El Paso Corporation (NYSE: EP), provides natural gas and related energy products and is one of North America's largest independent natural gas producers. It is headquartered at 1001 Louisiana Street in Downtown Houston, Texas. United States.[1]
The company owns North America's largest natural gas pipeline system which goes from border-to-border and coast-to-coast. The system includes Colorado Interstate Gas, El Paso Natural Gas, Southern Natural Gas, and Tennessee Gas Pipeline. Currently under construction Ruby Pipeline. The El Paso Corporation also owns fifty percent of Great Lakes Transmission and Florida Gas Transmission and employs 6,000 people. Florida Gas is part of Southern Natural Gas. In 1999 the company doubled in size when it merged with Birmingham, Alabama based natural gas giant Sonat.[citation needed] It went on to acquire Coastal States Gas in 2001.
The company's major offices are located in Houston, Texas, Birmingham, Alabama and Colorado Springs, Colorado. The company's current CEO is Douglas L. Foshee.
El Paso Corporation (El Paso) is an energy company, which operates in the natural gas transmission and exploration and production sectors of the energy industry. El Paso operates in two segments: Pipelines and Exploration and Production. The Company also has a Marketing segment. During the year ended December 31, 2010, the Company added 488 billion cubic feet of natural gas equivalents of PUD reserves, and acquired 37 billion cubic feet of natural gas equivalents of PUD reserves, of which 12 billion cubic feet of natural gas equivalents occurred from the acquisition of oil properties in the Wolfcamp Shale in west Texas, in its Gulf Coast division. During 2010, it also acquired 123,000 net acres in the Wolfcamp Shale in the Permian Basin in Texas. During 2010, its divestitures included the sale of its interests in certain Mexican pipeline and compression assets and the sale of a 50% interest in its Altamont gathering and processing assets, which are part of its new midstream joint venture. During 2010, El Paso also sold natural gas and oil properties, pipeline assets or related facilities, legacy international power investments and other assets.
Pipelines Segment
El Paso’s Pipelines segment includes its interstate natural gas transmission systems and related operations conducted through eight wholly or majority owned pipeline systems and two partially owned systems. These systems consist of approximately 43,100 miles of pipe that connect the nation’s principal natural gas supply regions to five consuming regions in the United States (the Gulf Coast, California, the northeast, the southwest and the southeast). It also has access to systems in Canada. The Company’s Pipelines segment also includes storage and LNG terminalling-related facilities, including its ownership of storage capacity through its transmission systems, three underground natural gas storage facilities, and two LNG terminalling facilities, one of which is under construction and the other which is located in Elba Island, Georgia.
The Company provides approximately 240 billion cubic feet of storage capacity and its LNG receiving terminal has a peak sendout capacity of 1.8 billion cubic feet per day. Its transmission systems include Tennessee Gas Pipeline (TGP), El Paso Natural Gas (EPNG), Mojave Pipeline (MPC) and Cheyenne Plains Gas Pipeline (CPG). Its transmission systems also include Colorado Interstate Gas (CIG), Southern Natural Gas (SNG), Wyoming Interstate (WIC), Elba Express and Florida GasTransmission (FGT). As of December 31, 2010, it held 50% interest in WYCO, which is a joint venture with an affiliate of Public Service Company of Colorado (PSCo). WYCO owns the 164 mile High Plains pipeline and Totem Gas Storage facilities located in Northeast Colorado, which are operated by the Company. The Totem Gas Storage facility consists of a six billion cubic feet natural gas storage field that services and interconnects with the High Plains pipeline. WYCO also owns a state-regulated intrastate gas pipeline.
As of December 31, 2010, El Paso had pipeline expansion projects on its systems, which included FGT Phase VIII, Ruby Pipeline, South System III (Phases I-III), Southeast Supply Header Phase II and 300 Line Project. In addition to the storage capacity in its wholly and majority owned pipeline systems, the Company had interests in the underground natural gas storage facilities, which consisted of Bear Creek, Totem Gas Storage and Young Gas Storage. It owns a 51% interest in SLNG, which owns a LNG receiving terminal located on Elba Island, near Savannah, Georgia, with a peak sendout capacity of 1.8 billion cubic feet per day and a storage capacity of 11.5 billion cubic feet per equivalent. El Paso also has a 50% interest in the Gulf LNG Clean Energy Project (GLNG). As of December 31, 2010, its master limited partnership, EPB, owned 100% of WIC, Elba Express, and SLNG; a 60% general partner interest in SNG, and a 58% general partner interest in CIG.
