El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
8-May-2009
El Paso Corporation Reports 42 Percent Increase in Adjusted First Quarter EarningsHOUSTON, TX, May 08, 2009 (MARKETWIRE via COMTEX) -- El Paso Corporation (NYSE: EP) is today reporting first quarter 2009
financial and operational results for the
company.
Highlights:
- $0.47 adjusted diluted earnings per share (EPS) versus $0.33 in 2008.
The improvement is due to realized gains on oil and natural gas hedges and
continued pipeline growth.
- First quarter 2009 reported loss of $1.41 per diluted share versus
earnings of $0.29 in 2008. 2009 results include $1.3 billion after-tax, or
$1.92 per share, of non-cash, full-cost ceiling test charges.
- Pipeline first quarter 2009 earnings before interest expense and taxes
(EBIT) rose 4 percent from first quarter 2008
- Exploration & Production (E&P) first quarter 2009 production of 803
million cubic feet equivalent per day (MMcfe/d), including 72 MMcfe/d of
unconsolidated affiliate volumes
- $3.3 billion of liquidity at March 31, 2009
- Hedge positions significantly expanded for 2010; new hedges in place
for 2011
"We had another solid quarter, which reflects the stable growth of
our pipeline group and very good execution by our E&P business," said
Doug Foshee, chairman, president, and chief executive officer of El
Paso Corporation. "Our Pipeline Group delivered another strong
quarter of earnings while executing on our backlog of projects, and
our E&P business continued to generate significant operating cash
flow, while reducing costs and slowing capital spending in light of
current commodity prices. We have maintained a strong liquidity
position with more than sufficient liquidity to meet 2009 debt
maturities, fund our 2009 capital program, and carry us well into
2010. In addition, we have taken steps to shore up our 2010 and 2011
cash flow by significantly adding to our natural gas hedge program."
A summary of financial results for the quarters ended March 31, 2009
and 2008 is as follows:
Financial Results Quarters Ended
March 31,
($ in millions, except per share amounts) 2009 2008
-------- ---------
Net income (loss) attributable to El Paso Corporation
(EPC) $ (969) $ 219
Preferred stock dividends(1) 9 19
-------- ---------
Net income (loss) attributable to EPC common
stockholders $ (978) $ 200
======== =========
Basic and diluted per common share amounts
Net income (loss) attributable to EPC common
stockholders $ (1.41) $ 0.29
======== =========
(1) Due to timing, 2008 includes two quarters of preferred stock dividends
Items Impacting Quarterly Results
First quarter 2009 and 2008 net income (loss) includes the following
items:
First Quarter 2009
Before After Diluted
($ millions, except per share amounts) Tax Tax EPS
------- ------- -------
Net income (loss) attributable to EPC common
stockholders $ (978) $ (1.41)
Adjustments(1)
Ceiling test charges $ 2,068 $ 1,332 $ 1.92
Change in fair value of power contracts (34) (22) (0.03)
Change in fair value of legacy natural gas
contracts (21) (13) (0.02)
Mark-to-market (MTM) impact of E&P financial
derivatives(2) 45 29 0.04
Effect of change in number of diluted shares - - (0.03)
-------
Adjusted EPS(3) $ 0.47
=======
(1) Assumes a 36 percent tax rate, except for international portion of
ceiling test charges, and 695 million diluted shares
(2) Consists of $394 million of MTM gains on financial derivatives,
adjusted for $439 million of realized cash settlements
(3) Based upon 763 million fully diluted shares and includes income impact
from dilutive securities
Adjusted earnings include $149 million, or $0.12 per share, of early
cash settlements of oil derivative contracts that hedged April though
December 2009 production.
