| Operations by Line of Business |
Operations by Line of Business QEP’s lines of business include natural gas and oil exploration and production (QEP Energy), midstream field services (QEP Field Services) and marketing (QEP Marketing and other). The lines of business are managed separately and therefore the financial information is presented separately due to the distinct differences in the nature of operations of each line of business, among other factors.
The following table is a summary of operating results for the three months ended September 30, 2012, by line of business:
| | | | | | | | | | | | | | | | | | | | | | QEP Energy | | QEP Field Services | | QEP Marketing & Other | | Eliminations | | QEP Consolidated |
| (in millions) | Revenues (1) | | | | | | | | | | From unaffiliated customers | $ | 374.0 |
| | $ | 77.9 |
| | $ | 90.5 |
| | $ | — |
| | $ | 542.4 |
| From affiliated customers | — |
| | 31.8 |
| | 145.8 |
| | (177.6 | ) | | — |
| Total Revenues | 374.0 |
| | 109.7 |
| | 236.3 |
| | (177.6 | ) | | 542.4 |
| Operating expenses | |
| | |
| | |
| | |
| | |
| Purchased gas, oil and NGL expense | 45.9 |
| | 4.9 |
| | 236.7 |
| | (144.9 | ) | | 142.6 |
| Lease operating expense | 43.1 |
| | — |
| | — |
| | (0.9 | ) | | 42.2 |
| Natural gas, oil and NGL transportation and other handling costs | 59.8 |
| | 6.9 |
| | — |
| | (30.4 | ) | | 36.3 |
| Gathering, processing and other | — |
| | 21.8 |
| | 0.1 |
| | 0.2 |
| | 22.1 |
| General and administrative | 32.2 |
| | 10.6 |
| | 0.5 |
| | (1.6 | ) | | 41.7 |
| Production and property taxes | 22.5 |
| | 1.7 |
| | 0.1 |
| | — |
| | 24.3 |
| Depreciation, depletion and amortization | 217.4 |
| | 15.8 |
| | 0.9 |
| | — |
| | 234.1 |
| Other operating expenses | 11.7 |
| | — |
| | — |
| | — |
| | 11.7 |
| Total operating expenses | 432.6 |
| | 61.7 |
| | 238.3 |
| | (177.6 | ) | | 555.0 |
| Operating (loss) income (2) | (58.6 | ) | | 48.0 |
| | (2.0 | ) | | — |
| | (12.6 | ) | Realized and unrealized gains (losses) on derivative contracts | 41.4 |
| | (0.6 | ) | | (4.7 | ) | | — |
| | 36.1 |
| Interest and other income | (0.2 | ) | | — |
| | 28.4 |
| | (28.4 | ) | | (0.2 | ) | Income from unconsolidated affiliates | — |
| | 2.3 |
| | — |
| | — |
| | 2.3 |
| Interest expense | (24.1 | ) | | (3.5 | ) | | (30.8 | ) | | 28.4 |
| | (30.0 | ) | (Loss) income before income taxes | (41.5 | ) | | 46.2 |
| | (9.1 | ) | | — |
| | (4.4 | ) | Income tax benefit (provision) | 15.3 |
| | (16.5 | ) | | 3.5 |
| | — |
| | 2.3 |
| Net (loss) income | (26.2 | ) | | 29.7 |
| | (5.6 | ) | | — |
| | (2.1 | ) | Net income attributable to noncontrolling interest | — |
| | (1.0 | ) | | — |
| | — |
| | (1.0 | ) | Net (loss) income attributable to QEP (3) | $ | (26.2 | ) | | $ | 28.7 |
| | $ | (5.6 | ) | | $ | — |
| | $ | (3.1 | ) |
____________________________ | | (1) | The impact of QEP’s settled derivative contracts for the three months ended September 30, 2012 are reflected below operating (loss) income. |
| | (2) | Operating (loss) income for the three months ended September 30, 2012, excludes the impact of realized commodity derivative contract settlements. During the three months ended September 30, 2012, gains and losses from realized commodity derivative contract settlements were included below operating (loss) income. |
| | (3) | Net (loss) income attributable to QEP for the three months ended September 30, 2012 includes the impact of unrealized gains and losses from changes in the fair value of the commodity derivative contracts. |
