SEC Filing | QEP Resources, Inc.

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 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 No. 0-30321 QUESTAR MARKET RESOURCES, INC. (Exact name of registrant as specified in its charter) STATE OF UTAH 87-0287750 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 45601, 180 East 100 South, Salt Lake City, Utah 84145-0601 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (801) 324- 2600 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 X Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of October 31, 2000 Common Stock, $1.00 par value 4,309,427 shares Registrant meets the conditions set forth in General Instruction H(a)(1) and (b) of Form 10-Q and is filing this Form 10-Q with the reduced disclosure format. 1

PART I FINANCIAL INFORMATION Item 1. Financial Statements QUESTAR MARKET RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) 3 Months Ended 9 Months Ended September 30, September 30, 2000 1999 2000 1999 (In Thousands) REVENUES $ 187,403 $ 129,000 $ 494,365 $ 359,068 OPERATING EXPENSES Natural gas and other product purchases 90,923 64,478 234,606 174,729 Operating and maintenance 25,177 19,530 72,647 59,029 Depreciation and amortization 21,047 19,565 63,175 58,549 Other taxes 9,764 5,351 25,122 15,009 Wexpro settlement agreement - oil income sharing 1,265 862 3,458 1,284 TOTAL OPERATING EXPENSES 148,176 109,786 399,008 308,600 OPERATING INCOME 39,227 19,214 95,357 50,468 INTEREST AND OTHER INCOME 3,624 459 6,667 3,106 MINORITY INTEREST (441) (441) INCOME FROM UNCONSOLIDATED AFFILIATES 827 411 2,132 349 DEBT EXPENSE (5,900) (4,219) (17,573) (12,772) INCOME BEFORE INCOME TAXES 37,337 15,865 86,142 41,151 INCOME TAXES 13,329 4,557 29,903 11,158 NET INCOME $ 24,008 $ 11,308 $ 56,239 $ 29,993 See notes to consolidated financial statements 2

QUESTAR MARKET RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30 December 31, 2000 1999 (Unaudited) (In Thousands) ASSETS Current assets Cash and cash equivalents $ 25,424 Notes receivable from Questar Corp. 2,600 $ 4,000 Accounts receivable, net 122,260 75,823 Inventories, at lower of average cost or market - Gas and oil storage 3,630 8,863 Materials and supplies 1,888 2,390 Prepaid expenses and other 5,174 4,452 Total current assets 160,976 95,528 Property, plant and equipment 1,604,095 1,469,676 Less allowances for depreciation and amortization 837,485 778,695 Net property, plant and equipment 766,610 690,981 Investment in unconsolidated affiliates 15,208 13,301 Other assets Cash held in escrow account 36,727 Other 10,474 11,354 10,474 48,081 $ 953,268 $ 847,891 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Checks outstanding in excess of cash balance $ 1,246 Short-term loans $ 31,500 Notes payable to Questar Corp. 11,700 24,500 Accounts payable and accrued expenses 132,785 92,278 Total current liabilities 175,985 118,024 Long-term debt 253,894 264,894 Other liabilities 11,938 14,674 Deferred income taxes 73,186 59,936 Minority interest 4,402 2,529 Common shareholder's equity Common stock 4,309 4,309 Additional paid-in capital 116,027 116,027 Retained earnings 313,652 270,388 Other comprehensive loss (125) (2,890) Total common shareholder's equity 433,863 387,834 $ 953,268 $ 847,891 See notes to consolidated financial statements 3

QUESTAR MARKET RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 9 Months Ended September 30, 2000 1999 (In Thousands) OPERATING ACTIVITIES Net income $ 56,239 $ 29,993 Depreciation and amortization 63,718 60,360 Deferred income taxes 5,548 1,194 (Income) loss from unconsolidated affiliates, net of cash distributions (1,907) 281 Gain from sale of securities (1,573) (388) Changes in operating assets and liabilities (6,731) (1,458) NET CASH PROVIDED FROM OPERATING ACTIVITIES 115,294 89,982 INVESTING ACTIVITIES Capital expenditures Property, plant and equipment (137,183) (67,085) Other investments (23,379) Total (137,183) (90,464) Proceeds from disposition of property, plant and equipment 2,359 1,638 Proceeds from sales of securities 9,478 1,214 NET CASH USED IN INVESTING ACTIVITIES (125,346) (87,612) FINANCING ACTIVITIES Change in notes receivable from Questar Corp. 1,400 102,900 Change in notes payable to Questar Corp. (12,800) (179,900) Checks outstanding in excess of cash balance (1,246) Change in short-term loans 31,500 Cash released from escrow account 36,727 Long-term debt issued 39,791 210,000 Long-term debt repaid (48,432) (130,000) Other 1,873 Payment of dividends (12,975) (12,450) NET CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES 35,838 (9,450) Foreign currency translation adjustment (362) 47 CHANGE IN CASH AND CASH EQUIVALENTS $ 25,424 $ (7,033) See notes to consolidated financial statements 4

