El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
10-May-2005
El Paso Corporation Provides First Quarter 2005 Financial ResultsHOUSTON, May 10, 2005 /PRNewswire-FirstCall via COMTEX/ -- El Paso Corporation (NYSE: EP)
is providing today first quarter 2005 financial and operational results for
the company.
Quarterly Highlights
* For the three months ended March 31, 2005, El Paso reported net income
of $106 million, or $0.17 per diluted share, compared with a net loss
of $206 million, or $0.32 per diluted share, for the same period in
2004.
* The company's regulated natural gas pipeline business generated
$412 million of earnings before interest and taxes (EBIT). It also
announced several new expansion opportunities that position this
business for future growth.
* El Paso's production business generated $183 million of EBIT and
completed producing property acquisitions totaling $271 million. It
also confirmed a deep shelf discovery in the Gulf of Mexico that is
expected to begin production later in the year.
* El Paso's debt, net of cash, was $16.1 billion at March 31, 2005, a
decrease of $3.4 billion from a year earlier and $1.0 billion from
December 31, 2004.
* During the first quarter, the company completed $721 million of asset
sales and eliminated $575 million of corresponding non-recourse debt.
* El Paso completed a $750-million, 4.99-percent convertible preferred
stock offering, the proceeds of which were targeted for the early
payment of the company's remaining cash obligation for its western
energy settlement and the redemption of an 8.25-percent preferred
stock.
"We continue to make progress on all fronts," said Doug Foshee, president
and chief executive officer of El Paso. "Our pipelines delivered solid
financial results and growth prospects look good. Our production business is
making the progress necessary to complete its turnaround this year, and it is
ahead of pace to replace production in 2005. Finally, in March we delivered
an update to our long-range plan that accelerates our debt-reduction plans as
well as our plan to be a company focused on two primary businesses: natural
gas pipelines and production."
Summary Financial Information
Unaudited financial results for the three months ended March 31 are as
follows:
Financial Results
Three Months
($ in millions, except per share amounts) Ended March 31,
2005 2004
Net income/(loss) $106 $(206)
Earnings/(loss) from continuing operations 108 (97)
Discontinued operations, net of income taxes $(2) $(109)
Income/(loss) per share - diluted $0.17 $(0.32)
Income/(loss) - continuing operations per share 0.17 (0.15)
Discontinued operations per share $--- $(0.17)
EBITDA
Regulated - pipelines $523 $486
Non-regulated - production 329 344
Non-regulated - marketing & trading (184) (169)
Non-regulated - power (38) (123)
Non-regulated - field services 193 39
Other (81) 40
Total $742 $617
EBIT
Regulated - pipelines $412 $386
Non-regulated - production 183 204
Non-regulated - marketing & trading (185) (172)
Non-regulated - power (50) (139)
Non-regulated - field services 191 36
Other (90) 27
Total $461 $342
Significant items affecting EBIT $31 $(269)
Cash flow from operations $51 $629
Selected Balance Sheet Items As of As of
($ in millions) March 31, December 31,
2005 2004
Total assets $30,535 $31,383
Balance sheet cash 1,651 2,117
Debt and obligations 17,777 19,196
Minority and preferred interests 365 367
Common equity 3,323 3,439
Significant Items
Significant items that impacted the reported periods are summarized below,
and a complete schedule of significant items can be found in the company's
detailed operating statistics at http://www.elpaso.com in the Investors
section.
Significant Items Impacting EBIT Three Months
($ in millions) Ended March 31,
2005 2004
Western energy settlement $(59) $---
Impairments, gain/(loss) on sales of
assets and investments 91 (242)
Restructuring costs (1) (27)
--------------------------
Total significant items impacting EBIT $31 $(269)
Review of Financial Results
For the three months ended March 31, 2005, El Paso reported net income of
$106 million, or $0.17 per diluted share, compared with a net loss of
$206 million, or $0.32 per diluted share, for the same period in 2004.
Significant items, which primarily relate to a gain on the sale of the
company's remaining general partner interests and common units in Enterprise
Products Partners (Enterprise), offset by impairments on certain power assets
and by adjustments for the early payoff of the western energy settlement,
increased first quarter 2005 EBIT by $31 million. Impairments on asset sales
and restructuring costs decreased first quarter 2004 EBIT by $269 million.
