Boosted by stronger results in its regulated business units, El Paso Corp. reported last week that it recorded a profit in 2Q2004. With Securities and Exchange Commission (SEC) approval, El Paso filed the quarterly statement late to reconcile prior income statements between 2001 and 2003.

For 2Q2004, the company posted a profit of $16 million (3 cents/share), compared with a loss of $1.24 billion (minus $2.07) in 2Q2003, as restated. Revenue in the quarter dropped to $1.52 billion from $1.57 billion a year earlier.

El Paso last week also closed $3 billion of credit facilities, which CEO Doug Foshee said indicate the “significant progress” the company has made to improve its financial position. The new facilities replace an existing facility set to expire in June 2005.

The new financing package includes a three-year, $1 billion revolving credit facility, a five-year, $1.25-billion term loan facility and a $750-million funded letter of credit facility that can also be used for loans as letter-of-credit requirements decrease. Combined, the facilities replace a revolving credit and letter of credit facility with an original capacity of $3 billion (current capacity of $2.5 billion), and they are secured by the same collateral securing the previous facility: interests in El Paso Natural Gas Co., Tennessee Gas Pipeline Co., ANR Pipeline Co., Colorado Interstate Gas Co., Wyoming Interstate Co. Ltd., ANR Storage Co., and Southern Gas Storage Co.

“These new facilities…provide us with longer-term liquidity, greater flexibility and a significantly lower cost than our previous bank facility,” said Foshee. “We appreciate the support shown by our lenders.”

At closing, El Paso borrowed $1.25 billion through the term loan facility and used a portion of these proceeds to repay its Lakeside Technology Center obligations of $229 million. This loan will be repaid in amounts of $5 million per quarter with the remaining unpaid balance due at maturity in November 2009.

The $750 million funded letter of credit facility provides the company with the flexibility to issue letters of credit or borrow any unutilized capacity under this facility as loans with a maturity in November 2009. This facility was used to support approximately $750 million of existing letters of credit issued under the previous revolving credit facility. The new credit facilities have restrictive covenants that are covered under one credit agreement.

“The market’s strong response to this transaction allowed us to achieve significantly lower borrowing costs and upfront fees versus our original expectations,” said Foshee. “In addition, we will benefit from $2 billion of our new facilities having a five-year maturity. The new borrowings, when combined with our existing strong cash position, will allow us to prudently use these funds over time to address our near-term debt maturities and extend our maturity profile.”

In other news, the company disclosed in a filing with the SEC that regulators are seeking information on Iraqi oil transactions under a United Nations program. The El Paso unit under scrutiny is part of the former Coastal Corp., which El Paso acquired in January 2001 (see NGI, Feb. 5, 2001).

The company said the CNG Co. unit received an order from the SEC earlier this month demanding a written statement and documents related to the UN oil-for-food program that governed Iraqi oil sales. A Senate investigation has discovered that former Iraqi leader Saddam Hussein’s regime reaped more than $21 billion before and during the program, which no longer exists, through oil surcharges and kickbacks.

CNG also received a subpoena from a U.S. district court grand jury seeking records related to the Iraqi oil deals between 1995 and 2003. The Senate’s Permanent Subcommittee of Investigations also is seeking information on a specific transaction in 2000, El Paso disclosed.

El Paso said it is cooperating with the U.S. Attorney and with other investigations into the transactions.

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