QUESTAR MARKET RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 (Unaudited) Note 1 - Basis of Presentation The interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. Due to the nature of the business, the results of operations for the three-and nine-month periods ended September 30, 2000, are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information refer to the financial statements and footnotes theretofore the year ended December 31, 1999, included in the Company's report on Form 10 filed November 9, 2000. Note 2 - Purchase of Canadian Gas and Oil Company On January 26, 2000, a subsidiary of Questar Market Resources (QMR or the Company) acquired 100% of the outstanding shares of Canor Energy Ltd (Canor) from NI Canada ULC, a subsidiary of Northwest Natural Gas Co for cash of $US 61 million plus the assumption of $US 5.4 million of short-term debt. The transaction was accounted for as a purchase. Canor owns and/or operates more than 800 wells located in Alberta, British Columbia and Saskatchewan provinces of Canada. Canor's proven gas and oil reserves were estimated at 61.1 billion cubic feet equivalent. Assets purchased and liabilities assumed were as follows: (In Thousands) Cash $ 245 Other current assets 3,502 Property, plant and equipment 73,720 Other assets 282 Short-term debt (5,444) Other current liabilities (4,356) Deferred income taxes (4,976) Other liabilities (1,989) Total purchase price, including acquisition costs $ 60,984 Note 3 - Financing On April 12, 2000, QMR filed with the Securities and Exchange Commission, a registration statement for a public debt offering. Following effectiveness of such registration statement, QMR intends to issue $150 million of notes and use the proceeds to repay a portion of its outstanding debt. In the third quarter of 2000, QMR initiated an unrated commercial paper program with a $100 million capacity. Commercial paper borrowings are limited to and supported by available capacity on QMR's existing revolving credit facility. At September 30, 2000, QMR had a commercial paper balance of $31.5 million. 5

Note 4 - Operations By Line of Business 3 Months Ended 9 Months Ended September 30, September 30, 2000 1999 2000 1999 (In Thousands) REVENUES FROM UNAFFILIATED CUSTOMERS Exploration and production $ 64,786 $ 42,462 $ 171,709 $ 116,943 Wexpro - cost of service 4,378 3,056 11,302 5,919 Gathering, processing and marketing 96,999 66,425 246,712 179,572 $ 166,163 $ 111,943 $ 429,723 $ 302,434 REVENUES FROM AFFILIATED COMPANIES Exploration and production $ 13 $ - $ 13 $ - Wexpro - cost of service 17,929 14,782 53,162 44,971 Gathering, processing and marketing 3,298 2,275 11,467 11,663 $ 21,240 $ 17,057 $ 64,642 $ 56,634 DEPRECIATION AND AMORTIZATION EXPENSE Exploration and production $ 16,102 $ 15,189 $ 48,787 $ 45,757 Wexpro - cost of service 3,451 3,151 10,355 9,172 Gathering, processing and marketing 1,494 1,225 4,033 3,620 $ 21,047 $ 19,565 $ 63,175 $ 58,549 OPERATING INCOME Exploration and production $ 26,166 $ 10,063 $ 61,146 $ 23,856 Wexpro - cost of service 9,680 8,622 28,076 23,856 Gathering, processing and marketing 3,381 529 6,135 2,756 $ 39,227 $ 19,214 $ 95,357 $ 50,468 NET INCOME Exploration and production $ 14,217 $ 5,540 $ 32,207 $ 12,906 Wexpro - cost of service 6,174 5,374 17,911 15,228 Gathering, processing and marketing 3,617 394 6,121 1,859 $ 24,008 $ 11,308 $ 56,239 $ 29,993 FIXED ASSETS - NET Exploration and production $ 545,808 $ 501,828 Wexpro - cost of service 144,981 133,533 Gathering, processing and marketing 75,821 67,491 $ 766,610 $ 702,852 GEOGRAPHIC INFORMATION REVENUES United States $ 177,488 $ 125,705 $ 468,697 $ 350,372 Canada 9,915 3,295 25,668 8,696 $ 187,403 $ 129,000 $ 494,365 $ 359,068 FIXED ASSETS - NET United States $ 662,765 $ 668,226 Canada 103,845 34,626 $ 766,610 $ 702,852 6

