Attached files
file | filename |
---|---|
EX-32 - EX-32 - QUESTAR GAS CO | ck0000068589-ex32_477.htm |
EX-31.B - EX-31.B - QUESTAR GAS CO | ck0000068589-ex31b_302.htm |
EX-31.A - EX-31.A - QUESTAR GAS CO | ck0000068589-ex31a_303.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2017
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 Number |
Exact name of registrant as specified in its charter |
I.R.S. Employer Identification Number |
|
|
|
333-69210 |
QUESTAR GAS COMPANY |
87-0155877 |
|
|
|
|
333 SOUTH STATE STREET SALT LAKE CITY, UTAH 84145 (801) 324-5000 |
|
State or other jurisdiction of incorporation or organization of the registrant: Utah
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 ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
|
|
|
|
Non-accelerated filer |
☒ (Do not check if a smaller reporting company) |
Smaller reporting company |
☐ |
|
|
|
|
|
|
Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).
Yes ☐ No ☒
Questar Gas does not have any voting or non-voting common equity held by non-affiliates. As of July 14, 2017, Questar Gas had 9,189,626 shares of common stock outstanding.
QUESTAR GAS COMPANY MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS FILING THIS FORM 10-Q UNDER THE REDUCED DISCLOSURE FORMAT.
|
|
|
|
Page Number |
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
PART I. Financial Information |
|
|
|
|
|
|
|
Item 1. |
|
|
4 |
|
|
|
|
|
|
Item 2. |
|
Management's Discussion and Analysis of Financial Condition and Results of Operations |
|
17 |
|
|
|
|
|
Item 4. |
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
PART II. Other Information |
|
|
|
|
|
|
|
Item 1. |
|
|
21 |
|
|
|
|
|
|
Item 1A. |
|
|
21 |
|
|
|
|
|
|
Item 6. |
|
|
22 |
|
|
|
|
|
|
2
The following abbreviations or acronyms used in this Form 10-Q are defined below:
Abbreviation or Acronym |
|
Definition |
|
|
|
ARO |
|
Asset retirement obligation |
|
|
|
bcf |
|
Billion cubic feet |
|
|
|
CEO |
|
Chief Executive Officer |
|
|
|
CERCLA |
|
Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund |
|
|
|
CET |
|
Conservation enabling tariff |
|
|
|
CFO |
|
Chief Financial Officer |
|
|
|
DEQPS |
|
Dominion Energy Questar Pipeline Services, Inc. (formerly known as QPC Services Company) |
|
|
|
Dominion Energy |
|
The legal entity, Dominion Energy, Inc. (formerly known as Dominion Resources, Inc.), one or more of its consolidated subsidiaries (other than Dominion Energy Questar or Questar Gas) or operating segments, or the entirety of Dominion Energy, Inc. and its consolidated subsidiaries |
|
|
|
Dominion Energy Gas |
|
The legal entity, Dominion Energy Gas Holdings, LLC (formerly known as Dominion Gas Holdings, LLC), one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Energy Gas Holdings, LLC and its consolidated subsidiaries |
|
|
|
Dominion Energy Questar |
|
The legal entity, Dominion Energy Questar Corporation (formerly known as Dominion Questar Corporation), one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Energy Questar Corporation and its consolidated subsidiaries |
|
|
|
Dominion Energy Questar Combination |
|
Dominion Energy's acquisition of Dominion Energy Questar completed on September 16, 2016 pursuant to the terms of the agreement and plan of merger entered on January 31, 2016 |
|
|
|
Dominion Energy Questar Pipeline |
|
Dominion Energy Questar Pipeline, LLC (formerly known as Questar Pipeline, LLC), one or more of its consolidated subsidiaries, or the entirety of Dominion Energy Questar Pipeline, LLC and its consolidated subsidiaries |
|
|
|
Dth |
|
Dekatherm |
|
|
|
EEP |
|
Energy-efficiency program |
|
|
|
EPA |
|
Environmental Protection Agency |
|
|
|
FERC |
|
Federal Energy Regulatory Commission |
|
|
|
GAAP |
|
U.S. generally accepted accounting principles |
