QEP Resources Reports Third Quarter EBITDA of $297.5 Million and Production of 61.7 Bcfe

Company raises 2010 EBITDA and production guidance

Oct 26, 2010, 16:05 ET from QEP Resources

DENVER, Oct. 26 /PRNewswire-FirstCall/ -- QEP Resources (NYSE: QEP) reported third quarter 2010 production of 61.7 Bcfe compared to 43.8 Bcfe for the 2009 period, a 41% increase.  Production volumes in the 2009 quarter were impacted by price-related production curtailments.  Accounting for the curtailments, QEP production was up approximately 20% in the third quarter of 2010 compared to the prior year quarter.  QEP third quarter 2010 continuing EBITDA (a non-GAAP measure) was $297.5 million, compared to $285.3 million a year earlier, a 4% increase in spite of a 28% decrease in net realized natural gas prices.  Net income from continuing operations in the 3rd quarter of 2010 was $71.1 million or $0.40 per diluted share, essentially equal to the $71.4 million or $0.40 per diluted share for the third quarter of 2009.  Excluding changes in unrealized gains and losses on natural gas basis-only swaps, gains and losses on non-core asset sales, separation costs and losses on early extinguishment of debt, QEP Resources net income from continuing operations was $57.2 million or $0.32 per diluted share for the current quarter compared to $78.3 million or $0.43 per diluted share in the prior-year period.  

CONTINUING EBITDA BY SUBSIDIARY

(in millions)

3 Months Ended

September 30,

9 Months Ended

September 30,

2010

2009

Change

2010

2009

Change

  QEP Energy

$246.0

$237.3

4%

$683.8

$714.3

(4)% 

  QEP Field Services

48.9

47.0

4

151.5

113.9

33 

  QEP Marketing and other

2.6

1.0

160

6.7

11.3

(41)

TOTAL(a)

$297.5

$285.3

4%

$842.0

$839.5

-% 

(a)  See computation in attached schedule

NET INCOME BY SUBSIDIARY

(in millions, except earnings per share)

3 Months Ended

September 30,

9 Months Ended

September 30,

2010

2009

Change

2010

2009

Change

QEP Energy

$58.6 

$49.6

18% 

$165.0 

$64.3

157% 

QEP Field Services(a)

21.0 

21.5

(2)

68.5 

47.4

45 

QEP Marketing and other

2.0 

0.3

567 

3.6 

6.5

(45)

Separation and debt extinguishment costs

(10.5)

  -

(19.1)

  -

Income from continuing operations(a)

$71.1 

$71.4

-% 

$218.0 

$118.2

84% 

Discontinued operations(b)

  - 

20.6

43.2 

59.2

NET INCOME(a)

$71.1 

$92.0

(23%) 

$261.2 

$177.4

47% 

Earnings per diluted share

 From continuing operations        

$0.40 

$0.40

$1.23 

$0.67

 Total earnings

$0.40 

$0.52

$1.47 

$1.01

Weighted average diluted shares

177.9 

176.3

177.6 

176.1

(a) Net income represents amounts attributable to QEP Resources after deducting non-controlling interest.

(b) QEP Resources completed its tax-free spin-off from Questar Corporation 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 historical financial results have been presented as discontinued operations in this release.

"The QEP Resources team continued to execute well in the third quarter," said Chuck Stanley, President and CEO.  "Taking into account price-related curtailments in the third quarter of 2009, QEP Energy delivered approximately 20% 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," Stanley added.  

