El Paso Corporation has 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
"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.