Looking to shore-up investor support and appease credit rating agencies, El Paso Corp. last week reiterated its restructuring commitment, along with its mission of focusing on its global liquefied natural gas (LNG) and petroleum business (see NGI, June 3).

El Paso has started slashing its energy trading staff — primarily on the power side — by 50% due to a contraction in the trading business and anticipated slowdown in electricity deregulation. The expected cost savings/proceeds from this and other moves — debt reduction and asset sales — is expected to be channeled to El Paso’s core natural gas businesses — exploration and production (E&P), LNG, and its midstream and pipelines facilities.

The Houston-based energy giant explained that the purpose of the plan is to limit its investment in and exposure to non-cash earnings associated with energy trading and to increase its investment in core natural gas businesses. Despite the cutbacks, the company said it is continuing to pursue a rich inventory of opportunities that will provide reliable, sustained earnings internationally.

“El Paso remains committed to its international business activities,” said CEO William A. Wise. “The company has been a member of the international business community for many years, and this plan will only strengthen that relationship through a more concentrated focus on our key assets around the world. Changed market dynamics and a progression toward a global economy provide El Paso an opportunity to continue a strong global presence with particular focus in Europe, Latin America, and Asia. The outlook of our global LNG business is very strong, with opportunities to utilize the EP Energy Bridge technology in areas all over the world. Going forward, El Paso will continue to pursue worldwide energy opportunities as we have in years past.”

Earlier in the year, El Paso revealed its EP Energy Bridge technology, which is a new ship-based LNG regasification system (see NGI, May 13). Tankers already ordered by El Paso to deliver future LNG are being redesigned to deliver LNG through a mooring buoy system and subsea pipeline.

The key elements of the strategic repositioning plan include structuring the Merchant Energy segment to further focus on the natural gas opportunities. El Paso has made company-wide staff reductions domestically, closed its trading office in Singapore and issued $1.56 billion in common shares and equity security units as part of its restructuring.

Going forward, the company said it will increase capital spending in its production business to $2.3 billion and continue its active infrastructure investment program. El Paso said it will also be limiting working capital investment in trading activities to $1 billion, reducing company-wide annual operating expenses by at least $300 million, and decreasing net debt-to-total capitalization to 49%.

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