Questar Corporation (STR) CEO Ronald Jibson says the company is has a goal to acquire about $50 million a year in acquisitions of new production assets. He says the “lowest-hanging” fruit is in acquiring additional interest in wells where the company currently operates, specifically its lowest-cost producing areas in the Vermillion Basin.
“So over the last two years now, we’ve been able to acquire a little more than the $50 million a year, but we’ve also indicated that that will be a little bit lumpy depending on the assets, and so we’ve acquired $150 million worth of production assets in the Vermillion Basin,” Jibson says. “This is important to us because these assets are very low-cost, they’re very good production areas, and we’ve got very good information and history on these assets. So when it comes time to produce these assets, we feel very positive about the return associated with that.”
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In December 2014, Questar, through its subsidiary Wexpro, acquired about $52 million worth of assets in the Canyon Creek area of the Vermillion Basin. To address concerns that Wexpro would eventually finish drilling all of its production assets, Questar forged an agreement with regulators a couple of years ago.
“What we call Wexpro II was approved by both Utah and Wyoming in April of 2013, and that gives us the opportunity to add new properties to the Wexpro Agreement,” Jibson says. “So that gave us the opportunity then to go out and acquire new low-cost production assets that were in the same fields that we currently have assets in.”
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