El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
13-Aug-2003
El Paso Corporation Reports Second Quarter 2003 Results HOUSTON, Aug. 13 /PRNewswire-FirstCall/ -- El Paso Corporation (NYSE: EP)
today reported results for the second quarter of 2003 and updated its progress
on its 2003 operational and financial plan.
Highlights
-- The company announced that Douglas L. Foshee will become the new
president and chief executive officer, effective September 2, 2003.
-- Year-to-date cash flow from operations increased to $1 billion from
$527 million in the first half of 2002.
-- During the first six months of 2003, El Paso reduced its consolidated
obligations senior to common stock by $1.5 billion, net of non-
recourse project finance debt.
-- The company continued to make progress on its asset sale program with
approximately $2.7 billion (78 percent) of sales completed or
announced against its 2003 goal of $3.4 billion.
-- The company continues to make substantial progress in its
restructuring efforts by exiting non-strategic businesses, which will
allow El Paso to focus on the future growth of its core businesses.
-- El Paso completed a number of important financings and extended its
near-term debt maturities.
-- The company executed definitive settlement agreements associated with
the western energy crisis.
-- The company completed its announced Clean Slate Initiative, which
resulted in the identification of approximately $445 million of cost
savings and business efficiencies that will be phased in by the end of
2004.
-- While the pipeline, production, midstream, and power businesses
achieved good second quarter results, financial results for energy
trading were below expectations. The company is continuing its
progress towards the liquidation of its trading book.
Financial Results
El Paso implemented two important strategic initiatives during the second
quarter that affected financial results. As previously announced, El Paso's
petroleum business was moved to discontinued operations as a result of the
decision to exit that business within the next 12 months. In accordance with
Generally Accepted Accounting Principles (GAAP), prior periods have been
restated (with no impact to net income) to classify petroleum as a
discontinued operation. In addition, as part of the company's efforts to
simplify its balance sheet, El Paso purchased the equity interests of Gemstone
and Electron for a total of $225 million in the second quarter, and the
associated assets and debt were consolidated accordingly. Because the
Electron acquisition process began in the first quarter, GAAP required that
first quarter 2003 results be restated (with no impact to net income) to
reflect the consolidation of the Electron assets as of January 1, 2003.
Second Quarter Results Quarter Ended June 30
(In millions, except per share amounts) 2003 2002
GAAP net loss $ (1,188) $(45)
Discontinued operations, net of income taxes 916 116
Cumulative effect of accounting changes -- (14)
GAAP income (loss) from continuing operations $(272) $57
Significant items from continuing
operations, net of tax 264
226
Pro forma net income (loss) $ (8) $283
GAAP loss per share-diluted $ (1.99) $ (.08)
Discontinued Operations 1.54 .22
Cumulative effect of accounting changes -- (.03)
GAAP earnings (loss) from continuing
operations per share-diluted $ (.45) $.11
Significant items from continuing operations .44 .42
Pro forma earnings (loss) per share-diluted $(.01) $.53
SECOND QUARTER RESULTS
El Paso reported a net loss of $1.2 billion, or $1.99 per diluted share,
for the second quarter of 2003 compared with a loss of $45 million, or $.08
per diluted share, in the second quarter of 2002. On a pro forma basis, the
company had a second quarter 2003 loss of $8 million, or $0.01 per diluted
share, compared with earnings of $283 million, or $.53 per diluted share, in
the second quarter of 2002. Second quarter 2003 results for discontinued
operations include an $836-million after-tax, or $1.40 per share, impairment
of its petroleum business, primarily related to the decision to sell the Aruba
refinery. Second quarter 2003 significant items affecting continuing
operations totaled $264 million, or $.44 per diluted share, mostly
attributable to an impairment of telecom assets and the western energy
settlement. Last year's second quarter results included significant items
totaling $226 million, or $.42 per diluted share, primarily for ceiling test
charges on Canadian and other international natural gas and oil properties and
restructuring costs. A complete schedule of significant items is attached to
this release.
