El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
7-Aug-2007
El Paso Corporation Provides Second Quarter 2007 Financial ResultsHOUSTON, Aug 07, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- El Paso Corporation (NYSE: EP)
is reporting today second quarter 2007 financial and operational results for
the company.
Highlights:
- $0.22 earnings per diluted share from continuing operations, including
an $0.08 charge for debt repurchases, versus earnings of $0.19 in 2006
- Production of 857 million cubic feet equivalent per day (MMcfe/d),
including unconsolidated affiliate volumes, increased 9 percent over
second quarter 2006 and 5 percent over first quarter 2007
- Pipeline earnings before interest expense and taxes (EBIT) and
throughput up 11 percent and 3 percent versus second quarter 2006,
respectively
- Expanded hedge position for 2008
- Announcing initiative to high-grade E&P portfolio
- Further progress on pipeline MLP
"This quarter demonstrates El Paso's ability to turn opportunities into
results," said Doug Foshee, El Paso's president and chief executive officer.
"The E&P business performed very well, generating a significant increase in
production and earnings as well as establishing a clear path to reaching our
full-year goals. Our pipeline business continues to grow as we develop our
deep inventory of expansion projects such as the Cypress pipeline project,
which was completed in the second quarter, on time and on budget."
A summary of financial results for the three months ended June 30, 2007
and 2006 is as follows:
Financial Results Three Months Ended
June 30,
---------------------
($ in millions, except per share amounts) 2007 2006
------------------------------------------------------------------------
Income from continuing operations $169 $134
Discontinued operations, net of income taxes (3) 16
---------------------
Net income 166 150
Preferred stock dividends 10 9
-------------------
Net income available to common stockholders $156 $141
=====================
Basic per common share amounts
Income from continuing operations $0.23 $0.19
Discontinued operations - 0.02
---------------------
Net income per common share $0.23 $0.21
=====================
Diluted per common share amounts
Income from continuing operations $0.22 $0.19
Discontinued operations - 0.02
---------------------
Net income per common share $0.22 $0.21
=====================
Items Impacting Quarterly Results
Second quarter 2007 results from continuing operations include a
$55-million, or $0.08 per diluted share, after-tax charge related to early
debt retirement costs. Results also include a $6-million, or $0.01 per
diluted share, after-tax gain related to the mark-to-market (MTM) impact of
derivatives intended to manage price risk on natural gas and oil production.
Second quarter 2006 results include a comparable $17-million after-tax MTM
gain. After-tax amounts were calculated using a 36-percent tax rate.
Second Quarter 2007 Before Tax After Tax EPS
($ millions except per share amounts)
-------------------------------------------------------------------------
Continuing operations $239 $169 $0.22
Adjustments
Debt repurchase costs $86 $55 0.08
MTM gain on production-related
derivatives $(9) $(6) (0.01)
--------
Adjusted EPS-continuing operations $0.29
========
Second Quarter 2006 Before Tax After Tax EPS
($ millions except per share amounts)
-------------------------------------------------------------------------
MTM gain on production-related
derivatives $(27) $(17) $(0.02)
Financial Results - Six Months Ended June 30, 2007
For the six months ended June 30, 2007, El Paso reported net income
available to common stockholders of $776 million, or $1.11 per diluted share,
compared with $487 million, or $0.70 per diluted share, for the first six
months of 2006. Results for 2007 include $674 million, or $0.96 per diluted
share, of earnings which relate primarily to the gain on the sale of ANR and
related assets. Results for 2007 also include a $184-million, or $0.26 per
diluted share, after-tax charge related to early debt retirement costs and a
$50-million, or $0.07 per diluted share, MTM loss on production-related
derivatives. During the same period in 2006, production-related derivatives
generated a $121-million, or $0.17 per diluted share, MTM after-tax gain, and
earnings from discontinued operations were $71 million, or $0.10 per diluted
share. After-tax amounts were calculated using a 36-percent tax rate.
Business Unit Financial Update
Segment EBIT Results Three Months Ended
June 30,
($ in millions) 2007 2006
-------------------------------------------------------------------------
Pipeline Group $318 $286
Exploration and Production 235 163
Marketing 5 13
Power 16 10
Corporate and Other (104) (34)
---------------------
$470 $438
=====================
Pipeline Group
The Pipeline Group's EBIT for the three months ended June 30, 2007, was
$318 million, compared with $286 million for the same period in 2006. The
increase is primarily due to incremental revenues from several expansion
projects that went into service during 2006; the Cypress Pipeline, which went
into service in May 2007; higher transportation revenues due to increased
sales and utilization of capacity; and higher costs in the second quarter of
2006 associated with hurricanes Katrina and Rita. In addition, second quarter
2007 results were also favorably impacted by a $10-million contract settlement
received from a bankruptcy claim.
