El Paso Corp. said Friday it would cooperate with the Securities and Exchange Commission (SEC), which has launched a formal investigation of the company’s recently announced oil and gas reserve revisions.

In a written statement, El Paso said that it had received a letter concerning the investigation from the SEC, which was accompanied by a subpoena requesting the “production of documents related to the company’s recently announced reserve revisions.”

In February, the Houston-based company revised its proved oil and gas reserves downward by 41% (see Daily GPI, Feb. 19). It has since announced that the changes also will delay release of its fourth quarter and 2003 year-end report (see Daily GPI, March 11).

“We will cooperate fully with the SEC or any other government agency conducting an investigation,” said CEO Doug Foshee in a statement. “In February, we proactively initiated an independent review of our reserve revisions, and we expect to complete that review no later than the end of next month. We will work to put this matter behind us as soon as possible so that we can focus on achieving the goals of our long- range plan.”

The formal investigation of El Paso would be the SEC’s second announced so far this year concerning proved revision changes. In February, the SEC launched a formal investigation of Royal Dutch/Shell Group’s reclassification of about 20% of its reserves (see Daily GPI, Feb. 20).

In other El Paso news on Friday, the company said that it agreed to sell 100% of its equity interests in Utility Contract Funding (UCF) to Bear Stearns’ Houston Energy Group for $21.1 million. UCF assets include a power contract that was restructured as part of the company’s previous power restructuring activities. The transaction is subject to Federal Energy Regulatory Commission approval and is expected to close in the second quarter of 2004.

El Paso said it expects to take an estimated $100 million pre-tax charge on this sale based on the company’s investment in the equity of this entity. However, the transaction will eliminate about $815 million in non-recourse debt associated with UCF that El Paso currently consolidates.

This sale supports El Paso’s recently announced long-range plan to reduce the company’s debt, net of cash, to $15 billion by year-end 2005 from more than $22 billion at the end of the third quarter of last year. To date, the company has announced or closed $2.9 billion of the $3.3 to $3.9 billion of assets sales targeted under the plan. In addition to using proceeds from these sales for direct debt reduction, about $1.1 billion of additional non-recourse debt will be eliminated.

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