While not listed as significant items, two additional items negatively
impacted second quarter 2003 results. An increase in the value of the Euro
against the dollar affected the unhedged portion of El Paso's Euro-denominated
debt, causing an additional $46 million of pre-tax corporate expense
($35 million after-tax, or $.06 per diluted share). Also, the early repayment
of a $1.2-billion secured loan caused an additional $37 million of pre-tax
corporate expense ($28 million after-tax, or $.05 per diluted share). This
repayment results in annual interest expense savings of $24 million.
El Paso reported strong cash flow from operating activities for the first
six months of 2003 of $1.0 billion. The company generated $527 million of
cash flow from operating activities during the same period last year.
"Although this has been a difficult year for El Paso shareholders, we
believe that the actions we are taking will position us for further debt
reduction and earnings growth in 2004," said Ronald L. Kuehn, Jr., chairman
and chief executive officer of El Paso Corporation. "We are making steady
progress on our asset sale program, simplifying our balance sheet, reducing
our total obligations senior to common stock, and continuing the liquidation
of our trading book. All of these are important components of our concerted
efforts to strengthen the company."
SECOND QUARTER SEGMENT RESULTS
Pipeline Group
The Pipeline Group's second quarter reported EBIT was $145 million
compared with reported EBIT of $323 million during the second quarter of 2002.
Second quarter 2003 results include $154 million of charges primarily related
to the western energy settlement and related expenses. After adjusting for
significant items, second quarter 2003 pro forma EBIT was $299 million
compared with $324 million for the same 2002 period. The decline is due to
the sale of Colorado Interstate Gas Company's production properties in July
2002, the sale of ANR Pipeline's ownership in the Alliance pipeline system in
November 2002, and lower revenues on the El Paso Natural Gas pipeline system.
These factors were partially offset by the reactivation of the Elba Island LNG
facility and new expansion projects, including Southern Natural Gas Company's
South System I expansion.
El Paso's Pipeline Group continues with its active expansion program. In
May, Cheyenne Plains Gas Pipeline Company filed an application with the
Federal Energy Regulatory Commission seeking approval to construct, own, and
operate a new, 560-thousand dekatherm per day (MDth/d) interstate pipeline to
transport natural gas from the Rockies to markets in the Mid-continent. The
pipeline is scheduled to be in-service by mid-2005. In June, Tennessee Gas
Pipeline Company announced the completion of construction and the beginning of
service on its Can-East Project that extends its system in northern
Pennsylvania to Leidy, Pennsylvania. Tennessee also placed its South Texas
Expansion Project into service on August 1, 2003. The project connects
Tennessee's existing South Texas system in Hidalgo County to Gasoducto del
Rio, a new natural gas pipeline in northern Mexico.
Pipeline Group Results Second Quarter Ended June 30
(In millions) 2003 2002
GAAP Operating Income $112 $277
Equity and Other Income 33 46
Reported EBIT $145 $323
Significant items(1) 154 1
Pro forma EBIT $299 $324
Total throughput (BBtu/d) 19,007 19,080
(1) Significant items: Principally western energy settlement and related
expenses (2003); restructuring costs (2002).
Production
Production's reported EBIT for the second quarter 2003 was $168 million
versus $7 million during the second quarter of 2002. Reported results for
2002 included a $234-million ceiling test charge associated primarily with
Canadian and other international natural gas and oil properties. Second
quarter equivalent production declined 25 percent due largely to sales of
proved reserves since early 2002. The realized price for natural gas, net of
hedges, rose to $4.06 per thousand cubic feet (Mcf) in 2003 from $3.45 per Mcf
in 2002, while the realized price for oil, condensate, and liquids, net of
hedges, rose to $25.15 from $22.14 per barrel (Bbl). Total per-unit costs
increased to an average of $2.69 per thousand cubic feet equivalent (Mcfe) in
the second quarter 2003 compared with $1.92 per Mcfe during the same 2002
period. The per-unit costs were affected by a higher depletion rate resulting
from higher finding and development costs experienced over the last year and
the sale of reserves that have decreased the company's reserve base. In
addition, the per-unit costs were affected by increased corporate expense
allocations on lower equivalent production and tax credits taken in 2002 for
qualified natural gas wells.