Exploration and Production Segment
The Company’s Exploration and Production segment’s business focuses on the exploration for and the acquisition, development and production of natural gas, oil and NGL in the United States, Brazil and Egypt. As of December 31, 2010, it operated through three divisions in the United States: Central, Western and Gulf Coast. During 2010, in the United States, El Paso focused on several programs: the Haynesville Shale in northwest Louisiana and east Texas, the Eagle Ford Shale in south Texas and the Altamont fractured tight sands in Utah. It also established a new core oil program in the Wolfcamp Shale, which is located in the Permian Basin of West Texas.
As of December 31, 2010, El Paso controlled approximately 3.7 million net leasehold acres and had proved natural gas and oil reserves of approximately 3.4 trillion cubic feet of natural gas equivalents, including 0.2 trillion cubic feet of natural gas equivalents of proved natural gas and oil reserves related to Four Star Oil & Gas Company. During 2010, daily equivalent natural gas production averaged approximately 782 million cubic feet of natural gas equivalents day, including 62 million cubic feet of natural gas equivalents per day from its equity interest in Four Star Oil & Gas Company.
The Central division includes operations that are primarily focused on shale gas, tight gas sands, coal bed methane and lower risk conventional producing areas. The principal operating areas include Haynesville, East Texas/ North Louisiana (Arklatex), Shallow. The Haynesville Shale is engaged in shale gas production primarily from the Haynesville but also the Bossier Shale. Land positions primarily focused on tight gas sands production in the Travis Peak/Hosston, Bossier and Cotton Valley formations. Its operations are primarily in the Bear Creek, Holly, Bethany Longstreet and Logansport, Minden and Bald Prairie fields. The Western division includes operations that are primarily focused on natural gas and oil production from coal bed methane, shale gas and producing areas.
El Paso’s core program is the Altamont-Bluebell-Cedar Rim Field, the Altamont. During 2010, its production averaged 160 million cubic feet of natural gas equivalents per day. The principal operating areas include the Uintah Basin, the Raton Basin and Rocky Mountains (Rockies). The Company focuses primarily on developing and exploring for natural gas and oil in shales and tight gas sands in south Texas and the upper Gulf Coast. It also has operations in Gulf of Mexico and south Louisiana focused on deeper reservoirs. El Paso’s core programs are the Eagle Ford Shale and the emerging Wolfcamp Shale. The principal operating areas include Upper Texas Gulf Coast, South Texas and Gulf of Mexico/ South Louisiana. It has an approximate 49% interest in Four Star Oil & Gas Company. Four Star Oil & Gas Company operates onshore in the San Juan, Permian, Hugoton and South Alabama basins and in the Gulf of Mexico. During 2010, its interest in Four Star Oil & Gas Company’s daily equivalent natural gas production averaged approximately 62 million cubic feet of natural gas equivalents per day.
The Company’s Brazilian operations cover approximately 137,000 net acres in Camamu, Espirito Santo and Potiguar basins located offshore Brazil. During 2010, its production averaged 33 million cubic feet of natural gas equivalents per day. The Company’s operations in each basin include the Camamu Basin, the Espirito Santo Basin and the Espirito Santo Basin. It owns a 100% working interest in two development areas, the Camarao and Pinauna Fields. The Company owns an 18% working interest in a development area. El Paso owns an approximate 24% working interest in the Camarupim Field. During 2010, it began production from the second and third wells of a four well development program. During 2010, the Company’s production from these wells averaged approximately 25 million cubic feet of natural gas equivalents per day.
El Paso owns a 35% working interest in the Pescada-Arabaiana Fields. During 2010, the Company’s production from these fields averaged approximately eight million cubic feet of natural gas equivalents per day. As of December 31, 2010, its Egyptian operations cover approximately 1.1 million net acres in three blocks located onshore in Egypt’s Western Desert. The Company owns a 60% working interest in the South Mariut block, which contains approximately 500,000 net acres. It also owns a 50% working interest in the South Alamein block, which contains approximately 300,000 net acres, on which El Paso drilled two wells, during 2010. It also owns a 40% working interest in the Tanta block, which contains approximately 300,000 net acres.