Third Quarter 2010 Highlights

  • QEP Energy grew natural gas, oil and NGL production to 61.7 billion cubic feet of natural gas equivalent (Bcfe) compared to 43.8 Bcfe for the 2009 quarter.  Crude oil and NGL's comprised 11% of reported production volumes.  Third quarter 2010 production was up 15% from second quarter 2010 volumes.
  • QEP Energy's third quarter 2010 EBITDA increased 4% compared to 2009, driven by a 41% increase in production which more than offset a 28% decrease in net realized natural gas prices.
  • Net crude oil and NGL revenues (including the settlement of crude oil-related derivatives) represented 19% of QEP Energy's net realized production revenues in the third quarter of 2010.  
  • Net realized natural gas prices at QEP Energy averaged $4.64 per thousand cubic feet (Mcf), down 28% compared to third quarter 2009.  While field-level natural gas prices were higher in the third quarter of 2010, net proceeds from the settlement of natural gas-related derivatives were significantly lower than in the 2009 quarter.  Field-level natural gas prices in the third quarter of 2010 were $3.37 per Mcf compared to $2.46 per Mcf in 2009, a 37% increase.  Natural gas-related derivative settlements increased net revenues $69.7 million in the third quarter of 2010 compared to $156.7 million in the 2009 quarter.
  • Net realized crude oil and NGL prices averaged $53.74 per barrel, up 3% from the year-ago quarter.  Field-level prices increased 3% to $55.03 per barrel.  Oil related derivative settlements reduced revenues $1.4 million compared to a $0.7 million decrease in the third quarter of 2009.
  • Sales of non-core assets at QEP Energy increased net income $6.9 million, compared to a loss of $0.2 million in 2009.
  • Loss on early extinguishment of debt reduced net income $8.2 million in the current year quarter.
  • Changes in unrealized gains and losses on natural gas basis-only swaps increased net income $17.5 million in the 2010 quarter compared to a loss of $6.7 million in the year-earlier period.
  • QEP Field Services EBITDA in the third quarter of 2010 was $48.9 million compared to $47.0 million a year ago, a 4% increase.  A 16% increase in gathering margin, driven by a 33% increase in gathering volumes was partially offset by a 20% reduction in keep-whole gas processing margin.  Net income was $21.0 million in the third quarter of 2010 down 2% from $21.5 million in the 2009 quarter.

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

QEP Resources now expects that 2010 EBITDA from continuing operations could range from $1.075 to $1.125 billion while QEP Energy 2010 EBITDA could range from $880 to $920 million based on QEP Energy 2010 production guidance of 225 to 227 Bcfe.

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

Guidance and Assumptions

2010

2010

Current

Previous

QEP Resources continuing EBITDA (billions)

$1.075-$1.125

$1.025-$1.075

QEP Energy EBITDA (millions)

$880-$920

$850-$900

QEP Resources capital spending (billions)

$1.42

$1.34

QEP Energy production – Bcfe

225-227

218-222

NYMEX gas price per MMBtu(a)

$3.50-$4.25

$4.00-$5.00

NYMEX crude oil price per bbl(a)

$75.00-$85.00

$70.00-$80.00

NYMEX/Rockies basis differential per MMBtu(a)

$0.40-$0.20

$0.75-$0.50

NYMEX/Midcontinent basis differential per MMBtu(a)

$0.30-$0.20

$0.50-$0.30

(a) For remainder of 2010 unhedged volumes

QEP Energy has hedged about 67% 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 Third Quarter Production Up 41%; EBITDA Up on Increased Production

QEP Energy – a QEP Resources subsidiary that acquires, explores for, develops and produces natural gas and oil – reported production of 61.7 Bcfe in the third quarter of 2010 compared to 43.8 Bcfe in the 2009 quarter.  The Midcontinent region contributed 54% of QEP Energy production for the third quarter of 2010 compared to 46% in the 2009 quarter.  Third quarter QEP Energy 2010 EBITDA was $246.0 million compared to $237.3 million in the 2009 quarter.  The increase in current-year EBITDA was primarily the result of a 41% increase in production which more than offset a 28% decrease in net realized natural gas prices.

