Buoyed largely by “significant asset acquisitions” completed during the past year, Houston-based El Paso Energy Partners LP reported last week a 77% jump in net income for the third quarter over a year ago. The company said approximately $2.2 million, or five cents per unit, had been shaved from its quarterly earnings due to disruptions caused by Hurricane Isadore and a loss associated with a natural gas hedging transaction.

El Paso Energy posted net income of $23.8 million, or 21 cents per unit, for the third quarter ended Sept. 30 compared to $13.4 million, or 9 cents per unit, for the comparable period in 2001. This pushed the partnership’s earnings for the nine-month period of 2002 to $71.6 million from $43 million for the same period in 2001. Cash flow as measured by adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 73% to $69 million during the quarter, up significantly from $39.8 million reported in the year-ago period.

Based on reported earnings, the publicly traded energy partnership recently declared a cash distribution of $0.675 per common unit payable Nov. 15 of this year to unitholders of record close of business on Oct. 31. The payout represents a distribution of $2.70 for the year, up 10% over the $0.6125 paid out in Nov. 2001, according to El Paso Energy.

This marks El Paso Energy’s eighth consecutive quarter of record cash flow, said Chairman and CEO Robert G. Phillips. “Our ability to achieve these results despite weather-related shut-ins and reduced shelf-based drilling in the Gulf of Mexico underscores the value of our diversification strategy. The partnership’s stable cash flow for the quarter is a result of the solid performance of our Texas and New Mexico natural gas assets, the expansion of our Petal natural gas storage facilities, and the acquisition of the Big Thicket gas gathering system in Southeast Texas.”

During the third quarter, El Paso Energy completed a $160 million expansion of its credit facility that will provide “additional flexibility as we continue construction on our growing base of greenfield projects in the Gulf of Mexico,” said Phillips.

The partnership also completed $155 million project financing for its 50% owned Marco Polo platform project due to be installed in August 2003; completed construction of its Medusa gas gathering system, which will move production from the Mississippi Canyon Block 582 to the Viosca Knoll Pipeline and Tennessee Gas Pipeline in early 2003; selected Valero Energy Corp. as its 50% partner in the Cameron Highway Oil Pipeline System due to be built in 2003 and 2004; and announced plans to build a new gas gathering system to serve the Red Hawk field located in the Garden Banks area of the Deepwater Trend in the Gulf.

El Paso Energy expects to close on the acquisition of $782 million of midstream assets from El Paso Corp. during the fourth quarter of this year, according to the company. The crown jewel of the assets to be purchased is El Paso’s gas gathering system in the San Juan Basin.

As for segment performance, El Paso Energy reported its natural gas pipelines and plants’ business finished out the third quarter with an adjusted EBITDA of $44.5 million, more than three times the $13.4 million posted during the year-ago period, due primarily to the acquisition of Texas and New Mexico gas assets in April of this year. Third-quarter gas transportation volumes (both onshore and offshore) were 5,971 MDth/d compared to 1,896 during the same quarter in 2001. Offshore transportation volumes were affected by Hurricane Isadore.

The partnership’s oil pipelines and natural gas liquids (NGL) transportation, fractionation and storage assets posted an adjusted EBITDA of $11.3 million for the third quarter, down from $13 million for the comparable period in 2001. Operating volumes were 219,449 barrels per day (Bbls/d) in the most recent third quarter, compared to 234,606 Bbls/d for the same period a year ago. The segment’s adjusted EBITDA and volumes were lower due to weather-related disruptions and normal production declines on El Paso Energy’s 36% owned Poseidon Oil Pipeline, it said. In addition, El Paso Energy’s Texas NGL fractionation and transportation facilities experienced lower volumes due to a poor processing environment during the quarter.

Natural gas storage operations saw an adjusted EBITDA of $5.4 million for the period, up 80% from $3 million during the third quarter in 2001. The increase was due to the initiation of service to Southern Co. following the completion of the Petal gas storage facility’s expansion and takeaway pipeline in July, El Paso Energy noted.

The partnership’s platform services’ segment reported an adjusted EBITDA of $4.6 million for the quarter, down significantly from the $7.4 million that was posted for the third quarter a year ago, due mostly to the sale of its Prince platform during the second quarter of this year, weather-related disruptions and production declines during the quarter.

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