PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

QUESTAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

3 Months Ended

6 Months Ended

12 Months Ended

June 30,

June 30,

June 30,

2002

2001

2002

2001

2002

2001

(In Thousands, Except Per Share Amounts)

REVENUES

  Questar Market Resources

$  123,545

$  152,057

$  248,703

$  382,922

$  511,648

$  768,562

  Questar Regulated Services

    Natural gas distribution

82,004

109,859

342,962

418,798

625,314

684,302

    Natural gas transmission

14,338

12,252

26,840

23,094

53,148

45,693

    Other

942

1,115

1,783

2,331

4,055

4,024

  Corporate and other operations

3,785

9,855

6,859

20,631

24,556

42,104

    TOTAL REVENUES

224,614

285,138

627,147

847,776

1,218,721

1,544,685

OPERATING EXPENSES

  Cost of natural gas and other products sold

47,558

120,024

226,086

451,182

449,915

782,611

  Operating and maintenance

65,125

59,971

139,155

122,830

286,680

258,727

  Depreciation, depletion and amortization

44,463

36,247

89,770

72,053

169,452

142,009

  Exploration

1,133

1,833

3,881

2,900

7,967

5,419

  Abandonment and impairment of oil

    and gas properties

749

2,045

1,055

2,595

3,631

4,804

  Production and other taxes

12,195

15,969

23,604

36,781

42,808

63,607

    TOTAL OPERATING EXPENSES

171,223

236,089

483,551

688,341

960,453

1,257,177

    OPERATING INCOME

53,391

49,049

143,596

159,435

258,268

287,508

Interest and other income

9,159

3,757

16,565

18,926

32,937

35,118

Minority interest

127

552

297

997

1,025

1,115

Earnings (loss) of unconsolidated affiliates

3,105

(1,206)

3,762

(1,092)

5,013

1,203

Debt expense

(20,362)

(14,330)

(40,398)

(29,922)

(75,309)

(61,590)

    INCOME BEFORE INCOME TAXES

      AND CUMULATIVE EFFECT

45,420

37,822

123,822

148,344

221,934

263,354

Income taxes

16,049

13,319

44,299

54,581

77,988

92,837

    INCOME BEFORE CUMULATIVE

      EFFECT

29,371

24,503

79,523

93,763

143,946

170,517

Cumulative effect of change in accounting for

    goodwill, net of $2,010 attributed to

    minority interest

(15,297)

(15,297)

        NET INCOME

$   29,371

$   24,503

$   64,226

$   93,763

$  128,649

$  170,517

Earnings per common share - basic

    Income before cumulative effect

$     0.36

$     0.30

$     0.98

$     1.16

$     1.77

$     2.12

    Cumulative effect

(0.19)

(0.19)

NET INCOME

$     0.36

$     0.30

$     0.79

$     1.16

$     1.58

$     2.12

Average basic common shares outstanding

81,754

80,864

81,672

80,803

81,601

80,432

Dividends per common share

$     0.18

$     0.175

$     0.36

$     0.35

$     0.715

$     0.695

See notes accompanying the consolidated financial statements

QUESTAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,

December 31,

2002

2001

2001

(Unaudited)

(In Thousands)