Pipeline Group Results Three Months Ended
June 30,
---------------------
($ in millions) 2007 2006
-------------------------------------------------------------------------
EBIT $318 $286
DD&A $91 $93
Total throughput (BBtu/d)(1) 17,161 16,658
(1)Includes proportionate share of jointly owned pipelines
NOTE: Results do not include ANR and related assets, which were sold in
February, 2007, and are included in discontinued operations.
Exploration and Production
The Exploration and Production segment's EBIT for the three months ended
June 30, 2007 was $235 million, compared with $163 million for the same period
in 2006. The increase is due to increased production and higher realized
natural gas prices. Second quarter 2007 production volumes averaged 786
MMcfe/d, excluding unconsolidated affiliate volumes of 71 MMcfe/d. Second
quarter 2006 production volumes averaged 719 MMcfe/d, excluding 66 MMcfe/d of
unconsolidated affiliate volumes. During the second quarter, the company
increased production volumes across all domestic regions, primarily through
successful drilling programs, acquisitions, recovery of hurricane shut-in
volumes, and bringing several key Gulf of Mexico discoveries on line. Based
on year-to-date production, the company increased the low end of its targeted
2007 average daily production range with a new target of 820 MMcfe/d to 860
MMcfe/d, which includes approximately 65 MMcfe/d to 70 MMcfe/d from
unconsolidated affiliate volumes. Total per-unit cash costs increased to an
average of $1.92 per thousand cubic feet equivalent (Mcfe) in second quarter
2007, compared with $1.86 per Mcfe for the same 2006 period. The company's
higher operating costs per unit were primarily a result of increased
production expenses resulting from higher workover activity levels, industry-
wide cost inflation, lower severance tax credits, and higher general and
administrative costs.
Exploration and Production Results Three Months Ended
June 30,
---------------------
($ in millions, except price and cost amounts) 2007 2006
--------------------------------------------------------------------------
EBIT $235 $163
DD&A $189 $156
Consolidated volumes:
Natural gas sales volumes (MMcf/d) 657 589
Oil, condensate, and NGL sales volumes (MBbls/d) 21 22
Total consolidated equivalent sales volumes (MMcfe/d) 786 719
Four Star total equivalent sales volumes (MMcfe/d)(1) 71 66
Weighted average realized prices including hedges2
Natural gas ($/Mcf) $7.67 $6.08
Oil, condensate, and NGL ($/Bbl) $56.87 $60.64
Transportation costs(2)
Natural gas ($/Mcf) $0.24 $0.22
Oil, condensate, and NGL ($/Bbl) $0.68 $0.80
Per-unit costs ($/Mcfe)(2)
Unit of production depletion costs $2.52 $2.24
Cash operating costs(3) $1.92 $1.86
(1) Four Star is an equity investment. Amounts disclosed represent the
company's proportionate share.
(2) Prices and costs do not include the company's proportionate share of
Four Star volumes, revenues, or costs.
(3) Includes lease operating costs, production-related taxes, G&A
expenses, and taxes other than production and income.
New Hedge Positions for 2008
El Paso has expanded its hedge position for 2008 with new positions that
create an $8.00-per-million-British-thermal-unit (MMBtu) floor price and a
$12.00 per MMBtu ceiling price on 31 trillion British thermal units (TBtu) of
anticipated 2008 natural gas production. When combined with previous 2008
ceilings and floors, the company has an average floor price of $7.61 per MMBtu
and an average ceiling price of $10.92 per MMBtu for 93 TBtu of anticipated
2008 natural gas production. El Paso also entered into fixed price swaps on
approximately 18 TBtu of anticipated 2008 natural gas production at an average
price of $8.24. In addition, the company has entered into swaps, which hedge
the basis differential for El Paso's anticipated south Texas and Raton
production. Further information on the company's hedging activities will be
available in El Paso's Form 10-Q.
