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-regulatedsegments, according to CEO William A. Wise.

Adjusted second quarter earnings per share were $0.69, up 73% overthe same time last year. The results excluded $0.13 per share forone-time merger-related items, all relating to its coming merger withThe Coastal Corp., approved by both companies’ stockholders May 5 (seeDaily GPI, Jan. 19).

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

“Outstanding growth in merchant energy and continued strongperformance in our other non-regulated segments produced theserecord results,” Wise said. “Reflecting our long-standing strategyof building a portfolio of flexible gas and power assets, merchantenergy’s earnings continued to accelerate in the second quarter.”

Merchant energy’s earnings are significant to the company’sbottom line at this point, and El Paso’s physical and financial gasand power portfolio developed over the past several years hascreated value in the current market. Wise said El Paso’s highearnings are keyed to its “enhanced trading opportunities,” strongwholesale consumer business and management fees from ProjectElectron, the company’s off-balance sheet vehicle for powergeneration investments.

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

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

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

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