SOURCE: El Paso Corporation

El Paso Corporation

December 10, 2009 07:00 ET

El Paso Corporation Provides Outlook for 2010

HOUSTON, TX--(Marketwire - December 10, 2009) - El Paso Corporation (NYSE: EP) today announced its financial and operational outlook for 2010.

Financial Highlights

--  $0.75 - $0.95 adjusted earnings per diluted share (EPS)
--  $2.9 billion - $3.1 billion adjusted earnings before interest, taxes
    and depreciation, depletion and amortization (EBITDA)
--  $2.0 billion - $2.2 billion adjusted earnings before interest and taxes
    (EBIT)
--  $1.6 billion to $1.8 billion cash flow from operations
--  $4.1 billion capital program
    -  $2.9 billion - Pipeline Group (includes 100 percent of the Ruby
       Pipeline Project)
    -  $1.1 billion - Exploration and Production (E&P)
    -  $0.1 billion - Corporate

Note: Adjusted EPS, EBIT and EBITDA exclude mark-to-market impacts from derivatives and include cash proceeds on settlements of E&P hedges based on guidance assumption prices.

2010 Guidance Assumptions

The 2010 financial highlights above assume commodity prices of $5.50 per MMBtu for natural gas (NYMEX) and $60.00 per barrel for oil (WTI).

"El Paso is finishing one of its best years ever operationally," said Doug Foshee, chairman, president and chief executive officer of El Paso Corporation. "Our pipelines continue to execute extremely well on the construction of our committed backlog, while developing new opportunities for future growth, such as the Marcellus Shale. Our E&P business has had an excellent year, as domestic operations have exceeded expectations with the advancement of our Haynesville, Eagle Ford and Altamont programs. We enter 2010 with excellent momentum, and during our investor and analyst meeting today, we will touch on the robust outlook we have for the next several years."

Business Plan Highlights

Pipeline Group

El Paso's Pipeline Group is targeting 2010 adjusted EBITDA of approximately $2.0 billion to $2.1 billion, with a $2.9 billion capital budget. Approximately $0.5 billion of the budget is maintenance capital and $2.4 billion is allocated to growth projects, including $1.7 billion for 100 percent of Ruby. The Pipeline Group has an industry-leading backlog of committed pipeline and LNG projects, most of which will be placed into service by the end of 2011. A significant amount of the construction and materials price risk of these projects has been mitigated. El Paso expects to deliver its construction backlog on time and on budget.

Exploration and Production

El Paso Exploration & Production expects to spend approximately $1.1 billion in 2010, with $0.9 billion allocated to domestic programs. Roughly half of domestic capital will be allocated to the Haynesville Shale, Eagle Ford Shale and Altamont oil programs. During today's investor and analyst meeting, the company will show that its risked unproved resources have grown sharply, and now total almost 5 trillion cubic feet equivalent.

The company expects to produce between 720 and 760 million cubic feet equivalent per day (MMcfe/d) in 2010, including its proportionate interest in Four Star Oil & Gas Company. Per-unit cash costs and DD&A rates are expected to be $1.90 - $2.20 per Mcfe and $1.65 - $1.85 per Mcfe, respectively.

Price Sensitivities

A dollar increase in the average annual NYMEX price of natural gas would increase 2010 adjusted EBITDA and adjusted EPS by approximately $40 million and $0.03 per share, respectively; while a dollar decrease would have approximately a $30 million and $0.02 per share impact, respectively. A $10 change in the WTI price for oil would impact 2010 adjusted EBITDA and adjusted EPS by approximately $15 million and $0.01 per share, respectively.

Webcast Information

El Paso will include a discussion of its 2010 plan during its annual investor and analyst meeting today, December 10, 2009. The webcast begins at 8 a.m. Eastern Time, 7 a.m. Central Time. The webcast may be accessed online through El Paso's Web site at 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 replay of the webcast will be available online through the company's Web site in the Investors section.

El Paso Corporation provides natural gas and related energy products in a safe, efficient, and dependable manner. The company 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 www.elpaso.com.

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 included in the body of this press release.

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, which consist of both consolidated businesses and investments in unconsolidated affiliates. The company believes that EBIT is useful to its investors because it allows them to evaluate more effectively the performance of all of El Paso's businesses and investments using the same performance measure analyzed internally by our management and so that our investors may evaluate the company's operating results without regard to its financing methods or capital structure. The company defines EBIT as net income (loss) adjusted for items such as (i) interest and debt expense; (ii) income taxes; (iii) net income attributable to noncontrolling interests. We also use the non-GAAP financial measure of EBITDA, which is defined as EBIT excluding depreciation, depletion and amortization.