Exploration & Production High Grading its Asset Base
El Paso also announced today that it is beginning a process of high
grading its domestic E&P portfolio. The process will result in the
divestiture of properties located throughout its domestic operations with the
greatest weighting in the Gulf of Mexico and south Texas areas. These
divestitures do not constitute an exit from either area. El Paso will market
these properties in multiple packages and expects to complete these sales in
the first quarter of 2008. The divestiture process is expected to result in
improved future capital and operating efficiencies and will be further
discussed on today's webcast.
Other Operations
Marketing
The Marketing segment reported EBIT of $5 million for the three months
ended June 30, 2007, compared to $13 million for the same period in 2006. The
second quarter 2007 and 2006 results included gains of $9 million and $27
million, respectively, from MTM changes in the fair value of derivatives
intended to manage the price risk of the company's natural gas and oil
production.
Power
The Power segment reported EBIT of $16 million for the three months ended
June 30, 2007, compared with $10 million for the same period in 2006. The
increase is primarily due to impairments recorded in the second quarter of
2006 relating to El Paso's Asian investments.
Corporate and Other
During the second quarter of 2007, Corporate and Other reported an EBIT
loss of $104-million compared with an EBIT loss of $34 million for the same
period in 2006. Second quarter 2007 results were unfavorably impacted by the
previously mentioned $86-million charge related to early debt retirement
costs.
Detailed operating statistics for each of El Paso's businesses will be
posted at http://www.elpaso.com in the Investors section.
Webcast Information
El Paso Corporation has scheduled a live webcast of its 2007 results on
August 7, 2007 beginning at 10:00 a.m. Eastern Time, 9:00 a.m. Central Time,
which may be accessed online through El Paso's Web site at
http://www.elpaso.com in the Investors section. During the webcast,
management will refer to slides that will be posted on the Web site. The
slides will be available one hour before the webcast and can be accessed in
the Investors section. A limited number of telephone lines will also be
available to participants by dialing (888) 710-3574 ten minutes prior to the
start of the webcast.
A replay of the webcast will be available online through the company's Web
site in the Investors section. A telephone audio replay will be also
available through August 14, 2007 by dialing (800) 642-1687 (access code
10404665). If you have any questions regarding this procedure, please contact
Margie Fox at (713) 420-2903.
Disclosure of Non-GAAP Financial Measures
The SEC's Regulation G applies to any public disclosure or release of
material information that includes a non-GAAP financial measure. In the event
of such a disclosure or release, Regulation G requires (i) the presentation of
the most directly comparable financial measure calculated and presented in
accordance with GAAP and (ii) a reconciliation of the differences between the
non-GAAP financial measure presented and the most directly comparable
financial measure calculated and presented in accordance with GAAP. The
required presentations and reconciliations are attached. Additional detail
regarding non-GAAP financial measures can be reviewed in El Paso's full
operating statistics, which will be posted at http://www.elpaso.com in the
Investors section.
El Paso uses the non-GAAP financial measure "earnings before interest
expense and income taxes" or "EBIT" to assess the operating results and
effectiveness of the company and its business segments. The company defines
EBIT as net income (loss) adjusted for (i) items that do not impact its income
(loss) from continuing operations, such as extraordinary items, discontinued
operations, and the impact of accounting changes; (ii) income taxes; (iii)
interest and debt expense; and (iv) distributions on preferred interests of
consolidated subsidiaries. The company excludes interest and debt expense and
distributions on preferred interests of consolidated subsidiaries so that
investors may evaluate the company's operating results without regard to its
financing methods or capital structure. El Paso's business operations consist
of both consolidated businesses as well as investments in unconsolidated
affiliates. As a result, the company believes that EBIT, which includes the
results of both these consolidated and unconsolidated operations, is useful to
its investors because it allows them to evaluate more effectively the
performance of all of El Paso's businesses and investments. Exploration and
Production per-unit total cash costs or cash operating costs equal total
operating expenses less DD&A and cost of products and services divided by
total production. It is a valuable measure of operating efficiency. Adjusted
EPS is earnings per share excluding debt repurchase and MTM charges in the
production-related derivatives during the quarter. It is useful in analyzing
the company's on-going earnings potential.
El Paso believes that the non-GAAP financial measures described above are
also useful to investors because these measurements are used by many companies
in the industry as a measurement of operating and financial performance and
are commonly employed by financial analysts and others to evaluate the
operating and financial performance of the company and its business segments
and to compare the operating and financial performance of the company and its
business segments with the performance of other companies within the industry.
