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Calpine Cuts Year-End Gas Reserves, Records $200M Charge for TX, LA Fields

Calpine Cuts Year-End Gas Reserves, Records $200M Charge for TX, LA Fields

Power producer Calpine Corp last Thursday said it cut its natural gas reserves estimate by 6% at the end of the fourth quarter and reduced the carrying value of certain fields in South Texas and offshore Louisiana. Both actions will take a toll on the San Jose, CA-based energy company's fourth quarter results, which will be announced in late February.

A review by an independent, third-party engineer put the company's year-end gas reserves at 389 Bcf equivalent, or 25 Bcfe (6%) below Calpine's projected year-end reserve level. The company's gas reserves now have an estimated value of $912 million, according to Calpine.

It also was determined that the carrying value of certain fields in South Texas and offshore Louisiana exceeded the sum of projected undiscounted cash flows, the company said. As a result, Calpine will be required to reduce the carrying value of those fields to fair market value by recording a pre-tax, non-cash charge preliminarily estimated to be $200 million. The charge will be reflected in the company's fourth quarter results for the period ending Dec. 31, 2004.

Calpine currently projects that it will report a loss of approximately 48 cents to 56 cents per share in the fourth quarter. This will include the pre-tax non-cash gas reserve impairment charge of approximately $200 million, along with other charges for project repair and maintenance expenses, and development project and equipment write-downs.

The consensus estimate by analysts on Wall Street was for a loss of 14 cents. Calpine stock closed at about $3.23 last Thursday, down by two cents.

Calpine's EBITDA (earnings before interest, taxes, depreciation and amortization) will be approximately $200 million to $250 million for the fourth quarter, according to the company. It expects to announce its fourth quarter results on Feb. 24.

For the entire year, Calpine estimates that it will report a loss of 69 cents to 78 cents per share, while its EBITDA will be approximately $1.6 billion to $1.65 billion.

During 2004, the company said it successfully completed approximately $2 billion in asset sales, and is eyeing $1 billion in additional opportunities now. Calpine said its cash and liquidity totaled about $1.6 billion.

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