ASSETS

Current assets

  Cash and cash equivalents

$      5,959

$          -

$   11,300

  Accounts receivable

126,232

134,574

209,050

  Fair value of hedging contracts

13,015

16,804

55,593

  Inventories, at lower of average cost or market

      Gas and oil storage

16,180

31,319

37,055

      Materials and supplies

9,919

11,678

12,073

  Purchased-gas adjustments

46,874

8,296

  Prepaid expenses and other

10,677

11,348

16,136

  Deferred income taxes - current

6,683

      Total current assets

188,665

252,597

349,503

Property, plant and equipment

4,220,451

3,387,202

4,089,407

Less accumulated depreciation, depletion

  and amortization

1,582,039

1,445,854

1,524,309

      Net property, plant and equipment

2,638,412

1,941,348

2,565,098

Investment in unconsolidated affiliates

143,395

37,145

144,928

Securities available for sale

1,431

21,185

13,623

Goodwill

72,702

19,401

90,927

Regulatory and other assets

66,956

74,056

76,955

$ 3,111,561

$ 2,345,732

$ 3,241,034

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

  Checks outstanding in excess of cash balance

$            -

$       1,544

$          -

  Short-term loans

347,509

195,722

530,246

  Accounts payable and accrued expenses

201,684

173,397

246,037

  Purchased-gas adjustments

17,588

  Deferred income taxes - current

17,812

3,153

  Fair value of hedging contracts

10,157

13,871

5,323

  Current portion of long-term debt

21,535

8

1,705

    Total current liabilities

598,473

402,354

786,464

Long-term debt, less current portion

1,054,626

661,802

997,423

Other liabilities

25,236

23,895

27,286

Deferred income taxes and investment tax credits

327,488

226,806

329,275

Minority interest

9,816

19,666

19,805

Common shareholders' equity

  Common stock

293,640

267,329

282,297

  Retained earnings

807,221

736,887

772,408

  Cumulative other comprehensive income (loss)

(4,939)

6,993

26,076

    Total common shareholders' equity

1,095,922

1,011,209

1,080,781

$ 3,111,561

$ 2,345,732

$ 3,241,034

See notes accompanying the consolidated financial statements

QUESTAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

6 Months Ended

June 30,

2002

2001

(In Thousands)

OPERATING ACTIVITIES

  Net income

$    64,226

$    93,763

  Depreciation, depletion and amortization

94,614

74,865

  Deferred income taxes and investment tax credits

6,517

16,340

  Abandonment and impairment of gas

    and oil properties

1,055

2,595

  Earnings from unconsolidated affiliates

    net of cash distributions and minority interest

4,884

365

  Gain from selling properties and securities

(5,431)

(11,507)

  Impairment of securities available for sale

530

  Cumulative effect of accounting change

15,297

181,692

176,421

  Changes in operating assets and liabilities

97,949

23,749

      NET CASH PROVIDED FROM OPERATING ACTIVITIES

279,641

200,170

INVESTING ACTIVITIES

  Capital expenditures

    Property, plant and equipment

(166,540)

(151,687)

    Other investments

(3,648)

(4,000)

      Total capital expenditures

(170,188)

(155,687)

  Proceeds from the disposition of property, plant and equipment

8,187

31,454

  Proceeds from the sales of securities and other

7,280

374

    NET CASH USED IN INVESTING ACTIVITIES

(154,721)

(123,859)

FINANCING ACTIVITIES

  Issuance of common stock

6,548

11,131

  Common stock repurchased

(1,298)

(12,432)

  Issuance of long-term debt

200,000

285,000

  Repayment of long-term debt

(124,485)

(337,059)

  Decrease in short-term loans

(182,737)

(13,417)

  Increase in cash held in escrow account

1,184

5,387

  Checks outstanding in excess of cash balances

1,544

  Payment of dividends

(29,413)

(28,291)

  Other

(143)

2,446

      NET CASH USED IN FINANCING ACTIVITIES

(130,344)

(85,691)

      Foreign currency translation adjustment

83

(36)

      Change in cash and cash equivalents

(5,341)

(9,416)

      Beginning cash and cash equivalents

11,300

9,416

      Ending cash and cash equivalents

$      5,959

$      -

See notes accompanying the consolidated financial statements

QUESTAR CORPORATION AND SUBSIDIARIES

NOTES ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2002

(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 of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Due to the seasonal nature of the gas distribution business, the results of operations for the three-, six- and twelve-month periods ended June 30, are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. The impact of abnormal weather on earnings during the heating season is partially reduced by the operation of a weather-normalization adjustment. While the transportation and storage operations are influenced by weather conditions, the straight fixed-variable rate design, which allows for recovery of substantially all fixed costs in the demand or reservation charges, reduces the earnings impact of weather conditions. For further information please refer to the financial statements and footnote s thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

Note 2 - New Accounting Standards

Cumulative Effect of Accounting Change - "Goodwill and Other Intangible Assets"