|
|
|
Gas Infrastructure |
|
Gas Infrastructure Group operating segment |
|
|
|
GHG |
|
Greenhouse gas |
|
|
|
Idaho Commission |
|
Idaho Public Utilities Commission |
|
|
|
IRCA |
|
Intercompany revolving credit agreement |
|
|
|
MD&A |
|
Management's Discussion and Analysis of Financial Condition and Results of Operations |
|
|
|
Questar Gas |
|
The legal entity Questar Gas Company |
|
|
|
SEC |
|
Securities and Exchange Commission |
|
|
|
Utah Commission |
|
Public Service Commission of Utah |
|
|
|
VIE |
|
Variable interest entity |
|
|
|
Virginia Power |
|
The legal entity, Virginia Electric and Power Company, one or more of its consolidated subsidiaries or operating segments, or the entirety of Virginia Power and its consolidated subsidiaries |
|
|
|
Wexpro |
|
The legal entity, Wexpro Company, one or more of its consolidated subsidiaries, or the entirety of Wexpro Company and its consolidated subsidiaries |
|
|
|
Wyoming Commission |
|
Wyoming Public Service Commission |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
QUESTAR GAS COMPANY
STATEMENTS OF INCOME
(Unaudited)
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 30, |
|
||||||||||
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenue(1) |
$ |
139.7 |
|
|
$ |
128.2 |
|
|
$ |
536.6 |
|
|
$ |
536.1 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
75.5 |
|
|
|
67.8 |
|
|
|
316.8 |
|
|
|
324.7 |
|
Other operations and maintenance(1) |
|
44.6 |
|
|
|
36.3 |
|
|
|
86.3 |
|
|
|
83.9 |
|
Depreciation and amortization |
|
16.5 |
|
|
|
15.0 |
|
|
|
32.7 |
|
|
|
29.7 |
|
Other taxes |
|
5.6 |
|
|
|
5.3 |
|
|
|
11.4 |
|
|
|
10.6 |
|
Total Operating Expenses |
|
142.2 |
|
|
|
124.4 |
|
|
|
447.2 |
|
|
|
448.9 |
|
Income (loss) from operations |
|
(2.5 |
) |
|
|
3.8 |
|
|
|
89.4 |
|
|
|
87.2 |
|
Other income |
|
1.0 |
|
|
|
0.9 |
|
|
|
2.0 |
|
|
|
1.9 |
|
Interest expense(1) |
|
8.5 |
|
|
|
7.5 |
|
|
|
17.0 |
|
|
|
15.2 |
|
Income (loss) from operations before income tax expense |
|
(10.0 |
) |
|
|
(2.8 |
) |
|
|
74.4 |
|
|
|
73.9 |
|
Income tax expense (benefit) |
|
(3.8 |
) |
|
|
(1.2 |
) |
|
|
28.4 |
|
|
|
27.9 |
|
Net Income (Loss) |
$ |
(6.2 |
) |
|
$ |
(1.6 |
) |
|
$ |
46.0 |
|
|
$ |
46.0 |
|
(1) |
See Note 12 for amounts attributable to related parties. |
The accompanying notes are an integral part of Questar Gas' Financial Statements.
4
BALANCE SHEETS
(Unaudited)
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2017 |
|
|
2016(1) |
|
||
(millions) |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2.1 |
|
|
$ |
7.6 |
|
Customer receivables (less allowance for doubtful accounts of $2.0 and $1.7 ) |
|
|
52.3 |
|
|
|
163.7 |
|
Receivable from affiliates |
|
|
0.6 |
|
|
|
0.6 |
|
Inventories at lower of average cost or market: |
|
|
|
|
|
|
|
|
Gas stored underground |
|
|
21.8 |
|
|
|
49.3 |
|
Materials and supplies |
|
|
25.7 |
|
|
|
27.6 |
|
Regulatory assets |
|
|
13.4 |
|
|
|
9.6 |
|
Other |
|
|
5.0 |
|
|
|
3.7 |
|
Total current assets |
|
|
120.9 |
|
|
|
262.1 |
|
Property, Plant and Equipment |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
2,917.9 |
|
|
|
2,883.0 |
|
Accumulated depreciation and amortization |
|
|
(727.6 |
) |
|
|
(737.6 |
) |
Total property, plant and equipment, net |
|
|
2,190.3 |
|
|
|
2,145.4 |
|
Deferred Charges and Other Assets |
|
|
|
|
|
|
|
|
Receivable from affiliates |
|
|
98.6 |
|
|
|
87.8 |
|
Other noncurrent assets |
|
|
12.1 |
|
|
|
11.2 |
|
Total deferred charges and other assets |
|
|
110.7 |
|
|
|
99.0 |
|
Total assets |
|
$ |
2,421.9 |
|
|
$ |
2,506.5 |
|
(1) |
Questar Gas' Balance Sheet at December 31, 2016 has been derived from the audited Balance Sheet at that date. |
The accompanying notes are an integral part of Questar Gas' Financial Statements.
