El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
26-Feb-2008
El Paso Corporation Reports Fifth Consecutive Year of Improved Earnings and Financial Strength HOUSTON, Feb. 26 /PRNewswire-FirstCall/ -- El Paso Corporation (NYSE: EP)
is reporting today fourth quarter and full-year 2007 financial and operational
results for the company.
Highlights:
- Earnings per share (EPS) $1.53 in 2007 versus $0.64 in 2006 - up 139%
- Quarterly EPS from continuing operations up significantly - $0.21
earnings per diluted share from continuing operations versus a loss of
$0.03 in 2006
- Pipeline earnings before interest expense and taxes (EBIT) and
throughput up 2 percent and 11 percent, respectively, from fourth
quarter 2006
- E&P EBIT up 92 percent versus fourth quarter 2006
- Production, including unconsolidated affiliate volumes, totaled
924 million cubic feet equivalent per day (MMcfe/d) - an 11 percent
increase over fourth quarter 2006
- Integrated Peoples Energy Production Company acquisition
- Successful IPO of El Paso Pipeline Partners, L.P.
"We are delighted to report our fifth consecutive year of improved
earnings," said Doug Foshee, El Paso's president and chief executive officer.
"During the year, our pipeline group placed more than $500 million of projects
into service while expanding our committed project backlog to almost
$4 billion. Our E&P business also had a very good year, with 8 percent
production growth, as well an 18 percent increase in proved reserves and lower
unit direct lifting costs. We enter 2008 with a strong balance sheet, visible
multi-year growth in hand, and opportunities to add to our growth trajectory."
A summary of financial results for the three- and 12-month periods ended
December 31, 2007 and 2006 is as follows:
Financial Results Three Months Twelve Months
Ended Ended
($ in millions, except December 31, December 31,
per share amounts) 2007 2006 2007 2006
------------------------------------------------------------------------
Income (loss) from continuing
operations
$160 $(15) $436 $531
Discontinued operations, net
of income taxes - (151) 674 (56)
---------------------------------------
Net income (loss) 160 (166) 1,110 475
Preferred stock dividends 9 9 37 37
---------------------------------------
Net income (loss) available to
common stockholders $151 $(175) $1,073 $438
=======================================
Basic per common share amounts
Income (loss) from continuing
operations $0.22 $(0.03) $0.57 $0.73
Discontinued operations - (0.22) 0.97 (0.08)
---------------------------------------
Net income (loss) per
common share $0.22 $(0.25) $1.54 $0.65
=======================================
Diluted per common share amounts
Income (loss) from continuing
operations $0.21 $(0.03) $0.57 $0.72
Discontinued operations - (0.22) 0.96 (0.08)
---------------------------------------
Net income (loss) per
common share $0.21 $(0.25) $1.53 $0.64
=======================================
Items Impacting Quarterly Results
Fourth quarter 2007 results from continuing operations include a
$17-million, or $0.02 per diluted share, after-tax loss due to the change in
fair value of derivatives intended to manage price risk on natural gas and oil
production in the marketing segment. Results also include a $22-million, or
$0.03 per diluted share, after-tax loss related to the change in fair value of
power contracts in the Pennsylvania, New Jersey, Maryland (PJM) power pool and
an $8-million, or $0.01 per diluted share, after-tax loss related to Brazilian
power impairments. After-tax amounts were calculated using a 36 percent tax
rate on all charges except Brazilian power impairments.
Fourth Quarter 2007
($ millions, except per share amounts) Before Tax After Tax EPS
-----------------------------------------------------------------------
Continuing operations $231 $160 $0.21
Adjustments
Change in fair value of PJM power contracts $34 $22 0.03
Change in fair value of production-related
derivatives 26 17 0.02
Brazilian power impairments 8 8 0.01
-------
Adjusted EPS-continuing operations $0.27
=======
Fourth Quarter 2006
($ millions, except per share amounts) Before Tax After Tax EPS
-----------------------------------------------------------------------
Continuing operations $(38) $(15) $(0.03)
Adjustments
Alliance capacity buyout $188 $122 0.17
Change in fair value of power contracts (7) (4) -
Change in fair value of production-related
derivatives (13) (8) (0.01)
Financial Results - 12 Months Ended December 31, 2007
For the 12 months ended December 31, 2007, El Paso reported net income
available to common stockholders of $1,073 million, or $1.53 per diluted
share, compared with $438 million, or $0.64 per diluted share, for full-year
2006. A schedule of items affecting annual results is listed below:
Financial Results
($ millions, except per share amounts) After Tax EPS
-----------------------------------------------------------------------
Twelve Months 2007 Continuing Operations
Debt repurchase costs $(186) $(0.27)
Impairment of Brazilian power assets (72) (0.10)
Change in fair value of production-related
derivatives (57) (0.08)
Change in fair value of power contracts (49) (0.07)
Case Corporation indemnity (7) (0.01)
Crude oil trading liability 49 0.07
Twelve Months 2007 Discontinued Operations
Sale of ANR and related assets $674 $0.96
Twelve Months 2006 Continuing Operations
Alliance capacity buyout $(122) $(0.17)
Change in fair value of Midland Cogeneration
Venture gas supply contracts (85) (0.12)
Change in fair value of production-related
derivatives 172 0.23
Income tax settlement benefits 159 0.22
Change in fair value of power contracts 45 0.06
Twelve Months 2006 Discontinued Operations
ANR and International Power assets $(56) $(0.08)
After-tax amounts were calculated using a 36 percent tax rate on all
charges except Brazilian power impairments and income tax settlement benefits.
