and so forth the opportunity to not necessarily sell right at the bitter bottom. So We think that, that has only expanded that window of opportunity. And the nice thing is, is we can be very diligent in the acquisition of those assets and add those as we go along and if we see the right asset, we'll certainly go after it. We've got those in mind right now, of some areas that we'll be really honing in on. And we're very confident that we're going to be able to add assets to Wexpro. Then we move to a pipeline question.
R. Allan Bradley
Yes, our relationship with SoCalGas is very good right now. It wasn't always the case. 10 years ago, the country was wild about
in California. So it's the only interstate pipeline that took the gas out of state. So we were actively competing with SoCalGas for the rights to LNG. We had also looked at major power plant conversions off of [indiscernible] natural gas [indiscernible] but the bypass issue kind of kept them nervous. 2009 recognized an opportunity to sell that desert section, it's about 150 miles. We like to think of it from [indiscernible] in the L.A. Basin...
was growing rapidly. They did not have the existing infrastructure. They came to us and offered a buyback of the desert section, which we sold them in 2009. We continued to have a good relationship. We recognize that a lot of options, how we might need a parallel and existing right away. Co-locate at the [indiscernible]. There were other quarters that we're also evaluating for the need. So while we're [indiscernible] strategic with the business development team project keenly focused on making sure we get all environmental timetable about [indiscernible] SoCalGas or to maintain it [indiscernible] service they [indiscernible]. Right now, we're still on schedule. There's just a lot going on with that rate meetings with [indiscernible] state lands, counties. By the way, we go through -- continue to dialogue with SoCalGas in terms of best way to approach the joint [indiscernible].
Do you feel that, that ownership change is -- or take some of the options off the table? Selling the pipeline or is there something?
James R. Livsey
No, the capital cost that we have voted, which is [indiscernible] does include, in creating that gap, does include some new routes as we [indiscernible] the L.A. Basin.
Ronald W. Jibson
I think we had a gas question. Yes, I believe the question in regards to Questar [indiscernible], the question is how that has come. Several years ago, as we begin aggressively upgrading our station and then also installing new stations, intentionally built these facilities to facilitate heavy duty trucks, knowing that this market would come to transition. As Questar is moving down the road with that, [indiscernible] the Swift and Central [indiscernible] for stepping out. They've been testing these trucks for a couple of years now, and testing them on that I15 [indiscernible] on Utah at several of our filling stations. So great connection Bid central they've been trying to testing these trucks for a couple of years now and testing them on that I-15 [indiscernible] on Utah at several of our filling stations. So reconnection there, owner of Swift is Utah native. Certainly those Questar, partnered with Questar, but that's kind of how this has transpired. They have indicated also that over the next several years, we think 5 years, they'll have several thousands of their trucks filling in natural gas. They are committed to [indiscernible] Many of the trucking companies we speak to have taken the position. We're going to wait and see what Swift and Central Freight do when we [indiscernible].
These are trucks that are based at the home base and come back every night?
Ronald W. Jibson
Yes, correct that's right. They return to terminals what they referred to, so oftentimes they [indiscernible] truck on the same route each day. The facility in Houston can have 5 fast-fill lanes, there was 120 time fill spots on that. We've got some largest...
Ronald W. Jibson
Thank you for that question. Additional questions?
Yes, and a question, again, on Southern Trails. The cost based on Southern Trails, I assume, is very, very low at this point. Do see it as being an [indiscernible] to some of the options that you're looking. And then also what would the capacity be of barrels going through Southern Trails if it is put in true service?
James R. Livsey
The capacity based on a fully [indiscernible] about 120,000 barrels. 16-inch line, small hydraulics. That's sort of what we're looking at. The basis original cost in that is $100 million. Obviously, certain transactions would have a tax consequence obviously. And we'll take all of that into account when our evaluation following the marketing of phase 2 is processed.
A couple of things, one was just to follow up on the fueling question. I was curious how you're pursuing getting new contracts. Do you have any type of sales force in place or are you developing or leveraging management concept, facts, et cetera? And then the second question was on the pipeline forecast and what your assumption is for dry gas production coming back into the Rockies over the next 5 years.
James R. Livsey
Regarding Questar Fueling, we do have a sales force that exists. I will tell you, since the Swift-Central Freight announcement, since the Frito-Lay announcement, we're receiving a lot of phone calls from [indiscernible]. Now it's certainly on their radar and then certainly, there are half a dozen key conferences or trade shows throughout the year that many of these folks attend that we're heavily involved with these folks. So, again, across the nation, many of these folks are tied in and know each other. And so right now, all of the leads that we're going out are from word of mouth based on the [indiscernible].
So I'm a big fan of compressed natural gas because I think as long as we chase coal from marginal market, gas prices are going to [indiscernible] are not going to bring the rigs back in the Rockies. If you look at drivers around timing that impact prices, the roads and CNG, maybe more importantly the LNG export. But one terminal on the West Coast, Colombia, Washington, Oregon and 4 or 5 of those [indiscernible] 1 Bcf to 2 Bcf a day terminals that has a capacity of sleeping a lot of gas out of the...
As we look at near term Rockies production, I'm just delighted it's flat and slightly growing around [indiscernible] gas some of the liquid drilling in the Vermillion area, and has been a surprise to me because 5 years ago, we saw it declining. I think, looking out the LNG terminals, what, 2017, 2018, CNG really moved the needle on gas prices, near term probably not. It's still in its infancy but it's got a lot of great potential. Stay tuned. I'm sort of a 2018 estimator [indiscernible] personal [indiscernible] 1 or 2 of these.
Ronald W. Jibson
Yes, I think if you look, national figures would be that by about 2022, it's anticipated you'll see about 80 Bcf per day. Demand projections on the transport seem to be in the 5 Bcf a day range. So is it going to in and of itself do it? No. But I think Alan is right, these other areas of more power generation, more transportation, will be gradual as they come along. Obviously, being one of the lowest cost producers, we're running at about parity right now with market prices. So how much is it got to move to bring people back into the production? I think that will be a factor of demand and price. And so as we see prices rebound some more, it doesn't have to get a lot higher before you'll see some more dry gas production on this. Certainly, the demand will grow, but it's not going to be an overnight thing. We think you'll see less volatility going forward. I think it will ramp up slowly. And hopefully, we stay in that $4 to $6 band for a lot longer than we've been able to in the past. We seem to go through that very quickly. Historically, I think that will change and I think we may still see some spikes, but I think that duration and the -- the extent of the spike and the duration of the spike will be shorter than what we've experienced. It's just our best projections. Nobody knows for sure. The only thing I know about projecting on gas prices is whatever I say, it will be wrong. But I think we all are trying to do the best we can to project out on those targets. Forward curve is probably a pretty good basis right now. Additional questions?
Seeing none, let me just, again, thank each of you. We take our jobs very seriously. This is something that I get asked often, what keeps me awake at night? And I can tell you the answer may surprise you, but it's the responsibility we feel as a management team in providing the value to you, our shareholders, the reliability and safety to our customers and certainly the opportunities for our employees. And so, we take this very seriously. We're going to do the best we can to make good decisions, weigh all the factors to use your input along with others and we appreciate the input that you give us as we move along. We take that very seriously also. But thank you for spending the time today. And if we didn't get to your questions, as always, you can call us directly. We can get our team together and talk on the phone or like I say, we get to New York quite often, and we'd look forward to meeting with you individually. So again, thank you, and have a great rest of the day.
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