The following table is a summary of operating results for the three months ended September 30, 2011, by line of business:
| | | | | | | | | | | | | | | | | | | | | | QEP Energy | | QEP Field Services | | QEP Marketing & Other | | Eliminations | | QEP Consolidated |
| (in millions) | Revenues (1) | | | | | | | | | | From unaffiliated customers | $ | 635.6 |
| | $ | 98.6 |
| | $ | 145.7 |
| | $ | — |
| | $ | 879.9 |
| From affiliated customers | — |
| | 21.0 |
| | 148.5 |
| | (169.5 | ) | | — |
| Total Revenues | 635.6 |
| | 119.6 |
| | 294.2 |
| | (169.5 | ) | | 879.9 |
| Operating expenses | |
| | |
| | |
| | |
| | |
| Purchased gas, oil and NGL expenses | 208.1 |
| | — |
| | 292.0 |
| | (147.4 | ) | | 352.7 |
| Lease operating expense | 38.0 |
| | — |
| | — |
| | (1.0 | ) | | 37.0 |
| Natural gas, oil and NGL transportation and other handling costs | 45.0 |
| | 2.5 |
| | — |
| | (20.0 | ) | | 27.5 |
| Gathering, processing and other | — |
| | 26.6 |
| | 0.4 |
| | — |
| | 27.0 |
| General and administrative | 23.0 |
| | 6.6 |
| | 0.2 |
| | (1.1 | ) | | 28.7 |
| Production and property taxes | 26.3 |
| | 1.4 |
| | — |
| | — |
| | 27.7 |
| Depreciation, depletion and amortization | 174.4 |
| | 14.0 |
| | 0.6 |
| | — |
| | 189.0 |
| Other operating expenses | 8.1 |
| | — |
| | — |
| | — |
| | 8.1 |
| Total operating expenses | 522.9 |
| | 51.1 |
| | 293.2 |
| | (169.5 | ) | | 697.7 |
| Net gain (loss) from asset sales | 1.2 |
| | (0.1 | ) | | 0.1 |
| | — |
| | 1.2 |
| Operating income (2) | 113.9 |
| | 68.4 |
| | 1.1 |
| | — |
| | 183.4 |
| Interest and other (loss) income | (0.7 | ) | | — |
| | 25.0 |
| | (25.0 | ) | | (0.7 | ) | Income from unconsolidated affiliates | — |
| | 2.3 |
| | — |
| | — |
| | 2.3 |
| Loss on early extinguishment of debt | — |
| | — |
| | (0.7 | ) | | — |
| | (0.7 | ) | Interest expense | (20.5 | ) | | (3.8 | ) | | (23.5 | ) | | 25.0 |
| | (22.8 | ) | Income before income taxes | 92.7 |
| | 66.9 |
| | 1.9 |
| | — |
| | 161.5 |
| Income taxes | (34.4 | ) | | (24.0 | ) | | (0.7 | ) | | — |
| | (59.1 | ) | Net income | 58.3 |
| | 42.9 |
| | 1.2 |
| | — |
| | 102.4 |
| Net income attributable to noncontrolling interest | — |
| | (0.9 | ) | | — |
| | — |
| | (0.9 | ) | Net income attributable to QEP (3) | $ | 58.3 |
| | $ | 42.0 |
| | $ | 1.2 |
| | $ | — |
| | $ | 101.5 |
|
____________________________ | | (1) | Revenues for the three months ended September 30, 2011, have been recast to reflect QEP’s revised reporting of its transportation and handling costs. See Note 2 - Basis of Presentation of Interim Consolidated Financial Statements for additional information. In addition, revenues for the three months ended September 30, 2011, reflect the impact of QEP’s settled derivative contracts. See Note 7 - Derivative Contracts for detailed information on derivative contract settlements in the three months ended September 30, 2011. |
| | (2) | Under hedge accounting, gains and losses from realized commodity derivative contract settlements were included in revenues and operating income during the three months ended September 30, 2011. |
| | (3) | Under hedge accounting, unrealized gains and losses from changes in the fair value were deferred in accumulated other comprehensive income during the three months ended September 30, 2011. |