Business Unit Financial Update
Segment EBIT Results Three Months Ended Twelve Months Ended
December 31, December 31,
($ in millions) 2007 2006 2007 2006
------------------------------------------------------------------------
Pipeline Group $308 $302 $1,265 $1,187
Exploration and Production 263 137 909 640
Marketing (64) (184) (202) (71)
Power (4) 31 (37) 82
Corporate and Other (20) (37) (283) (88)
---------------------------------------------
$483 $249 $1,652 $1,750
=============================================
Pipeline Group
The Pipeline Group's EBIT for the three months ended December 31, 2007,
was $308 million, compared with $302 million for the same period in 2006.
Fourth quarter 2007 results benefited from incremental revenues from several
expansion projects placed in service during 2006 and 2007; higher
transportation revenues due to increased sales and utilization of capacity;
and higher throughput, primarily in the Rocky Mountains and southern regions.
Offsetting these favorable results were higher operating costs for repair and
maintenance, and increased insurance costs.
Three Months Ended
Pipeline Group Results December 31,
($ in millions) 2007 2006
------------------------------------------------------------------------
EBIT $308 $302
DD&A $94 $92
Total throughput (BBtu/d) (1) 18,797 16,992
(1) Includes proportionate share of jointly owned pipelines
Exploration and Production
The Exploration and Production segment's EBIT for the three months ended
December 31, 2007, was $263 million, compared with $137 million for the same
period in 2006. The increase was primarily due to increased production
volumes and higher realized commodity prices, which benefited from hedging
gains that added $0.59 per thousand cubic foot (Mcf) to the realized price for
natural gas produced. Fourth quarter 2007 production volumes averaged
847 MMcfe/d, excluding 77 MMcfe/d of unconsolidated affiliate volumes. Fourth
quarter 2006 production volumes averaged 762 MMcfe/d, excluding 68 MMcfe/d of
unconsolidated affiliate volumes. The increase reflects successful drilling
programs and acquisitions. Despite industry inflation, total per-unit cash
operating costs decreased to an average of $1.83 per thousand cubic feet
equivalent (Mcfe) in fourth quarter 2007, compared with $1.91 per Mcfe for the
same 2006 period. The improvement is primarily a result of reduced unit direct
lifting costs resulting from lower workover activity levels, partially offset
by higher production taxes due to increased natural gas and oil revenues and
higher general and administrative costs due to the transfer of Marketing
employees to the E&P organization.
Exploration and Production Results Three Months Ended
December 31,
($ in millions, except price and unit cost amounts) 2007 2006
--------------------------------------------------------------------------
EBIT $263 $137
DD&A $227 $180
Consolidated volumes:
Natural gas sales volumes (MMcf/d) 708 630
Oil, condensate, and NGL sales volumes (MBbls/d) 23 22
Total consolidated equivalent sales volumes (MMcfe/d) 847 762
Four Star total equivalent sales volumes (MMcfe/d) (1) 77 68
Weighted average realized prices including hedges
Natural gas ($/Mcf) $7.16 $6.15
Oil, condensate, and NGL ($/Bbl) $77.47 $50.58
Transportation costs
Natural gas ($/Mcf) $0.24 $0.24
Oil, condensate, and NGL ($/Bbl) $0.96 $0.58
Per-unit costs ($/Mcfe)
Depreciation, depletion and amortization $2.91 $2.58
Cash operating costs (2) $1.83 $1.91
(1) Four Star is an equity investment. Amounts disclosed represent the
company's proportionate share.
(2) Includes direct lifting costs, production-related taxes, G&A expenses,
and taxes other than production and income.
New Hedge Positions for 2008
As of February 22, 2008, El Paso had hedge positions for more than
two-thirds of its estimated 2008 equivalent production. The hedges have an
average floor price of $7.94 per million British thermal unit (MMBtu) and an
average ceiling price of $10.21 per MMBtu on 188 trillion British thermal
unit. In addition, El Paso hedged 3.7 million barrels of crude oil with an
average floor price of $80.94 per barrel and an average ceiling price of
$81.44 per barrel. Further information on the company's hedging activities
will be available in El Paso's Form 10-K.
