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El Paso 3Q Results Rise 46%

El Paso 3Q Results Rise 46%

In announcing a 46% increase in third quarter profits led by a doubling of earnings from the company's nonregulated operations, El Paso CEO William Wise said last week he expected the company's acquisition of PG&E Gas Transmission Texas to win final approvals from the Federal Trade Commission and the Texas Attorney General's office "literally any moment now." He also said the Coastal merger still is expected to be completed in the fourth quarter.

El Paso reported third quarter earnings of 57 cents/share compared to 39 cents/share in 3Q99. All of the company's business units showed earnings growth. Pipeline volumes rose 7%, reflecting a 16% increase on El Paso Natural Gas and an adjusted 6% increase at Tennessee Gas Pipeline. Earnings before interest and taxes (EBIT) for the pipeline division was up 5%. For Field Services, EBIT rose 36%.

The E&P unit reported a 30% increase in EBIT and is expecting to replace 200% of its production this year "probably putting us in the top quartile of all E&P companies for the year," said Wise. Despite production being down 3% to about 503 MMcf/d during the quarter, Wise said the risk profile of the unit is down substantially.

EBIT from the Merchant Energy unit soared to $81 million from only $10 million in 3Q99. Year to date, EBIT from the unit has increased to $283 million from an adjusted $23 million in 1999. The growth has been fueled by high fee-based services, new power plants and significant margins for power sales particularly in the West this summer. While the units gas sales declined by 25% to 4,8788 billion Btu/d during the quarter, power sales rose by 71% to 40,911 thousand MWh. Liquids sales plummeted to 54 Mbbls from 1,203 Mbbls.

Rocco Canonica

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