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Questar Corporation (NYSE:STR)

Analyst & Investor Presentation

May 16, 2013 12:00 am ET

Executives

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 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 always something that we look forward to being in New York. And whoever is responsible for the weather today, we thank you. We know you had a long cold winter. It's pretty nice out there today and we probably jinxed ourselves because we're talking about how good the weather's 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're here was a week after the storm and to see what's taken place since then and the city coming together, it's just a phenomenal thing. And so we congratulate you with that. We do appreciate this opportunity and 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 of the 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. 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 has 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. Craig Wagstaff. Craig is our Executive Vice President, 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 Ivins, been with the company 31 years, and Tony continues to wear the hat of our Corporate Officer as a Corporate Treasurer and also manages our Investor Relations areas. 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. 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, or 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, more close to 40% at this point as a result of the recent 6% increase in dividend that we announced 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. It'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 then obviously, is involved to assume 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-based 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, appreciate Craig and his involvement and leadership with our utility Questar Gas.

Craig C. Wagstaff

Thanks, Ron. 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.

Let's take a few minutes and talk a bit about the distribution utility of Questar Gas. As Ron indicated, serving nearly 1 million customers now, we're in Utah, Southwestern Wyoming and Southeastern Idaho. Right now, we are fortunate to continue to have a 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. It's 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 cost. As you can see on this Chart #9, we continually have some of the lowest rates in the nation. It 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.

Slide 10. Here 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 in 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 is 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 as we went from a 10% allowed return to 10.35% return. We were in a 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'll 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 referred to as another attribute that we have, and I'll get into it in our next slide. 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 we 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 all 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 the 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 systems. And once that system is replaced and put into service, we can place that investment into rate base as opposed to waiting until the next rate case.

Key item here. Many folks think that we need to wait until our next rate for us to receive the benefit of this investment. But actually, with the tractor, 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. This is what we see out 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 are public, private stations that are opening within Utah owned by other individuals, which is great to expand this infrastructure. So really, anywhere in Utah right now and the southwestern part of Wyoming that we've served, 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 the 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 Freights, have signed contracts with Questar. And Swift and 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 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. And 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, is they utilize their large vehicles on natural gas.

So certainly, 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 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 up 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 are 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 where we'll continue to see transition on the 12-liter and 15-liter engine.

So it's absolutely key as we look at the 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 United States and just 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 the end-use customers.

And that's -- that would be kind of the summary of the Questar Fueling. With that, I'll turn the time over to Jim Livsey, 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 arrangements 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 an 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 -- near 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. Primarily resolution of the oil sharing dispute would be that 54% of the proceeds would go to reduced gas costs, 46% would go to the shareholder. That arrangement also called for how future development would occur and specified 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 are in a return on investment. We're not subject 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 top right of the slide that depicts the EBITDA growth over the last few years. This next chart depicts just the relationship between investment-based and net income. We've successfully grown investment-based and net income over the last few years primarily as a 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 oils 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. Remainder there 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 would continue to produce in the 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 with the blue bars, which represent reserves, we started out about 1/2 Tcf of reserves when the arrangement was entered into in 1981. We're now up to about 750 Bcf or 3/4% of the Tcf. And 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. Binding costs.

Binding costs. Binding costs is the ratio of well investment divided by the reserves and that's the single most important metric associated with the 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 industry when 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 costs 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.

Our overall cost structure is very competitive, again, by virtue of operating in this low-risk development areas that have been with the company for decades. As we compare ourselves 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 metric ourself against. And so this includes production taxes, lease operating expenses, depreciation, G&A and any associated interest charges. Utah actually had 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 customers since 1981. On the left side, you see the blue bar represents cost-of-service. About 50% to 60% of the utilities gas supply is sourced from Wexpro, the balance being purchased on the open market. The red line represents what that remainder was purchased at the over this period of time. And as a result, we've been able to provide the customer over $1.3 billion in savings by virtually 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. That'll 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 existing properties that is still available for us for the moment going forward, primarily in southwestern Wyoming, northwestern Colorado and a little bit in Uinta Basin. This year, our spending is primarily in the Pinedale area, and I want to lower cross 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 is 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 total Pinedale Anticline. Good news for us, as we move forward, lower finding cost, better performing wells and that's going to allow us to remain competitive in this relatively lower gas price environment. Just a quick snapshot as to show you how important finding costs 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 and low-cost areas.