First quarter 2005 results also were negatively impacted by a non-cash
$106-million mark-to-market loss on the $6.00 per MMBtu floors that El Paso
purchased and the $9.50 per MMBtu ceilings that El Paso sold to manage price
risk for its 2005-2007 natural gas production volumes. The company will
continue to highlight the earnings impact of these positions, which had a
remaining mark-to-market value of $11 million at March 31, 2005.
Cash flow from operations for the first quarter of 2005 was lower than a
year ago primarily due to higher cash flow from discontinued operations in
2004 and differences in working capital between the two periods. In the first
quarter of 2005, the company made a $240-million payment to eliminate El Paso
Marketing's power supply obligations associated with the sale of Cedar Brakes
I and II, which is reflected as a use of operating cash. The company's
liquidity position remains strong at approximately $1.8 billion, compared with
$1.3 billion in maturities over the next 12 months.
Business Unit Results
Regulated - Pipelines
Three Months
($ in millions, except as indicated) Ended March 31,
2005 2004
EBIT $412 $386
Depreciation, depletion, and amortization 111 100
Significant items --- (4)
Throughput (BBtu/d) 22,586 22,510
Capital Expenditures $138 $150
The pipeline segment reported a $26-million increase in EBIT in the first
quarter of 2005 compared with the same period last year primarily due to the
positive impact of a contract restructuring on ANR Pipeline and the sale of
higher volumes of natural gas made available by storage realignment projects
partially offset by higher costs.
The pipeline segment generally performed consistently with the company's
expectations for the first quarter of 2005, and El Paso currently anticipates
that the pipeline segment will continue to meet its expectations for the
remainder of 2005.
Non-Regulated - Production
Three Months
($ in millions, except as indicated) Ended March 31,
2005 2004
EBIT $183 $204
Depreciation, depletion, and amortization 146 140
Significant items --- (9)
Natural gas sales volumes (MMcf) 56,158 65,699
Oil, condensate, and natural gas liquids
sales volumes (MBbls) 2,136 2,710
Total equivalent sales volumes (MMcfe) 68,976 81,958
Weighted average realized prices
including hedges:
Natural gas ($/Mcf) $6.28 $5.61
Oil, condensate, and natural gas
liquids ($/Bbl) $39.86 $28.54
Per-unit costs ($/Mcfe):
Unit of production depletion costs $2.00 $1.58
Cash costs (A) $1.44 $0.98
Total costs $3.44 $2.56
Capital Expenditures (B) $412 $218
(A) Includes lease operating costs, production-related taxes, G&A
expenses, and other taxes.
(B) Assumes cash basis. 2005 includes acquisitions of $271 million, net
of $3 million cash acquired.
The production segment reported lower EBIT in the first quarter of 2005
than in the same period last year, primarily due to lower production volumes
and higher costs, partially offset by higher realized commodity prices. The
production segment's unit of production depletion rate was higher than the
2004 level due to higher finding and development costs. Per-unit cash costs
also rose from a year ago due to lower volumes, higher production-related
taxes, and an increase in workover activities, which are expensed in the
current period. Capital expenditures were higher for the first quarter of
2005 compared with a year ago due to acquisition activity.
The production segment generally performed consistently with the company's
expectations for the first quarter of 2005. Lower-than-expected production
volumes and higher costs were more than offset by higher-than-expected
commodity prices. Production volumes rose during the course of the first
quarter of 2005 and currently exceed 800 MMcfe/d. El Paso currently
anticipates that the production segment will meet its expectations for the
remainder of 2005.
Non-Regulated - Marketing and Trading
Three Months
($ in millions) Ended March 31,
2005 2004
Reported EBIT (loss) $(185) $(172)
Depreciation, depletion, and amortization 1 3
Significant items --- (2)
The marketing and trading segment reported lower EBIT in the first quarter
of 2005 than in the same period last year, due in part to the previously
mentioned $106-million non-cash loss on the mark-to-market value of the put
and call option contracts entered into as an economic hedge on the company's
production for 2005-2007. In addition, the segment reported an $83-million
loss in the value of its power-related contracts.
