El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
8-May-2007
El Paso Corporation Provides First Quarter 2007 Financial Results HOUSTON, May 8 /PRNewswire-FirstCall/ -- El Paso Corporation (NYSE: EP)
announced today that its first quarter 2007 earnings were $629 million, or
$0.89 per diluted share, compared with $356 million, or $0.49 per diluted
share, for the first quarter of 2006. First quarter 2007 results include a
gain on the sale of ANR Pipeline Company (ANR) and related assets as well as a
charge for debt repurchase costs. The Pipeline Group's throughput was up 9
percent from 2006 levels while production volumes in the Exploration and
Production segment increased 7 percent including the company's proportionate
share of Four Star volumes. Results for ANR Pipeline Company and associated
assets (ANR), which were sold on February 22, 2007, are included in
discontinued operations for all periods.
"The first quarter of 2007 was one of the most impactful in our company's
history," said Doug Foshee, president and chief executive officer. "With the
completion of the ANR sale, we reduced our debt to $11.7 billion, which is
approximately half of what it was only four years ago. As a result, our
pipelines regained investment grade credit ratings, which lowers the cost of
capital that we employ towards our $2.3 billion backlog of expansion projects.
And our pipeline and E&P businesses delivered very good results, putting us on
a path to achieve the 2007 goals that we announced in February."
A summary of financial results for the three months ended March 31, 2007
and 2006 is as follows:
Financial Results Three Months Ended
March 31,
---------------------
($ in millions, except per share amounts) 2007 2006
--------------------------------------------------------------------------
Income (loss) from continuing operations $ (48) $ 301
Discontinued operations, net of income taxes 677 55
---------------------
Net income 629 356
Preferred stock dividends 9 10
---------------------
Net income available to common stockholders $ 620 $ 346
=====================
Basic per common share amounts
Income (loss) from continuing operations $ (0.08) $0.44
Discontinued operations 0.97 0.09
---------------------
Net income per common share $0.89 $0.53
=====================
Diluted per common share amounts
Income (loss) from continuing operations $ (0.08) $0.42
Discontinued operations 0.97 0.07
---------------------
Net income per common share $ 0.89 $0.49
=====================
Three Months Ended March 31, 2007
First quarter 2007 results from continuing operations include a $128
million after-tax charge related to the purchase and retirement of $3.5
billion of debt during the quarter. Results also include a $56 million after-
tax loss related to the mark-to-market (MTM) impact on derivatives intended to
manage price risk on natural gas and oil production compared to a $104 million
after-tax gain in the first quarter of 2006. After-tax amounts were
calculated using a 36-percent tax rate.
The following table includes items impacting the quarterly results:
First Quarter 2007 Before Tax After Tax EPS
($ millions except per share amounts)
--------------------------------------------------------------------------
Continuing operations $ (67) $ (48) $(0.08)
Adjustments*
Debt repurchase costs $ 201 $ 128 0.18
MTM loss on production-related derivatives $ 87 $ 56 0.08
--------
Adjusted EPS -- continuing operations $ 0.18
========
Discontinued operations (ANR) $ 1,048 $ 677 $ 0.97
Adjustments
Gain on sale of ANR-related assets $(1,007) $(651) (0.94)
Debt repurchase costs (ANR)* $ 19 $ 12 0.02
--------
Adjusted EPS -- discontinued operations $ 0.05
========
* Assumes a 36-percent tax rate.
First Quarter 2006 Before Tax After Tax* EPS
($ millions except per share amounts)
--------------------------------------------------------------------------
MTM production-related derivatives $162 $104 $0.14
* Assumes a 36-percent tax rate.
Business Unit Financial Update
Segment EBIT Results Three Months Ended
March 31,
---------------------
($ in millions) 2007 2006
--------------------------------------------------------------------------
Pipeline Group $ 364 $346
Exploration and Production 179 199
Marketing (135) 208
Power 18 3
Corporate and Other (210) --
---------------------
$ 216 $756
=====================
Pipeline Group
The Pipeline Group's earnings before interest expense and taxes (EBIT) for
the three months ended March 31, 2007 were $364 million, compared with $346
million for the same period in 2006. The increase is due to higher
reservation revenues from several projects that went into service during 2006,
higher costs associated with hurricanes Katrina and Rita in the first quarter
of 2006, and other factors. Throughput was up 9 percent from 2006 levels due
to expansion projects, colder weather in January and February, and new power
loads in the Southeast.
Three Months Ended
Pipeline Group Results March 31,
---------------------
($ in millions) 2007 2006
--------------------------------------------------------------------------
EBIT $364 $346
DD&A $ 94 $ 93
Total throughput (BBtu/d)* 18,040 16,620
* Includes proportionate share of jointly owned pipelines.