QEP Energy – Production by Region (Bcfe)

3 Months Ended

9 Months Ended

September 30,

September 30,

2010

2009

Change

2010

2009

Change

Midcontinent

33.4

20.3

65% 

87.1

61.1

43% 

Pinedale Anticline

17.9

14.7

22 

49.9

43.4

15 

Uinta Basin

5.3

5.6

(5)

15.9

17.9

(11)

Rockies Legacy

5.1

3.2

59 

14.0

11.7

20 

    Total QEP Energy

61.7

43.8

41% 

166.9

134.1

24% 

QEP Energy – Realized Prices

3 Months Ended

9 Months Ended

September 30,

September 30,

2010

2009

Change

2010

2009

Change

Average field-level natural gas price ($ per Mcf)

$3.37 

$2.46 

37% 

$3.80 

$2.76 

38% 

Natural gas hedging impact ($ per Mcf)

1.77 

4.18 

1.62 

3.99 

Average revenue ($ per Mcf) (a)

5.14 

6.64 

5.42 

6.75 

Realized losses on basis-only swaps  ($ per Mcf) (b)

(0.50)

(0.18)

(0.61)

(0.13)

Net realized natural gas price ($ per Mcf)

$4.64 

$6.46 

(28%)

$4.81 

$6.62 

(27%)

Average field-level oil and NGL price ($ per bbl)

$55.03 

$53.30 

3% 

$58.61 

$41.09 

43% 

Oil and NGL hedging impact ($ per bbl)

(1.29)

(0.89)

(1.78)

2.05 

Net realized oil and NGL price ($ per bbl) (a)

$53.74 

$52.41 

3% 

$56.83 

$43.14 

32% 

(a) Reported in revenues in the consolidated income statement.

(b) Reported below operating income in the consolidated income statement.

QEP Energy – Production Costs (per Mcfe)

3 Months Ended

9 Months Ended

September 30,

September 30,

2010

2009

Change

2010

2009

Change

Depreciation, depletion and amortization

$2.56

$2.76

(7%) 

$2.59

$2.74

(5%) 

Lease operating expense

0.54

0.67

(19)

0.55

0.72

(24)

General and administrative expense

0.29

0.40

(28)

0.33

0.38

(13)

Allocated interest expense

0.34

0.36

(6)

0.35

0.34

Production taxes

0.30

0.24

25 

0.35

0.29

21 

    Production costs

$4.03

$4.43

(9%) 

$4.17

$4.47

(7%) 

  • QEP Energy average total costs per unit of gas-equivalent production decreased 9% compared to the third quarter of 2009, due primarily to reduced depreciation, depletion and amortization expense and reduced lease operating expense.
  • Production volume-weighted average depreciation, depletion and amortization per Mcfe (the DD&A rate) decreased compared to 2009 in both the quarter and year-to-date periods as the result of increased proved reserves related to higher natural gas and oil prices compared to a year ago.  The third-quarter 2010 DD&A rate decreased $0.03/Mcfe compared to the second quarter 2010.  
  • QEP Energy cash cost of production – lease operating expense plus general and administrative expense, allocated interest, and production taxes was $1.47 per Mcfe, compared to $1.67 per Mcfe in the third quarter of 2009, a 12% decrease.
  • Lease operating expense per Mcfe in the current year periods decreased as the result of increased production volumes combined with lower operating expense in the year-to-date period. Growing production from new high-rate, low-operating cost wells in NW Louisiana and declining production from higher cost areas is lowering average lease operating expense.
  • General and administrative expense per Mcfe in the current year periods decreased as the result of increased production volumes combined with flat expense in the quarter, and an 11% increase in expense for the nine month period.
  • Production taxes per Mcfe increased in the current periods as the result of higher field-level prices.

QEP Field Services EBITDA up in Third Quarter 2010

QEP Field Services (Field Services) – a QEP subsidiary that provides gas gathering and processing services – reported EBITDA of $48.9 million in the third quarter of 2010 compared to $47 million a year earlier, a 4% increase.  Net income of $21.0 million in the third quarter of 2010 was essentially flat compared to $21.5 million in the 2009 quarter.