Marketing Segment
El Paso’s Marketing segment’s primary focus is to market the Company’s Exploration and Production segment’s natural gas and oil production. As of December 31, 2010, it managed the natural gas transportation-related contracts and legacy natural gas and power contracts. Its transportation contracts give the Company the right to transport natural gas using pipeline capacity. As of December 31, 2010, El Paso had physical natural gas contracts with power plants associated with its legacy trading activities. The Company had power contracts that require it to swap locational differences in power prices between three power plants in Pennsylvania-New Jersey-Maryland (PJM) eastern region with the PJM west hub. These contracts require the Company to provide approximately 1,700 thousand megawatt hours of power per year and approximately 71 gigawatts of installed capacity per year in the PJM power pool through April 2016.
Burlington completed the spin-off of El Paso Natural Gas Company on June 30, 1992. William A. Wise was selected to act as president and chief executive of the once again independent El Paso. The 45-year-old Wise had been with El Paso since 1970, working as an attorney and then serving in various management positions. Wise was credited with helping the company make a transition to transport services during the late 1980s and with helping to make El Paso a low-cost industry leader. When El Paso regained its independence, its pipeline consisted of a 20,000 mile network connecting three oil producing regions in Texas, Oklahoma, and New Mexico to buyers primarily in California, Arizona, New Mexico, and Texas. Sales during 1993, its first full year of operation, topped $900 million, about $90 million of which was net income.
El Paso was in a relatively strong position in its industry going into the mid-1990s. It was the largest supplier of natural gas to the state of California and had successfully changed from merchant to transporter in compliance with new (1992) federal regulations. However, it was also facing obstacles. Most notably, the California gas market was becoming glutted, dampening profits in El Paso's most important region. Nevertheless, investors were enthusiastic about El Paso's chances, as evidenced by a doubling of the company's stock price between 1992 and early 1994. El Paso was pinning its long-term hopes on the rapidly expanding Mexican market, to which it had unsurpassed access. It was also engaged in an ambitious effort to vastly increase its access to the northern California natural gas market.
Problems in the Mid-1990s and Beyond
As part of its growth strategy, El Paso embarked on an impressive acquisition journey during the mid- to late 1990s. Three of the company's largest acquisitions significantly added to its holdings. El Paso acquired Tenneco Energy in 1996 in a $4 billion deal. Wise commented on the purchase in a December Inside F.E.R.C. article. "This watershed event unites the strengths of two seasoned organizations and caps 18 months of growth and change in our business." Wise went on to claim that the acquisition solidified the company's "place as a major player in domestic and international natural-gas transmission, gathering, processing and marketing, as well as electric power development." Indeed, as a result of the purchase El Paso gained control of the only coast-to-coast natural gas pipeline in the United States. Shortly after the purchase, the company adopted the El Paso Energy corporate moniker.
El Paso's next big move came in 1999 when it made a $6 billion play for Sonat Inc., a natural gas transporting and marketing firm. In order to clear regulatory hurdles, El Paso was forced to sell off its East Tennessee natural gas pipeline, 17 compressor stations, a liquefied natural gas facility, and Sonat's Sea Robin pipeline and its one-third interest in the Destin pipeline. The joining of El Paso and Sonat created the largest natural gas transmission system in North America. The company rounded out its spending spree with the $24 billion purchase of Coastal Corporation in 2001. Coastal had become an attractive target, mainly because of its natural gas reserves, and El Paso was eager to add it to its growing arsenal.
Over the past six years, El Paso had transformed itself into a leader in natural gas pipelines, gas processing, exploration and production, field services, and merchant energy, and the company planned to expand further into liquefied natural gas and telecommunications. Its revenues had also grown dramatically from $2.9 billion in 1995 to $21.9 billion in 2000. The company changed its name to El Paso Corporation in 2001.
El Paso began to face significant challenges during 2001. The Enron Corporation bankruptcy and the ensuing loss of investor confidence in energy companies forced the company to clean up its balance sheets. At the same time, El Paso came under fire for its alleged involvement in California's energy crisis. An August 2001 BusinessWeek article summed up the situation, reporting, "State and federal regulators are investigating charges that El Paso used its control of a key pipeline to sharply boost the price of natural gas flowing into the state. El Paso says it certainly didn't manipulate the market and blames higher prices on California's unique energy problems." In the end, however, the Federal Energy Regulatory Commission ruled that El Paso had manipulated the supply of natural gas in California in 2001 and early 2002. The company eventually reached a $1.6 billion settlement but continued to assert its innocence in the matter.