The company has hedged approximately 108 trillion British thermal units
(TBtu) of its remaining expected 2003 natural gas production at a NYMEX price
of $3.45 per million British thermal unit (MMBtu) or $3.65 per Mcf. For 2004,
El Paso has hedged approximately 75 TBtu of its natural gas production at a
NYMEX price of $2.55 per MMBtu or $2.70 per Mcf. The company expects that its
2003 realized price for natural gas will be approximately $.50 less than the
NYMEX spot price due to transportation costs and regional price differentials.
El Paso's exploration program has delivered good results so far this year,
particularly in the deep shelf Gulf of Mexico and Brazil. The company has
been successful on eight of 11 deep-shelf exploration wells. These
discoveries have resulted in approximately 130 billion cubic feet equivalent
(Bcfe) of proved reserves, with another 50 Bcfe of probable reserves
identified. These discoveries will add an estimated 185 million cubic feet
equivalent per day (MMcfe/d) of production, net to El Paso's interest. To
date, only one well has been placed on stream for 20 MMcfe/d. Offshore
Brazil, El Paso has made two discoveries in the Camamu Basin and the Santos
Basin that are adding an initial 256 Bcfe of proved reserves with another
374 Bcfe of probable reserves that could be added with additional drilling and
testing.
While El Paso's exploration and development drilling programs have yielded
good results this year, delays in connecting new wells, the loss of production
from existing Gulf of Mexico and South Texas wells, and a faster than
anticipated decline of base production have caused reduced expectations for
2003 production. The company now believes that its full year 2003 production
will be between 450 and 470 Bcfe, approximately 85 percent of which is natural
gas.
Production Results Second Quarter Ended June 30
(In millions) 2003 2002
GAAP Operating Income $164 $5
Equity and Other Income 4 2
Reported EBIT 168 7
Significant items(1) 1 234
Pro forma EBIT $169 $241
Natural gas sales volumes (MMcf) 96,857 120,020
Oil, condensate and liquids sales volumes (MBbls) 2,644 4,966
Total equivalent sales volumes (MMcfe) 112,723 149,816
Weighted average realized prices:
Natural gas ($/Mcf) $4.06 $3.45
Oil, condensate and liquids ($/Bbl) $25.15 $22.14
(1) Significant items: Restructuring costs and Canadian intangible
impairment offset by an asset sale gain (2003); ceiling test charges
on Canadian and other international natural gas and oil properties
(2002).
Field Services
Field Services reported an EBIT loss of $54 million for the second quarter
2003 compared with income of $54 million during the second quarter of 2002.
Reported results for 2003 include an $80-million impairment of a joint venture
interest in the Dauphin Island pipeline system, Mobile Bay gas processing
plant and related assets plus $3 million of restructuring costs offset by
$6 million of asset sale gains. Quarterly results for 2002 included a
$10-million asset sale gain. Second quarter 2003 pro forma EBIT was lower
than 2002 levels, primarily due to the sale of approximately $1 billion of
midstream assets in the past year to GulfTerra Energy Partners (NYSE: GTM) and
other third parties. As a result of these asset sales, El Paso's remaining
midstream business is largely comprised of certain gas processing plants and
its interest in GulfTerra.
The earnings contribution from GulfTerra increased to $42 million this
quarter from $18 million during the second quarter of 2002. GulfTerra had a
very successful second quarter due to significant contributions from the
onshore San Juan and Permian Basin assets and the offshore Viosca Knoll
pipeline and Falcon Nest platform and pipeline. Cash distributions from
GulfTerra totaled $31 million during the quarter compared with $19 million in
the second quarter of 2002.
The decrease in gathering and transportation volumes from prior-year
levels is due to asset sales. Processing margins were reduced during the
quarter due to higher gas prices and reduced petrochemical and refinery demand
for natural gas liquids.
Field Services Results Second Quarter Ended June 30
(In millions) 2003 2002
GAAP Operating Income (loss) $(16) $ 36
Equity and Other Income (expense) (38) 18
Reported EBIT (loss) (54) 54
Significant items(1) 77 (9)
Pro forma EBIT $ 23 $ 45
Gathering and transportation volumes (BBtu/d) 444 2,265
Weighted average gathering and
transportation rate ($/MMBtu) $.18 $.20
Total processing volumes (Inlet BBtu/d) 3,202 3,956
Weighted average processing margins ($/MMBtu) $.08 $.11
Total NGL production (Bbl/d) 91,818 181,718
(1) Significant items: Joint venture impairment and restructuring costs,
offset by a net asset sales gain (2003); gain on an asset sale
(2002).
