El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
5-May-2006
El Paso Corporation Reports First Quarter 2006 Financial Results HOUSTON, May 5 /PRNewswire-FirstCall/ -- El Paso Corporation (NYSE: EP) is
providing today first quarter 2006 financial and operational results for the
company.
Highlights:
- $0.52 earnings per fully diluted share from continuing operations
versus $0.18 in 2005
- $949 million cash flow from continuing operations
- $925-million reduction in gross debt in first quarter
- On track to deliver on 2006 goals
- Pipeline results reflect impact of growth capital
- E&P delivering outstanding drillbit performance
"El Paso's first quarter results provide solid evidence that 2006 will be
a breakout year for the company," said Doug Foshee, El Paso's president and
chief executive officer. "Our businesses are performing well; our cash flow
is strong; and our debt reduction is on track. In addition, the hedging
activities we are announcing today help ensure our earnings and cash flow
growth and balance sheet improvement will continue in 2007."
First Quarter Financial Results
For the three months ended March 31, 2006, El Paso reported net income
available to common stockholders of $346 million, or $0.49 per diluted share,
compared with net income of $106 million, or $0.17 per diluted share, for the
same period in 2005. Results for 2006 include $162 million ($0.14 per diluted
share) of non-cash, mark-to-market, pre-tax gains on derivatives intended to
hedge the price risk of natural gas and oil production. During the same
period in 2005, price risk management derivatives generated a $106-million
mark-to-market loss. Additionally, results in 2005 were impacted by net gains
on the sale of assets and investments of $105 million, driven primarily by
gains associated with the sale of the company's remaining interests in
Enterprise Products Partners, offset by impairments on certain power assets.
Also in 2005, results were negatively impacted by a $59-million charge for the
early payoff of the western energy settlement.
During the first quarter of 2006, El Paso's board of directors approved
the sale of the company's interest in the Macae power facility in Brazil to
Petrobras, which closed on April 27, 2006. As a result, the financial results
of Macae are reflected as discontinued operations for all periods presented
herein.
A summary of financial results for the three months ended March 31, 2006
and 2005 are as follows:
Financial Results
Three Months Ended
March 31,
($ in millions, except per-share amounts)
2006 2005
Earnings before interest and taxes (EBIT)
Pipelines $478 $412
Exploration and Production 199 183
Marketing and Trading 208 (185)
Power 3 (39)
Field Services --- 182
Corporate --- (90)
----------------------
Total $888 $463
==== ====
Income from continuing operations $375 $113
Discontinued operations, net of income taxes (19) (7)
----------------------
Net income 356 106
Preferred stock dividends 10 ---
----------------------
Net income available to common stockholders $346 $106
==== ====
Three Months Ended
March 31,
2006 2005
Earnings (loss) per common share
Basic
Income from continuing operations $0.56 $0.18
Discontinued operations (0.03) (0.01)
Net income $0.53 $0.17
===== =====
Diluted
Income from continuing operations $0.52 $0.18
Discontinued operations (0.03) (0.01)
-----------------------
Net income $0.49 $0.17
===== =====
In the first quarter of 2006, the company generated cash flow from
continuing operations of $949 million, invested $401 million of capital, and
paid $36 million in dividends.
At March 31, 2006, El Paso's debt, net of cash, was $15.5 billion, a $572-
million reduction from December 31, 2005. Gross debt was at $17.3 billion on
March 31, 2006, a $925-million reduction from year end. Both net debt and
gross debt include $229 million of Macae project debt that was reported in
liabilities from discontinued operations. In April, El Paso closed $513
million of asset sales, further reducing El Paso's net debt position. The
company maintains a strong liquidity position with approximately $2.0 billion
of available cash and borrowing capacity as of March 31, 2006.
Business Unit Financial Update
Pipelines
The Pipelines segment's reported EBIT for the three months ended March 31,
2006 was $478 million, compared with $412 million for the same period in 2005.