First Quarter 2008
Before After Diluted
($ millions, except per share amounts) Tax Tax EPS
------- ------- -------
Net income attributable to EPC common
stockholders $ 200 $ 0.29
Adjustments(1)
Change in fair value of power contracts $ 41 $ 26 $ 0.04
Change in fair value of legacy
indemnification 43 28 0.04
Case Corporation indemnification (65) (27) (0.04)
Gain on sale of portion of telecommunications
business (18) (12) (0.02)
Change in fair value of production-related
derivatives in Marketing 21 13 0.02
-------
Adjusted EPS(2) $ 0.33
=======
(1) Assumes a 36 percent tax rate, except for Case Corporation
indemnification, and 701 million diluted shares
(2) Based upon 767 million fully diluted shares and includes income
impact from dilutive securities
Business Unit Financial Update
Segment EBIT Results Quarters Ended
March 31,
($ in millions) 2009 2008
-------- --------
Pipeline Group $ 396 $ 381
Exploration and Production (1,685) 242
Marketing 52 (60)
Power 4 (2)
Corporate and Other (7) 39
-------- --------
$ (1,240) $ 600
======== ========
Pipeline Group
The Pipeline Group's EBIT for the quarter ended March 31, 2009 was
$396 million, compared with $381 million for the same period in 2008.
EBIT before adjustment for noncontrolling interests associated with El
Paso Pipeline Partners, L.P. (NYSE: EPB), which completed its first
acquisition from El Paso Corporation on September 30, 2008, was $408
million, a 5 percent increase from 2008 levels. First quarter 2009
results benefited primarily from incremental revenues from several
expansion projects that went into service in 2008 and higher capacity
sales in the Rocky Mountain region and on the El Paso Natural Gas
Pipeline and Tennessee Gas Pipeline systems. First quarter 2008
results benefited from the receipt of $29 million in proceeds
relating to Calpine's approved reorganization plan, partially offset
by $16 million of impairment losses principally related to a project
cancellation.
Pipeline Group Results Quarters Ended
March 31,
($ in millions) 2009 2008
-------- --------
EBIT before adjustment for noncontrolling interests $ 408 $ 390
Net income attributable to noncontrolling interests (12) (9)
-------- --------
EBIT $ 396 $ 381
DD&A $ 104 $ 99
Total throughput (BBtu/d)(1) 19,704 19,321
(1) Includes proportionate share of jointly owned pipelines
Exploration & Production
The Exploration & Production segment reported an EBIT loss of $1.7
billion for the quarter ended March 31, 2009, compared with EBIT of
$242 million for the same period in 2008. First quarter 2009 EBIT
includes $2.1 billion of non-cash, full-cost ceiling test charges
primarily in the company's domestic full cost pool, which was based
on lower domestic spot natural gas prices at the end of the first
quarter of 2009. Excluding these charges, EBIT increased
approximately $142 million compared with the same period in 2008,
primarily due to $394 million of MTM gains on financial derivatives
intended to hedge production volumes and lower DD&A expense,
partially offset by lower physical sales due to lower production
volumes and lower realized commodity prices.
During the first quarter, the company received $439 million of cash
related to settlements of derivative contracts hedging natural gas and
oil production. Of this amount, approximately $149 million related to
the early settlement of 2009 oil derivative contracts hedging April
through December production.
First quarter 2009 production volumes averaged 803 MMcfe/d, including
72 MMcfe/d of unconsolidated affiliate volumes. First quarter 2008
production volumes averaged 886 MMcfe/d, including 75 MMcfe/d of
unconsolidated affiliate volumes. First quarter 2008 production
volumes included 88 MMcfe/d associated with properties sold during
the first quarter of 2008.
Although overall cash operating costs were lower, total per-unit cash
operating costs increased to an average of $2.00 per thousand cubic
feet equivalent (Mcfe) in first quarter 2009, compared with $1.92 per
Mcfe for the same 2008 period, reflecting lower production volumes.
The per-unit DD&A rate for the first quarter 2009 was $2.28 per Mcfe.
As a result of the ceiling test charges, the full-year 2009 DD&A
rate is expected to drop to between $1.70 and $1.90 per Mcfe.