Other Operations
Marketing
The Marketing segment reported an EBIT loss of $64 million for the three
months ended December 31, 2007, compared with an EBIT loss of $184 million for
the same period in 2006. Changes in the fair value of derivatives intended to
manage the price risk of the company's natural gas and oil production resulted
in a 2007 fourth quarter loss of $26 million compared to a 2006 fourth quarter
gain of $13 million. Fourth quarter 2007 also includes a $34-million loss
related to PJM power contracts, while fourth quarter 2006 also includes a loss
of $188 million related to the divestiture of capacity on the Alliance
Pipeline.
Power
The Power segment reported an EBIT loss of $4 million for the three months
ended December 31, 2007, compared with EBIT of $31 million for the same period
in 2006. Fourth quarter 2007 results included impairments of $8 million on
the company's Manaus and Rio Negro power plants in Brazil, which were
transferred to the power purchaser on January 15, 2008. Fourth quarter 2006
results included a $34-million gain on the sale of the company's remaining
interest in Intercontinental Exchange (ICE).
Corporate and Other
During the fourth quarter of 2007, Corporate and Other reported EBIT loss
of $20 million compared with an EBIT loss of $37 million for the same period
in 2006. Fourth quarter 2007 results were impacted by adjustments to legacy
liabilities and 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 a review of its 2007
results on February 26, 2008, beginning at 9:00 a.m. Eastern Time, 8:00 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 (conference ID # 34210298)
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 March 4, 2008, by dialing (800) 642-1687 (conference ID #
34210298). If you have any questions regarding this procedure, please contact
Margie Fox at (713) 420-2903.
Disclosure of Non-GAAP Financial Measures - Update
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 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; and (iii)
interest and debt expense. The company excludes interest and debt expense 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 from continuing operations excluding Brazilian power
impairments, changes in fair value of PJM power contracts and changes in fair
value of the production-related derivatives in the Marketing segment 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
interstate 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 - Update
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 2008 plan, including achieving our 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 and Production segment;
uncertainties and potential consequences associated with the outcome of
governmental investigations, including, without limitation, those related to
the reserve revisions; 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 and basis differentials 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
SEGMENT INFORMATION
(UNAUDITED)
2007 2006
---- ----
(In millions) First Second Third Fourth First Second Third Fourth
-------------------------------------------------------------
Operating
revenues
Pipelines $644 $614 $586 $650 $643 $580 $582 $597
Exploration
and
Production 505 575 575 645 466 462 456 470
Marketing (135) (16) (9) (59) 205 18 (105) (176)
Power - - - - 1 2 3 -
Field
Services (1) - - - - - - - -
Corporate and
other,
including
eliminations
(2) 8 25 14 26 22 27 6 22
-------------------------------------------------------------
Consolidated
total $1,022 $1,198 $1,166 $1,262 $1,337 $1,089 $942 $913
-------------------------------------------------------------
Depreciation,
depletion and
amortization
Pipelines $94 $91 $94 $94 $93 $93 $92 $92
Exploration
and
Production 170 189 194 227 146 156 163 180
Marketing 1 1 - 1 1 1 1 1
Power - - 1 - - 1 - 1
Field
Services (1) - - - - - - - -
Corporate and
other (2) 6 5 4 4 10 5 4 7
-------------------------------------------------------------
Consolidated
total $271 $286 $293 $326 $250 $256 $260 $281
-------------------------------------------------------------
Operating income
(loss)
Pipelines $324 $276 $234 $277 $321 $251 $221 $270
Exploration
and
Production 177 229 228 252 191 161 138 135
Marketing (136) (20) (13) (65) 200 8 (113) (186)
Power (5) (9) (9) (3) (15) (17) (14) (15)
Field
Services (1) - - - - - - - -
Corporate and
other (2) (25) (25) (23) (19) (14) (40) (14) (41)
-------------------------------------------------------------
Consolidated
total $335 $451 $417 $442 $683 $363 $218 $163
-------------------------------------------------------------
Earnings (losses)
before interest
expense and
income taxes
(EBIT)
Pipelines $364 $318 $275 $308 $346 $286 $253 $302
Exploration
and
Production 179 235 232 263 199 163 141 137
Marketing (135) 5 (8) (64) 208 13 (108) (184)
Power 18 16 (67) (4) 3 10 38 31
Field
Services (1) - - - - - - - -
Corporate and
other (2) (210) (104) 51 (20) - (34) (17) (37)
-------------------------------------------------------------