El Paso also uses the terms adjusted EBIT, EBITDA and EPS as the company believes these measures are useful to investors in analyzing the company's on-going earnings potential. For its 2010 outlook, the company defines adjusted EBIT as EBIT excluding mark-to-market changes on derivatives and including cash proceeds on settlements of E&P hedges based on guidance assumption prices. Adjusted EBITDA is defined as adjusted EBIT excluding depreciation, depletion and amortization. For the company's 2010 outlook, adjusted EPS is defined as earnings per share attributable to El Paso Corporation common stockholders, excluding mark-to-market changes on derivatives and including cash proceeds on settlements of E&P hedges, and the effect of the change in the number of diluted shares.

Exploration and Production per-unit total cash operating costs is a non-GAAP measure calculated on a per Mcfe basis equal to total operating expenses less DD&A, transportation costs, ceiling test and other impairment charges, and the cost of products and services, divided by total equivalent production. Per-unit total cash operating costs is a valuable measure of operating performance and efficiency for our Exploration and Production segment.

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.

                                                Twelve Months Ending
($ Billions)                                     December 31, 2010
                                                --------------------
Adjusted EBITDA(1)                                    $2.9-$3.1
Less: DD&A                                               0.9
                                                --------------------
    Adjusted EBIT(1)                                  $2.0-$2.2
Less: Interest and debt expense                          1.1
Less: Income taxes                                     0.3-0.4
                                                --------------------
    Adjusted net income attributable to EPC(1)        $0.6-$0.7
Net income attributable to noncontrolling
 interests                                             0.1-0.2
                                                --------------------
Adjusted net income(1)                                $0.7-$0.9
Adjustments related to derivatives(2)                    0.2
                                                --------------------
    Net income                                        $0.5-$0.7
                                                ====================

(1) Amounts exclude MTM changes on derivatives, and include cash proceeds
    on settlements of E&P hedges based on guidance assumption prices.

(2) All adjustments assume a 36% tax rate.



($ Billions, Except EPS)                         After-tax     Diluted EPS
                                                ------------  -------------
Net income                                       $0.5-$0.7
Net income attributable to noncontrolling
 interests                                       (0.1-0.2)
                                                ------------
Net income attributable to EPC                    0.4-0.5
Net income attributable to EPC common
 Stockholders(1)                                  0.4-0.5      $0.53-$0.73
Adjustments related to derivatives(2)               0.2            0.22
                                                ------------  -------------

Adjusted net income attributable to
 EPC common stockholders                         $0.6-$0.7     $0.75-$0.95
                                                ============  =============

(1) Reflects $37 million of preferred stock dividends

(2) Amounts represent the after-tax effects of MTM changes on derivatives,
    and include cash proceeds on settlements of E&P hedges based on
    guidance assumption prices. All adjustments assume a 36% tax rate.

Cautionary Statement Regarding Forward-Looking Statements

This release includes certain forward-looking statements and projections. 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 achieve the targeted costs savings from the announced reorganization; complete planned asset sales; change management risk associated with the reorganization; our ability to pay the dividends declared; changes in unaudited and/or unreviewed financial information; volatility in, and access to, the capital markets; our ability to implement and achieve objectives in our 2010 plan and updated guidance, including achieving our 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; our ability to successfully identify and finance new Midstream opportunities; our ability to comply with the covenants in our various financing documents; our ability to obtain necessary governmental approvals for proposed pipeline and E&P 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; credit and performance risk of our lenders, trading counterparties, customers, vendors and suppliers; changes in commodity prices and basis differentials for oil, natural gas, and power; 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, including the risk of a global recession and negative impact on natural gas demand; 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.

Cautionary Note to U.S. Investors -- The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this press release that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosures regarding proved reserves in this press release and the disclosures contained in our Form 10-K for the year ended December 31, 2008, File No. 001-14365, available by writing; Investor Relations, El Paso Corporation, 1001 Louisiana St., Houston, TX 77002. You can also obtain this form from the SEC by calling 1-800-SEC-0330.

Contact Information

  • Contacts:

    El Paso Corporation
    Investor-Media Relations
    Bruce Connery
    Vice President
    Office: (713) 420-5855

    Media Relations
    Bill Baerg
    Manager
    Office: (713) 420-2906