These non-GAAP financial measures may not be comparable to similarly
titled measurements used by other companies and should not be used as a
substitute for net income, earnings per share or other GAAP operating
measurements.
El Paso Corporation provides natural gas and related energy products in a
safe, efficient, and dependable manner. El Paso owns North America's largest
natural gas pipeline system and one of North America's largest independent
natural gas producers. For more information, visit http://www.elpaso.com.
Cautionary Statement Regarding Forward-Looking Statements
This release includes forward-looking statements and projections, made in
reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The company has made every reasonable effort to ensure
that the information and assumptions on which these statements and projections
are based are current, reasonable, and complete. However, a variety of factors
could cause actual results to differ materially from the projections,
anticipated results or other expectations expressed in this release,
including, without limitation, changes in unaudited and/or unreviewed
financial information; our ability to implement and achieve our objectives in
our 2007 plan, including achieving our debt-reduction targets, earnings and
cash flow targets; changes in reserve estimates based upon internal and third
party reserve analyses; the effects of any changes in accounting rules and
guidance; our ability to meet production volume targets in our Exploration &
Production segment; uncertainties and potential consequences associated with
the outcome of governmental investigations, including, without limitation,
those related to the reserve revisions; outcome of litigation; our ability to
comply with the covenants in our various financing documents; our ability to
obtain necessary governmental approvals for proposed pipeline projects and our
ability to successfully construct and operate such projects; the risks
associated with recontracting of transportation commitments by our pipelines;
regulatory uncertainties associated with pipeline rate cases; actions by the
credit rating agencies; the successful close of our financing transactions;
our ability to close our announced asset sales on a timely basis; changes in
commodity prices and basis differentials for oil, natural gas, and power;
inability to realize anticipated synergies and cost savings associated with
restructurings and divestitures on a timely basis or at all; general economic
and weather conditions in geographic regions or markets served by the company
and its affiliates, or where operations of the company and its affiliates are
located; the uncertainties associated with governmental regulation; political
and currency risks associated with international operations of the company and
its affiliates; competition; and other factors described in the company's (and
its affiliates') Securities and Exchange Commission filings. While the company
makes these statements and projections in good faith, neither the company nor
its management can guarantee that anticipated future results will be achieved.
Reference must be made to those filings for additional important factors that
may affect actual results. The company assumes no obligation to publicly
update or revise any forward-looking statements made herein or any other
forward-looking statements made by the company, whether as a result of new
information, future events, or otherwise.
EL PASO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per common share amounts)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2007 2006 2007 2006
------------------ ----------------
Operating revenues $1,198 $1,089 $2,220 $2,426
Operating expenses
Cost of products and services 60 70 115 132
Operation and maintenance 329 338 630 623
Depreciation, depletion and
amortization 286 256 557 506
Taxes, other than income taxes 72 62 132 119
------- ------ ------ ------
747 726 1,434 1,380
------- ------ ------ ------
Operating income 451 363 786 1,046
Earnings from unconsolidated
affiliates 44 37 81 66
Loss on debt extinguishment (86) (3) (287) (9)
Other income, net 61 41 106 91
------- ------ ------ ------
19 75 (100) 148
------- ------ ------ ------
Earnings before interest expense,
income taxes, and other charges 470 438 686 1,194
Interest and debt expense (231) (316) (514) (647)
------- ------ ------ ------
Income before income taxes 239 122 172 547
Income taxes 70 (12) 51 112
------- ------ ------ ------
Income from continuing operations 169 134 121 435
Discontinued operations, net of
income taxes (3) 16 674 71