  • Gathering margin (total gathering revenues less gathering-related operating expenses) increased 16%, or $5.3 million, in the third quarter of 2010, driven primarily by a 33% increase in total throughput volume to 1.4 million MMBtu per day.  The increased volumes were primarily in NW Louisiana.
  • Processing margin (total processing plant revenues less plant operating expenses and shrink) decreased 14%, or $3.0 million, driven by 20% lower keep-whole processing margins.  NGL margins (NGL revenue less shrink) declined to $0.50/Gal in the third quarter of 2010 compared to $0.57/Gal in the 2009 quarter.  The decrease was the result of a 42% increase in shrink cost and a 9% decrease in NGL volume partially offset by a 5% increase in NGL prices.
  • Approximately 81% of Field Services' third quarter 2010 net operating revenue was derived from fee-based gathering and processing contracts, compared to 76% in the 2009 quarter.

Third Quarter 2010 Earnings Teleconference

QEP Resources management will discuss third quarter and nine month 2010 results and the outlook for the remainder of the year in a conference call with investors Wednesday, October 27, beginning at 11:00 a.m. EDT.  The call can be accessed at www.qepres.com.

About QEP Resources

QEP Resources (NYSE: QEP) is a leading independent natural gas and oil exploration and production company with operations focused in the Rocky Mountain and Midcontinent regions of the United States.  QEP Resources also gathers, compresses, treats, processes and stores natural gas. 

Forward-Looking Statements

This release includes forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933, as amended, and Section 21(e) of the Securities Exchange Act of 1934, as amended.  Such statements are based on management's current expectations, estimates and projections, which are subject to a wide range of uncertainties and business risks.  Factors that could cause actual results to differ from those anticipated are discussed in the company's periodic filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2009.  QEP Resources undertakes no obligation to publicly correct or update the forward-looking statements in this news release, in other documents, or on the Web site to reflect future events or circumstances.  All such statements are expressly qualified by this cautionary statement.

For more information, visit QEP Resources' Internet site at: www.qepres.com.

Hedge Positions – October 26, 2010

Time Periods

Rocky

Mountain

Midcontinent

Total

Rocky

Mountain

Midcontinent

Total

Estimated

Gas (Bcf) fixed-price swaps

Average price per Mcf, net to the well

2010

Fourth quarter

23.0

15.3

38.3

$3.61

$7.71

$5.25

2011

First half

38.6

12.0

50.6

$4.43

$6.44

$4.91

Second half

39.3

12.2

51.5

4.43

6.44

4.91

12 months

77.9

24.2

102.1

4.43

6.44

4.91

2012

First half

20.2

20.2

$5.91

$5.91

Second half

20.4

20.4

5.91

5.91

12 months

40.6

40.6

5.91

5.91

2013

First half

23.4

23.4

$5.98

$5.98

Second half

23.8

23.8

5.98

5.98

12 months

47.2

47.2

5.98

5.98

Estimated

Gas (Bcf) collars

Average price per Mcf, net to the well

Floor - Ceiling

Floor - Ceiling

Floor - Ceiling

2010

Fourth quarter

1.7

1.7

$4.65-$6.51

$4.65-$6.51

2011

First half

6.7

7.0

13.7

$3.39-$5.78

$5.82-$7.49

$4.63-$6.66

Second half

6.8

7.2

14.0

3.39 - 5.78

5.82 - 7.49

4.63 - 6.66

12 months

13.5

14.2

27.7

3.39 - 5.78

5.82 - 7.49

4.63 - 6.66

Estimated

Oil (Mbbl) fixed-price swaps

Average price per Bbl, net to the well

2010

Fourth quarter

212

18

230

$60.18

$66.15

$60.66

Estimated

Oil (Mbbl) collars

Average price per Bbl, net to the well

Floor - Ceiling

Floor - Ceiling

Floor - Ceiling

2010

Fourth quarter

124

60

184

$45.00-$93.78

$53.00-$100.92

$47.60-$96.10

2011

First half

425

118

543

$51.38-$99.98

$53.00-$109.75

$51.73-$102.10

Second half

433

119

552

51.38 - 99.98

53.00 - 109.75

51.73 - 102.10

12 months

858

237

1,095

51.38 - 99.98

53.00 - 109.75

51.73 - 102.10

QEP RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

3 Months Ended September 30,

9 Months Ended September 30,

2010

2009 (recast)

