Income

Two of Canada’s largest energy trusts, Calgary-based PrimeWest Energy Trust and Shiningbank Energy Income Fund, agreed last week to merge in an all-stock deal valued at C$1.25 billion. The combined trust will create a natural gas-heavy producer with an undeveloped land base of more than 1.1 million net acres primarily focused in west central Alberta, northeastern British Columbia and the Williston Basin in the United States.

Two of Canada’s largest energy trusts, Calgary-based PrimeWest Energy Trust and Shiningbank Energy Income Fund, agreed to merge in an all-stock deal valued at C$1.25 billion that will create a natural gas-heavy producer with an undeveloped land base of more than 1.1 million net acres primarily focused in west central Alberta, northeastern British Columbia and the Williston Basin in the United States.

El Paso Corp. reported a $175 million net loss (25 cents/share) for the fourth quarter of 2006 but $438 million (65 cents/share) in net income for the year. That compared to a 4Q2005 net loss of $172 million (26 cents/share) and a 2005 net loss of $633 million (98 cents/share). “2006 was a year of major accomplishments for El Paso,” said CEO Doug Foshee. “We reported a swing in profitability of more than $1 billion; our pipeline business reported record earnings and laid the foundation for future expansion-driven growth; our E&P business delivered organic production growth and replaced production through the drill bit; we reduced debt by $2.8 billion; and we eliminated numerous legacy issues. Finally, in December we announced, and last week we closed, the sale of ANR, which is a transformational event for our company as we regain our financial strength and flexibility while maintaining our earnings outlook. We look forward to additional progress in 2007.” Continuing operations in the fourth quarter lost $15 million, or 3 cents/share, because of a pre-tax charge of $188 million related to the divestiture of capacity on the Alliance Pipeline. Results were favorably impacted by a pre-tax, mark-to-market gain of $13 million on derivatives intended to manage the price risk of the company’s natural gas and oil production. Discontinued operations, including ANR Pipeline, for the fourth quarter lost $151 million. El Paso expects to recognize a gain on the ANR sale of $0.7 billion in the first quarter 2007. The company’s exploration and production segment reported quarterly earnings of $137 million, compared with $168 million for the same period in 2005. Lower earnings were primarily the result of lower realized prices. Fourth quarter 2006 production volumes averaged 762 MMcfe/d, up 11% from 2005 levels.

Dominion Resources Inc.’s net income in the final quarter of 2006 plunged 88% from a year ago, with the volatile exploration and production (E&P) segment posting an 83.6% drop in earnings compared with a year earlier. Dominion E&P, which the CEO said is “on track” to be sold by the end of 2Q2007, is rumored to be drawing the interest of private equity players, global oil and gas majors and several U.S.-based independents.

Energen Corp. subsidiary Energen Resources sold its allowed $12.5 million Enron bankruptcy claim, which will generate net income in 2006 of $6.7 million, or 9 cents per diluted share. The parent company reaffirmed its 2006 earnings guidance range of $3.10-$3.30 per diluted share, noting that the Enron settlement is expected to place Energen’s 2006 earnings toward the middle of this range. Excluded from the earnings guidance is a significant fourth quarter gain from the previously announced sale of one-half of Energen Resources’ acreage position in Alabama shales. The Birmingham, AL-based company has 1.7 Tcfe of proved reserves in the San Juan, Permian and Black Warrior basins and in the North Louisiana/East Texas area.

Occidental Petroleum Corp.’s net income in the third quarter fell nearly 33% to $1.168 billion ($1.36/share) from $1.747 billion ($2.12) in 3Q2005, which the producer attributed to one-time gains of $800 million and tax benefits a year ago. Core earnings, excluding charges and gains, jumped 16% to $1.16 billion ($1.35/share), in line with Wall Street estimates of $1.34/share. A year ago, Oxy’s quarterly earnings reached $1 billion ($1.22/share).

Occidental Petroleum Corp.’s net income in the third quarter fell nearly 33% to $1.168 billion ($1.36/share) from $1.747 billion ($2.12) in 3Q2005, which the producer attributed to one-time gains of $800 million and tax benefits a year ago. Core earnings, excluding charges and gains, jumped 16% to $1.16 billion ($1.35/share), in line with Wall Street estimates of $1.34/share. A year ago, Oxy’s quarterly earnings reached $1 billion ($1.22/share).

Dallas-based midstream operator Crosstex Energy LP said Wednesday it is reducing its previously reported first and second quarter net income by $0.9 million because of an accounting error related to a natural gas purchase.

Duke Energy Income Fund, which was spun off from Duke Energy Corp. to hold various Canadian midstream assets, said it is buying interests in four raw gas processing plants and related gas gathering system in northeastern British Columbia from Duke Energy Corp. subsidiary Westcoast Gas Services Inc. (WGSI) for $145 million. The acquisition will be accomplished through the purchase of all the issued and outstanding shares of WGSI from Westcoast Energy Inc., a subsidiary of Duke Energy Corp. and the sponsor of the fund. Closing is conditioned on the approval of the fund’s unitholders and is expected to occur by Sept. 30. The fund also announced its intention, contingent on the closing of the acquisition, to increase its monthly cash distributions to $0.07 per unit from $0.067 per unit, or $0.84 per unit on an annualized basis. Doug Haughey, CEO of the fund’s manager, said the facilities “represent an excellent strategic fit for the fund and will serve to strengthen our platform for further growth. In addition, the transaction will be immediately accretive to unitholder distributions.”