5
BALANCE SHEETS—(Continued)
(Unaudited)
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2017 |
|
|
2016(1) |
|
||
(millions) |
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Securities due within one year |
|
$ |
134.5 |
|
|
$ |
14.5 |
|
Short-term debt |
|
|
135.0 |
|
|
|
200.0 |
|
Affiliated current borrowings |
|
|
10.0 |
|
|
|
48.0 |
|
Accounts payable and accrued expenses |
|
|
71.1 |
|
|
|
117.2 |
|
Accounts payable to affiliates |
|
|
42.7 |
|
|
|
43.5 |
|
Customer advances |
|
|
11.8 |
|
|
|
27.9 |
|
Regulatory liabilities |
|
|
9.1 |
|
|
|
6.5 |
|
Other current liabilities |
|
|
2.8 |
|
|
|
1.7 |
|
Total current liabilities |
|
|
417.0 |
|
|
|
459.3 |
|
Long-Term Debt |
|
|
496.5 |
|
|
|
616.3 |
|
Deferred Credits and Other Liabilities |
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
504.3 |
|
|
|
475.8 |
|
Regulatory liabilities |
|
|
190.8 |
|
|
|
189.1 |
|
Payables to affiliates |
|
|
12.8 |
|
|
|
13.0 |
|
Other noncurrent liabilities |
|
|
96.9 |
|
|
|
95.4 |
|
Total deferred credits and other liabilities |
|
|
804.8 |
|
|
|
773.3 |
|
Total liabilities |
|
|
1,718.3 |
|
|
|
1,848.9 |
|
Commitments and Contingencies (see Note 9) |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Common stock - par value $2.50(2) |
|
|
23.0 |
|
|
|
23.0 |
|
Additional paid-in capital |
|
|
272.5 |
|
|
|
272.5 |
|
Retained earnings |
|
|
408.1 |
|
|
|
362.1 |
|
Total common shareholder's equity |
|
|
703.6 |
|
|
|
657.6 |
|
Total liabilities and shareholder's equity |
|
$ |
2,421.9 |
|
|
$ |
2,506.5 |
|
(1) |
Questar Gas' Balance Sheet at December 31, 2016 has been derived from the audited Balance Sheet at that date. |
(2) |
50.0 million shares authorized; 9.2 million shares outstanding at June 30, 2017 and December 31, 2016. |
The accompanying notes are an integral part of Questar Gas' Financial Statements.
6
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, |
|
2017 |
|
|
2016 |
|
||
(millions) |
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
46.0 |
|
|
$ |
46.0 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
32.7 |
|
|
|
32.6 |
|
Deferred income taxes |
|
|
28.5 |
|
|
|
12.5 |
|
Other adjustments for non-cash items |
|
|
0.5 |
|
|
|
0.8 |
|
Changes in operating assets and liabilities |
|
|
65.0 |
|
|
|
182.3 |
|
Net cash provided by operating activities |
|
|
172.7 |
|
|
|
274.2 |
|
Investing Activities |
|
|
|
|
|
|
|
|
Property, plant and equipment purchased |
|
|
(75.4 |
) |
|
|
(124.3 |
) |
Cash used in disposition of assets |
|
|
— |
|
|
|
(1.2 |
) |
Other |
|
|
0.2 |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(75.2 |
) |
|
|
(125.5 |
) |
Financing Activities |
|
|
|
|
|
|
|
|
Repayment of short-term debt, net |
|
|
(65.0 |
) |
|
|
— |
|
Repayment of affiliated current borrowings, net |
|
|
(38.0 |
) |
|
|
(144.3 |
) |
Dividends paid to Dominion Energy Questar |
|
|
— |
|
|
|
(20.0 |
) |
Other |
|
|
— |
|
|
|
5.1 |
|
Net cash used in financing activities |
|
|
(103.0 |
) |
|
|
(159.2 |
) |
Decrease in cash and cash equivalents |
|
|
(5.5 |
) |
|
|
(10.5 |
) |
Cash and cash equivalents at beginning of year |
|
|
7.6 |
|
|
|
10.5 |
|
Cash and cash equivalents at end of year |
|
$ |
2.1 |
|
|
$ |
— |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Significant noncash investing activities: |
|
|
|
|
|
|
|
|
Accrued capital expenditures |
|
$ |
18.8 |
|
|
$ |
22.6 |
|
The accompanying notes are an integral part of Questar Gas' Financial Statements.