2010

2009 (recast)  

(in millions, except per share amounts)

REVENUES 

 Natural gas sales

$283.2

$260.0

$808.4

$802.9

 Oil and NGL sales

59.2

40.6

166.9

109.0

 Gathering, processing and other

76.4

72.5

238.7

189.0

 Marketing sales

145.8

114.9

460.4

311.9

   Total Revenues

564.6

488.0

1,674.4

1,412.8

OPERATING EXPENSES

 Marketing purchases

143.6

113.9

455.4

301.2

 Lease operating expense

32.8

29.0

89.7

94.7

 Gathering, processing and other

19.5

17.9

62.6

54.3

 General and administrative 

24.7

24.4

75.6

67.5

 Separation costs

0.2

---

14.2

---

 Production and property taxes 

19.7

11.3

61.6

42.5

 Depreciation, depletion and amortization 

170.5

132.4

469.5

401.7

 Exploration

2.9

6.3

9.2

18.3

 Abandonment and impairment

12.2

5.1

29.1

12.6

   Total Operating Expenses

426.1

340.3

1,266.9

992.8

Net gain (loss) from asset sales

10.8

(0.4)

12.3

1.0

   OPERATING INCOME

149.3

147.3

419.8

421.0

Interest and other income

1.6

0.8

4.4

3.9

Income from unconsolidated affiliates

1.1

0.9

2.5

2.0

Unrealized and realized (loss) on basis-only swaps

---

(17.8)

---

(188.5)

Loss from early extinguishment of debt

(13.3)

---

(13.3)

---

Interest expense 

(22.6)

(17.2)

(62.8)

(49.2)

   INCOME FROM CONTINUING OPERATIONS

   BEFORE INCOME TAXES            

116.1

114.0

350.6

189.2

Income taxes 

(44.2)

(42.0)

(130.5)

(69.3)

   INCOME FROM CONTINUING OPERATIONS

71.9

72.0

220.1

119.9

Discontinued operations, net of income tax

---

20.6

43.2

59.2

   NET INCOME

71.9

92.6

263.3

179.1

Net income attributable to noncontrolling interest

(0.8)

(0.6)

(2.1)

(1.7)

   NET INCOME ATTRIBUTABLE TO QEP

$71.1

$92.0

$261.2

$177.4

EARNINGS PER COMMON SHARE - ATTRIBUTABLE TO QEP

Basic from continuing operations

$0.40

$0.41

$1.24

$0.68

Basic from discontinued operations

0.12

0.25

0.34

 Basic total

$0.40

$0.53

$1.49

$1.02

Diluted from continuing operations

$0.40

$0.40

$1.23

$0.67

Diluted from discontinued operations

---

0.12

0.24

0.34

 Diluted total

$0.40

$0.52

$1.47

$1.01

Weighted-Average Common Shares Outstanding

   Used in basic calculation

175.4

174.3

175.2

174.0

   Used in diluted calculation

177.9

176.3

177.6

176.1

QEP RESOURCES, INC.

OPERATIONS BY LINE OF BUSINESS

(Unaudited)

3 Months Ended September 30,

9 Months Ended September 30,

2010

2009 (recast)

2010

2009 (recast)

(in millions)

Revenues from Unaffiliated Customers

  QEP Energy

$343.5

$301.8

$979.0

$915.5

  QEP Field Services

75.3

71.2

234.1

184.7

  QEP Marketing and other

145.8

115.0

461.3

312.6

  Total

$564.6

$488.0

$1,674.4

$1,412.8

Revenues from Affiliated Companies

  QEP Field Services

$0.5

$0.5

$1.7

$1.4

  QEP Marketing and other

121.0

75.4

376.7

239.7

  Total

$121.5

$75.9

$378.4

$241.1

Operating Income

  QEP Energy

$112.2

$111.8

$317.0

$332.3

  QEP Field Services

35.3

35.1

111.9

78.9

  QEP Marketing and other

2.0

0.4

5.1

9.8

  Separation costs

(0.2)