The following table is a summary of operating results for the nine months ended September 30, 2012, by line of business: | | | | | | | | | | | | | | | | | | | | | | QEP Energy | | QEP Field Services | | QEP Marketing & Other | | Eliminations | | QEP Consolidated |
| (in millions) | Revenues (1) | | | | | | | | | | From unaffiliated customers | $ | 1,106.3 |
| | $ | 254.9 |
| | $ | 283.7 |
| | $ | — |
| | $ | 1,644.9 |
| From affiliated customers | — |
| | 88.1 |
| | 396.3 |
| | (484.4 | ) | | — |
| Total Revenues | 1,106.3 |
| | 343.0 |
| | 680.0 |
| | (484.4 | ) | | 1,644.9 |
| Operating expenses | |
| | |
| | |
| | |
| | |
| Purchased gas, oil and NGL expense | 159.0 |
| | 9.0 |
| | 681.7 |
| | (393.8 | ) | | 455.9 |
| Lease operating expense | 125.3 |
| | — |
| | — |
| | (2.5 | ) | | 122.8 |
| Natural gas, oil and NGL transportation and other handling costs | 167.4 |
| | 27.7 |
| | — |
| | (83.6 | ) | | 111.5 |
| Gathering, processing and other | — |
| | 65.6 |
| | 0.8 |
| | — |
| | 66.4 |
| General and administrative | 94.3 |
| | 24.1 |
| | 0.6 |
| | (4.5 | ) | | 114.5 |
| Production and property taxes | 63.6 |
| | 4.6 |
| | 0.2 |
| | — |
| | 68.4 |
| Depreciation, depletion and amortization | 597.7 |
| | 47.2 |
| | 2.5 |
| | — |
| | 647.4 |
| Other operating expenses | 78.1 |
| | — |
| | — |
| | — |
| | 78.1 |
| Total operating expenses | 1,285.4 |
| | 178.2 |
| | 685.8 |
| | (484.4 | ) | | 1,665.0 |
| Net gain from asset sales | 1.5 |
| | — |
| | — |
| | — |
| | 1.5 |
| Operating (loss) income (2) | (177.6 | ) | | 164.8 |
| | (5.8 | ) | | — |
| | (18.6 | ) | Realized and unrealized gains (losses) on derivative contracts | 330.4 |
| | 8.3 |
| | (4.0 | ) | | — |
| | 334.7 |
| Interest and other income | 2.2 |
| | 0.1 |
| | 81.1 |
| | (81.0 | ) | | 2.4 |
| Income from unconsolidated affiliates | 0.1 |
| | 5.5 |
| | — |
| | — |
| | 5.6 |
| Loss on early extinguishment of debt | — |
| | — |
| | (0.6 | ) | | — |
| | (0.6 | ) | Interest expense | (71.1 | ) | | (9.4 | ) | | (83.4 | ) | | 81.0 |
| | (82.9 | ) | Income (loss) before income taxes | 84.0 |
| | 169.3 |
| | (12.7 | ) | | — |
| | 240.6 |
| Income tax (provision) benefit | (32.4 | ) | | (59.2 | ) | | 5.1 |
| | — |
| | (86.5 | ) | Net income (loss) | 51.6 |
| | 110.1 |
| | (7.6 | ) | | — |
| | 154.1 |
| Net income attributable to noncontrolling interest | — |
| | (2.7 | ) | | — |
| | — |
| | (2.7 | ) | Net income (loss) attributable to QEP (3) | $ | 51.6 |
| | $ | 107.4 |
| | $ | (7.6 | ) | | $ | — |
| | $ | 151.4 |
|
____________________________ | | (1) | The impact of QEP’s settled derivative contracts, for the nine months ended September 30, 2012, are reflected below operating (loss) income. |
| | (2) | Operating (loss) income for the nine months ended September 30, 2012, excludes the impact of realized commodity derivative contract settlements. During the nine months ended September 30, 2012, gains and losses from realized commodity derivative contract settlements were included below operating (loss) income. |
| | (3) | Net (loss) income attributable to QEP for the nine months ended September 30, 2012, includes the impact of unrealized gains and losses from changes in the fair value of the commodity derivative contracts. |
The following table is a summary of operating results for the nine months ended September 30, 2011, by line of business: | | | | | | | | | | | | | | | | | | | | | | QEP Energy | | QEP Field Services | | QEP Marketing & Other | | Eliminations | | QEP Consolidated |
| (in millions) | Revenues (1) | | | | | | | | | | From unaffiliated customers | $ | 1,587.3 |
