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A Spin Off To Pay Attention To

|Includes: Questar Corporation (STR)

Questar (NYSE:STR), a natural gas energy company announced last week that its board approved the spin off of the exploration and production unit into a seperate entity, QEP. The spin off is expected to occur within the next 3 months according to published reports.

The company is spining off some divisions to focus on its natual gas and pipeline businesses. Questar is a company that has a market value just below $8 billion. The company continues to grow E&P production by 11% and were able to stay profitable in 2009 in tough market conditions. It's Wexpro, Pipeline and Gas businesses had record earnings and cash flow for the year. The company expects its E&P business to grow 12-15% per year over the next 5 years. After the spin off, it is expected that the $2.4 Billion the company has in long term debt will be split down the middle for both companies.

It has shown a lack of consistency in Free Cash Flow due to large capital expeditures. However, a look at operating income shows a very consistent growth picture. Management seems to be focused on adding shareholder value.

Stay tuned for future posts regarding Questar. Your feedback is welcomed.

Disclosure: No position