---

(14.2)

---

  Total

$149.3

$147.3

$419.8

$421.0

Net Income (Loss) from Continuing Operations Attributable to QEP Resources

  QEP Energy

$58.6

$49.6

$165.0

$64.3

  QEP Field Services

21.0

21.5

68.5

47.4

  QEP Marketing and other

2.0

0.3

3.6

6.5

  Separation and early debt extinguishment costs

(10.5)

---

(19.1)

---

  Total

$71.1

$71.4

$218.0

$118.2

QEP RESOURCES, INC.

SELECTED OPERATING STATISTICS

(Unaudited)

3 Months Ended September 30,

9 Months Ended September 30,

2010

2009

2010

2009

 QEP Energy production volumes

   Natural gas (Bcf)

55.0

39.2

149.2

119.0

   Oil and natural gas liquids (MMbbl)

1.1

0.7

2.9

2.5

   Total production (Bcfe)

61.7

43.8

166.9

134.1

   Average daily production (MMcfe)

670.3

476.0

611.2

491.3

 QEP Energy average realized price,

   net to the well (including hedges)

   Natural gas (per Mcf)

$5.14

$6.64

$5.42

$6.75

   Oil and NGL (per bbl)

$53.74

$52.41

$56.83

$43.14

 QEP Field Services natural gas processing volumes

    NGL sales (MMgal)

25.8

28.1

77.3

74.3

    NGL sales price (per gal)

$0.81

$0.77

$0.91

$0.63

    Fee-based processing (millions of MMBtu)

    For unaffiliated customers    (recast)

29.4

33.1

87.9

79.0

    For affiliated customers        (recast)

28.2

22.8

80.5

71.5

Total fee-based processing volumes

57.6

55.9

168.4

150.5

Fee-based processing (per MMBtu)

$0.16

$0.15

$0.16

$0.16

 QEP Field Services natural gas gathering volumes

 (millions of MMBtu)

   For unaffiliated customers     (recast)

74.3

70.4

210.0

230.4

   For affiliated customers         (recast)

52.3

25.2

144.5

79.3

     Total gathering

126.6

95.6

354.5

309.7

   Gathering revenue (per MMBtu)

$0.31

$0.32

$0.32

$0.30

 QEP Marketing gas and oil marketing volumes

  (MMdthe)    

60.6

52.6

170.5

156.5

QEP RESOURCES, INC.

PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

December 31,

2010

2009 (recast)

(Unaudited)

(in millions)

ASSETS

Current Assets

 Cash and cash equivalents

$2.2

$19.3

 Accounts receivable, net

297.8

272.7

 Fair value of derivative contracts

326.6

128.2

 Inventories

93.1

91.8

 Prepaid expenses and other

34.6

29.2

 Deferred income taxes

---

21.2

 Current assets of discontinued operations

---

42.8

   Total Current Assets

754.3

605.2

Property, Plant and Equipment

8,198.5

7,191.0

Accumulated depreciation, depletion and amortization

(2,540.9)

(2,099.7)

