UPDATE: El Paso 4Q Net More Than Doubles; El Paso Pipeline Earnings Up 24%
February 27 2012 - 12:18PM
Dow Jones News
El Paso Corp.'s (EP) fourth-quarter earnings more than doubled
as higher oil prices offset a drop in natural gas values, the
company said Monday.
El Paso, which operates an oil-and-gas production business and a
network of interstate natural-gas pipelines in North America, last
year agreed to sell itself to Kinder Morgan Inc. (KMI) for $21
billion, a deal which is expected to close by the second quarter of
this year. The Houston-based company said Friday it would sell its
oil and gas production business to a group of investors led by
Apollo Global Management for $7.15 billion, a deal also expected to
close by the second quarter.
For the latest period, El Paso posted a profit of $185 million,
or 24 cents a share, up from $71 million, or 9 cents a share, a
year earlier. Revenue rose 25% to $1.23 billion. Analysts surveyed
by Thomson Reuters expected earnings of 29 cents a share on $1.35
billion in revenue.
El Paso's E&P segment posted $92 million in profit, compared
with a $27 million loss last year, amid a 21% rise in oil prices.
The company increased its oil production by 50% year over year, to
22,300 barrels a day, the latest energy producer to shift its focus
away from a natural gas market weakened by a supply glut and
stagnant demand.
New drilling technology has allowed companies to produce more
natural gas from areas previously considered unproductive, creating
a glut that has depressed prices. Natural gas for April delivery
closed at $2.695 a million British thermal units Friday, down from
over $4 in February 2011.
El Paso said overall output rose 11% to 880 million cubic feet
equivalent a day. The amount of natural gas flowing through its
pipelines grew by 8% as growing production in the Marcellus shale
formation in the northeastern U.S. offset a drop in supply from the
Rocky Mountain region, El Paso said.
El Paso said it has four permits pending for pipeline expansion
projects in the Marcellus even as drillers have announced they will
slow down production because of the low prices for the
commodity.
"It's likely the right move strategically, but it may be a
little premature given where gas prices are," Morningstar analyst
Jason Stevens said of El Paso's Marcellus expansion.
An inflationary atmosphere was also a drag on the company's
pipeline business, with El Paso saying increased payroll, worker
benefit and maintenance costs drove operating earnings down 5% year
over year.
Meanwhile, El Paso Pipeline Partners LP (EPB) saw its earnings
rise 24%. El Paso Pipeline reported earnings of $126 million, or 51
cents a unit, up from $102 million, or 53 cents a unit a year
earlier. Operating revenue rose 2.8% to $362 million. Analysts
expected earnings of 60 cents a unit on revenue of $385
million.
El Paso Pipeline is a so-called master limited partnership, a
tax-advantaged structure in which most of the company's earnings
are paid out to shareholders in the form of dividend-like
distributions. A separate "general partner," which is owned by El
Paso Corp., oversees day-to-day operations.
El Paso Corp. was up 1.25% at $27.50 in recent trading. Units
for El Paso Pipeline Partners were $37.58, down 1.1%.
-By Ben Lefebvre, Dow Jones Newswires; 713-547-9201;
ben.lefebvre@dowjones.com
--Mia Lamar contributed to this article.
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