Exploration & Production Results Quarters Ended
March 31,
($ in millions, except price and unit cost amounts) 2009 2008
-------- --------
Physical sales - natural gas, oil, condensate and NGL $ 298 $ 642
Realized and unrealized gains (losses) on financial
derivatives(1) 394 (50)
Other revenues 8 11
-------- --------
Total operating revenues $ 700 $ 603
Operating expenses(2) (2,375) (377)
Other income (expenses) (10) 16
-------- --------
EBIT $ (1,685) $ 242
DD&A $ 150 $ 212
Consolidated volumes:
Natural gas sales volumes (MMcf/d) 632 679
Oil, condensate, and NGL sales volumes (MBbls/d) 16 22
Total consolidated equivalent sales volumes (MMcfe/d) 731 811
Four Star total equivalent sales volumes (MMcfe/d)(3) 72 75
Weighted average realized prices, including financial
derivative settlements
Natural gas ($/Mcf) $ 8.52 $ 7.60
Oil, condensate, and NGL ($/Bbl)(4) $ 70.14 $ 80.14
Transportation costs
Natural gas ($/Mcf) $ 0.34 $ 0.28
Oil, condensate, and NGL ($/Bbl) $ 0.93 $ 0.71
Per-unit costs ($/Mcfe)
DD&A $ 2.28 $ 2.87
Cash operating costs(5) $ 2.00 $ 1.92
(1) Includes amounts reclassified from accumulated other comprehensive
income (loss) associated with accounting hedges of $128 million in 2009
and $(15) million in 2008
(2) 2009 includes $2,068 million non-cash ceiling test charges primarily
related to the company's domestic full cost pool
(3) Four Star is an equity investment. Amounts disclosed represent the
company's proportionate share
(4) 2009 does not include approximately $149 million related to early
settlement of 2009 oil derivative contracts hedging April through
December 2009 production
(5) Includes direct lifting costs, production taxes, G&A expenses, and
taxes other than production and income
Hedge Positions
As of May 7, 2009, El Paso had natural gas hedges for the last nine
months of 2009 with an average floor price of $9.02 per million
British thermal unit (MMBtu) on 120 trillion British thermal units
(TBtu) and an average ceiling price of $14.35 per MMBtu on 96 TBtu.
In addition, following the early settlement of the $110 per barrel
oil derivative contracts during the first quarter of 2009, the
company entered into fixed-price hedges on 1.5 million barrels of
crude oil with an average price of $45 per barrel. El Paso has
approximately 1.35 million barrels of crude oil hedged at $45 for the
last nine months of 2009. The company has significantly expanded its
2010 natural gas hedge position and now has an average floor price of
$6.41 per MMBtu on 175 TBtu and an average ceiling price of $7.24 per
MMBtu on 113 TBtu. In addition, the company established a 2011
natural gas hedge position, locking in 125 TBtu with an average floor
price of $6.00 per MMBtu and an average ceiling price of $8.62 per
MMBtu. Further information on the company's hedging activities
will be available in El Paso's Form 10-Q.
Other Operations
Marketing
The Marketing segment reported EBIT of $52 million for the quarter
ended March 31, 2009, compared with an EBIT loss of $60 million for
the same period in 2008. First quarter 2009 results reflect an
improvement in the value of natural gas and power derivative
contracts principally due to the adoption of new accounting guidance
relating to determining the fair value of derivative liabilities that
have third party credit enhancements associated with them. First
quarter 2008 results include a $21 million MTM loss on derivative
contracts used to manage the price risk of the company's natural gas
and oil production and a $41 million MTM loss on remaining power
contracts in the Pennsylvania-New Jersey-Maryland power region.
Power
The Power segment reported first quarter EBIT of $4 million compared
with an EBIT loss of $2 million for the same period in 2008. In the
first quarter of 2009, the company sold its interest in the Porto
Velho power generation facility in Brazil for $101 million in cash
and $78 million in notes. This sale completed the company's exit
from the power business in Brazil.
Corporate and Other
During the first quarter of 2009, Corporate and Other reported an
EBIT loss of $7 million, compared with EBIT of $39 million for the
same period in 2008. First quarter 2008 results were positively
impacted by a $65 million reduction of the company's liability
related to the indemnification of medical benefits for retirees of
the Case Corporation, offset by a $43 million MTM loss related to
changes in fair value of a legacy indemnification from the sale of an
ammonia facility.