By 2002, El Paso was struggling under a mountain debt. As such, the company began a major sell off of its non-core assets. Over $3 billion in assets were jettisoned in 2003. Additional holdings were sold the following year, including part of its interest in GulfTerra Energy Partners, its refinery in Aruba, domestic power plants, various production properties, and chemical operations. At the same time, the company became entangled in a proxy fight with displeased shareholders that had watched the company's stock fall by 90 percent in recent years. Wise was ousted during the turmoil and Doug Foshee was tapped to oversee El Paso's turnaround.
During 2004, Foshee worked to reposition El Paso. According to the company, it planned to focus on pipeline operations in the United States and Mexico, production in the United States and Brazil, and marketing and trading. It also continued to clean up its accounting records. In 2004, the company revised its 1999-2003 figures, which resulted in a $2.7 billion drop in the value of its oil and gas assets. The move left it subject to an investigation by the Securities and Exchange Commission. While the past several years were indeed tumultuous for El Paso, the company appeared to be slowly emerging from the problems it had encountered in the early 2000s.
Principal Divisions: Southern Pipelines; Western Pipelines; Eastern Pipelines; Non-regulated Business.
Principal Competitors: AEP Inc.; Duke Energy Corporation; The Williams Companies Inc.
OVERALL
Beta: 1.17
Market Cap (Mil.): $14,008.31
Shares Outstanding (Mil.): 765.48
Annual Dividend: 0.04
Yield (%): 0.22
FINANCIALS
EP Industry Sector
P/E (TTM): 18.46 14.19 11.44
EPS (TTM): 214.53 -- --
ROI: 4.67 5.80 4.19
ROE: 25.64 12.67 5.51
Statistics:
Public Company
Incorporated: 1928
Employees: 11,855
Sales: $12.1 billion (2002)
Stock Exchanges: New York
Ticker Symbol: EP
NAIC: 486210 Pipeline Transportation of Natural Gas
Key Dates:
1928: Paul Kayser establishes El Paso Natural Gas.
1930: The company's pipeline is finished and put into service.
1957: Part of the operations of Pacific Northwest Pipeline Corporation are acquired.
1969: El Paso reaches a liquefied natural gas agreement with Sonatrach, an Algerian national oil and gas company.
1983: Burlington Northern Inc. buys El Paso.
1992: Burlington completes the spin-off of El Paso Natural Gas Co.
1996: El Paso acquires Tenneco Energy.
1999: Sonat Inc. is purchased.
2001: The company buys Coastal Corporation in a $24 billion deal.
2002: FERC rules that El Paso is guilty of manipulating the California natural gas market.
Name Age Since Current Position
Foshee, Douglas 51 2009 Chairman of the Board, President, Chief Executive Officer
Sult, John 51 2010 Chief Financial Officer, Executive Vice President
Cleary, James 56 2006 President - Western Pipeline Group
Ortenstone, Susan 54 2010 Executive Vice President, Chief Administrative Officer
Baker, Robert 54 2004 Executive Vice President, General Counsel
Leland, D. Mark 49 2009 Executive Vice President; President of Midstream Group
Yardley, James 59 2006 Executive Vice President - Pipeline Group
Smolik, Brent 49 2006 Executive Vice President; President of El Paso Exploration & Production Company
Whitehead, Dane 49 2009 Senior Vice President - Strategy and Enterprise Business Development
Talbert, J. Michael 64 2009 Lead Independent Director
Braniff, Juan 53 1997 Independent Director
Hall, Anthony 66 2001 Independent Director
Goldman, Robert 69 2003 Independent Director
Whitmire, John 70 2003 Independent Director
Hix, Thomas 63 2004 Independent Director
McClean, Ferrell 64 2006 Independent Director
Vagt, Robert 64 2005 Independent Director
Shapiro, Steven 59 2006 Independent Director
Crane, David 54 2009 Independent Director
Probert, Timothy 59 2009 Independent Director
Address:
1001 Louisiana Street
Houston, Texas 77001
U.S.A.
