-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hQtPF7KqTvkrsdzZGTGRpvBMeGDn6edAGgLpTO9MnHHJXJLq9hM571oo8xUu3QO4 mP7s9PeTzeGFBD80x9EnGw== 0000764044-94-000003.txt : 19940823 0000764044-94-000003.hdr.sgml : 19940823 ACCESSION NUMBER: 0000764044-94-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUESTAR PIPELINE CO CENTRAL INDEX KEY: 0000764044 STANDARD INDUSTRIAL CLASSIFICATION: 4924 IRS NUMBER: 870307414 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14147 FILM NUMBER: 94543131 BUSINESS ADDRESS: STREET 1: 79 S STATE ST STREET 2: P O BOX 11450 CITY: SALT LAKE CITY STATE: UT ZIP: 84147 BUSINESS PHONE: 8015302400 MAIL ADDRESS: STREET 1: 190 EAST FIRST SOUTH STREET STREET 2: P O BOX 11150 CITY: SALT LAKE CITY STATE: UT ZIP: 84147 FORMER COMPANY: FORMER CONFORMED NAME: MOUNTAIN FUEL RESOURCES INC DATE OF NAME CHANGE: 19880331 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____ Commission File No. 0-14147 QUESTAR PIPELINE COMPANY (Exact name of registrant as specified in its charter) STATE OF UTAH 87-0307414 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 11450, 79 South State Street, Salt Lake City, Utah 84147 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (801) 530-2400 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of July 31, 1994 Common Stock, $1.00 par value 6,550,843 shares Registrant meets the conditions set forth in General Instruction H(a)(1) and (b) of Form 10-Q and is filing this Form 10-Q with the reduced disclosure format. QUESTAR PIPELINE COMPANY STATEMENTS OF INCOME (Unaudited)
3 Months Ended 6 Months Ended 12 Months Ended June 30, June 30, June 30, 1994 1993 1994 1993 1994 1993 (In Thousands) REVENUES $29,419 $35,049 $57,169 $113,200 $115,597 $212,306 OPERATING EXPENSES Natural gas purchases 7,869 53,038 2,984 94,842 Operating and maintenance 10,570 12,324 21,849 26,069 44,136 50,112 Depreciation 3,728 3,499 7,402 6,955 14,531 13,718 Other taxes 1,237 979 2,371 2,022 4,264 3,867 TOTAL OPERATING EXPENSES 15,535 24,671 31,622 88,084 65,915 162,539 OPERATING INCOME 13,884 10,378 25,547 25,116 49,682 49,767 INTEREST AND OTHER INCOME (EXPENSE) 252 289 478 374 (35) 760 INCOME FROM UNCONSOLIDATED AFFILIATES 60 21 129 39 218 21 DEBT EXPENSE (3,273) (3,264) (6,476) (6,578) (13,012) (13,598) INCOME BEFORE INCOME TAXES 10,923 7,424 19,678 18,951 36,853 36,950 INCOME TAXES 4,054 2,646 7,301 6,791 13,361 13,018 NET INCOME $6,869 $4,778 $12,377 $12,160 $23,492 $23,932
QUESTAR PIPELINE COMPANY CONDENSED BALANCE SHEETS (Unaudited)
June 30, December 31, 1994 1993 1993 (In Thousands) ASSETS Current assets Cash and short-term investments $1,340 $1,341 Notes receivable from parent company $9,900 Accounts receivable 12,847 33,879 11,191 Inventories 2,892 10,248 2,394 Other current assets 1,801 3,945 2,268 Total current assets 18,880 57,972 17,194 Property, plant and equipment 587,964 524,313 561,108 Less allowances for depreciation 197,182 182,937 189,279 Net property, plant and equipment 390,782 341,376 371,829 Investment in unconsolidated affiliates 7,460 6,856 7,145 Other assets 10,884 6,978 9,726 $428,006 $413,182 $405,894 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Checks outstanding in excess of cash balances $2,530 Notes payable to parent company $21,100 $3,000 Accounts payable and accrued expense 12,767 14,282 12,668 Purchased gas adjustments 10,571 Total current liabilities 33,867 27,383 15,668 Long-term debt 134,497 134,477 134,487 Deferred credits 2,540 876 2,276 Deferred income taxes 67,597 67,433 67,335 Common shareholder's equity Common stock 6,551 6,551 6,551 Additional paid-in capital 57,034 57,034 57,034 Retained earnings 125,920 119,428 122,543 Total common shareholder's equity 189,505 183,013 186,128 $428,006 $413,182 $405,894
QUESTAR PIPELINE COMPANY CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
6 Months Ended June 30, 1994 1993 (In Thousands) OPERATING ACTIVITIES Net income $12,377 $12,160 Depreciation 8,216 7,870 Deferred income taxes 262 3,827 Income from unconsolidated affiliates (129) (39) 20,726 23,818 Change in operating assets and liabilities (2,472) 10,870 NET CASH PROVIDED FROM OPERATING ACTIVITIES 18,254 34,688 INVESTING ACTIVITIES Capital expenditures Purchase of property, plant and equipment (27,170) (12,664) Other investments (186) (163) Total capital expenditures (27,356) (12,827) Proceeds (uses) from disposition of property, plant and equipment 1 (46) CASH USED IN INVESTING ACTIVITIES (27,355) (12,873) FINANCING ACTIVITIES Increase (decrease) in notes payable to parent 18,100 (7,500) Checks outstanding in excess of cash balances 2,530 Increase in notes receivable from parent company (9,900) Payment of dividends (9,000) (8,000) CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES 9,100 (22,870) DECREASE IN CASH AND SHORT-TERM INVESTMENTS ($1) ($1,055)