Note 5 - Comprehensive Income Comprehensive income is defined as any nonowner change in common equity. Generally, comprehensive income includes earnings reported on the income statement plus changes in common equity formerly reported on the balance sheet only. Other comprehensive income included in this note is comprised of changes in the market value of the investments in securities available for sale and foreign currency translation adjustments. These transactions are not the culmination of the earnings process, but result from periodically adjusting historical balances to market value. 3 Months Ended 9 Months Ended September 30, September 30, 2000 1999 2000 1999 (In thousands) Comprehensive Income: Net income $ 24,008 $ 11,308 $ 56,239 $ 29,993 Other comprehensive income (loss) Unrealized gain on securities available for sale 957 203 6,474 203 Foreign currency translation adjustment (763) (42) (2,323) (533) Other comprehensive income (loss) before income taxes 194 161 4,151 (330) Income taxes on other comprehensive income (loss) 7 62 1,386 (126) Net other comprehensive income (loss) 187 99 2,765 (204) Total comprehensive income $ 24,195 $ 11,407 $ 59,004 $ 29,789 7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations QUESTAR MARKET RESOURCES, INC. September 30, 2000 (Unaudited) Operating Results Questar Exploration and Production, Wexpro, Questar Gas Management and Questar Energy Trading, collectively Questar Market Resources (QMR or the Company), conduct exploration and production, gas gathering and processing, and energy marketing operations. Following is a summary of QMR's financial results and operating information. 3 Months Ended 9 Months Ended September 30, September 30, 2000 1999 2000 1999 FINANCIAL RESULTS - (dollars in thousands) Revenues From unaffiliated customers $ 166,163 $ 111,943 $ 429,723 $ 302,434 From affiliates 21,240 17,057 64,642 56,634 Total revenues $ 187,403 $ 129,000 $ 494,365 $ 359,068 Operating income $ 39,227 $ 19,214 $ 95,357 $ 50,468 Net income 24,008 11,308 56,239 29,993 OPERATING STATISTICS Production volumes Natural gas (in million cubic feet) 17,361 15,557 51,985 45,946 Oil and natural gas liquids (in thousands of barrels) Questar Exploration & Production 562 576 1,679 1,770 Wexpro 126 151 395 419 Production revenue Natural gas (per thousand cubic feet) $ 2.98 $ 2.03 $ 2.55 $ 1.94 Oil and natural gas liquids (per barrel) Questar Exploration & Production $ 20.06 $ 15.40 $ 20.48 $ 13.18 Wexpro $ 29.06 $ 17.78 $ 26.63 $ 14.75 Wexpro investment base at Sept. 30, net of deferred income taxes (in millions) $ 116.1 $ 106.3 Marketing volumes in energy equivalent decatherms (in thousands of decatherms) 26,943 27,512 79,148 87,829 Natural gas gathering volumes (in thousands of decatherms) For unaffiliated customers 23,205 22,359 68,244 64,485 For Questar Gas 7,500 5,338 26,588 22,257 For other affiliated customers 6,476 4,964 18,154 14,083 Total gathering 37,181 32,661 112,986 100,825 Gathering revenue (per decatherm) $ 0.13 $ 0.15 $ 0.13 $ 0.15 8

