Questar in Expansion Mode - Analyst Blog

By Zacks | January 10, 2013 AAA

Questar Fueling, a unit of natural gas-focused energy company Questar Corp. (STR) has entered into a contract to construct and operate a compressed natural gas (CNG) fueling facility in Houston, Texas.

This facility will serve up to 200 natural gas-powered trucks operated by Swift Transportation (SWFT) and Central Freight Lines - both industry leaders in terms of adopting CNG as a viable transportation fuel alternative for the heavy-duty market. For public access, private time-fill pumps and five lanes of fast-fueling facility will be available on spot. 5 million gallons of natural gas per year will be consumed by Swift Transportation's and Central Freight Lines' trucks.

Founded in 1922, Salt Lake City, Utah-based Questar Corporation operates with three principal subsidiaries - Wexpro Company, Questar Pipeline, and Questar Gas Company.

Questar, after the QEP Resources (QEP) spin-off, has transformed itself into a natural gas-operated energy company, which focuses exclusively on exploring natural gas resources while serving customers in domestic and worldwide markets.

Questar is characterized by a cost-effective business strategy that generates lucrative returns on equity. The company is also consistently broadening its customer base and enjoys an enviable market share as compared to its peers which include AGL Resources, Inc. (GAS), National Fuel Gas Company (NFG), EQT Corporation (EQT) and Atmos Energy Corporation (ATO).

Apart from solid growth prospects and a rising dividend income, Questar enjoys of one of the best credit ratings in the utilities sector. This provides the company with a competitive advantage in accessing capital at a reasonable cost.

However, the glut in domestic gas supplies continues to weigh on the company, with storage levels remaining well above their five-year average.

Shares of Questar currently carry a Zacks Rank #3, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the shares.

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