Utah natural gas company Questar Corp. looks to spin off exploration and production operations

Utah gas company Questar Corp. plans spin-off

SALT LAKE CITY — Questar Corp. announced a plan Wednesday to spin off its exploration and development operations into a separate company.

Keith Rattie, the chairman, president and CEO of the natural-gas-focused energy company, shopped the idea to reporters and the company’s 2,500 employees at the close of trading Wednesday. The plan is subject to board approval and could take effect as early as this summer, he said.

Questar said it has become difficult to raise capital for a $8 billion company combining two distinctly different businesses. One is a regulated utility in Utah with dedicated gas-producing and pipeline operations.

The other is a fast-growing natural gas producer and energy trader across much of the country’s midsection that’s having trouble raising capital because it doesn’t stand alone, Rattie said.

He said he was awaiting market reaction, but that investors have long called for a split. It would separate the regulated parts of the company that provide steady but conservative returns from the more volatile drilling business, which has grown rapidly in recent years.

Questar shareholders would get an equal value of shares in both companies.

“The large, long-term owners are going to agree that this creates value for them,” Rattie predicted. “If we’re wrong, we want to know it before we do it. You can’t put Humpty Dumpty back together. Our large investors will vote with their feet.”

Shares of Questar rose 1 cent to $44.86 in regular trading Wednesday, then climbed $2.89, or 6.3 percent, in extended trading after the announcement.

“I think the market will react very positively and there’s substantial upside in this stock,” UBS analyst Ron Barone said Wednesday from Dallas. “Questar is getting a conglomerate discount right now. We think the parts separated are worth $67 a share — plenty of upside. I think it will go through.”

Questar has commercial operations in Wyoming, Colorado, Oklahoma, Texas and Louisiana. The exploration and production company yet to be named would be headquartered in Denver, where many of Questar’s drilling employees are based. The company also has large offices in Tulsa, Okla., and Oklahoma City.