El Paso Corporation (NYSE: EP) today announced its financial and
operational outlook for 2010.
Financial Highlights
-- $0.75 - $0.95 adjusted earnings per diluted share (EPS)
-- $2.9 billion - $3.1 billion adjusted earnings before interest, taxes
and depreciation, depletion and amortization (EBITDA)
-- $2.0 billion - $2.2 billion adjusted earnings before interest and taxes
(EBIT)
-- $1.6 billion to $1.8 billion cash flow from operations
-- $4.1 billion capital program
- $2.9 billion - Pipeline Group (includes 100 percent of the Ruby
Pipeline Project)
- $1.1 billion - Exploration and Production (E&P)
- $0.1 billion - Corporate
Note: Adjusted EPS, EBIT and EBITDA exclude mark-to-market
impacts from derivatives and include cash proceeds on settlements
of E&P hedges based on guidance assumption prices.
2010 Guidance Assumptions
The 2010 financial highlights above assume commodity prices of
$5.50 per MMBtu for natural gas (NYMEX) and $60.00 per barrel for
oil (WTI).
"El Paso is finishing one of its best years ever operationally,"
said Doug Foshee, chairman, president and chief executive officer
of El Paso Corporation. "Our pipelines continue to execute
extremely well on the construction of our committed backlog, while
developing new opportunities for future growth, such as the
Marcellus Shale. Our E&P business has had an excellent year, as
domestic operations have exceeded expectations with the advancement
of our Haynesville, Eagle Ford and Altamont programs. We enter 2010
with excellent momentum, and during our investor and analyst
meeting today, we will touch on the robust outlook we have for the
next several years."
Business Plan Highlights
Pipeline Group
El Paso's Pipeline Group is targeting 2010 adjusted EBITDA of
approximately $2.0 billion to $2.1 billion, with a $2.9 billion
capital budget. Approximately $0.5 billion of the budget is
maintenance capital and $2.4 billion is allocated to growth
projects, including $1.7 billion for 100 percent of Ruby. The
Pipeline Group has an industry-leading backlog of committed
pipeline and LNG projects, most of which will be placed into
service by the end of 2011. A significant amount of the
construction and materials price risk of these projects has been
mitigated. El Paso expects to deliver its construction backlog on
time and on budget.
Exploration and Production
El Paso Exploration & Production expects to spend
approximately $1.1 billion in 2010, with $0.9 billion allocated to
domestic programs. Roughly half of domestic capital will be
allocated to the Haynesville Shale, Eagle Ford Shale and Altamont
oil programs. During today's investor and analyst meeting, the
company will show that its risked unproved resources have grown
sharply, and now total almost 5 trillion cubic feet equivalent.
The company expects to produce between 720 and 760 million cubic
feet equivalent per day (MMcfe/d) in 2010, including its
proportionate interest in Four Star Oil & Gas Company. Per-unit
cash costs and DD&A rates are expected to be $1.90 - $2.20 per
Mcfe and $1.65 - $1.85 per Mcfe, respectively.
Price Sensitivities
A dollar increase in the average annual NYMEX price of natural
gas would increase 2010 adjusted EBITDA and adjusted EPS by
approximately $40 million and $0.03 per share, respectively; while
a dollar decrease would have approximately a $30 million and $0.02
per share impact, respectively. A $10 change in the WTI price for
oil would impact 2010 adjusted EBITDA and adjusted EPS by
approximately $15 million and $0.01 per share, respectively.
Webcast Information
El Paso will include a discussion of its 2010 plan during its
annual investor and analyst meeting today, December 10, 2009. The
webcast begins at 8 a.m. Eastern Time, 7 a.m. Central Time. The
webcast 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 will be posted on the Web
site. The slides will be available one hour before the webcast and
can be accessed 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
and one of North America's largest independent natural gas
producers. 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 "earnings before
interest expense and income taxes" or "EBIT" to assess the
operating results and effectiveness of the company and its business
segments, which consist of both consolidated businesses and
investments in unconsolidated affiliates. The company believes that
EBIT is useful to its investors because it allows them to evaluate
more effectively the performance of all of El Paso's businesses and
investments using the same performance measure analyzed internally
by our management and so that our investors may evaluate the
company's operating results without regard to its financing methods
or capital structure. The company defines EBIT as net income (loss)
adjusted for items such as (i) interest and debt expense; (ii)
income taxes; (iii) net income attributable to noncontrolling
interests. We also use the non-GAAP financial measure of EBITDA,
which is defined as EBIT excluding depreciation, depletion and
amortization.