| | $ | 273.9 |
| | $ | 444.7 |
| | $ | — |
| | $ | 2,305.9 |
| From affiliated customers | — |
| | 64.5 |
| | 426.8 |
| | (491.3 | ) | | — |
| Total Revenues | 1,587.3 |
| | 338.4 |
| | 871.5 |
| | (491.3 | ) | | 2,305.9 |
| Operating expenses | |
| | |
| | |
| | |
| | |
| Purchased gas, oil and NGL expense | 362.8 |
| | — |
| | 862.4 |
| | (421.9 | ) | | 803.3 |
| Lease operating expense | 106.4 |
| | — |
| | — |
| | (2.3 | ) | | 104.1 |
| Natural gas, oil and NGL transportation and other handling costs | 130.8 |
| | 4.6 |
| | — |
| | (62.2 | ) | | 73.2 |
| Gathering, processing and other | — |
| | 78.3 |
| | 1.1 |
| | — |
| | 79.4 |
| General and administrative | 69.8 |
| | 22.4 |
| | 1.8 |
| | (4.9 | ) | | 89.1 |
| Production and property taxes | 73.9 |
| | 4.4 |
| | 0.2 |
| | — |
| | 78.5 |
| Depreciation, depletion and amortization | 524.0 |
| | 40.7 |
| | 1.7 |
| | — |
| | 566.4 |
| Other operating expenses | 23.9 |
| | — |
| | — |
| | — |
| | 23.9 |
| Total operating expenses | 1,291.6 |
| | 150.4 |
| | 867.2 |
| | (491.3 | ) | | 1,817.9 |
| Net gain (loss) from asset sales | 1.4 |
| | — |
| | — |
| | — |
| | 1.4 |
| Operating income (2) | 297.1 |
| | 188.0 |
| | 4.3 |
| | — |
| | 489.4 |
| Interest and other income | (0.5 | ) | | — |
| | 74.2 |
| | (74.2 | ) | | (0.5 | ) | Income from unconsolidated affiliates | 0.1 |
| | 4.4 |
| | — |
| | — |
| | 4.5 |
| Loss on extinguishment of debt | — |
| | — |
| | (0.7 | ) | | — |
| | (0.7 | ) | Interest expense | (60.8 | ) | | (10.4 | ) | | (70.0 | ) | | 74.2 |
| | (67.0 | ) | Income before income taxes | 235.9 |
| | 182.0 |
| | 7.8 |
| | — |
| | 425.7 |
| Income taxes | (87.7 | ) | | (65.6 | ) | | (2.7 | ) | | — |
| | (156.0 | ) | Net income | 148.2 |
| | 116.4 |
| | 5.1 |
| | — |
| | 269.7 |
| Net income attributable to noncontrolling interest | — |
| | (2.2 | ) | | — |
| | — |
| | (2.2 | ) | Net income attributable to QEP (3) | $ | 148.2 |
| | $ | 114.2 |
| | $ | 5.1 |
| | $ | — |
| | $ | 267.5 |
|
____________________________ | | (1) | Revenues for the nine months ended September 30, 2011, have been recast to reflect QEP’s revised reporting of its transportation and handling costs. See Note 2 - Basis of Presentation of Interim Consolidated Financial Statements for additional information. In addition, revenues for the nine months ended September 30, 2011, reflect the impact of QEP’s settled derivative contracts. See Note 7 - Derivative Contracts for detailed information on derivative contract settlements in the nine months ended September 30, 2011. |
| | (2) | Under hedge accounting, realized gains and losses from realized commodity derivative contract settlements were included in revenues and operating income during the three and nine months ended September 30, 2011. |
| | (3) | Under hedge accounting, unrealized gains and losses from changes in the fair value were deferred in accumulated other comprehensive income during the three and nine months ended September 30, 2011. |
The following table is a summary of balance sheet information by line of business: | | | | | | | | | | | | | | | | | | | | | | QEP Energy | | QEP Field Services | | QEP Marketing & Other | | Eliminations | | QEP Consolidated | | (in millions) | Total assets as of September 30, 2012 | $ | 7,416.1 |
| | $ | 1,362.7 |
| | $ | 217.3 |
| | $ | — |
| | $ | 8,996.1 |
| Total assets as of December 31, 2011 | 5,815.7 |
| | 1,312.7 |
| | 314.3 |
| | — |
| | 7,442.7 |
|
|