SOURCE: El Paso Corporation

El Paso Corporation

May 24, 2011 07:15 ET

El Paso Corporation Raises 2011 Earnings Guidance

HOUSTON, TX--(Marketwire - May 24, 2011) - El Paso Corporation (NYSE: EP) announced today that it is raising its financial and operational guidance for 2011 as results to date have exceeded expectations.

Updated 2011 Guidance

-- $1.00-$1.10 adjusted diluted earnings per share (Adjusted EPS)
-- $2.3-$2.5 billion Adjusted Segment Earnings Before Interest and Taxes
   (Adjusted Segment EBIT)
-- $3.4-$3.6 billion Adjusted Segment Earnings Before Interest, Taxes and
   Depreciation, Depletion and Amortization (Adjusted Segment EBITDA)
-- $2.2-$2.4 billion cash flow from operations
-- $3.6 billion capital program
   -- $1.6 billion -- Exploration and Production (E&P)
   -- $1.8 billion -- Pipeline Group (includes 100 percent of the Ruby
      Pipeline Project)
   -- $0.2 billion -- Midstream and Other
-- Total production increasing to 830-860 million cubic feet equivalent
   per day
-- Oil volumes rising to 18,500-20,500 barrels per day, 35-45 percent above
   2010 levels

Note: Adjusted EPS, Adjusted Segment EBIT and Adjusted Segment EBITDA exclude loss on debt extinguishment and mark-to-market impacts from financial derivatives and include cash settlement proceeds of E&P financial derivatives based on guidance assumption prices. Guidance is based on $4.50 per MMBtu for natural gas (NYMEX) and $107 per barrel for oil (WTI).

"El Paso is on its way to another great year with improved earnings and operating cash flow," said Doug Foshee, chairman, president, and chief executive officer of El Paso Corporation. "We are particularly excited about our drilling results in the Eagle Ford shale, where our oil production will grow significantly this year. We are also very pleased with the pace of drop downs to El Paso Pipeline Partners, L.P. (NYSE: EPB). Our MLP has already issued more equity than we anticipated for all of 2011, and we will continue to accelerate our balance sheet improvement with the proceeds from future transactions."

The company is raising its E&P capital by approximately $300 million to $1.6 billion to increase its activity in its Eagle Ford Central oil shale program in La Salle, County, TX. So far this year, El Paso's E&P business has successfully mitigated much of the oil service cost inflation through increased efficiencies. Pipeline capital has been increased by approximately $100 million, primarily due to higher costs to complete the Ruby Pipeline.

Webcast Information

El Paso Corporation has scheduled a live webcast of its 2011 Investor & Analyst meeting on May 24, 2011, beginning at 8 a.m. Eastern Time, 7 a.m. Central Time, which 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 are posted on El Paso's web site 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, one of North America's largest independent oil and natural gas producers and an emerging midstream business. 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 "Segment earnings before interest expense and income taxes" or "Segment EBIT" to assess the operating results and effectiveness of the company and its business segments. The company believes that Segment EBIT is useful to its investors because it allows them to use the same performance measure analyzed internally by our management to evaluate the performance of our businesses and investments without regard to the manner in which they are financed or our capital structure. We define Segment EBIT as net income (loss), adjusted for interest and debt expense and income taxes. Segment EBIT does not reflect a reduction for any amounts attributable to noncontrolling interests. We also use the non-GAAP financial measure of Segment EBITDA, which is defined as Segment EBIT excluding depreciation, depletion and amortization.

El Paso also uses the terms Adjusted Segment EBIT, Adjusted Segment EBITDA and Adjusted EPS as the company believes these measures are useful to investors in analyzing the company's on-going earnings potential. For its 2011 outlook, the company defines Adjusted Segment EBIT as Segment EBIT excluding losses on debt extinguishment and mark-to-market impact of E&P financial derivatives and including anticipated cash settlement proceeds of E&P financial derivatives based on guidance assumption prices. Adjusted Segment EBITDA is defined as Adjusted Segment EBIT excluding depreciation, depletion and amortization. For the company's 2011 outlook, Adjusted EPS is defined as earnings per share attributable to El Paso Corporation common stockholders excluding losses on debt extinguishment and anticipated mark-to-market impact of E&P financial derivatives and including anticipated cash settlement proceeds of E&P financial derivatives.

