HOUSTON, TEXAS, October 24, 2001

El Paso Corporation (NYSE:EPG) today reported that adjusted diluted earnings per share increased by 42 percent to $0.78 compared with an adjusted $0.55 in the third quarter of 2000. Adjusted net income rose 43 percent to $405 million in 2001 from an adjusted $284 million in 2000. The adjusted results for 2001 exclude net after-tax merger-related costs and other non-recurring charges of $203 million, including an estimated $100-million after-tax ceiling test charge on Canadian oil and gas assets. Diluted average common shares outstanding totaled 528 million for 2001 compared with 517 million in 2000.

Consolidated earnings before interest expense and taxes (EBIT), adjusted for non-recurring items, increased 24 percent to an adjusted $928 million from an adjusted $747 million in 2000. The contribution from non-regulated operations rose to 71 percent of total operating EBIT, up from 61 percent in the year-ago period.

For the first nine months of 2001, adjusted diluted earnings per share increased 39 percent to $2.53 from $1.82 for the same period in 2000. Consolidated EBIT for the first nine months of 2001, excluding non-recurring items, increased 32 percent to approximately $3 billion versus $2.2 billion in 2000.

"El Paso continues on track for another record year," said William A. Wise, chairman, president, and chief executive officer of El Paso. "Despite lower natural gas, power, and petroleum prices and a slowing economy, the company achieved outstanding financial results in the quarter, led by the Merchant Energy and Production segments. This performance reflects the strong market positions of each of our businesses, our diversified asset base, and adherence to strict risk management guidelines. Our financial results were distinguished by attractive returns and high-quality, recurring cash earnings. For the full-year 2001, we will generate more than $3.5 billion in after-tax cash flow before capital expenditures. Each of our business segments continues to perform very well, and we remain comfortable with our earnings per share targets of $3.30 in 2001 and $3.60 to $3.70 in 2002, based on an annual average Henry Hub natural gas price of $3.00 per thousand cubic feet (Mcf)."

SEGMENT RESULTS

The Merchant Energy Group reported adjusted EBIT of $316 million, up 26 percent from $251 million in the third quarter of 2000. The increase reflects greater customer origination activity, increased income from international operations, and strong fee income from Project Electron and financial services. Physical natural gas and power volumes rose 4 percent and 48 percent, respectively, while financial volumes increased 61 percent from 2000 levels. In total, 56 percent of Merchant Energy's EBIT came from asset and management fee-based activities. The balance of earnings was derived from transactions involving new customer business, physical marketing activities, and commodity trading. Approximately two-thirds of these transactions will settle by year-end 2002.

Strong production growth and the benefit of El Paso's hedging program caused El Paso Production Company's adjusted EBIT to more than double to $307 million from $149 million in the third quarter of 2000. Production volumes rose 17 percent from a year ago to 1,823 million cubic feet per day (MMcf/d) equivalent, and 4 percent from second quarter 2001. The company's realized natural gas price increased to $3.46 per Mcf from $2.60 per Mcf a year ago, and realized oil, condensate, and liquids prices declined $0.19 to $21.62 per barrel.

The Pipeline Group's adjusted EBIT totaled $273 million compared with $297 million in the third quarter of 2000, primarily reflecting lower transportation revenues from recontracted capacity on the Tennessee Gas Pipeline system. Total pipeline system throughput for the third quarter 2001 averaged 18,536 billion British thermal units per day (BBtu/d), up 2 percent from 2000 levels. The Pipeline Group continues to pursue numerous expansion opportunities in North America. Eight expansions totaling approximately 2 billion cubic feet per day (Bcf/d) are currently under construction, and numerous other projects totaling approximately 6 Bcf/d are in various stages of development.

El Paso Field Services reported adjusted third quarter 2001 EBIT of $60 million compared with third quarter 2000 EBIT of $58 million. The improvement reflects higher gathering and processing volumes, partially offset by lower average gathering and processing margins. During the third quarter of 2001, gathering and treating volumes increased 59 percent to 6,071 BBtu/d, while processing volumes rose 46 percent to 4,551 BBtu/d. Total earnings contribution from Field Services' partnership interests in El Paso Energy Partners, L.P. (NYSE:EPN) grew to $10 million in the quarter.

