In announcing a 46% increase in third quarter profits led by adoubling of earnings from the company’s nonregulated operations, ElPaso CEO William Wise said last week he expected the company’sacquisition of PG&E Gas Transmission Texas to win finalapprovals from the Federal Trade Commission and the Texas AttorneyGeneral’s office “literally any moment now.” He also said theCoastal merger still is expected to be completed in the fourthquarter.

El Paso reported third quarter earnings of 57 cents/sharecompared to 39 cents/share in 3Q99. All of the company’s businessunits showed earnings growth. Pipeline volumes rose 7%, reflectinga 16% increase on El Paso Natural Gas and an adjusted 6% increaseat 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 isexpecting to replace 200% of its production this year “probablyputting us in the top quartile of all E&P companies for theyear,” said Wise. Despite production being down 3% to about 503MMcf/d during the quarter, Wise said the risk profile of the unitis down substantially.

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

Rocco Canonica

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