The company owns North America's largest natural gas pipeline system which goes from border-to-border and coast-to-coast. The system includes Colorado Interstate Gas, El Paso Natural Gas, Southern Natural Gas, and Tennessee Gas Pipeline. Currently under construction Ruby Pipeline. The El Paso Corporation also owns fifty percent of Great Lakes Transmission and Florida Gas Transmission and employs 6,000 people. Florida Gas is part of Southern Natural Gas. In 1999 the company doubled in size when it merged with Birmingham, Alabama based natural gas giant Sonat.[citation needed] It went on to acquire Coastal States Gas in 2001.
The company's major offices are located in Houston, Texas, Birmingham, Alabama and Colorado Springs, Colorado. The company's current CEO is Douglas L. Foshee.
El Paso Corporation (El Paso) is an energy company, which operates in the natural gas transmission and exploration and production sectors of the energy industry. El Paso operates in two segments: Pipelines and Exploration and Production. The Company also has a Marketing segment. During the year ended December 31, 2010, the Company added 488 billion cubic feet of natural gas equivalents of PUD reserves, and acquired 37 billion cubic feet of natural gas equivalents of PUD reserves, of which 12 billion cubic feet of natural gas equivalents occurred from the acquisition of oil properties in the Wolfcamp Shale in west Texas, in its Gulf Coast division. During 2010, it also acquired 123,000 net acres in the Wolfcamp Shale in the Permian Basin in Texas. During 2010, its divestitures included the sale of its interests in certain Mexican pipeline and compression assets and the sale of a 50% interest in its Altamont gathering and processing assets, which are part of its new midstream joint venture. During 2010, El Paso also sold natural gas and oil properties, pipeline assets or related facilities, legacy international power investments and other assets.
Pipelines Segment
El Paso’s Pipelines segment includes its interstate natural gas transmission systems and related operations conducted through eight wholly or majority owned pipeline systems and two partially owned systems. These systems consist of approximately 43,100 miles of pipe that connect the nation’s principal natural gas supply regions to five consuming regions in the United States (the Gulf Coast, California, the northeast, the southwest and the southeast). It also has access to systems in Canada. The Company’s Pipelines segment also includes storage and LNG terminalling-related facilities, including its ownership of storage capacity through its transmission systems, three underground natural gas storage facilities, and two LNG terminalling facilities, one of which is under construction and the other which is located in Elba Island, Georgia.
The Company provides approximately 240 billion cubic feet of storage capacity and its LNG receiving terminal has a peak sendout capacity of 1.8 billion cubic feet per day. Its transmission systems include Tennessee Gas Pipeline (TGP), El Paso Natural Gas (EPNG), Mojave Pipeline (MPC) and Cheyenne Plains Gas Pipeline (CPG). Its transmission systems also include Colorado Interstate Gas (CIG), Southern Natural Gas (SNG), Wyoming Interstate (WIC), Elba Express and Florida GasTransmission (FGT). As of December 31, 2010, it held 50% interest in WYCO, which is a joint venture with an affiliate of Public Service Company of Colorado (PSCo). WYCO owns the 164 mile High Plains pipeline and Totem Gas Storage facilities located in Northeast Colorado, which are operated by the Company. The Totem Gas Storage facility consists of a six billion cubic feet natural gas storage field that services and interconnects with the High Plains pipeline. WYCO also owns a state-regulated intrastate gas pipeline.
As of December 31, 2010, El Paso had pipeline expansion projects on its systems, which included FGT Phase VIII, Ruby Pipeline, South System III (Phases I-III), Southeast Supply Header Phase II and 300 Line Project. In addition to the storage capacity in its wholly and majority owned pipeline systems, the Company had interests in the underground natural gas storage facilities, which consisted of Bear Creek, Totem Gas Storage and Young Gas Storage. It owns a 51% interest in SLNG, which owns a LNG receiving terminal located on Elba Island, near Savannah, Georgia, with a peak sendout capacity of 1.8 billion cubic feet per day and a storage capacity of 11.5 billion cubic feet per equivalent. El Paso also has a 50% interest in the Gulf LNG Clean Energy Project (GLNG). As of December 31, 2010, its master limited partnership, EPB, owned 100% of WIC, Elba Express, and SLNG; a 60% general partner interest in SNG, and a 58% general partner interest in CIG.
