El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
31-Jan-2002
El Paso Corporation Reports Fourth Quarter and Full-Year 2001 Earnings, Updates Hedge Position and Earnings GuidanceHOUSTON, Jan 31, 2002 /PRNewswire-FirstCall via COMTEX/ -- El Paso Corporation
(NYSE: EP) today announced that its fourth quarter 2001 pro forma diluted
earnings per share increased to $0.79 from $0.78 per share in 2000. Pro forma
net income for the fourth quarter of 2001 was $408 million versus $403 million
in the fourth quarter of 2000. Reported diluted earnings per share for fourth
quarter 2001, which include asset impairments and merger-related items, were
$0.72 versus $0.65 in 2000. Reported net income for fourth quarter 2001 was $375
million compared with $335 million in 2000.
Pro forma fourth quarter earnings before interest expense and taxes (EBIT)
increased 5 percent to $940 million compared with $894 million in 2000. Reported
fourth quarter 2001 EBIT was $891 million compared with $825 million in 2000.
For the full year, 2001 pro forma earnings per share increased 27 percent to
$3.31 compared with $2.60 in 2000. Pro forma net income rose 30 percent to $1.7
billion in 2001 from $1.3 billion in 2000. Reported diluted earnings per share
for 2001, which include merger-related costs, asset impairments, and other
non-recurring charges, were $0.18 versus $2.57 in 2000. Reported net income for
2001 was $93 million compared with $1.3 billion in 2000. A schedule of
non-recurring items has been provided as an attachment to this press release.
Pro forma 2001 EBIT increased 25 percent to $3.9 billion compared with $3.1
billion in 2000. Reported 2001 EBIT was $1.6 billion compared with $3.0 billion
in 2000.
"2001 was another outstanding year for El Paso," said William A. Wise, chairman,
president, and chief executive officer of El Paso. "We achieved record financial
results across all of our business units in a very difficult market, while
successfully completing our merger with The Coastal Corporation. Looking
forward, El Paso's strong asset base, financial strength, and commercial skills
make it the company best positioned to prosper in a future where most of North
America's incremental energy demand will be served by natural gas."
"Additionally, we continue to make excellent progress on our balance sheet
enhancement program, which will reduce the company's debt-to-total capital ratio
to 50 percent or below by year end, including the Project Electron and Gemstone
debt," Wise continued. "The company issued $863 million of common equity in
December 2001 and is making excellent progress on its planned disposition of
$2.25 billion in assets. El Paso expects to have firm sales agreements completed
for more than half of the targeted sales by the end of the first quarter."
FOURTH QUARTER SEGMENT RESULTS
Fourth quarter 2001 EBIT for the Pipeline Group rose 6 percent to $362 million
from $341 million in 2000. The increase reflects lower operating expenses and
the impact of higher transportation rates on re-contracted capacity on the El
Paso Natural Gas system in 2001, partially offset by lower transportation
revenues from re-contracted capacity on the Tennessee Gas Pipeline system.
Milder weather caused total pipeline system throughput to drop 4 percent to
18,936 billion British thermal units per day (BBtu/d) from 19,660 BBtu/d in the
fourth quarter of 2000.
El Paso Production Company's fourth quarter EBIT more than doubled from 2000
levels to $277 million due to favorable hedges on its natural gas production
along with a 15-percent increase in total production. Natural gas production for
the fourth quarter of 2001 was 1,578 million cubic feet per day (MMcf/d), up 11
percent from the previous year. Realized natural gas prices increased to $3.33
per thousand cubic feet (Mcf) from $2.87 per Mcf in the fourth quarter of 2000.
Liquids production rose 40 percent to 47,098 barrels per day, primarily due to
the commencement of production from new fields in the Gulf of Mexico. Realized
liquids prices dropped sharply to $16.58 per barrel from $21.46 in the fourth
quarter of 2000.
El Paso Merchant Energy reported pro forma fourth quarter EBIT of $300 million,
which was essentially flat with the year-ago period. While earnings from natural
gas and power activities were strong, there was a $62-million decrease from the
fourth quarter of 2000 from refining, chemical, and coal operations. In
addition, Merchant Energy established a $46-million reserve for Enron
receivables. Physical power volumes rose 165 percent and natural gas physical
volumes declined 23 percent from 2000 levels. New financial disclosure regarding
Merchant Energy's trading activities is available in the company's operating
statistics, which are available on El Paso's Web site.
The Field Services segment reported fourth quarter 2001 EBIT of $61 million, up
slightly from a pro forma $59 million the previous year. Gathering volumes rose
65 percent to 6,157 BBtu/d while processing volumes rose 80 percent to 4,647
Bbtu/d. Both increases resulted from the acquisition of South Texas assets in
December 2000. However, average gathering and processing margins dropped sharply
from 2000 levels.