Detailed operating statistics for each of El Paso's businesses will
be posted at www.elpaso.com in the Investors section.
Webcast Information
El Paso Corporation has scheduled a live webcast of its first quarter
2009 results on May 8, 2009, beginning at 10 a.m. Eastern Time, 9 a.m.
Central Time, which may be accessed online through El Paso's Web site
at 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 (conference ID # 96178675) 10 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 May 15, 2009, by dialing (800)
642-1687 (conference ID # 96178675). 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, or included in the
body of this release. Additional detail regarding non-GAAP financial
measures can be reviewed in El Paso's full operating statistics,
which will be posted at 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 items such as
(i) interest and debt expense; (ii) income taxes; and (iii) net
income attributable to noncontrolling interests. The company excludes
interest and debt expense 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 operating costs equal total operating expenses less DD&A,
transportation costs, ceiling test charges, and cost of products and
services divided by total production. It is a valuable measure of
operating efficiency. For 2009, Adjusted EPS is earnings per share
attributable to El Paso Corporation common stockholders excluding
changes in fair value of power contracts, changes in fair value of
legacy natural gas contracts, impact of mark-to-market E&P financial
derivatives, ceiling test charges, and the effect of the change in
the number of diluted shares. For 2008, Adjusted EPS is earnings per
share attributable to El Paso Corporation common stockholders
excluding the gain or loss related to the change in fair value of an
indemnification from the sale of an ammonia plant in 2005, the gain
related to an adjustment of the liability for indemnification of
medical benefits for retirees of the Case Corporation, the gain
related to the disposition of a portion of the company's investment
in its telecommunications business, changes in fair value of power
contracts, and changes in fair value of the production-related
derivatives in Marketing. Adjusted EPS 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 interstate natural gas pipeline system and one of
North America's largest independent natural gas producers. For more
information, visit www.elpaso.com.
Cautionary Statement Regarding Forward-Looking Statements
This release includes certain forward-looking statements and
projections. 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
meet our 2009 debt maturities; volatility in, and access to, the
capital markets; our ability to implement and achieve our objectives
in our 2009 plan, including achieving our earnings and cash flow
targets; the effects of any changes in accounting rules and guidance;
our ability to meet production volume targets in our Exploration and
Production segment; our ability to comply with the covenants in our
various financing documents; our ability to obtain necessary
governmental approvals for proposed pipeline and E&P 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 asset sales, as well
as transactions with partners on one or more of our expansion
projects that are included in the plan on a timely basis; credit and
performance risk of our lenders, trading counterparties, customers,
vendors and suppliers ;changes in commodity prices and basis
differentials for oil, natural gas, and power; our ability to obtain
targeted cost savings in our businesses; 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, including the risk of a global recession and negative
impact on natural gas demand; 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.
Certain of the production information in this press release include
the production attributable to El Paso's 49 percent interest in Four
Star Oil & Gas Company ("Four Star"). El Paso's Supplemental Oil and
Gas disclosures, which are included in its Annual Report on Form
10-K, reflect its proportionate share of the proved reserves of Four
Star separate from its consolidated proved reserves. In addition, the
proved reserves attributable to its proportionate share of Four Star
represent estimates prepared by El Paso and not those of Four Star.
