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El Paso Earnings Up 73%

El Paso Earnings Up 73%

Record second quarter earnings at Houston's El Paso Energy Corp. came from "outstanding growth" in its merchant energy operations, and strong performances in the company's other non-regulated segments, according to CEO William A. Wise.

Adjusted second quarter earnings per share were $0.69, up 73% over the same time last year. The results excluded $0.13 per share for one-time merger-related items, all relating to its coming merger with The Coastal Corp., approved by both companies' stockholders May 5 (see NGI, Jan. 24).

Diluted average common shares outstanding for the second quarter totaled $242 million, and consolidated adjusted earnings before interest expense and income taxes (EBIT) increased 55%, to $408 million, compared with $263 million a year ago. EBIT from non-regulated businesses more than tripled in the quarter to $246 million, representing 60% of the consolidated EBIT.

"Outstanding growth in merchant energy and continued strong performance in our other non-regulated segments produced these record results," Wise said. "Reflecting our long-standing strategy of building a portfolio of flexible gas and power assets, merchant energy's earnings continued to accelerate in the second quarter."

Merchant energy's earnings are significant to the company's bottom line at this point, and El Paso's physical and financial gas and power portfolio developed over the past several years has created value in the current market. Wise said El Paso's high earnings are keyed to its "enhanced trading opportunities," strong wholesale consumer business and management fees from Project Electron, the company's off-balance sheet vehicle for power generation investments.

Production-wise, El Paso reported a 30% increase in second quarter EBIT, to $52 million compared with $40 million a year ago. Weighted average realized prices for the quarter were $2.26 MMcf of natural gas, up 12%, and $19.21 per barrel of oil, up 29%. Average natural gas production totaled 512 MMcf/d, and oil production averaged 14,275 barrels a day.

Its field services segment earned $30 million, nearly double the $16 million in 1999, mostly because of higher realized gathering and processing margins, and the acquisition of an interest in the Indian Basin processing plant in March.

Following one of the warmest winters on record, the natural gas transmission segment of El Paso reported earnings of $190 million, compared with $187 million in 1999, reflecting cost savings from the Sonat merger. Overall, system throughput averaged 11.3 Bcf/d

Carolyn Davis, Houston

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