FULL-YEAR SEGMENT RESULTS
The Pipeline Group reported a 4-percent increase in pro forma EBIT to $1,372
million compared with $1,323 million in 2000. The increase reflects lower
operating expenses and the impact of higher transportation rates on
re-contracted capacity on the El Paso Natural Gas system in 2001, partially
offset by lower transportation revenues from re-contracted capacity on the
Tennessee Gas Pipeline system. Total pipeline system throughput for 2001
averaged 19,105 BBtu/d, up 2 percent from 2000's average of 18,749 BBtu/d.
An 11-percent increase in production and higher realized natural gas prices were
the key drivers behind an 85-percent increase in El Paso Production Company's
2001 pro forma EBIT to $1,128 million. Realized natural gas prices were $3.44
per Mcf versus $2.62 per Mcf in 2000. Natural gas production volumes rose 10
percent in 2001 to 1,547 MMcf/d, while liquids production averaged 39,403
barrels per day, up 24 percent from 2000 levels. Realized liquids prices fell
slightly from $21.82 to $21.68 per barrel in 2001.
El Paso Merchant Energy reported pro forma EBIT of $1,275 million, a 34-percent
increase from 2000 pro forma EBIT of $950 million. The increase reflects greater
customer origination and trading activity as well as strong fee income from
Project Electron and financial services. Partially offsetting these increases
were lower contributions from refining, chemical, and coal operations. In total,
54 percent of Merchant Energy's 2001 pro forma EBIT came from asset and
management fee-based activities. Physical natural gas and power volumes rose 19
percent and 86 percent, respectively, from 2000 levels.
The Field Services segment reported pro forma 2001 EBIT of $251 million-a
12-percent increase over pro forma 2000 EBIT of $225 million. The improvement
reflects higher gathering and processing volumes as a result of the acquisition
of South Texas gathering and processing assets in December 2000, partially
offset by lower average gathering and processing margins. For 2001, average
gathering and transportation volumes rose 58 percent to 6,109 BBtu/d, while
processing volumes rose 49 percent over 2000 levels to 4,360 BBtu/d.
HEDGING UPDATE
El Paso continues to hedge its expected natural gas production in order to
mitigate price volatility and achieve consistent returns on invested capital.
For 2002, approximately 75 percent of production is hedged at a NYMEX price of
$4.05 per Mcf and approximately 57 percent of production for 2003 is hedged at a
NYMEX price of $3.85 per Mcf. The company also has initiated hedges for 2004
through 2006 for less than 20 percent of its expected production at NYMEX prices
ranging from $3.35 to $3.48 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.
EARNINGS GUIDANCE
On December 12, 2001, El Paso revised its 2002 earnings guidance to a range of
$3.40 to $3.55 per share based upon an expected average annual NYMEX natural gas
price of $3.00 per Mcf. With a current annual average NYMEX price of $2.50 per
Mcf, the expected earnings range now stands at $3.30 to $3.45 per share.
CONFERENCE CALL REMINDER
El Paso Corporation has scheduled a conference call today at 10:00 a.m. Eastern
Standard Time, 9:00 a.m. Central Standard Time to discuss its financial results.
To access the call, dial 973-872-3100 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 February 7,
2002 by dialing 973-341-3080 (access code 3056979). 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.
The El Paso Corporation model-strong in assets, market expertise, valuation
skills, and risk discipline-has proven itself year after year, resulting in a
company with great financial strength and a reputation for integrity. El Paso
has core businesses in natural gas production, gathering and processing, and
transmission, as well as in international project development, energy financing,
power generation, liquefied natural gas transport and receiving, and merchant
energy services. The company is committed to developing new energy sources and
technology to supply energy to communities around the world. For more
information, please visit 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. While the company makes
these statements and projections in good faith, neither the company nor its
management can guarantee that the anticipated future results will be achieved.
Reference should be made to the company's (and its affiliates') Securities and
Exchange Commission filings for additional important factors that may affect
actual results.