Exploration and Production
The Exploration and Production segment's EBIT for the three months ended
March 31, 2007 was $179 million, compared with $199 million for the same
period in 2006. First quarter 2007 production volumes averaged 750 million
cubic feet equivalent per day (MMcfe/d), excluding unconsolidated affiliate
volumes of 70 MMcfe/d. First quarter 2006 production volumes averaged 694
MMcfe/d, excluding 71 MMcfe/d of unconsolidated affiliate volumes. The
increase was due to the success of the onshore drilling program, recovery of
volumes shut-in by hurricane damage, and new discoveries in the Gulf of Mexico
and South Louisiana. Brazilian volumes were 16 MMcfe/d lower in 2007
primarily due to a contractual ownership reduction that took place in early
2006. The realized price for natural gas during the three months ended March
31, 2007 was $7.19 per thousand cubic feet (Mcf), compared with $7.03 per Mcf
for the same period in 2006. Oil, condensate, and natural gas liquids (NGL)
realized prices were $49.32 per barrel in first quarter 2007, down 4 percent
from the same period in 2006. Total per-unit cash costs increased to an
average of $1.99 per thousand cubic feet equivalent (Mcfe) in first quarter
2007, compared with $1.71 per Mcfe for the same 2006 period. The company's
higher operating costs were primarily a result of increased production
expenses resulting from higher workover activity levels, industry inflation in
services, labor and material costs, and lower severance tax credits.
Exploration and Production Results Three Months Ended
March 31,
---------------------
($ in millions, except price and cost amounts) 2007 2006
--------------------------------------------------------------------------
EBIT $ 179 $ 199
DD&A $ 170 $ 146
Consolidated volumes:
Natural gas sales volumes (MMcf/d) 630 578
Oil, condensate, and NGL sales volumes (MBbls/d) 20 19
Total consolidated equivalent sales volumes (MMcfe/d) 750 694
Four Star total equivalent sales volumes (MMcfe/d)(1) 70 71
Weighted average realized prices including hedges(2,3)
Natural gas ($/Mcf) $ 7.19 $ 7.03
Oil, condensate, and NGL ($/Bbl) $49.32 $51.25
Transportation costs(3)
Natural gas ($/Mcf) $ 0.31 $ 0.24
Oil, condensate, and NGL ($/Bbl) $ 0.76 $ 1.25
Per-unit costs ($/Mcfe)(3)
Unit of production depletion costs $ 2.40 $ 2.20
Cash operating costs(4) $ 1.99 $ 1.71
(1) Four Star is an equity investment. Amounts disclosed represent the
company's proportionate share.
(2) Prices are stated before transportation costs.
(3) Prices and costs do not include the company's proportionate share of
Four Star volumes, revenues, or costs.
(4) Includes lease operating costs, production-related taxes, G&A
expenses, and taxes other than production and income.
New Hedge Positions for 2008
El Paso announced today that it has entered into option contracts intended
to hedge its 2008 E&P natural gas volumes. The new positions created an $8.00
per million British thermal unit (MMBtu) floor price and a $10.53 per MMBtu
ceiling price on 44 trillion British thermal units (Tbtu) of anticipated 2008
natural gas production. When combined with existing 2008 hedges, the
positions create an average floor price of $7.14 per MMBtu and an average
ceiling price of $9.89 per MMBtu for 67 TBtu of anticipated 2008 natural gas
production. These new positions were placed at El Paso Exploration &
Production Company. They are expected to receive hedge accounting treatment
and do not require margin postings.
Other Operations
Marketing
The Marketing segment reported an EBIT loss of $135 million for the three
months ended March 31, 2007, compared to a gain of $208 million for the same
period in 2006. The first quarter 2007 and 2006 results included $87 million
of losses and $162 million of gains, respectively, of MTM changes in the fair
value of derivatives intended to manage the price risk of the company's
natural gas and oil production. First quarter 2007 results also included a
$13-million loss on the assignment of a natural gas option contract to supply
gas in the northeast U.S., while first quarter 2006 results included a
$49-million non-cash gain associated with the assignment of two natural gas
derivative contracts to supply natural gas in the southeastern U.S.
Power
The Power segment reported EBIT of $18 million for the three months ended
March 31, 2007, compared with $3 million for the same period in 2006. The
increase is primarily from the Porto Velho project in Brazil, which generated
EBIT of $13 million in the 2007 period compared to $7 million in the 2006
period. A reduction of general and administrative expenses also contributed to
the increase in earnings in 2007.
Corporate and Other
During the first quarter of 2007, Corporate and Other reported an EBIT
loss of $210 million compared with break-even results for the same period in
2006. First quarter 2007 results were unfavorably impacted by a $201-million
charge for debt repurchase costs and $28 million of unfavorable changes in
litigation, insurance, and other reserves. The first quarter 2006 EBIT
includes $22 million of unfavorable changes in litigation, insurance, and
other reserves.