Finally, in conclusion, I just want to talk about the Wexpro II arrangement maybe most of you have heard about. But over the last few months, we were pleased to get approval of that by Utah and Wyoming Public Service Commissions. Essentially, this methodology amulets the Wexpro I agreement and allows us now to add properties for continual development in the Wexpro heretofore limited to those producing areas that existed in 1981. The value proposition that our regulators opted to approve is that in this environment. Now is a good time to go out and buy out, out of favorite gas assets that can benefit 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 to 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 utilities' cost of capital, 8.42%. So any leasehold costs or properties that are already producing but don't have a risk associated with further development will learn the cost of capital. And as we develop for gas properties, we would earn a 20% return that mirrors the arrangement that we have in the Wexpro I arrangement. So with a $50 million hypothetical financed by debt, you would see that, that would be accretive $0.01 to $0.02 per share and less than 1% increase to gas costs by the customer. With that, let me turn the time over to Allan Bradley, President and CEO Questar Pipeline Company.

R. Allan Bradley

Thank you, Jim. It's great to 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 basin, 3 major basins, the Greater Green, Uinta and Piceance Basin; up right in a 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 -- oh, I'm sorry, through a transportation contract the, Questar Pipeline holds on Overthrust.

On the southern system, same thing. We were able to buildout Questar Pipelines 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 deploying gas to every major export pipeline out of the region.

Also, most importantly, one of our strategic asset is the Clay Basin in the heart of our system. Clay Basin is the largest storage facility the Rockies, 54 Bcf of working gas. We recently expanded about 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, as 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 think it gives us a lot of flexibility with bidirectional flows between those hubs. As you think about the market dynamics with flat production in the Rockies, still surplus takeaway capacity, what's important us is to remain competitive at the margin. 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 value 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, and 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 capability, merely a small facility that would take advantage of markets need for additional LNG for heavy-duty mining trucks, drilling rigs, and as may be seen, Warren Buffet's announcement about LNG for locomotive fuels. 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 and we realized 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 reach capacity on that system and 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, receive points back in the 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 playing forward.

Looking at what's happening in the Uinta Basin, 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, isolate the 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 a long-term contracts, contracts 10 years or greater. And it's a great way to optimize the use of our system. Once produced, there got than on our systems, they'll span our systems to hubs. Very good business, we have an open season going on today for the third phase, which will be an extension of JL47 up to and ultimately result up in a complete looping of JL47.

Another example of integration with Questar Pipeline Questar Gas is a successful effort that went on last year to capture the transportation service for Lake Side 2, new combined cycle, our plant that -- pipeline with a little bit of compression and boost its deliveries to Questar Gas.

Questar Gas has a nuclear line. It was put in few years back. The other, we put a very competitive service in to supply gas to PacifiCorp's LakeSide II. That's a 2014 project, 30-year contract, a nice rate, there's slight discount below our $0.17 recourse rate or max rate. So, looking at really what's exciting in the pipeline these days is our Strategic Review of Southern Trails. If you'll recall back in October, we announced the strategic review 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, did an internal review of what Questar might look like through various scenarios and outright sale joint venture. As we got through that analysis, it was clear that Overthrust belong with Questar Pipeline weren't going to save operating costs because the same operators operated Questar Pipeline and Overthrust. We just push more cost back on Questar Pipeline. At the end of the day, we got a lot of flexibility serving those full winter days in Salt Lake because we could utilize that transportation contract that Questar Pipeline has in Overthrust will actually increase the delivery to those Northern City Gates. When temperatures remain cold. Believe me, we had about 3 weeks of subzero temperature in the work flawlessly system.