Merchant Energy
The Merchant Energy Group, consisting of domestic and international power,
LNG, and energy trading, reported second quarter 2003 EBIT of $76 million
compared with $123 million in the prior-year period. Significant items for
2003 include an $18-million reduction in the estimated western energy
settlement liability, net of related expenses, plus offsetting net asset sale
gains, impairments and restructuring costs, while 2002 results included
$11 million for restructuring costs.
El Paso's power business had pro forma second quarter EBIT of $169 million
versus $213 million in 2002. Second quarter results reflect the consolidation
of earnings from Electron, which earned $70 million during the period compared
with $78 million last year, including $46 million of management fees earned in
2002. EBIT from the Gemstone investment consolidated in April 2003 increased
by $33 million for the quarter compared with last year. Also contributing to
2003 results was higher income from domestic power assets. Last year's
results also benefited from the $90-million gain from a buyout of a power
contract in El Salvador.
Trading operations had a second quarter pro forma EBIT loss of $95 million
compared with a $132-million EBIT loss in the same 2002 period. Several
factors contributed to the second quarter 2003 loss. A lower spread between
natural gas prices and power prices at quarter end caused a $31-million
mark-to-market loss on a power tolling arrangement in the Midwest. El Paso
also incurred approximately $15 million of demand charges for transportation
and storage contracts that were not fully utilized due to decreased activity
as the company continues to exit trading and focus on conserving cash. The
remainder of the losses came primarily from general and administrative
expenses, including $12 million of accretion for the western energy settlement
liability.
LNG and Other had a pro forma EBIT loss of $17 million in the second
quarter of 2003 versus income of $53 million last year. The decrease was
primarily due to mark-to-market income from the execution of the Snovhit LNG
supply contract in 2002 and mark-to-market losses on LNG supply contracts in
2003.
El Paso continues to show consistent progress in exiting the trading
business. Since the beginning of the year through June 30, 2003, forward
contract positions have declined 40 percent, including the liquidation of its
European trading portfolio and its coal, currency, and interest rate books.
In addition, the company's transportation capacity has declined 57 percent,
and storage capacity has declined 78 percent. The company also continues to
pursue the sale of its domestic power facilities and LNG supply contracts.
Merchant Energy Results Second Quarter Ended June 30
(In millions) 2003 2002
GAAP Operating Income (Loss) $(46) $ 36
Equity and Other Income 122 87
Reported EBIT $ 76 $123
Significant items(1) (19) 11
Pro forma EBIT $ 57 $134
(1) Significant items: western energy settlement liability and related
expenses plus offsetting net asset sale gains, impairments and
restructuring costs (2003); restructuring costs (2002).
Detailed operating statistics for each of El Paso's businesses are
available at www.elpaso.com in the Investors section.
INTEREST EXPENSE
Interest expense on outstanding debt and preferred interests of
consolidated subsidiaries (which includes payments on financings such as
preferred securities and Clydesdale) increased to $479 million in the second
quarter of 2003 versus $347 million in the prior year. The increase is due to
higher average debt balances in 2003 and the consolidation of Electron,
Gemstone, and the Lakeside operating lease.
Interest Expense and Return on Preferred
Interests of Consolidated Subsidiaries Second Quarter Ended June 30
(In millions) 2003 2002
Interest expense $463 $304
Return on preferred interests of
consolidated subsidiaries 16 43
Total expense $479 $347
OUTLOOK
El Paso has created a Board-level Long Range Planning Committee, which is
preparing a course of action to optimize and streamline the company's core
natural gas businesses, achieve improved earnings and additional debt
reduction, and generate free cash flow. The plan will undergo further review
by Douglas L. Foshee after he becomes El Paso's president and chief executive
officer on September 2, 2003.
On a reported basis for 2003, El Paso expects to realize a loss of
approximately $2.35 to $2.65 per diluted share. This forecast assumes that
discontinued operations will break even for the rest of the year and that
there will not be any additional significant items. El Paso now expects to
achieve pro forma earnings per diluted share for continuing operations for
2003 of approximately $.15 to $.45. This is based primarily on lower natural
gas and oil production and current natural gas prices, the movement of
petroleum to discontinued operations and greater-than-expected trading losses.
