El Paso Grows Earnings 42% in 1st Quarter 2009

El Paso Corporation has reported first quarter 2009 financial and operational results for the company.

  • $0.47 adjusted diluted earnings per share (EPS) versus $0.33 in 2008. The improvement is due to realized gains on oil and natural gas hedges and continued pipeline growth.
  • First quarter 2009 reported loss of $1.41 per diluted share versus earnings of $0.29 in 2008. 2009 results include $1.3 billion after-tax, or $1.92 per share, of non-cash, full-cost ceiling test charges.
  • Pipeline first quarter 2009 earnings before interest expense and taxes (EBIT) rose 4 percent from first quarter 2008
  • Exploration & Production (E&P) first quarter 2009 production of 803 million cubic feet equivalent per day (MMcfe/d), including 72 MMcfe/d of unconsolidated affiliate volumes
  • $3.3 billion of liquidity at March 31, 2009
  • Hedge positions significantly expanded for 2010; new hedges in place for 2011

"We had another solid quarter, which reflects the stable growth of our pipeline group and very good execution by our E&P business," said Doug Foshee, chairman, president, and chief executive officer of El Paso Corporation. "Our Pipeline Group delivered another strong quarter of earnings while executing on our backlog of projects, and our E&P business continued to generate significant operating cash flow, while reducing costs and slowing capital spending in light of current commodity prices. We have maintained a strong liquidity position with more than sufficient liquidity to meet 2009 debt maturities, fund our 2009 capital program, and carry us well into 2010. In addition, we have taken steps to shore up our 2010 and 2011 cash flow by significantly adding to our natural gas hedge program."

Exploration & Production

The Exploration & Production segment reported an EBIT loss of $1.7 billion for the quarter ended March 31, 2009, compared with EBIT of $242 million for the same period in 2008. First quarter 2009 EBIT includes $2.1 billion of non-cash, full-cost ceiling test charges primarily in the company's domestic full cost pool, which was based on lower domestic spot natural gas prices at the end of the first quarter of 2009. Excluding these charges, EBIT increased approximately $142 million compared with the same period in 2008, primarily due to $394 million of MTM gains on financial derivatives intended to hedge production volumes and lower DD&A expense, partially offset by lower physical sales due to lower production volumes and lower realized commodity prices.

During the first quarter, the company received $439 million of cash related to settlements of derivative contracts hedging natural gas and oil production. Of this amount, approximately $149 million related to the early settlement of 2009 oil derivative contracts hedging April through December production.

First quarter 2009 production volumes averaged 803 MMcfe/d, including 72 MMcfe/d of unconsolidated affiliate volumes. First quarter 2008 production volumes averaged 886 MMcfe/d, including 75 MMcfe/d of unconsolidated affiliate volumes. First quarter 2008 production volumes included 88 MMcfe/d associated with properties sold during the first quarter of 2008.

Although overall cash operating costs were lower, total per-unit cash operating costs increased to an average of $2.00 per thousand cubic feet equivalent (Mcfe) in first quarter 2009, compared with $1.92 per Mcfe for the same 2008 period, reflecting lower production volumes.

The per-unit DD&A rate for the first quarter 2009 was $2.28 per Mcfe. As a result of the ceiling test charges, the full-year 2009 DD&A rate is expected to drop to between $1.70 and $1.90 per Mcfe.