El Paso also uses the terms adjusted EBIT, EBITDA and EPS as the
company believes these measures are useful to investors in
analyzing the company's on-going earnings potential. For its 2010
outlook, the company defines adjusted EBIT as EBIT excluding
mark-to-market changes on derivatives and including cash proceeds
on settlements of E&P hedges based on guidance assumption
prices. Adjusted EBITDA is defined as adjusted EBIT excluding
depreciation, depletion and amortization. For the company's 2010
outlook, adjusted EPS is defined as earnings per share attributable
to El Paso Corporation common stockholders, excluding
mark-to-market changes on derivatives and including cash proceeds
on settlements of E&P hedges, and the effect of the change in
the number of diluted shares.
Exploration and Production per-unit total cash operating costs
is 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. Per-unit total
cash operating costs is a valuable measure of operating performance
and efficiency for our Exploration and Production segment.
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.
Twelve Months Ending
($ Billions) December 31, 2010
--------------------
Adjusted EBITDA(1) $2.9-$3.1
Less: DD&A 0.9
--------------------
Adjusted EBIT(1) $2.0-$2.2
Less: Interest and debt expense 1.1
Less: Income taxes 0.3-0.4
--------------------
Adjusted net income attributable to EPC(1) $0.6-$0.7
Net income attributable to noncontrolling
interests 0.1-0.2
--------------------
Adjusted net income(1) $0.7-$0.9
Adjustments related to derivatives(2) 0.2
--------------------
Net income $0.5-$0.7
====================
(1) Amounts exclude MTM changes on derivatives, and include cash proceeds
on settlements of E&P hedges based on guidance assumption prices.
(2) All adjustments assume a 36% tax rate.
($ Billions, Except EPS) After-tax Diluted EPS
------------ -------------
Net income $0.5-$0.7
Net income attributable to noncontrolling
interests (0.1-0.2)
------------
Net income attributable to EPC 0.4-0.5
Net income attributable to EPC common
Stockholders(1) 0.4-0.5 $0.53-$0.73
Adjustments related to derivatives(2) 0.2 0.22
------------ -------------
Adjusted net income attributable to
EPC common stockholders $0.6-$0.7 $0.75-$0.95
============ =============
(1) Reflects $37 million of preferred stock dividends
(2) Amounts represent the after-tax effects of MTM changes on derivatives,
and include cash proceeds on settlements of E&P hedges 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 achieve the targeted costs savings from
the announced reorganization; complete planned asset sales; change
management risk associated with the reorganization; our ability to
pay the 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
2010 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; our ability to
successfully identify and finance 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.
Cautionary Note to U.S. Investors -- The SEC permits oil and gas
companies, in their filings with the SEC, to disclose only proved
reserves that a company has demonstrated by actual production or
conclusive formation tests to be economically and legally
producible under existing economic and operating conditions. We use
certain terms in this press release that the SEC's guidelines
strictly prohibit us from including in filings with the SEC. U.S.
Investors are urged to consider closely the disclosures regarding
proved reserves in this press release and the disclosures contained
in our Form 10-K for the year ended December 31, 2008, File No.
001-14365, available by writing; Investor Relations, El Paso
Corporation, 1001 Louisiana St., Houston, TX 77002. You can also
obtain this form from the SEC by calling 1-800-SEC-0330.
Contacts: El Paso Corporation Investor-Media Relations Bruce
Connery Vice President Office: (713) 420-5855 Media Relations Bill
Baerg Manager Office: (713) 420-2906
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