Consolidated
total $216 $470 $483 $483 $756 $438 $307 $249
-------------------------------------------------------------
Year-to-Date
------------
(In millions) 2007 2006 2005
---------------------------
Operating revenues
Pipelines $2,494 $2,402 $2,171
Exploration and Production 2,300 1,854 1,787
Marketing (219) (58) (796)
Power - 6 82
Field Services (1) - - 123
Corporate and other, including
eliminations (2) 73 77 (8)
---------------------------
Consolidated total $4,648 $4,281 $3,359
---------------------------
Depreciation, depletion and
amortization
Pipelines $373 $370 $343
Exploration and Production 780 645 612
Marketing 3 4 4
Power 1 2 2
Field Services (1) - - 3
Corporate and other (2) 19 26 42
---------------------------
Consolidated total $1,176 $1,047 $1,006
---------------------------
Operating income (loss)
Pipelines $1,111 $1,063 $779
Exploration and Production 886 625 671
Marketing (234) (91) (855)
Power (26) (61) (63)
Field Services (1) - - (16)
Corporate and other (2) (92) (109) (577)
---------------------------
Consolidated total $1,645 $1,427 $(61)
---------------------------
Earnings (losses) before interest
expense and income taxes (EBIT)
Pipelines $1,265 $1,187 $924
Exploration and Production 909 640 696
Marketing (202) (71) (837)
Power (37) 82 (89)
Field Services (1) - - 285
Corporate and other (2) (283) (88) (521)
---------------------------
Consolidated total $1,652 $1,750 $458
---------------------------
E&P Cash Costs Fourth Quarter Fourth Quarter
2007 2006
Total Per Unit Total Per Unit
($MM) ($/Mcfe) ($MM) ($/Mcfe)
-------------------------------------
Total operating expense $393 $4.61 $335 $4.78
Depreciation, depletion and
amortization (645) (2.42) (180) (2.58)
Cost of products & services (87) (0.33) (20) (0.29)
-------------------------------------
Per unit cash costs (3) $1.86 $1.91
-------------------------------------
Total equivalent volumes (Mmcfe) (3) 77,914 70,142
-------------------------------------
(1) By the end of 2005, we sold or transferred to other segment
substantially all of our Field Services assets; therefore, Field
Services is not reported as a segment starting 2006.
(2) Includes our corporate businesses, telecommunications business and
residual assets and liabilities of previously sold or discontinued
businesses.
(3) Excludes volumes and costs associated with equity investment in
Four Star.
EL PASO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per common share amounts)
(UNAUDITED)
Three Months Ended 12 Months Ended
December 31, December 31,
------------------ -----------------
2007 2006 2007 2006
------------------ -----------------
Operating revenues $1,262 $913 $4,648 $4,281
Operating expenses
Cost of products and services 75 37 245 238
Operation and maintenance 355 380 1,333 1,337
Gain on long-lived assets
Depreciation, depletion and
amortization 326 281 1,176 1,047
Taxes, other than income taxes 64 52 249 232
---------- -------- -------- --------
820 750 3,003 2,854
---------- -------- -------- --------
Operating income 442 163 1,645 1,427
Earnings from unconsolidated affiliates 26 24 101 145
Loss on debt extinguishment (4) - (291) (26)
Other income, net 19 62 197 204
---------- -------- -------- --------
41 86 7 323
---------- -------- -------- --------
Earnings before interest expense,
income taxes, and other charges 483 249 1,652 1,750
Interest and debt expense (252) (287) (994) (1,228)
---------- -------- -------- --------
Income (loss) before income taxes 231 (38) 658 522
Income taxes 71 (23) 222 (9)
---------- -------- -------- --------
Income (loss) from continuing
operations 160 (15) 436 531
Discontinued operations, net of
income taxes - (151) 674 (56)
---------- -------- -------- --------
Net income (loss) 160 (166) 1,110 475
Preferred stock dividends 9 9 37 37
---------- -------- -------- --------
Net income (loss) available to common
stockholders $151 $(175) $1,073 $438
========== ======== ======== ========
Earnings (losses) per common share
Basic
Income (loss) from continuing
operations $0.22 $(0.03) $0.57 $0.73
Discontinued operations, net of
income taxes - (0.22) 0.97 (0.08)
---------- -------- -------- --------
Net income (loss) per common share $0.22 $(0.25) $1.54 $0.65
========== ======== ======== ========
Diluted
Income (loss) from continuing
operations $0.21 $(0.03) $0.57 $0.72
Discontinued operations, net of
income taxes - (0.22) 0.96 (0.08)
---------- -------- -------- --------
Net income (loss) per common share $0.21 $(0.25) $1.53 $0.64
========== ======== ======== ========
Weighted average common shares
outstanding
Basic 697 693 696 678
========== ======== ======== ========
Diluted 759 693 699 739
========== ======== ======== ========
Dividends declared per common share $0.04 $0.04 $0.16 $0.16
========== ======== ======== ========
SOURCE El Paso Corporation
02/26/2008
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
1288 02/26/2008 07:30 EST http://www.prnewswire.com
|
El Paso Corp.