And then finally, I don't think anybody relished the thought of having a competitor lose in the heart of our market. So at the end of the day, the decision was made, we're going maintain the status quo. For us, it will be a -- continue to be subsidiary of Questar Pipeline.

Southern Trails is a very different animal, an interesting 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 big basis differential, about $0.50 in those days. Well, so 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 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 in California. As a result, when contracts expired, we would end up basically taking what the market would give us. Basis differential started the decline from $0.50 to $0.35. Our most recent contract 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 was 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 when Long Beach took most of their incremental supplies from international markets, dipped in, and as a result, it traded more like Brent. Those are business development folks look at this opportunity. It was giving us about a $15 to $20 a barrel differential. So 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 it 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 in the natural gas. So it took a little time to execute the strategic review. We didn't put any bounce on the strategic review. It was launched in January. We divided a wide range of participants. By that, I mean midstream, crude oil players, liquid players, producers, refiners. We didn't limit it just to San Juan or Permian.

There were players that had rail loading facilities, unloading facilities, pipelines in other areas. Air shippers all saw the value uplift of creating a transportation system to move additional crude into Long Beach, L.A., to back out foreign source crude. We were pleasantly surprised by the interest in our first base, which is a nonbinding indicative bid process. There was some -- obviously some compelling proposals. It 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 and 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 proposals. So stay tuned on that exciting time for Questar Pipeline. And now, I'd like introduce our CFO, Kevin Hadlock.

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, anchored by Wexpro which earns a 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, their authorized levels. Then again, on a consolidated basis, back up to near 20% of the higher consolidated ROE relative to sort of some of the parts is really consequent of some of the negative equities that we see at the parent company as you see on Slide 46. Those are the nature of the Wexpro Agreement, Wexpro is 100% equity finance. Questar Pipeline which has an authorized level of equity at about 54%. It's a little bit rich today as we dividend some of that out. As Questar Pipeline continues to grow, you'll see that equity level 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 short-term debt, you see that number a little bit lower, normal. At the corporate, I mentioned the negative equity, as well as about $250 million of corporate debt that sits at the parent, sits as a combined equity ratio of about 45%. From a credit-rating perspective, reviewed by the agencies as having very strong credits, 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 minus 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, it's about $450 million. Wexpro has been very consistent, right around that $140 million level. You'll see Questar Pipeline pick up a little bit from last year as Allan walked you through 3 of the key projects that they're working on that has -- shows a little bit of an increase from the 61 last year. The largest consumer of capital right now is Questar Gas. A lot of that is driven by ramp up again in customer growth. As Craig mentioned, we're about 1.5% today, forecasting that to grow closer to 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 to some other system enforcement projects, we should see Questar Gas spending about $200 million a year, each year, for the 5-year plan adding accumulatively to about $1 billion in the next 5 years. They 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 toward dividend, we announced a 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% from that point in time. The management team, the dividend is important for us. You will see that increase over time and certainly to the Board of Directors. And we have delivered on that commitment to see that move 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, which we're seeing 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 some dilution from benefits plans and compensation each year. To summarize in a financial perspective, we expect 4% to 6% EBITDA and net income growth, anchored by Questar Gas' growth where we're seeing 7% to 9% is really driven by the customer growth forecast, as well as the infrastructure replacement, capital spending that we see. As Craig mentioned also, we are anticipating filing a rate case here at the request of the commission from the past settlement around July 1. At Wexpro, they're seeing sustained growth at 48% with a cumulative 5-year capital program of $450 million to $600 million plus our 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 of that business. And as Allan 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, as a given customer of Questar Gas who takes that gas a cost-of-service and yet continues to return tremendous returns to our shareholders and at the same time, great 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 companies. So we'd like to -- again, we committed to the dividend, we'll continue to drive that, pay 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 known 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 in any area or aspect of the business. I think we've got a mic there, Jeff.

Question-and-Answer Session

Ronald W. Jibson

Questions? Yes. We'll get you a mic.