The increase in first quarter EBIT is primarily due to the implementation of
new rates at El Paso Natural Gas (EPNG) and the expiration of discounted rates
to certain of EPNG's customers along with higher sales of firm and
interruptible capacity on other pipeline systems and contributions from
expansions including Cheyenne Plains. In addition, 2006 results benefited
from a favorable price revaluation of natural gas imbalances. These favorable
impacts were partly offset by higher O&M costs due to the hurricane repair
costs that were not fully reimbursed by insurance. Results for the first
quarter of 2005 were also favorably impacted by a contract restructuring on
ANR Pipeline.
The Pipelines placed two significant projects into service during the
first quarter. The Southern Pipelines completed an expansion of the Elba
Island terminal, roughly doubling the storage and sendout capacities of this
important supply source for Georgia and the Southeast. In addition, Wyoming
Interstate Company's 143-mile Piceance pipeline expansion went into service,
providing new takeaway capacity for producers in the Piceance Basin.
Pipelines Results Three Months Ended
March 31,
($ in millions) 2006 2005
EBIT $478 $412
DD&A $115 $111
Total throughput (BBtu/d) (A) 22,306 22,586
(A) Includes proportionate share of jointly owned pipelines
Exploration and Production
The Exploration and Production segment's EBIT for the three months ended
March 31, 2006 was $199 million, with $183 million for the same period in
2005. First quarter 2006 consolidated production volumes averaged 694 million
cubic feet equivalent per day (MMcfe/d), excluding unconsolidated affiliate
volumes of 71 MMcfe/d, compared with 766 MMcfe/d for the same period in 2005.
Average daily equivalent production volumes in the first quarter of 2006 were
negatively impacted by approximately 40 MMcfe/d of continued shut-in
production volumes in the Gulf of Mexico and south Louisiana regions as a
result of last year's hurricanes.
El Paso's 2006 drilling program is off to a strong start, with a 100-
percent success rate on operated wells so far this year. Based on the success
of the drilling program and expected recovery of volumes impacted by
hurricanes, El Paso believes it will reach the 825 MMcfe/d to 850 MMcfe/d
average production target (including unconsolidated affiliate volumes)
established for 2006.
The realized price for natural gas (net of transportation costs) during
the three months ended March 31, 2006, including the impact of hedges, was
$6.79 per thousand cubic feet (Mcf), compared with $6.10 per Mcf for the same
period in 2005. Oil, condensate, and natural gas liquids (NGL) realized
prices, including the impact of hedges, were $50.00 per barrel in first
quarter 2006, up 28 percent, compared with the same period in 2005. Total
per-unit cash costs increased to an average of $1.71 per Mcfe in first quarter
2006, compared with $1.44 per Mcfe for the same 2005 period, primarily due to
higher maintenance, repair, and workover costs and higher fuel and utility
expenses. Additionally, production taxes increased as compared with the first
quarter of 2005 primarily as a result of higher commodity prices.
Exploration and Production Results
($ in millions) Three Months Ended
March 31,
2006 2005
EBIT $199 $183
DD&A $146 $146
Average consolidated daily sales volumes:
Natural gas sales volumes (MMcf/d) 578 624
Oil, condensate, and NGL sales
volumes (MBbls/d) 19 24
Total equivalent average daily sales
volumes (MMcfe/d) 694 766
Four Star equity average daily sales
volumes (A)
Natural gas sales volumes (MMcf/d) 50 ---
Oil, condensate, and NGL sales volumes
(MBbls/d) 3 ---
Total equivalent average daily sales
volumes (MMcfe/d) 71 ---
Weighted average realized prices,
including hedges (B) (C)
Natural gas ($/Mcf) $6.79 $6.10
Oil, condensate, and NGL ($/Bbl) $50.00 $39.11
Per-unit costs ($/Mcfe) (C)
Unit of production depletion costs $2.20 $2.00
Cash costs (D) $1.71 $1.44
Total costs $3.91 $3.44
(A) Four Star is an equity investment acquired in the Medicine Bow
transaction. Amounts disclosed represent the company's proportionate
share in Four Star.