EL PASO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per common share amounts)
(UNAUDITED)
Quarters Ended
March 31,
----------------
2009 2008
------- -------
Operating revenues $ 1,484 $ 1,269
Operating expenses
Cost of products and services 61 56
Operation and maintenance 300 271
Ceiling test charges 2,068 -
Depreciation, depletion and amortization 256 313
Taxes, other than income taxes 68 79
------- -------
2,753 719
------- -------
Operating income (loss) (1,269) 550
Earnings from unconsolidated affiliates 19 37
Other income, net 22 22
Noncontrolling interests (12) (9)
------- -------
29 50
------- -------
Earnings (loss) before interest expense and income taxes
(EBIT) (1,240) 600
Adjustment for noncontrolling interests 12 9
Interest and debt expense (255) (233)
------- -------
Income (loss) before income taxes (1,483) 376
Income tax expense (benefit) (526) 148
------- -------
Net income (loss) (957) 228
Net income attributable to noncontrolling interests (12) (9)
------- -------
Net income (loss) attributable to El Paso Corporation
(EPC) (969) 219
Preferred stock dividends (1) 9 19
------- -------
Net income (loss) attributable to EPC's common
stockholders $ (978) $ 200
======= =======
Basic and diluted earnings (loss) per common share
Net income (loss) per common share $ (1.41) $ 0.29
======= =======
Weighted average common shares outstanding
Basic 695 697
======= =======
Diluted 695 701
======= =======
Dividends declared per common share(1) $ 0.05 $ 0.08
======= =======
(1) Due to timing, 2008 includes two quarters of dividends
EL PASO CORPORATION
SEGMENT INFORMATION
(UNAUDITED)
2009 2008
-------- --------------------------------------
(In millions) Q1 Q1 Q2 Q3 Q4
-------- -------- -------- -------- --------
Operating revenues
Pipelines $ 733 $ 720 $ 646 $ 628 $ 690
Exploration and
Production 700 603 655 881 623
Marketing 53 (57) (146) 89 31
Power - - - - -
Corporate and other,
including eliminations
(1) (2) 3 (2) - (1)
-------- -------- -------- -------- --------
Consolidated total $ 1,484 $ 1,269 $ 1,153 $ 1,598 $ 1,343
-------- -------- -------- -------- --------
Depreciation, depletion
and amortization
Pipelines $ 104 $ 99 $ 99 $ 97 $ 100
Exploration and
Production 150 212 197 191 199
Marketing - - - - -
Power - - - - 1
Corporate and other (1) 2 2 2 4 2
-------- -------- -------- -------- --------
Consolidated total $ 256 $ 313 $ 298 $ 292 $ 302
-------- -------- -------- -------- --------
Operating income (loss)
Pipelines $ 367 $ 357 $ 263 $ 241 $ 291
Exploration and
Production (1,675) 226 281 528 (2,393)
Marketing 52 (60) (154) 82 29
Power (3) (8) (5) (5) (4)
Corporate and other (1) (10) 35 36 (7) 37
-------- -------- -------- -------- --------
Consolidated total $ (1,269) $ 550 $ 421 $ 839 $ (2,040)
-------- -------- -------- -------- --------
Earnings before interest
expense and income taxes
(EBIT)
Pipelines $ 396 $ 381 $ 295 $ 278 $ 319
Exploration and
Production (1,685) 242 304 532 (2,526)
Marketing 52 (60) (153) 82 27
Power 4 (2) 12 (6) (3)
Corporate and other (1) (7) 39 41 (5) 49
-------- -------- -------- -------- --------
Consolidated total $ (1,240) $ 600 $ 499 $ 881 $ (2,134)
-------- -------- -------- -------- --------
E&P Cash Costs First Quarter 2009 First Quarter 2008
($MM) ($/Mcfe) ($MM) ($/Mcfe)
-------- -------- -------- --------
Total operating
expense $ 2,375 $ 36.14 $ 377 $ 5.11
Depreciation,
depletion and
amortization (150) (2.28) (212) (2.87)
Transportation Costs (20) (0.30) (19) (0.25)
Cost of products (5) (0.08) (5) (0.07)
Ceiling Test Charge (2,068) (31.48) - -
-------- -------- -------- --------
Per unit cash costs(2) $ 132 $ 2.00 $ 141 $ 1.92
-------- -------- -------- --------
Total equivalent volumes
(Mmcfe)(2) 65,700 73,762
------------------ ------------------
(1) Includes our corporate businesses, telecommunications business and
residual assets and liabilities of previously sold or
discontinued businesses.
(2) Excludes volumes and costs associated with equity investment in Four
Star.
Contacts
Investor and Public Relations
Bruce L. Connery
Vice President
Office: (713) 420-5855
Media Relations
Bill Baerg
Manager
Office: (713) 420-2906
SOURCE: El Paso Corporation
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El Paso Corp.