Unknown Analyst

Just curious on your natural gas vehicle program which seems like it should start expanding, you're getting more customers on board. 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 kind of an overview and then ask Craig 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's 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 did -- it 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 -- via your waste-tolling trucks, the buses, shuttle vehicles at airports and so forth, they're really creating a foundation of natural gas and transportation that's expected by -- in about 3 years, you'll see 70% of the waste-tolling 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 and vehicles for about 25 years, building the in-state infrastructure to allow for what Craig explained of vehicles to travel throughout Utah. But as a result of that need, we now have Questar Fueling, which gives us that 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 a business for about a year in 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 a $25 million level per year going forward. That could increase substantially over that. We're trying to be conservative on our speculation with this. We'll be contract-driven and when we have the contracts, we'll build the facilities and it'll 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

Okay. Thanks for the question again and Ron hit it right on and that's about $25 million is what we would project right now. Now certainly, we could throw a lot more capital. There are some companies investing in this market very aggressively. They'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 each specific locations. 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 these projects, we feel very good about the partners that we've been with. We don't have a substantial or a large staff at Questar working this. I mean, we do have resources dedicated from Questar. As you can imagine, projects are going to kind of fluctuate in timing but it would not be prudent for us to staff up substantially for us to do install. So we're more or less partnered. Ron's right. So what would change that capital spend, we come across projects, customers are willing to make that commitment to sign a contract and so forth and we'll certainly -- but if the commitments aren't there or the essential use is not there, we will not be making the investment. The nice things about the 2 locations where we talked about, those 2 have public access as well. We have received a fair number of calls from other trucking companies. At this point, they're planning on using those facilities as well to build their vehicles.

Ronald W. Jibson

Let me just say with that, that I would not anticipate this in the near term to be a fourth leg to 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 a vast resource of natural gas that we have. So we're excited about the possibilities and it will have an impact on growth opportunity for us as a business.

Unknown Analyst

I wanted to follow up on the pipeline. With respect to the Southern Trails opportunity 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, that actually might provide? And is that actually in a 5-year projection of being flat to moderate that you guys outline, I think, on by 50 [ph] is it?

Ronald W. Jibson

Yes, I'll answer the second question and then ask Allan to address the tougher one. But this is not included in that projection of what we see as far as our economic plan, going financial plan in the 5-year plan. So it would be accretive to that. And, Allan, do you want to cover the...

R. Allan Bradley

I'll be able to answer that first question in about 2 months. Quite frankly, wide range of outcomes, so much depends...

Ronald W. Jibson

I think the real key there, obviously, 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...

Unknown Analyst

I was just wondering if you could give us bookings maybe because I mean, you got some indicative. Now obviously, I understand the caution in that like -- it would 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 or anything but I'm just sort of trying to get a sense as to what, because it sounds intriguing in terms of what the POPs [ph] really might be.

R. Allan Bradley

What?

Unknown Analyst

Intriguing.

R. Allan Bradley

Absolutely. We're waiting to have the results.

Ronald W. Jibson

We're sorry, we've had to had you on that. It's been tough, believe me because we'd like to say a lot more but let's just say, I think, on Southern Trails, we were very pleased with the wide range of options that came through in Phase I as we move into the second phase here and second step of getting to a binding-bid 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, grow the business and we'll be able to talk a lot more about how that will play into our long-term strategy.

Unknown Analyst

Okay. And then just -- you guys mentioned sort of the competitive threat to pipeline with respect to -- but you said you were signing up customers at relatively high rates, it sounded like. But now or in terms -- just sort of if you could give -- just elaborate a little bit 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, is there anything we should be thinking about there?

R. Allan Bradley

Like I said, teasers [ph] aren't that certain

[Audio Gap]

to shorter terms. What we are seeing, seeing an ability to repackage contract with receipt points that may add higher value.

Unknown Analyst

What points? Could you repeat?

R. Allan Bradley

Receipt, receipt points. So for example, if a shipper has the price Utah [ph] and had his contracts at Ferron basin 20 miles over to Goshen, all the gas supply now is originating in Fidlar, got the flexibility to take those receipt points probably where production is declining

[Audio Gap]

opened up. I really like the way our system upright strategy, bidirectional basin

[Audio Gap]

market focused

[Audio Gap]

affinity on system

[Audio Gap

ample expansion, we drove a value proposition gas, extended contract

[Audio Gap]

about $2 million [ph]. Because these kinds of contract tweaks that add value.

