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QEP Resources' CEO Discusses Q1 2012 Results - Earnings Call Transcript

In terms of reported results, we issued a combined operations update in earnings release yesterday, in which we reported the first quarter 2012 financial results, reported first quarter 2012 production of 74.2 Bcfe, 20% of which was composed of crude oil and natural gas liquids.

We updated operating activities in our core areas and updated our guidance for 2012. We reaffirmed our EBITDA guidance to be in the range of $1.35 billion to $1.45 billion. We reaffirmed our production guidance to be in the range of 305 to 310 Bcfe, and we modestly increased our CapEx guidance to be in the range of $1.35 billion to $1.45 billion, which is still in line with our projected EBITDA for the year.

As you've heard us say in the past, the current year capital program generally has more impact from the following year's production than on the current year's production.

From a financial reporting perspective, we continue to try to keep you on your toes. In the first quarter of 2012, we elected to discontinue hedge accounting. We believe that investors understand what is going on with the change in the mark-to-market valuations of our derivatives portfolio, and we don't believe there's any real benefit derived from the effort required to maintain hedge accounting. As a result, the entire change of the mark-to-market value of our derivatives portfolio now runs through our income statement instead of through other comprehensive income.

In addition, the impact of settled derivative contracts is no longer included in the revenue section of the income statement, but is now reported below the operating income line.

Also, recall that in the fourth quarter of 2011, we changed the presentation of transportation expenses. Historically, we netted transportation expenses against revenues. We are now reporting these expenses in a separate line item in the operating expense section of the income statement, and a recast historical revenue and historical product price dated to reflect the change of presentation.

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