LIQUIDITY UPDATE
As of July 31, 2003, El Paso had $3.0 billion of available cash and lines
of credit as detailed below.
Sources
(in billions)
Available cash $1.5
2-year bank facility 3.0
Multi-year bank facility 1.0
Subtotal sources $5.5
Uses
2-year bank facility $1.5
2-year facility letters of credit 1.0
Multi-year bank facility --
Multi-year facility letters of credit --
Subtotal uses $2.5
Net available cash and lines of credit $3.0
As of June 30, 2003, El Paso had $1.8 billion of total cash, $1.4 billion
of which was readily available. El Paso's multi-year bank facility expired on
August 4, 2003, and was not renewed in accordance with its previously
announced financing plans.
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 provided herein and will also
be maintained on El Paso's Web site 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 (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 substantial 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 more effectively evaluate
the performance of all El Paso's businesses and investments.
The company also uses the following non-GAAP financial measures to analyze
its ongoing operating results and business segments and to monitor, assess,
and identify meaningful trends in its operating and financial performance:
-- "pro forma net income (loss)";
-- "pro forma earnings (loss) per share-diluted"; and
-- "pro forma earnings before interest and income taxes" or
"pro forma EBIT."
These measures reflect adjustments to GAAP net income (loss), GAAP
earnings (loss) per share-diluted, and EBIT, respectfully, for significant
items specified herein and in the attached schedule that management believes
are unusual due to their nature or infrequency. El Paso believes that pro
forma net income (loss), pro forma earnings (loss) per share-diluted and pro
forma EBIT measurements are useful to investors because they reflect
adjustments for significant items that are unusual due to their nature or
infrequency, thereby permitting a meaningful comparison of the company's
financial and operating performance between periods and providing important
information regarding performance trends.
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 business segments and
to compare the operating and financial performance of the company and 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.
CONFERENCE CALL REMINDER; SLIDES TO BE AVAILABLE ON WEB SITE
El Paso Corporation has scheduled a live webcast to discuss its financial
results today at 10:00 a.m. Eastern Daylight Time, 9:00 a.m. Central Daylight
Time, which may be accessed online through El Paso's Web site at
www.elpaso.com in the Investors section. A limited number of telephone lines
will also be available to participants by dialing (973) 935-8506 ten minutes
prior to the start of the webcast.
During the webcast, management will refer to slides that will be posted on
the Web site. The slides will be available 30 minutes before the webcast and
can be accessed in the Investors section.
The webcast replay will be available online through the Web site in the
Investors section. A telephone audio replay will be also available through
August 20, 2003 by dialing (973) 341-3080 (access code 4069279).
El Paso Corporation is the leading provider of natural gas services and
the largest pipeline company in North America. The company has core
businesses in pipelines, production, and midstream services. Rich in assets,
El Paso is committed to developing and delivering new energy supplies and to
meeting the growing demand for new energy infrastructure. For more
information, 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,
including, without limitation, the successful implementation of the 2003
operational and financial plan; the successful implementation of the
settlement related to the western energy crisis; actions by the credit rating
agencies; the successful close of financing transactions; our ability to
successfully exit the energy trading business; our ability to divest of
certain non-core assets; changes in commodity prices for oil, natural gas, and