QUESTAR PIPELINE COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS June 30, 1994 (Unaudited) Note A - Basis of Presentation The interim financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. Due to the seasonal nature of the business, the results of operations for the three-and six-month periods ended June 30, 1994, are not necessarily indicative of the results that may be expected for the year ending December 31, 1994. For further information refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1993. Note B - Accounting for Postemployment Benefits Effective January 1, 1994, the Company recorded a liability for postemployment disability and health care benefits in compliance with the Statement of Financial Accounting Standards No. 112. This did not have an effect on net income since the $1,256,000 liability was offset with a regulatory asset because the Company expects to include these costs in future rates. Note C - Financing On July 1, 1994 Questar Pipeline received a $25,000,000 capital contribution from its parent company. Proceeds from the capital contribution were used to fund capital expenditures and to repay short-term debt. QUESTAR PIPELINE COMPANY MANAGEMENT'S ANALYSIS June 30, 1994 Operating Results -- Following is a summary of operating information for the Company:
3 Months Ended 6 Months Ended 12 Months Ended June 30, June 30, June 30, 1994 1993 1994 1993 1994 1993 Natural gas volumes (in thousands of decatherms) Transportation For Mountain Fuel 15,204 9,778 52,064 23,037 94,088 40,179 For other customers 38,729 41,536 69,932 80,407 138,713 172,550 Total transportation 53,933 51,314 121,996 103,444 232,801 212,729 Sales for resale to Mountain Fuel 3,298 24,337 42,044 Total system throughput 53,933 54,612 121,996 127,781 232,801 254,773 Gathering For Mountain Fuel 8,637 6,281 20,702 27,270 37,864 46,519 For other customers 12,624 11,809 24,407 19,399 53,344 37,865 Total gathering 21,261 18,090 45,109 46,669 91,208 84,384 Natural gas revenues (per decatherm) Transportation $0.28 $0.23 $0.25 $0.23 $0.25 $0.22 Sales for resale 5.00 2.99 3.19 Gathering 0.34 0.22 0.28 0.22 0.25 0.23
Questar Pipeline began operating under Federal Energy Regulatory Commission (FERC) Order 636 effective September 1, 1993. At that time Questar Pipeline unbundled its transportation, gathering and storage services and eliminated its sales-for-resale function. Under the Order 636 operating environment, firm transportation volumes do not have a significant impact on current operating results since 96% of the cost of service is recovered in the demand component of rates using the straight fixed-variable rate design. Since this demand component is collected equally each month of the year, revenues collected using the straight fixed-variable rate design in the high-volume first and fourth quarters are less than those collected under the rate design in effect during the comparable periods of 1993. The straight fixed-variable rate design resulted in increased revenues during the second quarter of 1994, when compared to the same quarter of 1993. Deliveries to Mountain Fuel were higher in the 3-, 6- and 12-month periods ended June 30, 1994. Transportation for other customers was lower in the 1994 periods because of lower firm transportation contract demand. In April 1994, the FERC approved a gathering agreement between Questar Pipeline and Mountain Fuel retroactive to September 1, 1993, which allocates 60% of gathering costs to the demand component of rates and 40% to the commodity component. Gathering revenues were increased $1,335,000 in the second quarter of 1994, to retroactively reflect the FERC approved gathering agreement. Mountain Fuel accounted for 46% of the volumes of gas gathered in the first half of 1994. Questar Pipeline expanded firm storage service at Clay Basin from 31 to 41.8 Bcf working gas capacity in mid-May 1994. With additional cushion gas, storage capacity will be increased to 46.3 Bcf by the 1995-96 heating season. Operating and maintenance expenses were lower in the periods ended June 30, 1994, because of lower