7
(Unaudited)
Note 1. Nature of Operations
Questar Gas is a wholly-owned subsidiary of Dominion Energy Questar which, effective September 2016, is a wholly-owned subsidiary of Dominion Energy.
Questar Gas distributes natural gas as a public utility in Utah, southwestern Wyoming and a small portion of southeastern Idaho. The Utah, Wyoming and Idaho Commissions have granted Questar Gas the necessary regulatory approvals to serve these areas. Questar Gas also has long-term franchises granted by communities and counties within its service area.
Revenue generated by Questar Gas is based primarily on rates established by the Utah and Wyoming Commissions. The Idaho Commission has contracted with the Utah Commission for rate oversight of Questar Gas operations in Idaho.
Wexpro, an affiliate, provides the majority of Questar Gas' natural gas supply and Dominion Energy Questar Pipeline, an affiliate, provides the majority of Questar Gas' transportation and storage services.
Note 2. Significant Accounting Policies
As permitted by the rules and regulations of the SEC, Questar Gas' accompanying unaudited Financial Statements contain certain condensed financial information and exclude certain footnote disclosures normally included in annual audited financial statements prepared in accordance with GAAP. These unaudited Financial Statements should be read in conjunction with the Financial Statements and Notes in Questar Gas' Annual Report on Form 10-K for the year ended December 31, 2016.
In the opinion of management, the accompanying unaudited Financial Statements contain all adjustments necessary to present fairly its financial position as of June 30, 2017, its results of operations for the three and six months ended June 30, 2017 and 2016 and its cash flows for the six months ended June 30, 2017 and 2016. Such adjustments are normal and recurring in nature unless otherwise noted.
Questar Gas makes certain estimates and assumptions in preparing its Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses and cash flows for the periods presented. Actual results may differ from those estimates.
The results of operations for interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in sales, rate changes, purchased gas expenses and other factors.
Questar Gas reports certain contracts and instruments at fair value. See Note 4 for further information on fair value measurements.
Certain amounts in the 2016 Financial Statements and Notes have been reclassified to conform to the 2017 presentation for comparative purposes. The reclassifications did not affect Questar Gas' net income, total assets, liabilities, equity or cash flows.
Note 3. Operating Revenue
Questar Gas' operating revenue consists of the following:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential and commercial gas sales |
|
$ |
122.0 |
|
|
$ |
112.9 |
|
|
$ |
500.5 |
|
|
$ |
504.6 |
|
Industrial gas sales |
|
|
3.1 |
|
|
|
4.5 |
|
|
|
6.3 |
|
|
|
9.5 |
|
Gas transportation |
|
|
6.3 |
|
|
|
5.7 |
|
|
|
13.2 |
|
|
|
11.7 |
|
Other(1) |
|
|
8.3 |
|
|
|
5.1 |
|
|
|
16.6 |
|
|
|
10.3 |
|
Total operating revenue |
|
$ |
139.7 |
|
|
$ |
128.2 |
|
|
$ |
536.6 |
|
|
$ |
536.1 |
|
(1) |
See Note 11 for amounts attributable to related parties. |
8
Note 4. Fair Value Measurements
Questar Gas' fair value measurements are made in accordance with the policies discussed in Note 5 to the Financial Statements in Questar Gas' Annual Report on Form 10-K for the year ended December 31, 2016. See Note 5 in this report for further information about Questar Gas' derivatives and hedge accounting activities.