Statement of Financial Accounting Standards 142 (SFAS 142) "Goodwill and Other Intangible Assets" was issued in June 2001. SFAS 142 addresses, among other things, the financial accounting and reporting for goodwill subsequent to an acquisition. According to the new standard, amortization of goodwill was replaced by a requirement to test goodwill for impairment at least yearly or sooner if a specific triggering event occurs. The Company adopted the provisions of SFAS 142 as of January 1, 2002 and performed an initial test that indicated an impairment of the goodwill acquired by Consonus. As a result, the Company wrote off $17.3 million of goodwill, of which, $15.3 million ($.19 per diluted common share) was attributed to Questar InfoComm's share and reported as a cumulative effect of a change in accounting for goodwill. The remaining $2.0 million was attributed to minority shareholders. Consonus is a data hosting and internet services subsidiary in which Questar InfoComm owns 89%. Goodwi ll has declined in value because of the sharp downturn in the information-technology sector. Consonus recorded $2.2 million of goodwill amortization in 2001 that will not be repeated in future years.

The following table shows net income excluding amortization of goodwill. Amortization of goodwill was not deductible for income tax purposes.

3 Months Ended

6 Months Ended

12 Months Ended

June 30,

June 30,

June 30,

2002

2001

2002

2001

2002

2001

(In Thousands)

Income before cumulative effect

$   29,371

$   24,503

$   79,523

$   93,763

$  143,946

$   70,517

     add goodwill amortization

556

1,113

2,423

Cumulative effect of change in

     accounting for goodwill, net of $2,010

     attributed to minority interest

(15,297)

(15,297)

Pro forma net income

$   29,371

$   25,059

$   64,226

$   94,876

$  128,649

$  172,940

The Company acquired all goodwill reported on its December 31, 2001 balance sheet through purchases of businesses. In 2001, the Company acquired $73 million of goodwill in two business combinations. No impairment was indicated as a result of an initial test. The remaining goodwill balance was acquired in 2000 and 1999. The balance in goodwill in each line of business at December 31, 2001 and June 30, 2002 is listed below:

Questar

Questar

Corporate

Market

Regulated

and Other

Consolidated

Resources

Services

Operations

(In Thousands)

Balance at December 31, 2001

$90,927

$66,823

$5,876

$18,228

       Goodwill attributed to assets sold

(921)

(921)

       Impaired goodwill identified in initial SFAS 142 test

(17,307)

(17,307)

       Adjustment of allocation of acquisition cost

3

3

Balance at June 30, 2002

$72,702

$66,823

$5,879

$   -  

Intangible assets with indefinite lives are subject to a yearly impairment test according to SFAS 142. As of December 31, 2001, the Company held about $592,000 of intangible assets with indefinite lives and no impairment was indicated in an initial test. Intangible assets subject to amortization amounted to $2.6 million, gross, and $1.6 million, net of accumulated amortization.

Impairment or Disposal of Long-Lived Assets

The Company adopted SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" as of January 1, 2002 without an impact in the balance sheet, income statement or statement of cash flows.

Note 3 - Earnings Per Share

The following table shows basic and diluted earnings per common share.

3 Months Ended

6 Months Ended

12 Months Ended

June 30,

June 30,

June 30,

2002

2001

2002

2001

2002

2001

(In Thousands, Except Per Share Amounts)

Earnings per common share - basic

       Income before cumulative effect

$      0.36

$      0.30

$      0.98

$      1.16

$      1.77

$      2.12

Cumulative effect

(0.19)

(0.19)

Net income

$      0.36

$      0.30

$      0.79

$      1.16

$      1.58

$      2.12

Earnings per common share - diluted

       Income before cumulative effect

$      0.36

$      0.30

$      0.97

$      1.15

$      1.76

$      2.10

Cumulative effect

(0.19)

(0.19)

Net income

$      0.36

$      0.30

$      0.78

$      1.15

$      1.57

$      2.10

Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the accounting period. Diluted EPS includes the potential increase in the number of outstanding shares that could result from exercising stock options; which is the reason for the difference between the number of basic and diluted average shares outstanding.

3 Months Ended

6 Months Ended

12 Months Ended

June 30,

June 30,

June 30,

2002

2001

2002

2001

2002

2001

(In Thousands)

Average basic common shares

    outstanding

81,754

80,864

81,672

80,803

81,601

80,432

Potential number of shares issuable

    under stock option plans

650

774

581

780

461

826

Average diluted common shares

    outstanding

82,404

81,638

82,253

81,583

82,062

81,258