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