Cost of service properties of discontinued operations, net

---

593.9

  Net Property, Plant and Equipment

5,657.6

5,685.2

Investment in unconsolidated affiliates

44.5

43.9

Goodwill

59.6

60.1

Fair value of derivative contracts

186.6

61.2

Other noncurrent assets, net

17.8

10.0

Noncurrent assets of discontinued operations

---

15.8

  Total Assets

$6,720.4

$6,481.4

LIABILITIES AND EQUITY

Current Liabilities

 Accounts payable and accrued expenses

393.3

426.3

 Fair value of derivative contracts

131.2

149.7

 Deferred income taxes

58.3

---

 Current portion of long-term debt

58.5

---

 Current liabilities of discontinued operations

---

88.9

   Total Current Liabilities

641.3

664.9

Long-term debt, less current portion

1,297.1

1,348.7

Deferred income taxes

1,421.9

1,175.8

Asset retirement obligations

144.2

124.7

Fair value of derivative contracts

34.1

140.6

Other long-term liabilities

83.8

42.5

Noncurrent liabilities of discontinued operations

---

175.5

EQUITY

Common Stock

1.8

1.7

Additional paid-in capital

388.6

126.8

Retained earnings

2,365.9

2,538.2

Accumulated other comprehensive income

288.4

87.1

 Total Common Shareholders' Equity

3,044.7

2,753.8

Non-controlling interest

53.3

54.9

  Total Equity

3,098.0

2,808.7

  Total Liabilities and Equity

$6,720.4

$6,481.4

QEP RESOURCES, INC.

PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

9 Months Ended September 30,

2010

2009 (recast)

(in millions)

OPERATING ACTIVITIES

 Net income

$263.3

$179.1

 Discontinued operations, net of income tax

(43.2)

(59.2)

  Adjustments to reconcile net income to net cash

       provided from operating activities:

    Depreciation, depletion and amortization

471.3

402.4

    Deferred income taxes

206.3

52.2

    Abandonment and impairment

29.1

12.6

    Share-based compensation

11.3

10.2

    Dry exploratory well expense

---

3.6

    Net (gain) from asset sales

(12.3)

(1.0)

    (Income) from unconsolidated affiliates

(2.5)

(2.0)

    Distributions from unconsolidated affiliates and other

2.1

0.3

    Loss on early extinguishment of debt

13.3

---

    Unrealized (gain) loss on basis-only swaps

(90.0)

173.4

    Changes in operating assets and liabilities

(96.4)

83.9

       NET CASH PROVIDED FROM OPERATING ACTIVITIES

752.3

855.5

INVESTING ACTIVITIES

 Capital expenditures

(1,035.9)

(800.7)

 Proceeds from disposition of assets

25.4

14.3

 Change in notes receivable

52.9

20.0

      NET CASH USED IN INVESTING ACTIVITIES

(957.6)

(766.4)

FINANCING ACTIVITIES

 Checks outstanding in excess of cash balances

7.8

 Long-term debt issued

819.3

349.5

 Long-term debt issued, net of issuance costs

(18.1)

(2.5)

 Current portion long-term debt repaid

(91.5)

---

 Long-term debt repaid

(721.5)

(375.0)

 Long-term debt extinguishment costs

(4.9)

---

 Change in notes payable

(39.3)

(89.4)

 Equity contributed

252.0

---

 Treasury Stock Held

(0.6)

---

 Dividends paid

(3.5)

---

 Distribution to noncontrolling interest

(3.7)

(4.6)

      NET CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES

188.2

(114.2)

 Change in cash and cash equivalents

(17.1)

(25.1)

Cash provided by operating activities of discontinued operations

68.6

131.9

Cash used in investing activities of discontinued operations

(39.9)

(89.9)

Cash provided by financing activities of discontinued operations

(26.9)

(37.2)

Effect of change in cash and cash equivalents of discontinued operations

(1.8)

(4.8)

Change in cash and cash equivalents

(17.1)

(25.1)

 Beginning cash and cash equivalents

19.3

25.1

 Ending Cash and Cash Equivalents

$2.2

$0.0

QEP RESOURCES, INC.

NOTE 1 NON-GAAP MEASURES

(Unaudited)

This release contains reference to a non-GAAP measure of earnings per diluted share from continuing operations excluding gains and losses from asset sales, unrealized gains and losses on basis-only swaps, separation costs and loss on early extinguishment of debt.  Management believes earnings per diluted share excluding asset sales, unrealized basis-only swaps, separation costs and loss on early extinguishment of debt is an important measure of the Company's operational performance relative to other gas and oil producing companies.

