El Paso Energy Partners L.P. (EPN) reported its highest ever cash flow and net income in 2002, reflecting an array of acquisitions during the year which should contribute to continued high returns, company officials said.

“During 2002 we achieved the highest levels of cash flow and net income ever recorded by the partnership and we continued our string of nine consecutive quarters of record cash flow and net income,” said Robert G. Phillips, chairman and CEO. “We more than doubled our assets during the year, completing two immediately accretive acquisitions totaling over $1.5 billion, both of which are outperforming our acquisition economics. We made substantial progress on nearly $1 billion of greenfield projects that will positively impact cash flow in future years and will solidify our position as the leading provider of pipeline and platform infrastructure and midstream services in the Deepwater Trend of the Gulf of Mexico.”

“Entering 2003, we expect EPN to generate approximately $420 million in cash flow, a 57% increase over that of 2002, from our existing asset base and expansion projects,” Phillips continued. “Driving our cash flow growth in 2003 are full-year contributions from the Texas natural gas pipelines and Permian Basin gathering and processing assets acquired in April 2002; the most recent expansion of the Petal natural gas storage facility completed during the third quarter of 2002; and the San Juan natural gas gathering, treating, and processing assets acquired in late November 2002.

“Greenfield projects coming online and contributing to cash flow during 2003 include the Falcon Nest platform and pipeline located in the western Gulf of Mexico; the Medusa gathering system expansion of EPN’s Viosca Knoll Deepwater natural gas gathering system located in the eastern Gulf of Mexico; and first revenues from our Marco Polo platform located in the growing Green Canyon Deepwater corridor. We intend to continue to be a leading provider of offshore infrastructure, maintaining a steady flow of these high-return projects.”

“Our focus during 2003 is to optimize cash flow and investment opportunities from our portfolio of midstream assets through integration, operating synergies and organic growth projects. For example, the new oil and gas pipelines we are building as part of our Marco Polo project will be operationally integrated with our newly acquired Typhoon gas pipeline and our existing Allegheny oil pipeline as we extend further into the Deepwater Trend,” Phillips said.

“A second example is the operating synergies of our upper Texas Gulf Coast natural gas liquids (NGL) assets acquired in November 2002 with our South Texas NGL assets, which will broaden our NGL market access. An example of organic growth in 2003 is the development of compression and pipeline projects on the San Juan gathering system to support expected increases in drilling and production levels due to higher gas prices in late 2002 and early 2003,” Phillips concluded.

El Paso Energy Partners recorded a 65% increase in 2002 cash flow, as measured by adjusted earnings before interest, taxes, depreciation and amortization of $266.8 million compared with $161.3 million in 2001. Full-year 2002 net income was $97.7 million ($0.92 per unit), up 58% from $61.8 million ($0.58 per unit) in 2001 excluding non-recurring items. Including non-recurring charges of $6.7 million ($0.19 per unit) relating to asset sales, 2001 net income was $55.1 million ($0.38 per unit). There were no non-recurring items impacting net income during 2002.

For the fourth quarter of 2002 cash flow was $78.4 million, up 58% from $49.6 million in the fourth quarter of 2001. Net income was $26.0 million ($0.20 per unit) compared with $18.9 million ($0.18 per unit) excluding non-recurring items in the fourth quarter of 2001. Including non-recurring items, fourth quarter 2001 net income was $18.3 million ($0.17 per unit).

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