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Questar pushing Southern Trails pipe sale, considering shutting down line

Leaning more heavily on the utility side of its business,Questar Corp. isworking on trimming its midstream asset base, company executives said April 28.

Michael Dunn, QuestarPipeline Co.'s executive vice president, said on the first-quarterearnings call that thecompany is still looking for an appropriate buyer for the Southern Trailspipeline, a noncore asset for Questar, ideally by the end of the secondquarter. Failing to sell the asset, Questar would continue operating the lineas the company is required to by FERC. If continued operation provesuneconomic, Questar would then determine whether to take the pipe out ofservice entirely, Dunn said.

"We could … shut down the pipeline ultimately, [but]obviously the first two options are something we'd consider first," Dunnsaid during the call.

This strategy is a marked change from just a few years ago,when Questar was moving forward on plans to convert the western part of the New Mexico-to-CaliforniaSouthern Trails pipelinefrom natural gas to crude oil.Questar has since abandoned that idea.

Questar Pipeline's capital investment in the first quarterfell notably compared to the same period of 2015 — down 24% — in large partbecause of struggles brought on by persistently low commodity prices. AtWexpro Co., Questar'sproduction arm, the capital spending drop-off was even more pronounced, down59% year over year in the first quarter of 2016.

The corporation's utility arm remained a bright spot,though, and even saw a capital spending uptick in the most recent quarter,company officials noted. Ronald Jibson, Questar's chairman, president and CEO,attributed the continued strength of QuestarGas Co. to robust customer growth coupled with the ongoinginfrastructure replacement program.

The company as a whole on April 27 reported first-quarter adjustedearnings of $87.5 million, or 50 cents per share, compared to $84.6 million, or48 cents per share, during the year-ago period.

The S&P Global Market Intelligence consensus estimate ofnormalized EPS for the quarter was 51 cents.

Jibson expressed optimism that the planned merger withDominion Resources Inc.will help Questar grow.

"Dominion Resources recognizes the value of [Questar's]unique strengths. Their size and financial resources expand potential forfuture opportunities," Jibson said during the call.

Questar on May 12 will hold a shareholder vote on Dominion'splans to acquire Questar, and Jibson said he expects the deal to close in thethird or fourth quarter of 2016. Jibson plans to retire once the merger closes.