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 2007 results on
May 8, 2007 beginning at 10:00 a.m. Eastern Time, 9:00 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 (888) 710-3574 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 15, 2007 by dialing (800) 642-1687 (access code
5161968). 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 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 costs or cash operating costs equal total
operating expenses less DD&A and cost of products and services divided by
total production. It is a valuable measure of operating efficiency. Adjusted
EPS is earnings per share excluding debt repurchase and MTM charges in the
production-related derivatives during the quarter. It 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
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
our 2007 plan, including achieving our debt-reduction targets, earnings and
cash flow targets; changes in reserve estimates based upon internal and third
party reserve analyses; the effects of any changes in accounting rules and
guidance; our ability to meet production volume targets in our Exploration &
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; 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 close our
announced asset sales on a timely basis; changes in commodity prices for oil,
natural gas, and power; inability to realize anticipated synergies and cost
savings associated with restructurings and divestitures on a timely basis or
at all; 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,
---------------------------
2007 2006
---------------------------
Operating revenues $1,022 $1,337
Operating expenses
Cost of products and services 55 62
Operation and maintenance 308 285
Gain on long-lived assets (7) ---
Depreciation, depletion and amortization 271 250
Taxes, other than income taxes 60 57
----------- -----------
687 654
----------- -----------
Operating income 335 683
Equity earnings and other income (expense) (119) 73
----------- -----------
Earnings before interest expense,
income taxes, and other charges 216 756
Interest and debt expense 283 331
----------- -----------
Income (loss) before income taxes (67) 425
Income taxes (benefit) (19) 124
----------- -----------
Income (loss) from continuing operations (48) 301
Discontinued operations, net of income taxes 677 55
----------- -----------
Net income 629 356
Preferred stock dividends 9 10
----------- -----------
Net income available to common stockholders $620 $346
=========== ===========
Earnings (losses) per common share
Basic
Income (loss) from continuing operations $(0.08) $0.44
Discontinued operations, net of income taxes 0.97 0.09
----------- -----------
Net income per common share $0.89 $0.53
=========== ===========
Diluted
Income (loss) from continuing operations $(0.08) $0.42
Discontinued operations, net of income taxes 0.97 0.07
----------- -----------
Net income per common share $0.89 $0.49
=========== ===========
Weighted average common shares outstanding
Basic 694 656
=========== ===========
Diluted 694 724
=========== ===========
EL PASO CORPORATION
SEGMENT INFORMATION
(UNAUDITED)
2007 2006
(In millions) First First Second Third Fourth
------- ----------------------------
Operating revenues
Pipelines $644 $643 $580 $582 $597
Exploration and Production 505 466 462 456 470
Marketing (135) 205 18 (105) (176)
Power --- 1 2 3 ---
Corporate and other, including
eliminations (1) 8 22 27 6 22
------- ----------------------------
Consolidated total $1,022 $1,337 $1,089 $942 $913
------- ----------------------------
Depreciation, depletion and
amortization
Pipelines $94 $93 $93 $92 $92
Exploration and Production 170 146 156 163 180
Marketing 1 1 1 1 1
Power --- --- 1 --- 1
Corporate and other (1) 6 10 5 4 7
------- ----------------------------
Consolidated total $271 $250 $256 $260 $281
------- ----------------------------
Operating income (loss)
Pipelines $324 $321 $251 $221 $270
Exploration and Production 177 191 161 138 135
Marketing (136) 200 8 (113) (186)
Power (5) (15) (17) (14) (15)
Corporate and other (1) (25) (14) (40) (14) (41)
------- ----------------------------
Consolidated total $335 $683 $363 $218 $163
------- ----------------------------
Earnings (losses) before interest
expense and income taxes (EBIT)
Pipelines $364 $346 $286 $253 $302
Exploration and Production 179 199 163 141 137
Marketing (135) 208 13 (108) (184)
Power 18 3 10 38 31
Corporate and other (1) (210) --- (34) (17) (37)
------- ----------------------------
Consolidated total $216 $756 $438 $307 $249
------- ----------------------------
(1) Includes our corporate businesses, our telecommunications business
and residual assets and liabilities of previously sold or
discontinued businesses.
SOURCE El Paso Corporation
05/08/2007
CONTACT: Investor and Public Relations, Bruce L. Connery, Vice
President, +1-713-420-5855, Fax, +1-713-420-4417, or Media Relations, Bill
Baerg, Manager, +1-713-420-2906, Fax, +1-713-420-4417, both of El Paso
Corporation
3063 05/08/2007 07:19 EDT http://www.prnewswire.com
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El Paso Corp.