The following table calculates earnings per diluted share excluding gains and losses on assets sales, unrealized gains and losses on basis-only swaps, separations costs and loss on early extinguishment of debt:

3 Months Ended September 30,

9 Months Ended September 30,

2010

2009

2010

2009

(in millions, except earnings per share)

Net income attributable to QEP Resources

$71.1

$92.0

$261.2

$177.4

Less: Discontinued operations

---

(20.6)

(43.2)

(59.2)

Net Income from continuing operations attributable to QEP Resources

$71.1

$71.4

$218.0

$118.2

Exclusion of net (gain) loss from assets sales, unrealized (gain) loss on basis-only swaps, separation costs and loss on early extinguishment of debt from net income

   Net (gain) loss from asset sales

(10.8)

0.4

(12.3)

(1.0)

   Income taxes on net (gain) loss on asset sales

3.9

(0.2)

4.5

0.3

   Unrealized (gain) loss on basis-only swaps

(27.9)

10.7

(90.0)

173.4

   Income taxes on unrealized (gain) loss on basis-only swaps

10.4

(4.0)

33.4

(64.5)

   Separation costs

0.2

---

14.2

---

   Income taxes on separation costs

2.1

---

(3.3)

---

   Loss from early extinguishment of debt

13.3

---

13.3

---

   Income taxes on loss from early extinguishment of debt

(5.1)

---

(5.1)

---

After-tax (gain) loss on assets sales, unrealized (gain) loss on basis-only swaps, separation costs and loss from early extinguishment of debt

(13.9)

6.9

(45.3)

108.2

Net income attributable to QEP Resources excluding (gain) loss from  assets sales, unrealized (gain) loss on basis-only swaps, separation costs and loss from early extinguishment of debt

$57.2

$78.3

$172.7

$226.4

EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS ATTRIBUTABLE TO QEP RESOURCES

   Diluted

$0.40

$0.40

$1.23

$0.67

   Diluted after-tax (gain) loss from asset sales, unrealized (gain) loss on basis-only swaps, separation costs and loss from early extinguishment of debt

(0.08)

0.03

(0.26)

0.61

Earnings per diluted share attributable to QEP Resources excluding asset sales, unrealized (gain) loss on basis only swaps, separation costs and loss from early extinguishment of debt

$0.32

$0.43

$0.97

$1.28

Weighted-Average Common Shares Outstanding

   Diluted

177.9

176.3

177.6

176.1

This release also contains reference to a non-GAAP measure of EBITDA.  Management defines EBITDA as net income before the following items:  discontinued operations, unrealized gains and losses on basis-only swaps, gains and losses from asset sales, interest and other income, income taxes, interest expense, separation costs, loss on early extinguishment of debt, depreciation, depletion, and amortization, abandonment and impairment, and exploration expense.  Management believes EBITDA is an important measure of the Company's cash flow and liquidity and an important measure for comparing the Company's financial performance to other gas and oil producing companies.  

The following table reconciles QEP Resources' net income to EBITDA:

3 Months Ended September 30,

9 Months Ended September 30,

2010

2009

2010

2009

(in millions)

Net income attributable to QEP Resources

$71.1

$92.0

$261.2

$177.4

Net income attributable to non-controlling interest

0.8

0.6

2.1

1.7

Net Income

71.9

92.6

263.3

179.1

Discontinued operations, net of tax

(20.6)

(43.2)

(59.2)

Income from continuing operations

71.9

72.0

220.1

119.9

Unrealized (gain) loss on basis-only swaps

(27.9)

10.7

(90.0)

173.4

Net (gain) loss from asset sales

(10.8)

0.4

(12.3)

(1.0)

Interest and other income

(1.6)

(0.8)

(4.4)

(3.9)

Income taxes

44.2

42.0

130.5

69.3

Interest expense

22.6

17.2

62.8

49.2

Separation costs

0.2

---

14.2

---

Loss from early extinguishment of debt

13.3

---

13.3

---

Depreciation, depletion and amortization

170.5

132.4

469.5

401.7

Abandonment and impairment

12.2

5.1

29.1

12.6

Exploration

2.9

6.3

9.2

18.3

EBITDA

$297.5

$285.3

$842.0

$839.5

SOURCE QEP Resources



RELATED LINKS

http://www.qepres.com