EL PASO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Millions, Except per Share Amounts)
(UNAUDITED)
Fourth Quarter Ended Twelve Months Ended
December 31, December 31,
2001 2000 2001 2000
Operating revenues $ 12,115 $ 16,299 $ 57,475 $ 48,915
Operating expenses
Cost of gas and other products 10,365 14,413 50,043 42,430
Operation and maintenance 686 732 2,589 2,446
Merger related costs, asset
impairments and other non-
recurring charges 49 69 2,160 125
Ceiling test charge --- --- 135 ---
Depreciation, depletion and
amortization 354 345 1,359 1,247
Taxes, other than income taxes 49 59 356 283
11,503 15,618 56,642 46,531
Operating income 612 681 833 2,384
Equity earnings and other income 279 144 788 634
Earnings before interest expense,
income taxes and other
charges 891 825 1,621 3,018
Interest and debt expense 290 283 1,155 1,040
Minority interest 48 59 217 204
Income before income taxes and
other charges 553 483 249 1,774
Income taxes 178 129 182 538
Income before extraordinary
items 375 354 67 1,236
Extraordinary items, net of
income taxes --- (19) 26 70
Net income $ 375 $ 335 $ 93 $ 1,306
Pro forma net income (A) $ 408 $ 403 $ 1,726 $ 1,323
Diluted earnings per common
share:
Pro forma diluted earnings
per common share (A) $ 0.79 $ 0.78 $ 3.31 $ 2.60
Extraordinary items --- (0.04) 0.05 0.14
Merger related costs, asset
impairments and other
non-recurring charges (0.07) (0.09) (2.96) (0.17)
Ceiling test charge --- --- (0.17) ---
Adjusted pro forma
diluted earnings per
common share (B) $ 0.72 $ 0.65 $ 0.23 $ 2.57
Reported diluted
earnings per common
share (C) $ 0.72 $ 0.65 $ 0.18 $ 2.57
Adjusted pro forma diluted
average common shares
outstanding (000's) (B) 529,154 520,254 530,494 513,578
Reported diluted average common
shares outstanding (000's) (C) 529,154 520,254 515,591 513,578
(A) Fourth quarter 2001 pro forma net income and pro forma diluted
earnings per share exclude after-tax merger related costs, asset
impairments and other non-recurring charges of $(33) million. Fourth
quarter 2000 pro forma net income and pro forma diluted earnings per
share exclude after-tax merger related costs, asset impairments and
other non-recurring charges of $(49) million and an after-tax
extraordinary loss related to FTC-ordered asset sales of
$(19) million. Year to date 2001 pro forma net income and pro forma
diluted earnings per share exclude after-tax merger related costs,
asset impairments and other non-recurring charges of $(1,568) million,
the after-tax impact of extraordinary items related to FTC-ordered
asset sales of $26 million and the after-tax ceiling test charge of
$(91) million. Year to date 2000 pro forma net income and pro forma
diluted earnings per share exclude after-tax merger related costs,
asset impairments and other non-recurring charges of $(87) million and
the after-tax impact of extraordinary items related to FTC-ordered
asset sales of $70 million.
(B) Adjusted pro forma diluted earnings per common share and adjusted pro
forma diluted average common shares outstanding for the twelve months
ended December 31, 2001, include the impact of securities that are
antidilutive for purposes of reporting under U.S. generally accepted
accounting principles.
(C) Reported diluted earnings per common share and average common shares
outstanding represent those amounts determined under U.S. generally
accepted accounting principles.
EL PASO CORPORATION
SCHEDULE OF NON-RECURRING ITEMS
(In Millions)
Fourth Quarter Ended Twelve Months Ended
December 31, December 31,
2001 2000 2001 2000
pre- after- pre- after- pre- after- pre- after-
tax tax tax tax tax tax tax tax
Merger-related costs
Employee severance,
retention and
transition costs $9 $6 $1 $--- $840 $570 $31 $21
Transaction costs --- --- 36 26 70 48 60 42
Business and
operational
integration (34) (23) --- --- 382 259 --- ---
Merger-related
asset impairments 6 4 --- --- 163 111 --- ---
Other 16 11 --- --- 229 257 2 1
Total merger-
related costs (3) (2) 37 26 1,684 1,245 93 64
Asset Impairment
Charges 52 35 32 23 159 108 32 23
Total merger-
related and asset
impairment
charges 49 33 69 49 1,843 1,353 125 87
Changes in accounting
estimates --- --- --- --- 317 215 --- ---
Total merger-
related, asset
impairment and
other 49 33 69 49 2,160 1,568 125 87
Ceiling Test Charge --- --- --- --- 135 91 --- ---
Total charges
impacting EBIT 49 33 69 49 2,295 1,659 125 87
Extraordinary
(gain)/loss, net of
income taxes --- 19 (26) (70)
Total Non-recurring
charges $49 $33 $69 $68 $2,295 $1,633 $125 $17
Fourth Quarter 2001 Twelve Months Ended 2001
Pro Non- Pro Non-
forma Rec Reported forma Rec Reported
Total EBIT by segment EBIT Charges EBIT EBIT Charges EBIT
Pipelines $362 $--- $362 $1,372 $334 $1,038
Merchant Energy 300 50 250 1,275 378 897
Production 277 --- 277 1,128 208 920
Field Services 61 --- 61 251 56 195
Corporate and Other (60) (1) (59) (110) 1,319 (1,429)
Total $940 $49 $891 $3,916 $2,295 $1,621
Fourth Quarter 2000 Twelve Months Ended 2000
Pro Non- Pro Non-
forma Rec Reported forma Rec Reported
Total EBIT by segment EBIT Charges EBIT EBIT Charges EBIT
Pipelines $341 $--- $341 $1,323 $--- $1,323
Merchant Energy 302 21 281 950 21 929
Production 137 --- 137 609 --- 609
Field Services 59 11 48 225 11 214
Corporate and Other 55 37 18 36 93 (57)
Total $894 $69 $825 $3,143 $125 $3,018
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SOURCE El Paso Corporation
CONTACT: Communications and Government Affairs, Norma F. Dunn, Senior
Vice President, +1-713-420-3750, or fax, +1-713-420-3632, or Investor
Relations, Bruce L. Connery, Vice President, +1-713-420-5855, or fax,
+1-713-420-4417, both of El Paso Corporation
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