power; general economic and weather conditions in geographic regions or
markets served by El Paso Corporation 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; inability to
realize anticipated synergies and cost savings associated with restructurings
and divestitures on a timely basis; difficulty in integration of the
operations of previously acquired companies, 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 Share Amounts)
(UNAUDITED)
Second Quarter Six Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
Operating revenues $1,679 $1,821 $3,604 $4,737
Operating expenses
Cost of products and services 441 414 1,032 1,383
Operation and maintenance 462 434 949 950
Restructuring costs 31 63 100 63
(Gain) loss on long-lived assets 401 (12) 423 (27)
Western Energy Settlement 123 --- 123 ---
Ceiling test charges --- 234 --- 267
Depreciation, depletion and
amortization 361 334 721 684
Taxes, other than income taxes 71 58 149 136
1,890 1,525 3,497 3,456
Operating income (loss) (211) 296 107 1,281
Equity earnings and other income
(expense) 45 134 (94) (261)
Earnings (losses) before interest
expense, income taxes and other
charges (166) 430 13 1,020
Interest and debt expense 463 304 876 607
Return on preferred interests of
consolidated subsidiaries 16 43 37 83
Income (loss) before income taxes (645) 83 (900) 330
Income taxes (373) 26 (478) 104
Income (loss) from continuing
operations (272) 57 (422) 226
Discontinued operations, net of
income taxes (916) (116) (1,138) (56)
Cumulative effect of accounting
changes, net of income taxes --- 14 (22) 168
Net income (loss) $(1,188) $(45) $(1,582) $338
Diluted earnings (losses) per common
share, as reported
Income (loss) from continuing
operations $(0.45) $0.11 $(0.71) $0.43
Discontinued operations, net of
income taxes (1.54) (0.22) (1.91) (0.11)
Cumulative effect of accounting
changes, net of income taxes --- 0.03 (0.04) 0.32
Net income (loss) $(1.99) $(0.08) $(2.66) $0.64
Diluted average common shares
outstanding (000's) 595,569 532,163 595,316 530,861
EL PASO CORPORATION
CONSOLIDATED ANALYSIS OF SIGNIFICANT ITEMS
(In Millions, Except per Share Amounts)
(UNAUDITED)
Second Quarter Six Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
Reported net income (loss) $(1,188) $(45) $(1,582) $338
Significant items affecting EBIT
Restructuring costs 31 63 100 63
Impairment of long-lived assets 421 --- 439 ---
Impairment of equity investments 81 --- 374 286
Impairment of cost basis investments --- --- --- 56
Net gain on sale of long-lived
assets (14) (10) (8) (10)
Net gain on sale of equity
investments (23) --- (12) ---
Western Energy Settlement and
related expenses 138 --- 138 ---
Ceiling test charges --- 234 --- 267
Currency loss on Euro bond offering --- 45 --- 45
Total significant items affecting
EBIT 634 332 1,031 707
Income tax effect of above
significant items (370) (106) (511) (223)
Discontinued operations, net of
income taxes 916 116 1,138 56
Cumulative effect of accounting
changes, net of income taxes:
Adoption of Derivatives Issue C-16 --- (14) --- (14)
Adoption of SFAS No. 143- retirement
obligations --- --- 22 ---
Adoption of SFAS No. 141-
elimination of negative goodwill --- --- --- (154)
Pro forma net income (loss) $(8) $283 $98 $710
Diluted earnings (losses) per common
share:
Pro forma diluted earnings per
common share $(0.01) $0.53 $0.16 $1.33
Restructuring costs (0.02) (0.08) (0.08) (0.08)
Impairment of long-lived assets (0.29) --- (0.37) ---
Impairment of equity investments (0.06) --- (0.32) (0.36)
Impairment of cost basis investments --- --- --- (0.07)
Net gain on sale of long-lived
assets 0.01 0.01 0.01 0.01
Net gain on sale of equity
investments 0.02 --- 0.01 ---
Western Energy Settlement and
related expenses (0.10) --- (0.12) ---
Ceiling test charges --- (0.29) --- (0.34)
Currency loss on Euro bond offering --- (0.06) --- (0.06)
Discontinued operations (1.54) (0.22) (1.91) (0.11)
Cumulative effect of accounting
changes:
Adoption of Derivatives Issue C-16 --- 0.03 --- 0.03
Adoption of SFAS No. 143-
retirement obligations --- (0.04) ---
Adoption of SFAS No. 141-
