SOURCE: El Paso Corporation

El Paso Corporation

February 25, 2009 16:31 ET

El Paso Corporation Provides 2009 Outlook

HOUSTON, TX--(Marketwire - February 25, 2009) - El Paso Corporation (NYSE: EP) today announced its financial and operational outlook for 2009.

Financial Highlights

   --  El Paso has ample liquidity for 2009
   --  Earnings per diluted share (EPS): $0.85 - $1.05
   --  $3.1 billion - $3.3 billion earnings before interest, taxes and
       depreciation and amortization (EBITDA)
   --  Cash flow from operations: $1.7 billion to $2.0 billion
   --  $2.7 billion to $3.1 billion capital program:
       -  $1.7 billion - Pipeline Group
       -  $0.9 billion - $1.3 billion Exploration and Production

Note: EPS and EBITDA are adjusted to exclude mark-to-market changes on hedge derivatives and include cash proceeds on settlements, based on plan prices

"We are approaching 2009 with three primary points of focus -- to execute on our committed pipeline backlog; to create value from our E&P capital, while preserving our inventory of E&P opportunities, and to ensure adequate liquidity," said Doug Foshee, president and chief executive officer of El Paso Corporation. "And while we are in a challenging environment, El Paso is advantaged in several respects. First, we have an excellent hedge position with a $9.00 per MMBtu floor on approximately 75 percent of our expected 2009 domestic natural gas production. Second, due to our recent successful financings and asset sales, our current liquidity is roughly $3.3 billion, so we have more than adequate liquidity to carry us into 2010. And importantly, we have eliminated much of the construction risk associated with our pipeline projects."

Plan Assumptions

The 2009 objectives above assume commodity prices of $5.00 per MMBtu for natural gas (NYMEX) and $40.00 per barrel for oil (WTI). It also assumes that the company is successful in partnering on one or more pipeline projects. That process is moving forward; however, El Paso has ample liquidity for 2009 whether or not the company is successful in its partnering efforts.

Business Plan Highlights

Pipeline Group

El Paso's Pipeline Group is targeting 2009 EBITDA of approximately $1.8 billion, with a $1.7 billion capital budget. Approximately $0.4 billion of the budget is maintenance capital and $1.3 billion is allocated to growth projects. The Pipeline Group currently has approximately $8 billion of committed pipeline, storage, and LNG projects that range from coast-to-coast, reaching virtually all the major growth markets as well as many key supply basins. El Paso has mitigated the construction and materials price risk on much of this portfolio. During 2009, the company expects to complete four growth projects that have total project capital costs of approximately $0.2 billion. El Paso's pipelines carry investment-grade ratings and maintain significant financial flexibility to meet future capital needs.

Exploration and Production

El Paso Exploration & Production expects to spend between $0.9 billion and $1.3 billion in 2009 depending on market conditions. In order to maximize returns on capital, the allocation between drilling programs and the timing of spending will be reviewed on a continuous basis. El Paso has already reduced the pace of capital activity in the first quarter of 2009 and will adjust it further based on changes to the company's commodity price outlook and the costs of materials and services.

The 2009 drilling program is typified by lower-risk, repeatable programs, with approximately 35 percent of domestic spending in the Arklatex area, which includes the company's Haynesville Shale and Cotton Valley horizontal drilling programs. Internationally, El Paso expects to spend approximately $250 million, with the largest portion devoted to the Camarupim (Bia) development project. Production from Camarupim, which is operated by Petrobras, is expected to begin in the second quarter, reaching 50 to 60 MMcfe/d, net to El Paso's interest, later in the year.

At the current range of capital, the company expects to produce between 725 to 815 million cubic feet equivalent per day (MMcfe/d), including its proportionate interest in Four Star Oil & Gas in 2009. Per-unit cash costs and DD&A rates are expected to be $2.05 - $2.35 per Mcfe and $2.30 - $2.50 per Mcfe, respectively.

Price Sensitivities

A $1 change in the NYMEX price of natural gas or a $10 change in the WTI price for oil would impact 2009 EBITDA and EPS by approximately $40 million and $0.04 per share, respectively.

Webcast Information

El Paso will include a discussion of its 2009 plan in its February 26, 2009 fourth quarter earnings webcast, which begins at 10:00 a.m. Eastern Time, 9:00 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 limited number of telephone lines will also be available to participants by dialing (888) 710-3574 (conference ID # 85245286) 10 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 5, 2009 by dialing (800) 642-1687 (conference ID # 85245286).

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.

                                                       Twelve Months Ending
Non-GAAP Reconciliation Schedule                        December 31, 2009
($ billions)                                           --------------------

EBITDA                                                       $3.1-$3.3
Less: DD&A                                                    1.0-1.1
                                                       --------------------
EBIT                                                          2.0-2.3
Less: Interest                                                  1.0
Less: Taxes                                                   0.4-0.5
                                                       --------------------
Net Income                                                   $0.6-$0.8

EPS                                                         $0.85-$1.05

Note: Numbers may not foot due to rounding.

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 where reasonably available (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.

El Paso uses the non-GAAP financial measures "adjusted earnings per diluted share" (EPS) and "earnings before interest expense, income taxes, depreciation and amortization" or "EBITDA" to assess the operating results and effectiveness of the company and its business segments. Adjusted EPS is defined as diluted earnings per share excluding mark-to-market changes on hedge derivatives and includes cash proceeds on settlements. The company defines EBITDA as net income (loss) adjusted for (i) items that do not impact its income (loss) from continuing operations, such as extraordinary items and discontinued operations; (ii) income taxes; (iii) interest and debt expense, and (iv) depreciation and amortization . 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 EBITDA and adjusted EPS, 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.

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.

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, changes in unaudited and/or unreviewed financial information; our ability to meet our 2009 debt maturities; volatility in, and access to, the capital markets; our ability to implement and achieve our objectives in our 2009 plan, 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 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; our ability to close asset sales, as well as transactions with partners on one or more of our expansion projects that are included in the plan on a timely basis; 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; our ability to obtain targeted cost savings in our businesses; inability to realize anticipated synergies and cost savings 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, 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.

Certain of the production information in this press release include the production attributable to El Paso's 49 percent interest in Four Star Oil & Gas Company ("Four Star"). El Paso's Supplemental Oil and Gas disclosures, which are included in its Annual Report on Form 10-K, reflect its proportionate share of the proved reserves of Four Star separate from its consolidated proved reserves. In addition, the proved reserves attributable to its proportionate share of Four Star represent estimates prepared by El Paso and not those of Four Star.

Contact Information

  • Contacts:

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

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