The marketing and trading segment's performance did not meet the company's
expectations for the first quarter of 2005, primarily due to the non-cash
mark-to-market loss on the production option contracts previously discussed
and El Paso's power portfolio (including the Cordova tolling agreement), which
was impacted by natural gas and power price increases during the quarter. The
company currently anticipates that results from this segment will continue to
be volatile as the marketing and trading segment continues to transition
toward a core marketing business.
Non-Regulated - Power
Three Months
($ in millions) Ended March 31,
2005 2004
Reported EBIT (loss) $(50) $(139)
Depreciation, depletion, and amortization 12 16
Significant items (88) (245)
The power segment reported a smaller loss in EBIT in the first quarter of
2005 than in the same period last year due to smaller impairment charges.
Operating results for the first quarter of 2005 were lower than 2004 due to
the impact of domestic asset sales over the last year. The international
businesses performed in line with expectations; however, the decision to not
recognize earnings from certain of El Paso's Asian power assets in 2005 based
on the planned sale and the decision to not recognize revenues from the Macae
plant in Brazil in 2005 pending resolution of the company's ongoing dispute
with Petrobras resulted in earnings from the power segment which were below
the company's expectations.
Non-Regulated - Field Services
Three Months
($ in millions) Ended March 31,
2005 2004
Reported EBIT $191 $36
Depreciation, depletion, and amortization 2 3
Significant items 179 (4)
The field services segment reported higher EBIT in the first quarter of
2005 than in the same period last year. The improvement is primarily due to
the recognition of a gain of $183 million in the first quarter of 2005 related
to the completion of the sale of El Paso's remaining interests in Enterprise.
Results from this segment were lower in 2005 excluding the benefit of this
sale due to the disposition of a significant portion of this segment's assets
in 2004 and early 2005.
The field services segment generally performed consistently with the
company's expectations for the first quarter of 2005, due to successful
execution of the sale of the remaining interests in Enterprise and strong
performance by the remaining assets due to high commodity prices. El Paso
currently anticipates that earnings from this segment will decline in the
future as a result of the company's ongoing asset sales efforts.
Corporate
Corporate operations reported a $90-million EBIT loss for the first
quarter of 2005, which was $117 million below the same period last year. The
EBIT decrease is primarily due to a $59-million charge related to the western
energy settlement, $29 million of losses on early extinguishment of Euro-
denominated debt, and other items including increased legal and insurance
reserves.
Tax Rate
The company reported a negative 3-percent tax rate in the period due
primarily to a reduction in its reserves for tax contingencies as a result of
an IRS settlement on the 1995 to 1997 Coastal Corporation income tax returns,
tax benefits recognized on the sale of a foreign investment, and state tax
adjustments to reflect income tax returns as filed. Partially offsetting
these items was an impairment of certain foreign investments for which there
was no corresponding tax benefit. This resulted in an overall income tax
benefit for a period in which there was pre-tax income. The company expects
to report an ongoing book tax rate of between
35 percent and 38 percent.
Business Segment Operating Statistics
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 financial results
today beginning 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
http://www.elpaso.com in the Investors section. A limited number of telephone
lines will also be available to participants by dialing (973) 582-2734 ten
minutes prior to the start of the webcast. The company requests that those
who do not intend to ask questions use the webcast option.
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.