elimination of negative goodwill --- --- --- 0.29
Reported diluted earnings (losses)
per common share $(1.99) $(0.08) $(2.66) $0.64
Adjusted pro forma diluted average
common shares outstanding (000's) 595,569 539,975 595,316 547,130
Reported diluted average common
shares outstanding (000's) 595,569 532,163 595,316 530,861
EL PASO CORPORATION
SCHEDULE OF SIGNIFICANT ITEMS
(UNAUDITED)
Second Quarter Ended June 30,
2003 2002
(In Millions) Pre-tax After-tax Pre-tax After-tax
Restructuring costs
Employee severance,
retention and transition costs $31 $13 $23 $16
Transaction costs and fees --- --- 40 27
LNG charter cancellation
and restructuring costs --- --- --- ---
Total restructuring costs 31 13 63 43
Asset impairments and net
(gain)/loss on sales
Long-lived assets impairment 421 175 --- ---
Equity investments impairment 81 34 --- ---
Cost basis investments
impairment --- --- --- ---
Long-lived assets net gain on
sales (14) (6) (10) (7)
Equity investments net gain
on sales (23) (9) --- ---
Total (gain)/loss on assets 465 194 (10) (7)
Western Energy Settlement
and related expenses 138 57 --- ---
Currency loss on Euro bond offering --- --- 45 31
Ceiling test charges --- --- 234 159
Total charges impacting EBIT 634 264 332 226
Discontinued operations, net
of income taxes --- 916 --- 116
Cumulative effect of accounting
changes, net of income taxes --- --- --- (14)
Total significant items $634 $1,180 $332 $328
Second Quarter 2003
Pro forma Significant Reported
Total EBIT by segment EBIT Items EBIT
Pipelines $299 $154 $145
Production 169 1 168
Merchant Energy 57 (19) 76
Field Services 23 77 (54)
Corporate and Other (80) 421 (501)
Total $468 $634 $(166)
Second Quarter 2002
Pro forma Significant Reported
Total EBIT by segment EBIT Items EBIT
Pipelines $324 $1 $323
Production 241 234 7
Merchant Energy 134 11 123
Field Services 45 (9) 54
Corporate and Other 18 95 (77)
Total $762 $332 $430
Six Months Ended June 30,
2003 2002
(In Millions)
Pre-tax After-tax Pre-tax After-tax
Restructuring costs
Employee severance, retention
and transition costs $56 $28 $23 $16
Transaction costs and fees --- --- 40 27
LNG charter cancellation
and restructuring costs 44 22 --- ---
Total restructuring costs 100 50 63 43
Asset impairments and net
(gain)/loss on sales
Long-lived assets impairment 439 221 --- ---
Equity investments impairment 374 189 286 196
Cost basis investments
impairment --- --- 56 38
Long-lived assets net gain
on sales (8) (4) (10) (7)
Equity investments net gain
on sales (12) (6) --- ---
Total (gain)/loss on assets 793 400 332 227
Western Energy Settlement
and related expenses 138 70 --- ---
Currency loss on Euro bond offering --- --- 45 31
Ceiling test charges --- --- 267 183
Total charges impacting
EBIT 1,031 520 707 484
Discontinued operations,
net of income taxes --- 1,138 --- 56
Cumulative effect of accounting
changes, net of income taxes --- 22 --- (168)
Total significant items $1,031 $1,680 $707 $372
Six Months Ended June 30, 2003
Pro forma Significant Reported
Total EBIT by segment EBIT Items EBIT
Pipelines $728 $154 $574
Production 425 13 412
Merchant Energy (32) 343 (375)
Field Services 51 78 (27)
Corporate and Other (128) 443 (571)
Total $1,044 $1,031 $13
Six Months Ended June 30, 2002
Pro forma Significant Reported
Total EBIT by segment EBIT Items EBIT
Pipelines $723 $1 $722
Production 450 267 183
Merchant Energy 446 353 93
Field Services 96 (9) 105
Corporate and Other 12 95 (83)
Total $1,727 $707 $1,020
SOURCE El Paso Corporation
-0- 08/13/2003
/CONTACT: Norma F. Dunn, Senior Vice President, Communications and
Government Affairs, +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; or Joele Frank, or Dan Katcher,
both of Joele Frank, Wilkinson Brimmer Katcher, +1-212-355-4449, or fax,
+1-212-355-4554, for El Paso Corporation/
/Web site: http://www.elpaso.com /
(EP GTM)
CO: El Paso Corporation; GulfTerra Energy Partners
ST: Texas
IN: OIL
SU: ERN
GN
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9475 08/13/2003 07:30 EDT http://www.prnewswire.com
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El Paso Corp.