HEDGING UPDATE

In recent weeks, El Paso has added additional hedges for its natural gas production. For the months of October through December 2001, approximately 85 percent of projected natural gas production is hedged at a NYMEX price of approximately $3.79 per Mcf. For 2002, approximately 70 percent of natural gas production is hedged at a NYMEX price of approximately $4.07 per Mcf, and for 2003 approximately 44 percent is hedged at a NYMEX price of approximately $3.99 per Mcf. The company expects that its realized price for natural gas will be approximately $0.30 less than the NYMEX per Mcf price due to transportation costs and regional price differentials.

ESTIMATED CEILING TEST CHARGE AND SFAS NO. 133 ADJUSTMENT

Based on recent natural gas and oil prices, El Paso estimates that it will recognize a non-cash "ceiling test" charge of approximately $150 million pre-tax ($100 million after-tax). This anticipated charge is primarily related to the company's Western Canadian natural gas reserves. A ceiling test calculation is required by the Securities and Exchange Commission (SEC) on a quarterly basis for exploration and production companies on the "full-cost" method of accounting. The calculation compares the current present value of El Paso's oil and natural gas reserves with the carrying value of those reserves on the company's balance sheet. If the calculated present value is less than the balance sheet value, a non-cash charge must be taken to write down the value of the reserves.

It is important to note that the ceiling test calculation is based on prevailing spot commodity prices and reserve development costs, and does not take into account the company's production hedges or forward curve futures prices. However, the Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, does recognize the value of El Paso's substantial production hedges, and the balance sheet impact of any non-cash ceiling test charge recorded for the third quarter of 2001 is expected to be more than offset by the SFAS No. 133 adjustment for this quarter. The SFAS No. 133 adjustment for third quarter 2001 is expected to total approximately $400 million after-tax, and will be reflected as an addition to accumulated other comprehensive income in the shareholders' equity section of the balance sheet.

The actual amount of any ceiling test charge will be finally determined and published on or before November 15, 2001, concurrent with the filing of El Paso's SEC Form 10-Q for the quarter ended September 30, 2001.

El Paso does not expect to incur a ceiling test charge pertaining to its U.S. reserve base as long as the Henry Hub natural gas cash price is approximately $2.33 per Mcf or higher immediately prior to the filing of the company's SEC Form 10-Q for the third quarter. In the event that the Henry Hub natural gas spot price is below $2.33 per Mcf at that time, El Paso would incur a ceiling test charge on its U.S. reserves, and the after-tax impact of that charge is estimated to total approximately $200 million after-tax for every $0.10 per Mcf decline below the $2.33 level. On October 23, 2001, the Henry Hub cash price was approximately $2.95 per Mcf.

CONFERENCE CALL

El Paso Corporation has scheduled a conference call on Wednesday, October 24, 2001, at 10:00 a.m. Eastern Time, 9:00 a.m. Central Time to discuss financial results. To access the call, please dial (973) 633-6740 ten minutes prior to the call. A live Web cast of the call also will be available online through our Web site at www.elpaso.com in the "For Investors" section.

A telephone replay of the conference call will be available through October 31, 2001 by dialing (973) 341-3080 (access code 2849438). A replay also can be accessed online through our Web site in the "For Investors" section.

Detailed operating statistics for each of El Paso's businesses are available on our Web site listed above.

El Paso Corporation is committed to meeting energy needs throughout the United States and the world, with operations that span the energy value chain from wellhead to electron. El Paso Corporation is involved in every segment of the natural gas industry, including production, gathering and processing, and transmission. The company also provides merchant energy services, international project development, energy financing, power generation, and telecommunications services. El Paso is focused on speeding the development of new energy sources to address critical energy shortages across the globe. For more information, please visit www.elpaso.com.