Revenues Continued strength in commodity prices and increased gas production in 2000 resulted in revenues that were substantially higher than the revenues reported for the comparable 1999 periods. The average natural gas price per thousand cubic feet (Mcf) increased 47% in the third quarter and 31% in the first nine months of 2000 when compared with the same periods of 1999. Double-digit gas production growth also contributed to the increase in revenues in the 2000 periods. Oil and natural gas liquids prices increased 30% in the third quarter and 55% per barrel in the first nine months of 2000 (excluding Wexpro's oil production). The higher gas price realizations were the combined results of hedging contracts on a portion of the gas produced and higher spot prices on the remainder. Approximately 42% of the gas produced in the third quarter was sold under hedge contracts at an average price of $2.20 per Mcf, net back to the wellhead. About one-third of the contracts are collars and the remainder are fixed price contracts. The floor price of collar arrangements was used in calculating the average hedged price. Approximately 77% of oil produced in the third quarter, excluding Wexpro production, was hedged at an average price of $17.03 per barrel, net back to the wellhead. Gas production benefited from a successful development drilling program and the first quarter acquisition of Canadian producing properties. In the third quarter, Canadian gas production grew 143% to 1.8 billion cubic feet (Bcf). U.S. gas production was 5% above year-ago levels at 15.6 Bcf as increased drilling activity offset a property sale in the fourth quarter of 1999. However, the increased drilling did not fully replace the production of oil and NGL as a result of selling nonstrategic properties in the fourth-quarter of 1999. Expenses Operating and maintenance expenses were higher in the three- and nine-month periods of 2000 when compared with the corresponding 1999 periods primarily because of the increase in the number of producing properties including the acquisition of a Canadian gas and oil company in January 2000 and an increase in legal expenses. In addition, higher gas prices increased the cost of replacing gas in extraction plant operations. The combined U.S. and Canadian full-cost amortization rate for the first nine months of 2000 declined $.02 to $.79 per thousand cubic feet equivalent (Mcfe) of production compared with the rate a year ago. The lower rate was due to successfully adding reserves through drilling and purchases, while selling nonstrategic properties at favorable prices. Depreciation and amortization expenses were higher in the 2000 periods presented when compared with the 1999 periods because increased production volumes from full-cost properties more than offset the lower amortization rates. Also, increased investment in other properties resulted in a higher depreciation expense in the 2000 periods. The fourth quarter rate is expected to be $.78 per Mcfe. Higher commodity prices and increased gas production volumes resulted in an increase in production-related taxes reported as Other taxes on the income statement. Debt expense was higher in the 2000 periods presented because of increased borrowings and higher floating interest rates. The effective income tax rate for the first nine months of 2000 was 34.7% up from the 27.1% for the same period of 1999. The effective income tax rate increased largely because of a reduction in nonconventional fuel tax credits and a higher portion of earnings derived from Canada, where income tax rates are higher. The Company recognized $3,332,000 of nonconventional credits in the 2000 period and $3,992,000 in the 1999 period. Other income Other income was substantially higher in the third quarter and first nine months of 2000. The Company recorded $1.9 million of capitalized finance costs (AFUDC) on its gas storage facility, of which $476,000 was attributable to its partner in the project. Operation of the underground gas storage facility began in September 2000. The remainder of the year-to-date increase was the result of a $1.6 million pretax gain from the sale of securities and interest earned on the cash collateral deposited in commodity trading accounts with brokers. 9

Net income QMR's third quarter net income increased $12.7 million representing a 112% improvement over the third quarter of 1999. Net income for the first nine months of 2000 was 88% higher compared with the same period of 1999. Higher commodity prices and gas production were the primary reasons for the increase. Also, earnings for Wexpro and gathering, processing and marketing were higher. Wexpro's net income increased $2.7 million in the first nine months of 2000. Wexpro increased its investment in development-drilling projects. Wexpro develops gas reserves on behalf of affiliated company, Questar Gas, which is a rate-regulated distributor of natural gas. In addition, higher oil and NGL prices contributed to Wexpro's improved earnings. Gathering, processing and marketing operations reported a $4.3 million increase of earnings for the first nine months of 2000 versus the 1999 period. The increase resulted primarily from higher liquids prices realized from processing plants and QMR's share of AFUDC recorded on a storage facility. Liquidity and Capital Resources Operating Activities Net cash provided from operating activities in the first nine months of 2000 of $115.3 million was $25.3 million more than was generated in the first nine months of 1999. The increase in cash flow from operating activities resulted from higher net income. Partially offsetting this source of cash was an increase in the amount of cash deposits as collateral for hedging contracts. The deposits are interest bearing and totaled $25 million as of September 30, 2000. Cash collateral deposits were included with receivables on the balance sheet. Investing Activities Capital expenditures were $137.2 million in 2000, which includes a $66.1 million cash payment, net of cash received, for the purchase of a Canadian company. Capital expenditures for calendar year 2000 are estimated at $189.1 million. Financing Activities QMR financed capital expenditures, including the acquisition of a Canadian company, through borrowings from Questar and from an existing long-term debt arrangement, from net cash provided from operating activities, from cash released from an escrow account and issuance of commercial paper. In the third quarter of 2000, QMR initiated an unrated commercial paper program with a $100 million capacity. Commercial paper borrowings are limited to and supported by available capacity on QMR's existing revolving credit facility. At September 30, 2000, QMR had a commercial paper balance of $31.5 million. On April 12, 2000, QMR filed with the Securities and Exchange Commission a registration statement covering a planned $150 million public debt offering. Proceeds of the debt offering will be used to repay a portion of debt outstanding. QMR intends to finance remaining 2000 capital expenditures through net cash provided from operations, borrowings from Questar and borrowings under an existing long-term debt facility. Pinedale Drilling Program Test results from four wells drilled in the Pinedale Anticline in western Wyoming tend to validate and may enhance earlier estimates of the field's productive potential. In evaluating the new wells, the Company compared them with two other Questar Pinedale 10