Unknown Analyst

And so you feel as you're going to able to continue to do that with -- okay because -- okay. Can you just finally, the ROE 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, Questar Gas?

R. Allan Bradley

Yes, these are our financial calculation but the regulated ROE's are going to be slightly different. There are carve outs and [indiscernible].

Unknown Analyst

It's roughly the same, you say?

R. Allan Bradley

Regulated ROE is slightly higher typically but not substantially. They're are a good indication of the regulated ROE.

Unknown Analyst

And then just finally, on the Southern Trails, just -- what's the timing in terms of us being able to -- when you think you'll be able to give us the lowdown on that?

Ronald W. Jibson

Yes, we'll have those -- those bids will be in by the end of June and then we'll take July to essentially bet the options. Our plan would be that during July, or maybe the end of July but right in that time frame 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 and try to stay right on schedule with that. Appreciate the questions, very good questions. Additional questions?

Unknown Analyst

First of all, I mean, thank you for the stewardship of our investor assets. I think you guys have done a great job and I'm, obviously, looking forward to get 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 then for Allan, can you talk a little bit about the SoCalGas relationship, in the ownership and how that's going to maybe impact the timing in the process? And a little bit of a lose end for Allan but your relationship with Swift? I was a little surprised. 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. Thank you. So we'll start with Wexpro II and let me just say that we're very excited about this decision. We worked through a process that in looking back, I think 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 support and to have the decisions in both Utah and Wyoming come out with no changes. Basically, the agreement is 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, do 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 five 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 at $450 million to $600 million but we'll just have to stay tuned and work our way through the...

Unknown Analyst

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 on 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 $1.3 billion that we've already identified with Wexpro I.

Unknown Analyst

No, I'm thinking more the acquisition of asset versus actual production. When you move between the ROE.

James R. Livsey

Okay. Yes, it's conceived but 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 took decades to put together back in the '30s, '40s and '50s and it's a 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, that 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 was 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. Okay, then we move to the pipeline question?

James R. Livsey

Yes, our relationship with SoCalGas is very good right now. It wasn't always the case. 10 years ago

[Audio Gap]

for LNG

[Audio Gap]

California which is the only interstate pipeline to get the gas out of state. So we were actively competing with SoCalGas for the rights to LNG grid. Also, looked at major power plant conversions off of being natural gas [indiscernible] but the bypass issue kind of kept them

[Audio Gap]

2009 recognized an opportunity to sell that desert sections, it's about 150 miles. I like to think of it from Escastino [ph] and the [indiscernible] basin being by itself, nowhere we'll bring our soldiers right in the middle

[Audio Gap]

very difficult terrain. It's growing rapidly. They did not have the existing infrastructure of growth. They came to us and offered to buy that desert section, we sold them in 2009. Continue to have a good relationship, recognize that a lot of options, how we might need a parallel and existing right away

[Audio Gap]

former Southern Trails

[Audio Gap]

locate that same right away. There are other quarters that we're also evaluating for the need. So while we're a strategic business development team, project keenly focused on making sure we get all environmental timetables around baiting SoCalGas to maintain service dates. Right now, we're still on schedule. There's just a lot going on, we've had great meetings with ELM [ph], state lands, counties, which by the way, we go through. We continue the dialogue with SoCalGas in terms of best way to approach the joint

[Audio Gap]

Unknown Analyst

You don't feel that, that ownership changes -- or takes some of the options off the table selling the pipe under the company?

James R. Livsey

No, the capital cost that we put which was probably $500 does include creating that gap. It does include some new outs

[Audio Gap]

[indiscernible] basin, west end of that line. Thus far, taking

[Audio Gap]

that away one step. We don't see any problem. Ask me what the critical path was. Hit it right on, so we're getting that gap, the environmental perspective, make sure there's no [indiscernible] construction schedules, [indiscernible] rights away, issues like that. Since we've sold it, it has been a new quarter established for our voltage line. So looking at several

[Audio Gap]

Ronald W. Jibson

I think we had a gas question.

