El Paso to Focus on Core Business
El Paso Corp. executives said they plan to cut trading staff by about half and sell more assets. The Houston-based company said the changes are part of a plan to increase investment in its core natural gas businesses and limit its investment in and exposure to energy trading, which has come under intense scrutiny for possible sham trades. The company hopes to cut costs by at least $300 million in the process. But the moves also will sharply cut into earnings.
The company did not say how many jobs would be affected. Reducing trading personnel by about 50 percent, the company said would help achieve $150 million in annualized cost savings. "By limiting our investment in trading and its demand on corporate credit and liquidity, this plan allows El Paso to utilize its strengthened balance sheet and credit profile to take advantage of significant growth opportunities in the natural gas arena," El Paso Corp. chairman, president and chief executive William A. Wise said.
The company said it will increase capital spending in El Paso Production to $2.3 billion. The announcement comes amid turmoil in the energy trading sector as federal regulators probe simultaneous power swaps between energy traders that artificially boosted trading volume and, in some cases, added to revenue. El Paso said it would limit its cash investment in trading activities to $1 billion and divide the segment into three separate divisions.
Another part of the restructuring involves a plan to issue $1.5 billion in stock and the sale of San Juan Basin natural gas gathering assets to El Paso Energy Partners for an estimated $800 million. The partnership produces oil and gas in the Gulf of Mexico and owns interests in pipelines.