(B) Prices are stated after transportation costs.
(C) Price and costs per unit do not include the company's proportionate
share of Four Star volumes, revenue, or cost.
(D) Includes lease operating costs, production-related taxes, G&A
expenses, and other taxes
New Hedge Positions for 2007
El Paso announced today that it has entered into options contracts in
order to hedge 2007 E&P natural gas volumes. In total, the new positions
create an $8.00-per-million-British-thermal-unit (MMBtu) floor price and an
average ceiling price of $16.02 per MMBtu for 130 trillion British thermal
units (TBtu) of anticipated 2007 production. These positions were placed at
El Paso Exploration & Production Company. They are expected to receive hedge
accounting treatment and do not require margin postings. These positions
replaced option contracts in the Marketing and Trading segment that created a
$6.00 per-MMBtu floor for 30 TBtu as well as a $7.00 per-MMBtu floor and a
$9.00-per MMBtu ceiling for 21 TBtu of production.
Other Operations
Marketing and Trading
The Marketing and Trading segment reported EBIT of $208 million for the
three months ended March 31, 2006, compared with a loss of $185 million for
the same period in 2005. First quarter 2006 results were primarily driven by
$162 million of non-cash, mark-to-market gains on derivatives intended to
manage the price risk of the Exploration and Production segment's natural gas
and oil production and a $49-million, non-cash gain associated with the
assignment of two natural gas supply contracts. First quarter 2005 results
were driven by losses on natural gas and power derivative contracts.
Power
The Power segment reported EBIT of $3 million for the three months ended
March 31, 2006, compared with a loss of $39 million for the same period in
2005. First quarter 2006 results for the Power segment were primarily
attributable to earnings from the company's Brazilian investments. First
quarter 2005 results were negatively impacted by $74 million of impairments,
net of gains on sales. As previously discussed, the financial results of the
Macae power plant are reflected in discontinued operations.
Field Services
El Paso completed its exit from the midstream business in 2005 and, as a
result, had no activity in the Field Services segment for the three months
ended March 31, 2006. In the first quarter 2005, the segment reported EBIT of
$182 million. 2005 results were driven by $179 million of net gains primarily
associated with the sale of the company's remaining interests in Enterprise
Products Partners.
Corporate
Corporate reported break-even EBIT during the first quarter of 2006,
compared with an EBIT loss of $90 million in 2005. First quarter 2005 results
were negatively impacted by $59 million as a result of the early payoff of the
western energy settlement.
Other Operations Results
($ in millions) Three Months Ended
March 31,
2006 2005
Marketing and Trading
EBIT $208 $(185)
DD&A $1 $1
Power
EBIT $3 $(39)
DD&A $--- $1
Field Services
EBIT $--- $182
DD&A $--- $1
Corporate
EBIT $--- $(90)
DD&A $10 $9
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 first quarter 2006
results on May 5, 2006 beginning at 10 a.m. Eastern Time, 9 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 (973) 935-8504 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 May 12, 2006 by dialing (973) 341-3080 (access code
7285003). 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 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 evaluate more effectively
the performance of all of El Paso's businesses and investments. Per-unit total
cash expenses equal total operating expenses less DD&A and other non-cash
charges divided by total consolidated production. It is a valuable measure of
operating efficiency.