Questar Gas enters into certain physical forwards and options, which are considered Level 3 as they have one or more inputs that are not observable and are significant to the valuation. The discounted cash flow method is used to value Level 3 physical forward contracts. An option model is used to value Level 3 physical options. The discounted cash flow model for forwards calculates mark-to-market valuations based on forward market prices, original transaction prices, volumes, risk-free rate of return, and credit spreads. The option model calculates mark-to-market valuations using variations of the Black-Scholes option model. The inputs into the models are the forward market prices, implied price volatilities, risk-free rate of return, the option expiration dates, the option strike prices, the original sales prices, and volumes. For Level 3 fair value measurements, forward market prices and implied price volatilities are considered unobservable. The unobservable inputs are developed and substantiated using historical information, available market data, third-party data, and statistical analysis. Periodically, inputs to valuation models are reviewed and revised as needed, based on historical information, updated market data, market liquidity and relationships, and changes in third-party pricing sources.
The following table presents Questar Gas' quantitative information about Level 3 fair value measurements at June 30, 2017. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.
|
|
Fair Value (millions) |
|
|
Valuation Techniques |
|
Unobservable Input |
|
|
|
Range |
|
Weighted Average(1) |
|
||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
$ |
0.3 |
|
|
Option model |
|
Market price (per Dth) |
|
(2 |
) |
3.2 - 3.4 |
|
|
3.3 |
|
|
|
|
|
|
|
|
|
Price volatility |
|
(3 |
) |
25.1% - 31.7% |
|
|
27.7 |
% |
Total assets |
|
$ |
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical forwards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(4) |
|
$ |
0.5 |
|
|
Discounted cash flow |
|
Market price (per Dth) |
|
(2 |
) |
2.3 - 3.4 |
|
|
2.9 |
|
Total liabilities |
|
$ |
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Averages weighted by volume. |
(2) |
Represents market prices beyond defined terms for Level 1 and 2. |
(3) |
Represents volatilities unrepresented in published markets. |
(4) |
Includes basis. |
Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:
Significant Unobservable Inputs |
|
Position |
|
Change to Input |
|
Impact on Fair Value Measurement |
Market price |
|
Buy |
|
Increase (decrease) |
|
Gain (loss) |
Market price |
|
Sell |
|
Increase (decrease) |
|
Loss (gain) |
Price volatility |
|
Buy |
|
Increase (decrease) |
|
Gain (loss) |
Price volatility |
|
Sell |
|
Increase (decrease) |
|
Loss (gain) |
9
Recurring Fair Value Measurements
The following table presents Questar Gas’ assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions.
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.3 |
|
|
$ |
0.3 |
|
Total assets |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.3 |
|
|
$ |
0.3 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
0.1 |
|
|
$ |
0.5 |
|
|
$ |
0.6 |
|
Total liabilities |
|
$ |
— |
|
|
$ |
0.1 |
|
|
$ |
0.5 |
|
|
$ |
0.6 |
|
At December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
0.1 |
|
|
$ |
— |
|
|
$ |
0.1 |
|
Total assets |
|
$ |
— |
|
|
$ |
0.1 |
|
|
$ |
— |
|
|
$ |
0.1 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
0.1 |
|
|
$ |
— |
|
|
$ |
0.1 |
|
Total liabilities |
|
$ |
— |
|
|
$ |
0.1 |
|
|
$ |
— |
|
|
$ |
0.1 |
|
The following table presents the net change in Questar Gas' assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
(1.3 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Total realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings(1) |
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
Included in regulatory assets/liabilities |
|
|
1.0 |
|
|
|
— |
|
|
|
(0.3 |
) |
|
|
— |
|
Settlements |
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
Purchases |
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
Ending balance |
|
$ |
(0.2 |
) |
|
$ |
— |
|
|
$ |
(0.2 |
) |
|
$ |
— |
|
(1) |
The gains and losses included in earnings were classified in cost of sales. |
There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three and six months ended June 30, 2017.
