Questar Corporation (STR) announced that its board of directors has authorized management to proceed with a tax-free spin-off to shareholders of its natural gas and oil exploration and production (E&P) and midstream field services businesses to form an independent, publicly traded company to be named QEP Resources, Inc. Questar previously announced on April 21, 2010 that it has been considering a separation of those businesses. The transaction is subject to market conditions, successful restructuring of certain credit facilities, and final approval of certain material agreements by the boards of both companies.
After the spin-off, Questar would remain an integrated natural gas company comprised of subsidiaries Wexpro Company, Questar Pipeline Company, and Questar Gas Company. Questar’s corporate headquarters would remain in Salt Lake City. QEP Resources, Inc. (formerly Questar Market Resources) would be comprised of subsidiaries Questar Exploration & Production, Questar Gas Management, and Questar Energy Trading. Following the spin, the QEP Resources subsidiaries would be renamed QEP Energy, QEP Field Services, and QEP Marketing, respectively. QEP Resources would be headquartered in Denver, Colorado.
“This transaction is a logical step in a long-term strategy that has served all Questar stakeholders well,” said Keith O. Rattie, Questar’s Chairman, President and Chief Executive Officer. “The spin-off would create two top-tier companies. QEP Resources would be a high-growth, diversified E&P business with operations in several of the most economic natural gas plays in the U.S. Questar would be a uniquely integrated natural gas company with a track record of solid returns on capital, visible growth, and the capacity to pay and grow a competitive dividend,” added Rattie.
Questar believes the transaction could be completed within the next three months. The spin-off would be structured as a pro rata dividend of the shares of common stock of QEP Resources to Questar shareholders of record. The number of outstanding shares of Questar held by existing stockholders would not change as a result of the spin-off. Questar common stock would continue to trade on the NYSE under the symbol STR. QEP Resources has applied to have its common stock listed on the NYSE under the symbol “QEP.”
After completion of the spin-off, Keith O. Rattie, Questar’s current Chairman, President and Chief Executive Officer, would serve as chairman of the board of both companies. Charles B. Stanley would be named President and Chief Executive Officer of QEP Resources. Richard J. Doleshek would serve as Chief Financial Officer of QEP Resources. Ronald W. Jibson would be named President and Chief Executive Officer of Questar. Martin H. Craven would be named Chief Financial Officer of Questar.
The company estimates that QEP Resources would have total debt of approximately $1.2 billion on the spin date, with no outstanding balance under its revolving credit facility. Questar would also have approximately $1.2 billion of total debt outstanding on the spin date.
The company previously disclosed on May 4, 2010 that the Internal Revenue Service has issued a private letter ruling, subject to various customary representations and assumptions, that the proposed spin-off will qualify as a tax-free transaction for U.S. federal income tax purposes.