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, dependable manner. The company 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
the 2006 plan, including achieving our debt-reduction targets, 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; uncertainties and potential consequences associated with
the outcome of governmental investigations, including, without limitation,
those related to the reserve revisions and natural gas hedge transactions;
outcome of litigation, including shareholder derivative and class actions
related to reserve revisions and restatements; 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 successfully exit the energy trading business; our ability to close
our announced asset sales on a timely basis; changes in commodity prices for
oil, natural gas, and power and relevant basis spreads; inability to realize
anticipated synergies and cost savings associated with restructurings and
divestitures on a timely basis; 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
March 31,
-----------------------------
2006 2005
-----------------------------
Operating revenues $ 1,531 $ 1,088
Operating expenses
Cost of products and services 61 94
Operation and maintenance 334 411
Depreciation, depletion and
amortization 272 269
Loss on long-lived assets --- 7
Taxes, other than income taxes 64 65
------------ ------------
731 846
------------ ------------
Operating income 800 242
Equity earnings and other income 88 221
------------ ------------
Earnings before interest expense,
income taxes, and other charges 888 463
Interest and debt expense 348 343
Preferred interests of consolidated
subsidiaries --- 6
------------ ------------
Income before income taxes 540 114
Income taxes 165 1
------------ ------------
Income from continuing operations 375 113
Discontinued operations, net of
income taxes (19) (7)
------------ ------------
Net income 356 106
Preferred stock dividends 10 ---
------------ ------------
Net income available to common
stockholders $ 346 $ 106
============ ============
Earnings (losses) per common share
Basic
Income from continuing operations $ 0.56 $ 0.18
Discontinued operations, net of
income taxes (0.03) (0.01)
------------ ------------
Net income $ 0.53 $ 0.17
============ ============
Diluted
Income from continuing operations $ 0.52 $ 0.18
Discontinued operations, net of
income taxes (0.03) (0.01)
------------ ------------
Net income $ 0.49 $ 0.17
============ ============
Weighted average common shares
outstanding
Basic 656 640
============ ============
Diluted 724 642
============ ============
Dividends declared per common share $ 0.04 $ 0.04
============ ============
EL PASO CORPORATION
SEGMENT INFORMATION
(UNAUDITED)
2006 2005
--------------------------------------------------------------------------
(In millions) First First Second Third Fourth
--------------------------------------------------------------------------
Operating revenues
Pipeline Group $ 837 $ 768 $ 653 $ 646 $ 716
Exploration & Production 466 439 452 449 447
Marketing and Trading 205 (175) (21) (389) (211)
Power 1 23 54 2 3
Field Services (A) --- 48 28 45 2
Corporate and eliminations 22 (15) 3 (1) 4
--------------------------------------------------------------------------
Consolidated total 1,531 1,088 1,169 752 961
--------------------------------------------------------------------------
Depreciation, depletion and
amortization
Pipeline Group 115 111 108 108 110
Exploration & Production 146 146 157 153 156
Marketing and Trading 1 1 1 1 1
Power --- 1 --- 1 ---
Field Services (A) --- 1 1 1 ---
Corporate 10 9 17 6 10
--------------------------------------------------------------------------
Consolidated total 272 269 284 270 277
--------------------------------------------------------------------------
Operating income (loss)
Pipeline Group 438 362 262 207 188
Exploration & Production 191 180 175 167 149
Marketing and Trading 200 (186) (32) (404) (233)
Power (15) (25) 26 (20) (44)
Field Services (A) --- 2 (5) (26) 13
Corporate (14) (91) (36) (79) (371)
--------------------------------------------------------------------------
Consolidated total 800 242 390 (155) (298)
--------------------------------------------------------------------------
Earnings (loss) before interest
expense and income taxes (EBIT)
Pipeline Group 478 412 309 272 233
Exploration & Production 199 183 176 169 168
Marketing and Trading 208 (185) (30) (398) (224)
Power 3 (39) (2) (46) (2)
Field Services (A) --- 182 (3) (22) 128
Corporate --- (90) (12) (67) (352)
--------------------------------------------------------------------------
Consolidated total $ 888 $ 463 $ 438 $ (92) $ (49)
--------------------------------------------------------------------------
(A) By the end of 2005, we sold or transferred to other segments
substantially all of our Field Services assets.
SOURCE El Paso Corporation
05/05/2006
CONTACT: investor and public relations, Bruce L. Connery, Vice
President, +1-713-420-5855, or media relations, Bill Baerg, Manager,
+1-713-420-2906, both of El Paso Corporation
4221 05/05/2006 07:00 EDT http://www.prnewswire.com
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El Paso Corp.