variable costs caused by reduced system throughput and lower field gathering costs. Depreciation expense was higher in the periods ended June 30, 1994, because of capital spending, primarily for storage and gathering activities. The effective income tax rate of 37.1% in the first half of 1994 was higher than the 35.8% in the first half of 1993 because of an increase in the federal income tax rate from 34% to 35%. Effective January 1, 1994, the Company recorded a liability for postemployment disability and health care benefits in compliance with the Statement of Financial Accounting Standards No. 112. This did not have an effect on net income since the $1,256,000 liability was offset with a regulatory asset because the Company expects to include these costs in future rates. Liquidity and Capital Resources -- Operating Activities: Net cash provided from operating activities was $18,254,000 for the first half of 1994 compared with $34,688,000 for the same period of 1993. The decrease was due to reduced sources from deferred taxes and working capital. In the Order 636 operating environment, Questar Pipeline eliminated the purchased gas cost adjustment account and all but 3 Bcf of working gas capacity. As a result, the Company no longer experiences large seasonal changes in working capital as it did in the first six months of 1993. Investing Activities: Capital expenditures were $27,356,000 in the first half of 1994, compared with $12,827,000 in the corresponding 1993 period as the Company continues expanding a major gas storage reservoir. Capital expenditures for calendar year 1994 are estimated at $64,500,000. Financing Activities: On July 1, 1994 Questar Pipeline received a $25,000,000 capital contribution from its parent company. The Company used the capital contribution to fund capital expenditures and to repay short-term debt borrowed from its parent company. The Company had a short-term line-of-credit arrangement with a bank totaling $200,000. In addition, its parent company loans funds to the Company under a short-term arrangement. As of June 30, 1994, Questar Pipeline had borrowed $21,100,000 from Questar Corporation. PART II OTHER INFORMATION Item 1. Legal Proceedings. a. The Federal Energy Regulatory Commission (the FERC), on May 17, 1994, issued an order disclaiming jurisdiction over the Blacks Fork processing plant, which is being constructed in southwestern Wyoming by a joint venture between Questar Pipeline Company (Questar Pipeline or the Company), through an affiliate, and Coastal Gas Gathering and Processing Company. The plant, which is currently scheduled to be completed in December of 1994, will remove hydrocarbon liquids from gas gathered in the area. b. On June 3, 1994, the FERC issued an order granting an application filed by TransColorado Gas Transmission Company (TransColorado) to construct and operate a new interstate gas transmission system. Questar Pipeline, through a subsidiary, has a one-third interest in the proposed TransColorado project, which will extend from producing areas in northwestern Colorado and interconnect with major pipeline systems in northwestern New Mexico. The Company's partners in TransColorado are affiliates of Public Service Company of Colorado and KN Energy Inc. TransColorado filed a petition for rehearing on a limited number of issues. On August 1, 1994, the FERC issued an order granting a rehearing for the purpose of further consideration. c. On July 11, 1994, Questar Pipeline, as operator of the Overthrust Pipeline Company (Overthrust Pipeline) partnership, filed an offer of settlement in that entity's pending general rate case with the FERC. Comments supporting the settlement offer have been filed by the FERC's staff and shippers that are affiliated with the Overthrust Pipeline partners. In addition to the Company with its 18 percent ownership interest, Overthrust Pipeline partners include CIG Overthrust, Inc., Columbia Gulf Transmission Company, Enron Overthrust Pipeline Company, NGPL - Overthrust Inc., and Tennessee Overthrust Gas Company. As of the date of this report, the FERC has not issued an order concerning the settlement offer. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. QUESTAR PIPELINE COMPANY (Registrant) August 11, 1994 /s/ A. J. Marushack (Date) A. J. Marushack President and Chief Executive Officer August 11, 1994 /s/ W. F. Edwards (Date) W. F. Edwards Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----