------- ------ ------ ------
Net income 166 150 795 506
Preferred stock dividends 10 9 19 19
------- ------ ------ ------
Net income available to common
stockholders $156 $141 $776 $487
======= ====== ====== ======
Earnings per common share
Basic
Income from continuing operations $0.23 $0.19 $0.15 $0.63
Discontinued operations, net of
income taxes -- 0.02 0.97 0.11
------- ------ ------ ------
Net income per common share $0.23 $0.21 $1.12 $0.74
======= ====== ====== ======
Diluted
Income from continuing operations $0.22 $0.19 $0.15 $0.60
Discontinued operations, net of
income taxes -- 0.02 0.96 0.10
------- ------ ------ ------
Net income per common share $0.22 $0.21 $1.11 $0.70
======= ====== ====== ======
Weighted average common shares
outstanding
Basic 696 671 695 664
======= ====== ====== ======
Diluted 757 732 699 724
======= ====== ====== ======
Dividends declared per common share $0.04 $0.04 $0.08 $0.08
======= ====== ====== ======
EL PASO CORPORATION
SEGMENT INFORMATION
(UNAUDITED)
2007
------------------------
(In millions) First Second
------------------------
Operating revenues
Pipelines $644 $614
Exploration and Production 505 575
Marketing (135) (16)
Power -- --
Corporate and other, including
eliminations (1) 8 25
------ ------
Consolidated total $1,022 $1,198
------ ------
Depreciation, depletion and
amortization
Pipelines $94 $91
Exploration and Production 170 189
Marketing 1 1
Power -- --
Corporate and other (1) 6 5
------ ------
Consolidated total $271 $286
------ ------
Operating income (loss)
Pipelines $324 $276
Exploration and Production 177 229
Marketing (136) (20)
Power (5) (9)
Corporate and other (1) (25) (25)
------ ------
Consolidated total $335 $451
------ ------
Earnings (losses) before interest
expense and income taxes (EBIT)
Pipelines $364 $318
Exploration and Production 179 235
Marketing (135) 5
Power 18 16
Corporate and other (1) (210) (104)
------ ------
Consolidated total $216 $470
------ ------
2006
--------------------------------
(In millions) First Second Third Fourth
--------------------------------
Operating revenues
Pipelines $643 $580 $582 $597
Exploration and Production 466 462 456 470
Marketing 205 18 (105) (176)
Power 1 2 3 --
Corporate and other, including
eliminations (1) 22 27 6 22
------ ------ ----- -----
Consolidated total $1,337 $1,089 $942 $913
------ ------ ----- -----
Depreciation, depletion and
amortization
Pipelines $93 $93 $92 $92
Exploration and Production 146 156 163 180
Marketing 1 1 1 1
Power -- 1 -- 1
Corporate and other (1) 10 5 4 7
------ ------ ----- -----
Consolidated total $250 $256 $260 $281
------ ------ ----- -----
Operating income (loss)
Pipelines $321 $251 $221 $270
Exploration and Production 191 161 138 135
Marketing 200 8 (113) (186)
Power (15) (17) (14) (15)
Corporate and other (1) (14) (40) (14) (41)
------ ------ ----- -----
Consolidated total $683 $363 $218 $163
------ ------ ----- -----
Earnings (losses) before interest
expense and income taxes (EBIT)
Pipelines $346 $286 $253 $302
Exploration and Production 199 163 141 137
Marketing 208 13 (108) (184)
Power 3 10 38 31
Corporate and other (1) -- (34) (17) (37)
------ ------ ----- -----
Consolidated total $756 $438 $307 $249
------ ------ ----- -----
Year-to-Date
-----------------------
(In millions) 2007 2006
-----------------------
Operating revenues
Pipelines $1,258 $1,223
Exploration and Production 1,080 928
Marketing (151) 223
Power -- 3
Corporate and other, including
eliminations (1) 33 49
------ ------
Consolidated total $2,220 $2,426
------ ------
Depreciation, depletion and
amortization
Pipelines $185 $186
Exploration and Production 359 302
Marketing 2 2
Power -- 1
Corporate and other (1) 11 15
------ ------
Consolidated total $557 $506
------ ------
Operating income (loss)
Pipelines $600 $572
Exploration and Production 406 352
Marketing (156) 208
Power (14) (32)
Corporate and other (1) (50) (54)
------ ------
Consolidated total $786 $1,046
------ ------
Earnings (losses) before interest
expense and income taxes (EBIT)
Pipelines $682 $632
Exploration and Production 414 362
Marketing (130) 221
Power 34 13
Corporate and other (1) (314) (34)
------ ------
Consolidated total $686 $1,194
------ ------
(1) Includes our corporate businesses, our telecommunications business
and residual assets and liabilities of previously sold or
discontinued businesses.
SOURCE El Paso Corporation
investor and public relations, Bruce L. Connery, Vice President, +1-713-420-5855,
fax, +1-713-420-4417, or media relations, Bill Baerg, Manager, +1-713-420-2906, fax,
+1-713-420-4417, both of El Paso Corporation
http://www.elpaso.com
|
El Paso Corp.