R. Allan Bradley

I believe the question in regards to Questar, how that has come about. Several years ago, as we begin aggressively upgrading our station and also installing new stations, potentially built these facilities to facilitate heavy-duty [ph] trucks knowing that this market would come to transition. So Questar has moved down the road with that, I got to commend Swift and Central Freight for stepping out. They've been testing these trucks for a couple of years now, been testing them on that I-15 quarter [ph] on Utah and several of our fueling stations. So reconnection there. Owner of Swift is Utah native. Certainly, post-Questar, have been partnering with Questar but that's kind of how this has transpired. They have indicated also that over the next several years, 5 years, they'll have several thousands of their trucks coming in. They are committed to -- we commend many of the trucking companies we speak to taking a position. We're going to wait and see what Swift and Central Freight do but we may [indiscernible].

Unknown Analyst

These are trucks that are based at the home base and come back every night?

R. Allan Bradley

Yes, correct. That's right. Return to terminals is what they're referred to. So oftentimes, Walmart [indiscernible] trucks from the same route each day. Facility in Houston. We have 5 fast-fuel lanes, 120 time fill lots on that. We've got the largest fueling

[Audio Gap]

Ronald W. Jibson

Thank you for those questions. Additional questions?

Unknown Analyst

Yes. I had a question issue again on Southern Trails. The cost base on Southern Trails, I assume, is very, very low at this point. Do you see those being impotent [ph] to some of the options that you're looking at? And then also, what would the capacity be of barrels going through Southern Trails within crude service?

Kevin W. Hadlock

Well, the capacity be sort of fully about 120,000 barrels 16-inch line with simple hydraulics. That's what we're looking at. The basis, original cost in that today is over $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 or Phase II of this process. Yes?

Unknown Analyst

Couple of things. One was just a follow-up on the fueling question. I was curious how you're pursuing getting new contracts. You have any type of sales force in place? Are you developing your leveraging management contacts, etc.? 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.

Ronald W. Jibson

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]. It's certainly on their radar. And then certainly, there are half a dozen key conferences or tradeshows throughout the year that many of these folks attend that we're heavily involved with. 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 off of fully mount based on the

[Audio Gap]

R. Allan Bradley

So I'm a big fan of Compressed Natural Gas because I think as long as we chase coal marginal market, gas prices are going to flow and they're not going bring the rigs back in the Rockies. But if you look at drivers around timing that impact prices, the growth in CNG, maybe more importantly, with the LNG export. You buy one terminal on the West Coast, Colombia, Washington, Oregon, I think 4 or 5 proposed are 1 to 2 Bcf a day terminals and has the capacity of sweeping a lot of gas out of the [indiscernible] in the Rockies

[Audio Gap]

As we look at near-term Rockies production, I'm just delighted it's held up flat, slightly growing around [indiscernible] gas. Some of the liquid drilling, drilling an area. That has been surprise to me because 5 years ago, we saw it declining. I think looking out, LNG terminals 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 personal in terms of it would be 1 or 2 of these

[Audio Gap]

Ronald W. Jibson

Yes. I think if you look, the natural figures would be about 20, 22 that's anticipated, you'll see about 80 Bcf per day demand projections on the transport seemed to be in 5 Bcf a day range. Is it going to in and of itself to it? No, but I think Allan's 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 has 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 be a lot higher before you'll see some more dry gas production. Certainly, the demand will grow but it's not going to be an overnight change. We think we'll see less volatility going forward. I think it will ramp up slowly. And hopefully, we will stay in that $4 to $6 band for a lot longer that 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 the duration of the -- the extent of the spike and the duration of the spike will be shorter than what we experience. It's just our best projections, nobody knows for sure. The only thing I know but projecting on gas prices is whatever I say, it'll 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 pretty good basis right now.

Additional questions? Being none, let me just again the 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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