QEP Resources Reports Second Quarter EBITDA of $276.0 Million and Production of 53.7 BCFE

DENVER, July 27 /PRNewswire-FirstCall/ -- QEP Resources (NYSE: QEP) reported second quarter 2010 production of 53.7 Bcfe compared to 43.4 Bcfe for the 2009 period, a 24% increase.  QEP second quarter 2010 continuing EBITDA (a non-GAAP measure) was $276.0 million, compared to $272.2 million a year earlier, a 1% increase in spite of a 28% decrease in net realized natural gas prices.  Net income from continuing operations increased 53% in the 2nd quarter of 2010 to $68.8 million or $0.39 per diluted share, compared to $44.9 million or $0.26 per diluted share for the second quarter of 2009.  Excluding changes in unrealized gains and losses on natural gas basis-only swaps, gains and losses on non-core asset sales and, certain separation costs related to the spin-off of QEP Resources from Questar Corporation, QEP Resources net income from continuing operations was $58.7 million or $0.33 per diluted share for the current quarter compared to $62.6 million or $0.36 per diluted share in the prior-year period.  

QEP Resources (formerly Questar Market Resources) completed its tax-free spin-off from Questar on June 30, 2010.  In conjunction with the spin-off, QEP Resources distributed the common stock of its wholly-owned subsidiary, Wexpro Company, to Questar.  Accordingly, Wexpro's financial results have been presented as discontinued operations in this release.  QEP Resources' principal subsidiaries are QEP Energy Company (formerly Questar Exploration and Production), QEP Field Services Company (formerly Questar Gas Management) and QEP Marketing Company (formerly Questar Energy Trading).

"The QEP Resources team continued to execute well in the second quarter," said Chuck Stanley, President and CEO.  "QEP Energy delivered 24% year-over-year production growth, driven by strong results from ongoing Haynesville Shale and Pinedale Anticline development activities, combined with significant contributions from new wells in our Woodford Shale, Granite Wash and Bakken plays.  We are well-positioned to deliver at least 15% year-over-year production growth in 2010.  QEP Field Services also had a good quarter.  Field Services gathering and processing businesses benefitted from growing production at QEP Energy and our third-party customers, and from strong frac-spread margins," Stanley added.  

Second Quarter 2010 Highlights

• QEP Energy grew natural gas, oil and NGL production 24% to 53.7 billion cubic feet of natural gas equivalent (Bcfe) compared to 43.4 Bcfe for the 2009 quarter.  Natural gas comprised 89% of reported production volumes.  Second quarter 2010 production was up 4% from first-quarter 2010 volumes.  
• QEP Energy second quarter 2010 EBITDA decreased 5% compared to 2009, driven by a 28% decrease in net realized natural gas prices, mostly offset by a 24% increase in production and higher realized oil and natural gas liquids (NGL) prices.  Net natural gas revenues (including the settlement of all natural gas-related derivative contracts) represented 81% of QEP Energy net realized production revenues in the second quarter of 2010.  Net realized natural gas prices at QEP Energy averaged $4.87 per thousand cubic feet (Mcf), down 28% compared to second quarter 2009.  While field-level natural gas prices were higher in the second quarter of 2010, net proceeds from settlement of natural gas-related derivatives were significantly lower than in the 2009 quarter.  Field-level natural gas prices in the second quarter of 2010 were $3.40 per Mcf compared to $2.43 per Mcf in 2009, a 40% increase.  Natural gas-related derivative settlements increased net revenues $70.1 million in the second quarter of 2010 compared to $166.7 million in the 2009 quarter.
• Net realized crude oil and NGL prices averaged $55.87 per barrel, up 26% from the year-ago quarter.  Field-level prices increased 35% to $57.75 per barrel.  Oil hedge settlements reduced revenues $1.8 million compared to a $1.3 million increase in revenues in the second quarter of 2009.
• Changes in unrealized gains and losses on natural gas basis-only swaps increased net income $17.2 million in the 2010 quarter compared to a loss of $17.5 million in the year-earlier period.
• Production volume-weighted per-unit depreciation, depletion and amortization (DD&A) expense at QEP Energy decreased to $2.59 per Mcfe, compared to $3.07 per Mcfe in second quarter 2009.  The 2009 quarterly rate was impacted by negative price related reserve adjustments.  The 2010 quarterly rate was positively impacted by reserve additions and higher production volumes.  The current quarter rate decreased $0.03 compared to the first-quarter 2010.
• QEP Field Services EBITDA increased 46% to $52.1 million in the second quarter of 2010 compared to $35.7 million a year ago, driven by increased gathering and processing margins.  Net income increased to $24.3 million in the second quarter of 2010 compared to $14.5 million in the 2009 quarter, a 68% increase.  Gathering margin increased 29% to $37.6 million and processing margin increased 59% to $22.2 million.  

QEP Resources provides 2010 EBITDA guidance; QEP Energy 2010 production guidance

QEP Resources expects that 2010 continuing EBITDA could range from $1.025 to $1.075 billion while QEP Energy 2010 EBITDA could range from $850 to $900 million based on QEP Energy 2010 production guidance of 218 to 222 Bcfe.

The company's guidance assumes hedges in place on the date of this release.  Other assumptions are summarized in the table below:

QEP Energy has hedged about 69% of forecast natural gas and oil-equivalent production for the remainder of 2010 with fixed-price swaps and 5% with collars.  (See table at the end of this release).

QEP Energy Second Quarter Production Up 24%; EBITDA Down on Lower Realized Prices

QEP Energy – a QEP Resources subsidiary that acquires, explores for, develops and produces natural gas and oil – reported production of 53.7 Bcfe in the second quarter of 2010 compared to 43.4 Bcfe in the 2009 quarter, a 24% increase.  The Midcontinent region contributed 51% of QEP Energy production for the second quarter of 2010 compared to 46% in the 2009 quarter.  Second quarter QEP Energy 2010 EBITDA was $222.4 million compared to $234.9 million in the 2009 quarter.  The reduction in current-year EBITDA was primarily the result of a 28% decrease in net realized natural gas prices.  The impact of lower net realized gas prices was mostly offset by a 24% increase in natural gas-equivalent production and higher realized oil and NGL prices.

QEP Energy – Production Costs (per Mcfe)
	3 Months Ended				6 Months Ended
	June 30,				June 30,
	2010	2009	Change		2010	2009	Change
Depreciation, depletion and amortization	$2.59	$3.07	(16%)		$2.61	$2.73	(4%)
Lease operating expense	0.54	0.74	(27)		0.55	0.74	(26)
General and administrative expense	0.35	0.40	(13)		0.36	0.37	(3)
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