El Paso Reduces 2009 Capital Expenditures
El Paso has announced a capital plan for 2009 that is designed to provide the company with adequate liquidity to meet its debt maturities and other on-going obligations while enabling El Paso to fulfill its pipeline growth program and preserve its inventory of exploration and production opportunities.
"El Paso is well-positioned to meet the current credit market challenges while continuing to execute on the core elements of our business plan," said Doug Foshee, president and chief executive officer of El Paso Corporation. "We have strong cash flow from our Pipeline Group that is essentially unaffected by changes in natural gas prices. At our Exploration and Production business, we have excellent 2009 hedge positions with a $9 per MMBtu floor price on approximately 70 percent of our expected 2009 domestic natural gas production and approximately 60 percent of expected 2009 domestic oil production hedged at $110 per barrel. In addition, we have substantial flexibility in our E&P program, which allows us to reduce near-term capital spending and retain sufficient liquidity while not impacting long-term growth potential."
As of September 30, 2008, El Paso's liquidity was $1.9 billion, which was composed of $1.2 billion of cash and approximately $0.7 billion available from committed bank facilities.
Capital plan highlights include:
- 2008 capital expenditures will be reduced to $3.5 billion from $3.8 billion.
- 2009 capital expenditures will be reduced to approximately $3 billion.
- The Pipeline Group has $1.7 billion of planned capital for 2009.
- E&P spending is expected to be $1.3 billion. The 2009 program will focus on repeatable, low-risk, short cycle projects.
- E&P production in 2009 is estimated to be approximately flat with 2008 volumes.
- Based on our current and projected liquidity following our May 2009 maturities, our plan does not contemplate having to access the capital markets until the second half of 2009. However, we will be opportunistic in accessing the capital markets prior to that time.
- The plan also includes the sale of $150 million of several non-core assets by mid-2009 that are subject to either preliminary or binding sales agreements, as well as obtaining potential partners on one or more pipeline expansion projects
- The company has numerous additional alternatives to address potential liquidity challenges if access to the capital markets remain restricted, any of the asset sales or partnering opportunities outlined above are delayed or not completed or there is a further decline in commodity prices, including:
- Additional cuts in discretionary capital spending
- Secured financings
- Additional non-core asset sales
- Partnering in growth projects
El Paso will discuss its spending plans during its November 6, 2008 third quarter earnings conference call.
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