Anticline wells completed in the first quarter of 2000. The four wells were evaluated as if flow-tested in the same manner as the earlier wells. The two earlier wells had initial production rates of slightly more than 11 million cubic feet of gas and between 89 and 113 barrels of condensate per day. The four new wells are expected to have comparative initial production rates between 7 and 11 million cubic feet per day. The data supports our estimation of 135-150 potential well locations, based on 80-acre spacing. If 40-acre spacing is determined to be appropriate, the potential well locations and reserves could double. Based on short-term testing, pressures in the new wells have generally been higher than previously modeled, which tends to confirm estimates of a potential average 5 to 6 Bcfe of reserves per well. However, short-term tests are insufficient to determine estimated reserves. Market Risk The Company's primary market-risk exposures arise from commodity-price changes for natural gas, oil and other hydrocarbons and changes in floating interest rates. The Company has an investment in a foreign operation that may subject it to exchange-rate risk. QMR also has reserved certain volumes of pipeline capacity for which it is obligated to pay $3 million annually for the next seven years, whether or not it is able to market the capacity to others. Energy-Price Risk Management: Energy-price risk is a function of changes in commodity prices as supply and demand fluctuate. Market Resource bears a majority of the risk associated with changes in commodity prices. A primary objective of energy-price hedging is to protect product sales from adverse changes in energy prices. The Company does not enter into derivative contracts for speculative purposes. At September 30, 2000, Questar Market Resources held hedge contracts covering the price exposure for about 49.8 million decatherms of gas and 1.3 million barrels of oil. The hedging contracts exist for a significant share of QMR-owned gas and oil production and for a portion of gas-marketing transactions. Hedge contracts at September 30, 2000, had terms extending through October 2002, with about 22% of those contracts expiring by the end of 2000. The mark-to-market adjustment of gas and oil price-hedging contracts at September 30, 2000, was a negative $80.8 million. A 10% decline in gas and oil prices would cause a positive $18.9 million mark-to-market adjustment resulting in a negative $61.9 million balance. Conversely, a 10% increase in prices results in a $18.8 million negative mark-to-market adjustment resulting in a negative $99.6 million balance as of September 30, 2000. The calculation used energy prices posted on the NYMEX from the last trading day of September 2000. The sensitivity calculations do not consider the effect of gains or losses on the associated physical side of these transactions, which should largely offset the change in value. Interest-Rate Risk Management: As of September 30, 2000, the Company owed $297.1 million of variable rate debt. The book value of variable-rate debt approximates fair value. Securities Available for Sale: Securities available for sale represent equity instruments traded on national exchanges. The value of these investments is subject to day to day market volatility. A 10% change in prices would result in an insignificant change in value as of September 30, 2000. Foreign Currency Risk Management: The Company does not hedge the foreign currency exposure of its foreign operation's net assets and long-term debt. Long-term debt held by the foreign operation, amounts to $58.9 million (U.S.), and is expected to be repaid from future operations of the foreign company. 11

