Natural Gas Distributor El Paso Sees 194% Jump in 3Q Profit

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Natural gas distributor El Paso Corporation (NYSE:EP) (Houston, Texas) has announced that its third-quarter 2008 earnings jumped to $455 million, up 194% from $155 million in the same quarter last year on hedging and increased sales. Revenues rose 37% to $1.6 billion. Growth and earnings were driven by high gas prices, which rose $1.90 per million cubic feet to $8.92 per million cubic feet, said Mark Leland, Chief Financial Officer and Executive Vice President.

Business Segments

• Pipeline:



• Earnings before interest and taxes (EBIT): $278 million, up from $275 million, including a $12 million loss related to lost natural gas and higher operations and maintenance costs because of facility damage caused by the hurricanes. "The company continues to assess the damages resulting from the hurricanes and the corresponding impact on estimated costs to repair and abandon impacted facilities," Leland said. "El Paso anticipates additional costs to occur in the fourth quarter and into 2009."



• Exploration and Production (E&P):



• EBIT: $532 million, up from $232 million. E&P increased primarily because of higher realized commodity prices despite production cuts totaling about 41 million cubic feet equivalent per day after hurricanes Ike, Gustav and Dolly and Tropical Storm Edouard.



• Hedge Positions:



• Natural gas: 42 trillion British thermal units (BTU) of natural gas production hedged with an average floor price of $7.93 per million British thermal unit and a ceiling price of $10.16 per million BTU. For 2009, El Paso has natural gas hedges with an average floor price of $9.02 per million BTU on 176 trillion BTU and an average ceiling price of $14.97 per million BTU on 151 trillion BTU.
• Crude oil: 800,000 barrels of fourth-quarter 2008 crude oil production hedged with an average floor price of $79.81 per barrel and an average ceiling price of $80.10 per barrel. For 2009, the company has oil hedges on 3.4 million barrels of crude oil at an average fixed price of $109.93 per barrel.

Capital expenditures through September totaled about $1.905 billion, Leland said. He said that 2008 capital expenditures have been scaled down from an initial $3.8 billion to $3.5 billion and that for 2009, capital spending is being pared down to $3 billion.

Industrial Info is tracking 30 projects worth more than $2.2 billion involving El Paso or one of its subsidiaries. The projects range from a $2.5 million compressor station control upgrade to a $375 million grassroot natural gas pipeline.

"For a lack of better description with regard to the current capital markets environment, as we say here in Texas, this ain't our first rodeo," President and CEO Doug Foshee said. "We have experience, engaged and talented professionals that have been through much tougher environments than this one relative to our own company in the past six years. So, we know how to operate our company in an environment where capitals constrain and speed, flexibility and contingency are key."

View Plant Profile - 1076982
View Project Report - 22001367

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.