OilVoice - El Paso Corporation Reports Fourth Quarter and Full-Year Results

El Paso Corporation Reports Fourth Quarter and Full-Year Results

Sunday, March 01, 2009

El Paso Corporation has reported fourth quarter and full-year 2008 financial and operational results for the company.

- $1.31 adjusted full-year diluted earnings per share (EPS) versus $1.00 in 2007
- $1.24 reported loss per diluted share from continuing operations for 2008 versus $0.57 reported income in 2007
- $0.21 adjusted fourth quarter 2008 diluted EPS versus $0.27 in 2007
- Fourth quarter 2008 reported loss of $2.43 per diluted share versus earnings of $0.21 in 2007
- Pipeline fourth quarter 2008 earnings before interest expense and taxes (EBIT) and throughput up 4 percent and 1 percent, respectively, from fourth quarter 2007
- Exploration & Production (E&P) had a $2.5 billion fourth quarter 2008 EBIT loss, including $2.7 billion of pre-tax non-cash full cost ceiling test charges, a $0.1 billion non-cash impairment related to the company's investment in Four Star Oil & Gas Company (Four Star), and $0.2 billion of mark-to-market (MTM) gains on derivative contracts not designated as accounting hedges
- Fourth quarter production 752 million cubic feet equivalent per day (MMcfe/d), including unconsolidated affiliate volumes of 73 MMcfe/d, which includes production losses of 53 MMcfe/d due to Hurricane Ike
- $2.2 billion of liquidity at December 31, 2008, which has since risen to $3.3 billion

"We had very solid results in 2008, despite a challenging business environment during the second half of the year," said Doug Foshee, president and chief executive officer of El Paso Corporation. "We were successful on the pipeline expansion front, increasing our committed project backlog to $8 billion and placing seven pipeline projects in service. At the same time, we recorded our best-ever safety performance. On the E&P side, we had success with the drill bit. Prior to revisions, we added 595 Bcfe to our proved reserves and reduced our reserve replacement costs to $2.87 per Mcfe."

Foshee added, "We also acted aggressively to meet the challenges of the current economic environment by adding $1.9 billion of liquidity over the past several months primarily through debt offerings, a new revolving credit facility, and non-core asset sales."

For the 12 months ended December 31, 2008, El Paso reported a net loss available to common stockholders of $860 million, or $1.24 per diluted share, compared with net income of $1,073 million, or $1.53 per diluted share, for full-year 2007, which includes a $674 million, or $0.96 per share, gain on the sale of ANR and related assets. Earnings for 2008 and 2007, after adjusting for the impacts of production-related derivatives, ceiling test charges and other items, were $1.31 and $1.00 per diluted share, respectively.

Exploration and Production
The Exploration and Production segment reported an EBIT loss of $2.5 billion for the quarter ended December 31, 2008, compared with EBIT of $263 million for the same period in 2007. Fourth quarter 2008 EBIT includes $2.7 billion of non-cash full cost ceiling test charges in the company's domestic and Brazilian full cost pools, which was based on the December 31, 2008 spot natural gas and oil prices, as well as a $125 million non-cash impairment related to the company's investment in Four Star. Excluding the $2.8 billion of non-cash fourth quarter charges, EBIT decreased approximately $4 million compared to the same period in 2007. The decrease was primarily due to lower production volumes and lower realized commodity prices, partially offset by MTM gains associated with derivative hedging contracts and lower DD&A expense.

Fourth quarter 2008 production volumes averaged 752 MMcfe/d, including 73 MMcfe/d of unconsolidated affiliate volumes. Production volumes were negatively impacted by the loss of 53 MMcfe/d due to Hurricane Ike. Fourth quarter 2007 production volumes averaged 924 MMcfe/d, including 77 MMcfe/d of unconsolidated affiliate volumes. Fourth quarter 2007 production volumes also included 110 MMcfe/d associated with properties sold in the first quarter of 2008. Total per-unit cash operating costs increased to an average of $2.09 per thousand cubic feet equivalent (Mcfe) in fourth quarter 2008, compared with $1.83 per Mcfe for the same 2007 period due to lower production volumes, partially offset by lower cash operating costs.

Pipeline Group
The Pipeline Group's EBIT for the quarter ended December 31, 2008 was $319 million, compared with $308 million for the same period in 2007. EBIT before minority interest associated with El Paso Pipeline Partners, L.P., which completed its initial public offering in November 2007, was $330 million, a 6 percent increase from 2007 levels. Fourth quarter 2008 results benefited from higher reservation revenues due to several expansion projects that went into service in late 2007 and 2008 and additional capacity sales, offset by an $18 million unfavorable impact related to higher maintenance costs caused by Hurricanes Ike and Gustav. El Paso expects to incur additional hurricane repair costs in 2009.

Marketing
The Marketing segment reported EBIT of $27 million for the quarter ended December 31, 2008, compared with an EBIT loss of $64 million for the same period in 2007. 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 2008 fourth quarter gain of $9 million compared to a 2007 fourth quarter loss of $26 million. Fourth quarter 2008 also includes a $37 million MTM gain on remaining Pennsylvania-New Jersey-Maryland power contracts, compared with a fourth quarter 2007 loss of $34 million.

Power
The Power segment reported an EBIT loss of $3 million for the quarter ended December 31, 2008, compared with an EBIT loss of $4 million for the same period in 2007. 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. During the first quarter of 2009, El Paso closed on the sale of its interest in the Porto Velho power generation facility in Brazil for $178 million, completing the sale of all of its power assets in Brazil. El Paso received $100 million in cash and $78 million in notes.