Hitting the comeback trail, El Paso Corp. reported Tuesday its year-end 2005 proved natural gas and oil reserves totaled 2.7 Tcfe, up 22% from 2004. The total included El Paso’s share of proved reserves in Four Star Oil & Gas Co. During 2005, El Paso’s exploration and production (E&P) capital expenditures totaled $1.867 billion, and reserve replacement costs were estimated to be $2.36/Mcfe.

Based on an independent review of its reserves, El Paso in early 2004 reduced its estimated proved reserves by 41% (see Daily GPI, Feb. 19, 2004). Following an independent review, El Paso reported some employees had used “unsupportable methods” over a four-year period, which allowed the overbooking of reserves (see Daily GPI, May 4, 2004), and since then, it has revamped its reporting practices and sold off some of its reserves to concentrate on domestic production.

“The dramatic reduction in reserve replacement costs reflects the completion of the turnaround in our E&P operations,” said CEO Doug Foshee. “I am particularly proud of the fact that we replaced 94% of production through the drill bit, even though 43% of our drilling capital was directed at the development of proved undeveloped (PUD) reserves. At our plan price of $4.75/MMBtu, our E&P business created solid value for shareholders in 2005.”

El Paso is forecasting 27% of the 2006 drilling capital will be directed to developing PUD reserves, and it is targeting 5-10% reserve growth for 2006.

El Paso has scheduled a financial analyst meeting to provide an in depth review of its 2006 operational plans beginning at 8:30 a.m. EST on Wednesday. The meeting may be accessed at www.elpaso.com.

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