The webcast replay will be available online through the Web site in the
Investors section. A telephone audio replay also will be available through
May 24, 2005 by dialing (973) 341-3080 (access code 6009257). 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. El Paso
defines EBITDA as EBIT plus depreciation, depletion, and amortization. EBITDA
is a measure that indicates a company's ability to service interest expense
and capital expenditures. Net debt is defined as El Paso's total financing
obligations as disclosed on the company's consolidated balance sheet net of
cash and cash equivalents. Net debt is an important measure of the company's
total leverage. Per-unit cash expenses equal total operating expenses less
DD&A and other non-cash charges divided by total 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, and 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, our ability to implement and achieve our
objectives in the long-range plan, including achieving our debt-reduction
targets; changes in reserve estimates based upon internal and third party
reserve analyses; our ability to meet production volume targets in our
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; 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 share amounts)
(UNAUDITED)
Three Months Ended
March 31,
---------------------------
2005 2004
---------------------------
Operating revenues $1,208 $1,557
Operating expenses
Cost of products and services 148 390
Operation and maintenance 389 401
Loss on long-lived assets 21 222
Western Energy Settlement 59 ---
Depreciation, depletion and amortization 281 275
Taxes, other than income taxes 72 64
-------- --------
970 1,352
-------- --------
Operating income 238 205
Equity earnings and other income 223 137
-------- --------
Earnings before interest expense,
income taxes, and other charges 461 342
Interest and debt expense 350 423
Return on preferred interests of
consolidated subsidiaries 6 6
-------- --------
Income (loss) before income taxes 105 (87)
Income taxes (benefits) (3) 10
-------- --------
Income (loss) from continuing operations 108 (97)
Discontinued operations, net of income taxes (2) (109)
-------- --------
Net income (loss) $106 $(206)
======== ========
Diluted earnings (loss) per common share
Income (loss) from continuing operations $0.17 $(0.15)
Discontinued operations, net of income taxes --- (0.17)
-------- --------
Net income (loss) per common share $0.17 $(0.32)
======== ========
Diluted average common shares outstanding
(000's) 641,816 638,212
======== ========
EL PASO CORPORATION
SEGMENT INFORMATION
(UNAUDITED)
2005 2004
----------------------------------
(In millions) First First Second Third Fourth
----------------------------------
Operating revenues
Pipeline Group $768 $721 $617 $604 $709
------ ------ ------ ------ ------
Non-regulated Group
Production 439 446 430 400 459
Marketing and Trading (175) (159) (141) (120) (88)
Power 77 207 236 181 171
Field Services 136 387 428 426 121
Other non-regulated (A) 27 43 28 31 28
Non-regulated eliminations (A) (53) (78) (64) (72) (51)
------ ------ ------ ------ ------
Non-regulated Group Total 451 846 917 846 640
Corporate Group and eliminations (A) (11) (10) (10) (21) 15
----------------------------------
Consolidated total 1,208 1,557 1,524 1,429 1,364
----------------------------------
Depreciation, depletion and amortization
Pipeline Group 111 100 101 104 105
------ ------ ------ ------ ------
Non-regulated Group
Production 146 140 131 136 141
Marketing and Trading 1 3 3 4 3
Power 12 16 12 14 12
Field Services 2 3 4 3 2
Other non-regulated (A) 2 2 2 2 3
------ ------ ------ ------ ------
Non-regulated Group Total 163 164 152 159 161
Corporate Group and eliminations (A) 7 11 10 7 14
----------------------------------
Consolidated total 281 275 263 270 280
----------------------------------
Operating income (loss)
Pipeline Group 362 348 260 218 303
------ ------ ------ ------ ------
Non-regulated Group
Production 180 203 202 147 174
Marketing and Trading (186) (175) (154) (139) (94)
Power (38) (188) 56 (48) (228)
Field Services 11 10 7 (477) (5)
Other non-regulated (A) 9 17 (1) 4 5
------ ------ ------ ------ ------
Non-regulated Group Total (24) (133) 110 (513) (148)
Corporate Group and eliminations (A) (100) (10) --- (60) (169)
----------------------------------
Consolidated total 238 205 370 (355) (14)
----------------------------------
Earnings (loss) before interest expense
and income taxes (EBIT)
Pipeline Group 412 386 308 268 369
------ ------ ------ ------ ------
Non-regulated Group
Production 183 204 204 150 176
Marketing and Trading (185) (172) (152) (138) (85)
Power (50) (139) 102 (7) (525)
Field Services 191 36 27 61 (4)
Other non-regulated (A) 8 18 (4) 5 8
------ ------ ------ ------ ------
Non-regulated Group Total 147 (53) 177 71 (430)
Corporate Group and eliminations (A) (98) 9 13 (62) (201)
----------------------------------
Consolidated total $461 $342 $498 $277 $(262)
----------------------------------
Total significant items impacting
EBIT $(31) $269 $39 $109 $666
----------------------------------
(A) Included in Corporate results in SEC filings
SOURCE: El Paso Corporation
Bruce L. Connery, Vice President, Investor and Public Relations
1-713-420-5855
or
Bill Baerg, Manager, Media Relations
1-713-420-2906
Both of El Paso Corporation
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