Our Exploration and Production segment uses per-unit total cash operating costs as 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. It is a valuable measure used by oil and gas companies and analysts to evaluate operating performance and 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.


                      Updated 2011 Segment Guidance



                                                    Midstream
                                                        &
 ($ Billions)                Pipelines      E&P       Other        Total
                            ----------- ----------- ----------  -----------
Adjusted Segment EBIT       $ 1.7-$ 1.8 $ 0.7-$ 0.8   $ (0.1)   $ 2.3-$ 2.5
Adjusted Segment EBITDA     $ 2.2-$ 2.3 $ 1.3-$ 1.4   $ (0.1)   $ 3.4-$ 3.6
Capital                        $ 1.8       $ 1.6       $ 0.2       $ 3.6

Note: Updated guidance assumes $4.50/MMBtu Gas (NYMEX) and $107/Bbl Oil
      (WTI)





              Updated 2011 Exploration & Production Outlook



                                                Original        Updated
                                              -------------  -------------

Total production (MMcfe/d)                       790-840        830-860
Oil production growth                            30%-40%        35%-45%
Oil revenue growth                                > 50%          > 65%
Unit cash costs ($/Mcfe)                      $ 1.70-$ 1.90  $ 1.70-$ 1.85
DD&A rate ($/Mcfe)                            $ 1.90-$ 2.10  $ 2.05-$ 2.15

Note: Updated guidance assumes $4.50/MMBtu (NYMEX) and $107/Bbl (WTI)






             Adjusted 2011 Segment EBIT/EBITDA Reconciliation



                                                            Twelve Months
                                                               Ending
 ($ Billions)                                             December 31, 2011
                                                          -----------------
Adjusted Segment EBITDA(1)                                   $ 3.4-$ 3.6
Less: DD&A                                                       1.1
                                                          -----------------
  Adjusted Segment EBIT(1)                                   $ 2.3-$ 2.5
Less: Interest and debt expense                                  0.9
Less: Income taxes                                             0.3-0.4
                                                          -----------------
Adjusted net income(1)                                       $ 1.1-$ 1.2
Adjustments related to derivatives and other(1,2)                0.3
                                                          -----------------
  Net income                                                 $ 0.8-$ 0.9
                                                          =================

(1) Adjustments exclude losses on debt extinguishment and the
    mark-to-market impact of E&P financial derivatives and include cash
    settlement proceeds of E&P financial derivatives based on guidance
    assumption prices
(2) All adjustments assume a 36% tax rate







                     Adjusted 2011 EPS Reconciliation



($ Billions, Except EPS)                          After-tax   Diluted EPS
                                                ------------- -------------
Net income attributable to EPC common
 stockholders                                    $ 0.5-$ 0.6  $ 0.62-$ 0.72
Adjustments related to derivatives and other(1)      0.3          0.38
                                                ------------- -------------

Adjusted net income attributable to EPC
 common stockholders                             $ 0.8-$ 0.9  $ 1.00-$ 1.10
                                                ============= =============

(1) Adjustments exclude losses on debt extinguishment and the
    mark-to-market impact of E&P financial derivatives and include cash
    settlement proceeds of E&P financial derivatives 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 execute our strategy of selling assets to El Paso Pipeline Partners, L.P.; our ability to pay 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 2011 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; the uncertainty of estimating proved reserves and unproved resources; the future level of service and capital costs, the availability and cost of financing to fund our future exploration and production operations; the success of our drilling programs with regard to proved undeveloped reserves and unproved resources; our ability to successfully identify 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.

Contact Information

  • Contacts

    Investor and Media Relations
    Bruce Connery
    Vice President
    (713) 420-5855

    Media Relations
    Bill Baerg
    Manager
    (713) 420-2906