El Paso Corp.'s (EP) third-quarter profit sank 85% on slumping natural gas prices and lower hedging gains compared to last year.

Shares fell 4.5% after-hours, to $9.36, as revenue was well short of analysts' expectations. The stock through the close was up 25% this year.

El Paso reported third-quarter earnings of $67 million, or 8 cents a share, down from $445 million, or 58 cents a share, a year earlier. Excluding derivative and other impacts, earnings fell to 23 cents from 35 cents.

Revenue fell 39%, to $981 million.

Analysts polled by Thomson Reuters had most recently forecast earnings of 22 cents on $1.12 billion in sales.

El Paso's exploration and production business was hard-hit by lower gas prices, with earnings before income and taxes in that segment down 84%, compared to the third quarter of last year. Average daily output fell 7.7%. But earnings in the company's pipeline group rose 17% as new transportation and storage projects boosted revenues.

El Paso said Tuesday that it plans to sell an additional $300 to $500 million of assets in 2010 to improve liquidity and increase long-term returns to shareholders. The company also said it would reduce its divided from 5 cents to a penny per share and has identified $150 million of additional cost savings.

"Our actions to make significant reductions in our ongoing cost structure, streamline our organization and reduce the dividend are designed to improve the long term returns to our shareholders," said Doug Foshee, El Paso's chairman, president and chief executive, in a press release.

Gas companies have been hurt amid a glut of U.S. output and slack demand, especially from industrial users. Natural-gas prices also have been on the skids, dropping to multi-year lows during the quarter before rebounding slightly in recent weeks.

In October, El Paso said it would reenter the natural-gas gathering and processing business five years after mounting debt forced the company to stop. El Paso said it would form a new segment that will acquire and possibly build gathering and processing facilities to treat and transport gas.

-By Nathan Becker and Christine Buurma, Dow Jones Newswires; 212-416-2855; nathan.becker@dowjones.com
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