D Dominion Energy Inc

By Lisa Beilfuss 

Dominion Resources Inc. agreed to buy Questar Corp. for about $4.4 billion in cash, in a move to expand its natural gas operations beyond the mid-Atlantic and into the West.

Richmond, Va.-based Dominion will pay $25 a share for Salt Lake City-based Questar, representing a 23% premium to where Questar's stock closed on Friday. Dominion said it also would assume Questar's debt--as of Sept. 30, Questar had roughly $1.31 billion in short and long-term debt on its balance sheet.

Questar is a natural gas distributor that primarily serves customers across Utah. Dominion said the deal would "provide enhanced geographic diversity" to its operations, and said it expects the value of the Questar pipeline system to rise over time as Utah and other Western states seek to comply with the requirements of the U.S. Environmental Protection Agency's Clean Power Plan and meet state-mandated renewable standards.

The deal comes amid a deep rout in energy prices. The price of natural gas has fallen 7% since the start of the year and is down about 15% over the past 12 months.

The combined company would serve about 2.5 million electric utility customers and 2.3 million gas utility customers in seven states, the companies said. Dominion said the deal, expected to be completed by year-end, would add to earnings upon closing.

If not completed by Feb. 28, 2017, the merger may be terminated and result in termination fees of about $154 million for Dominion and about $99 million for Questar.

Separately on Monday, Dominion reported a fourth-quarter operating profit of $416 million, or 70 cents a share, down from $490 million, or 84 cents, a year earlier. The result fell short of the company's expected earnings of 85 cents to 95 cents a share, a miss Dominion attributed to warmer-than-normal weather.

For the year, Dominion projects $3.60 to $4 in adjusted earnings per share, up from $3.44 in 2015 and bracketing the $3.85 average analyst estimate. First-quarter per-share earnings will be between 90 cents and $1.05, the company said. Analysts polled by Thomson Reuters predict 99 cents a share for the March quarter.

Questar shares, down 21% over the past 12 months through Friday's close, rose 19% to $24.25 in premarket trading. Dominion shares slipped 1.6% to $71.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

February 01, 2016 08:09 ET (13:09 GMT)

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