10
Fair Value of Financial Instruments
Substantially all of Questar Gas' financial instruments are recorded at fair value, with the exception of the instruments described below, which are reported at historical cost. Estimated fair values have been determined using available market information and valuation methodologies considered appropriate by management. The carrying amount of cash and cash equivalents, customer receivables, receivable from affiliates, short-term debt, affiliated current borrowings, accounts payable and accounts payable to affiliates are representative of fair value because of the short-term nature of these instruments. For Questar Gas' financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:
|
|
June 30, 2017 |
|
|
December 31, 2016 |
|
||||||||||
|
|
Carrying Amount |
|
|
Estimated Fair Value(1) |
|
|
Carrying Amount |
|
|
Estimated Fair Value(1) |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including securities due within one year(2) |
|
$ |
631.0 |
|
|
$ |
687.1 |
|
|
$ |
630.8 |
|
|
$ |
672.6 |
|
(1) |
Fair value is estimated using market prices, where available, and interest rates currently available for issuance of debt with similar terms and remaining maturities. The fair value measurements are classified as Level 2. |
(2) |
Carrying amount includes amounts which represent the unamortized debt issuance costs, discount or premium. |
Note 5. Derivatives and Hedge Accounting Activities
Questar Gas' accounting policies, objectives and strategies for using derivative instruments are discussed in Note 2 to the Financial Statements in the Questar Gas' Annual Report on Form 10-K for the year ended December 31, 2016. See Note 4 in this report for further information about fair value measurements and associated valuation methods for derivatives.
Derivative assets and liabilities are presented gross on Questar Gas' Balance Sheets. Questar Gas' derivative contracts include over-the-counter transactions, which are bilateral contracts that are transacted directly with a counterparty. At June 30, 2017, substantially all of Questar Gas' derivative assets and liabilities were not subject to a master netting or similar arrangement.
Volumes
The following table presents the volume of Questar Gas' derivative activity at June 30, 2017. These volumes are based on open derivative positions and represent the combined absolute value of its long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of its long and short positions.
|
|
Current |
|
|
Noncurrent |
|
||
Natural Gas (bcf): |
|
|
|
|
|
|
|
|
Basis |
|
|
12.1 |
|
|
|
25.9 |
|
11
Fair Value and Gains and Losses on Derivative Instruments
The following table presents the fair values of Questar Gas' derivatives and where they are presented in its Balance Sheets.
|
|
Fair Value - Derivatives not under Hedge Accounting |
|
|
Total Fair Value |
|
||
(millions) |
|
|
|
|
|
|
|
|
At June 30, 2017 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Commodity |
|
$ |
0.3 |
|
|
$ |
0.3 |
|
Total current derivative assets(1) |
|
|
0.3 |
|
|
|
0.3 |
|
Total derivative assets |
|
$ |
0.3 |
|
|
$ |
0.3 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Commodity |
|
$ |
0.2 |
|
|
$ |
0.2 |
|
Total current derivative liabilities(2) |
|
|
0.2 |
|
|
|
0.2 |
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
Commodity |
|
|
0.4 |
|
|
|
0.4 |
|
Total noncurrent derivative liabilities(3) |
|
|
0.4 |
|
|
|
0.4 |
|
Total derivative liabilities |
|
$ |
0.6 |
|
|
$ |
0.6 |
|
At December 31, 2016 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Commodity |
|
$ |
0.1 |
|
|
$ |
0.1 |
|
Total current derivative assets(1) |
|
|
0.1 |
|
|
|
0.1 |
|
Total derivative assets |
|
$ |
0.1 |
|
|
$ |
0.1 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Commodity |
|
$ |
0.1 |
|
|
$ |
0.1 |
|
Total current derivative liabilities(2) |
|
|
0.1 |
|
|
|
0.1 |
|
Total derivative liabilities |
|
$ |
0.1 |
|
|
$ |
0.1 |
|
(1) |
Current derivative assets are presented in other current assets in Questar Gas' Balance Sheets. |
(2) |
Current derivative liabilities are presented in other current liabilities in Questar Gas’ Balance Sheets. |
(3) |
Noncurrent derivative liabilities are presented in other noncurrent liabilities in Questar Gas' Balance Sheets. |
The following table presents the gains and losses on Questar Gas' derivatives, as well as where the associated activity is presented in its Statements of Income.
|
|
Amount of Gain (Loss) Recognized in Income on Derivatives (1) |
|
|||||||||||||
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
Derivatives not designated as hedging instruments |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Type and Location of Gains (Losses) |
|
|
|
|
|