New Accounting Standards The Company is required to adopt the accounting provisions of Statement of Financial Accounting Standard (SFAS) 133 "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS 138, by January 2001. The new accounting rules require that the fair value of derivative instruments be measured and recorded as either assets or liabilities in the balance sheet. The Statement requires that changes in the derivatives fair value must be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows derivatives' gains and losses to offset related results on the hedged items in the income statement. Companies must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting treatment. The Company is evaluating its derivatives and how the new accounting standards apply. The Company believes its derivatives to be highly effective and would qualify as hedges under SFAS 133 as amended by SFAS 138. If any portion of the hedge instrument is deemed to be ineffective, as defined, changes in the value of that portion would be reflected in the income statement. The Company is currently evaluating its derivatives for ineffectiveness, as defined in the standards. Revenue Recognition Guideline Issued by the Securities and Exchange Commission In December 1999, the SEC issued Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." The SAB raised issues concerning the timing of recording revenues given that sales transactions may contain some conditions allowing customers to return products or receive refunds. The SEC expects companies that make conditional sales to postpone fully recognizing revenues until the earnings process is completed. The Company records revenues when services are provided or products are delivered. The pronouncement is effective for Questar Market Resources beginning with the fourth quarter of 2000 and is not expected to cause a change in the method used to record revenues. Forward-Looking Statements The 10-Q contains forward-looking statements about future operations, capital spending, regulatory matters and expectations of Questar Market Resources. According to management, these statements are made in good faith and are reasonable representations of the Company's expected performance at the time. Actual results may vary from management's stated expectations and projections due to a variety of factors. Important assumptions and other significant factors that could cause actual results to differ materially from those discussed in forward-looking statements include changes in general economic conditions, gas and oil prices and supplies, competition, regulation of the Wexpro settlement agreement, availability of gas and oil properties for sale or for exploration and other factors beyond the control of the Company. These other factors include the rate of inflation, the effect of accounting policies issued periodically by accounting standards setting bodies, volatility of quoted prices of securities available for sale and adverse changes in the business or financial condition of the Company. These factors are not necessarily all of the important factors that could cause actual results to differ significantly from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also have a significant adverse effect on future results. The Company does not undertake an obligation to update forward-looking information contained herein or elsewhere to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. 12

Part II Other Information Item 6. Exhibits and Reports on Form 8-K a. The following exhibit has been filed as part of this report. Exhibit no. Exhibit 12. Ratio of earnings to fixed charges. b. The Company did not file a Current Report on Form 8-K during the quarter. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. QUESTAR MARKET RESOURCES, INC. (Registrant) November 10, 2000 /s/G. L. Nordloh (Date) G. L. Nordloh President and Chief Executive Officer November 10, 2000 /s/S. E. Parks (Date) S. E. Parks Vice President, Treasurer and Chief Financial Officer 13

EXHIBIT INDEX Exhibit Number Exhibit 12. Ratio of earnings to fixed charges. 14

Exhibit No. 12 Questar Market Resources, Inc. and Subsidiaries Ratio of Earnings to Fixed Charges (Unaudited) 12 months ended September 30, 2000 1999 (Dollars in Thousands) Earnings Income from continuing operations before income taxes $90,857 $22,531 Less income from Canyon Creek (189) (267) Plus distribution from Canyon Creek 323 255 Plus debt expense 22,164 16,951 Plus interest capitalized during construction 232 1,088 Plus interest portion of rental expense 987 881 $114,374 $41,439 Fixed Charges Debt expense $22,164 $16,951 Plus interest capitalized during construction 232 1,088 Plus interest portion of rental expense 987 881 $23,383 $18,920 Ratio of Earnings to Fixed Charges 4.89 2.19 1/ For purposes of this presentation, earnings represent income from continuing operations before income taxes and fixed charges. Fixed charges consist of total interest charges, amortization of debt issuance costs, and the interest portion of rental costs (which is estimated at 50%). 2/ Income from continuing operations before income taxes includes QMR's 50% share of pretax earnings of Blacks Fork. 3/ Distributions from Canyon Creek are included and earnings are excluded because QMR owns less than 50%. QMR's ownership interest in Canyon Creek is 15%. 4/ A write-down of investment in full-cost oil and gas properties reduced income from continuing operations before income taxes by $31 million in the fourth quarter of 1998. 15

5 Exhibit 27 The following schedule contains summarized financial information extracted from the Questar Market Resources Consolidated Income Statement and Balance Sheet for the period ended September 30, 2000, and is qualified in its entirety by reference to such unaudited financial statements. 1,000 9-MOS DEC-31-2000 SEP-30-2000 25,424 0 124,860 0 5,518 160,976 1,604,095 837,485 953,268 175,985 253,894 0 0 4,309 429,554 953,268 0 494,365 0 307,253 91,755 0 17,573 86,142 29,903 56,239 0 0 0 56,239 0 0