El Paso Corporation (
EP) reported an adjusted EPS of 23 cents for the third quarter of 2009, slightly above the Zacks Consensus Estimate of 22 cents, but below 35 cents posted in the same quarter a year ago. Encouraging performance in the Pipeline segment, which clocked an 17% operating earnings growth, was more than offset by lower realized commodity prices.
Reported net income, which includes the impact of production-related derivatives, ceiling test charges and other items, declined to $58 million or 8 cents per share from $436 million or 58 cents per share. Revenues dropped 39% to $981 million and operating income fell 61% to $329 million.
Operating income of Pipeline segment grew 17% to $326 million, driven primarily by incremental revenues from several expansion projects that went into service during 2008 and 2009. Results also benefited from lower operating & maintenance costs and higher volumes and realized prices on operational sales of gas not used in operations. Pipeline throughput volumes averaged 17,757 billion British thermal unit per day (BBtu/d) compared to the year-ago level of 18,905 BBtu/d.
Operating income of the Exploration and Production segment declined 83% to $88 million, mainly due to lower realized commodity prices, lower production volumes, lower hedging gains and impairment charges, partially offset by lower cash operating costs and lower DD&A expense. Realized natural gas price averaged $7.37 per Mcf (down 15%) and oil, condensate and NGL price averaged $82.25 per Bbl (down 7%).
However, per unit cash operating costs improved to $1.78 from $1.89 largely due to lower lease operating expenses and production taxes. Production volumes, including contributions from unconsolidated associates, averaged 732 million cubic feet of natural gas equivalents per day (MMcfe/d), down 8% year-over-year from 793 MMcfe/d.
The Marketing segment posted an operating loss of $28 million compared to an operating gain of $82 million a year ago largely due to hedging losses. The Power segment reported an operating loss of $8 million compared to an operating loss of $6 million in the year-ago quarter.
El Paso’s Board of Directors cut the quarterly dividend from 5 cents to 1 cent per share. The dividend reduction will result in approximately $112 million of annual cash savings. El Paso intends to sell an additional $300 million to $500 million of assets during 2010. It raised the 2009 adjusted EPS guidance to $1.15 to $1.20.
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