Exploration and Production Segment
The Company’s Exploration and Production segment’s business focuses on the exploration for and the acquisition, development and production of natural gas, oil and NGL in the United States, Brazil and Egypt. As of December 31, 2010, it operated through three divisions in the United States: Central, Western and Gulf Coast. During 2010, in the United States, El Paso focused on several programs: the Haynesville Shale in northwest Louisiana and east Texas, the Eagle Ford Shale in south Texas and the Altamont fractured tight sands in Utah. It also established a new core oil program in the Wolfcamp Shale, which is located in the Permian Basin of West Texas.
As of December 31, 2010, El Paso controlled approximately 3.7 million net leasehold acres and had proved natural gas and oil reserves of approximately 3.4 trillion cubic feet of natural gas equivalents, including 0.2 trillion cubic feet of natural gas equivalents of proved natural gas and oil reserves related to Four Star Oil & Gas Company. During 2010, daily equivalent natural gas production averaged approximately 782 million cubic feet of natural gas equivalents day, including 62 million cubic feet of natural gas equivalents per day from its equity interest in Four Star Oil & Gas Company.
The Central division includes operations that are primarily focused on shale gas, tight gas sands, coal bed methane and lower risk conventional producing areas. The principal operating areas include Haynesville, East Texas/ North Louisiana (Arklatex), Shallow. The Haynesville Shale is engaged in shale gas production primarily from the Haynesville but also the Bossier Shale. Land positions primarily focused on tight gas sands production in the Travis Peak/Hosston, Bossier and Cotton Valley formations. Its operations are primarily in the Bear Creek, Holly, Bethany Longstreet and Logansport, Minden and Bald Prairie fields. The Western division includes operations that are primarily focused on natural gas and oil production from coal bed methane, shale gas and producing areas.
El Paso’s core program is the Altamont-Bluebell-Cedar Rim Field, the Altamont. During 2010, its production averaged 160 million cubic feet of natural gas equivalents per day. The principal operating areas include the Uintah Basin, the Raton Basin and Rocky Mountains (Rockies). The Company focuses primarily on developing and exploring for natural gas and oil in shales and tight gas sands in south Texas and the upper Gulf Coast. It also has operations in Gulf of Mexico and south Louisiana focused on deeper reservoirs. El Paso’s core programs are the Eagle Ford Shale and the emerging Wolfcamp Shale. The principal operating areas include Upper Texas Gulf Coast, South Texas and Gulf of Mexico/ South Louisiana. It has an approximate 49% interest in Four Star Oil & Gas Company. Four Star Oil & Gas Company operates onshore in the San Juan, Permian, Hugoton and South Alabama basins and in the Gulf of Mexico. During 2010, its interest in Four Star Oil & Gas Company’s daily equivalent natural gas production averaged approximately 62 million cubic feet of natural gas equivalents per day.
The Company’s Brazilian operations cover approximately 137,000 net acres in Camamu, Espirito Santo and Potiguar basins located offshore Brazil. During 2010, its production averaged 33 million cubic feet of natural gas equivalents per day. The Company’s operations in each basin include the Camamu Basin, the Espirito Santo Basin and the Espirito Santo Basin. It owns a 100% working interest in two development areas, the Camarao and Pinauna Fields. The Company owns an 18% working interest in a development area. El Paso owns an approximate 24% working interest in the Camarupim Field. During 2010, it began production from the second and third wells of a four well development program. During 2010, the Company’s production from these wells averaged approximately 25 million cubic feet of natural gas equivalents per day.
El Paso owns a 35% working interest in the Pescada-Arabaiana Fields. During 2010, the Company’s production from these fields averaged approximately eight million cubic feet of natural gas equivalents per day. As of December 31, 2010, its Egyptian operations cover approximately 1.1 million net acres in three blocks located onshore in Egypt’s Western Desert. The Company owns a 60% working interest in the South Mariut block, which contains approximately 500,000 net acres. It also owns a 50% working interest in the South Alamein block, which contains approximately 300,000 net acres, on which El Paso drilled two wells, during 2010. It also owns a 40% working interest in the Tanta block, which contains approximately 300,000 net acres.
Marketing Segment
El Paso’s Marketing segment’s primary focus is to market the Company’s Exploration and Production segment’s natural gas and oil production. As of December 31, 2010, it managed the natural gas transportation-related contracts and legacy natural gas and power contracts. Its transportation contracts give the Company the right to transport natural gas using pipeline capacity. As of December 31, 2010, El Paso had physical natural gas contracts with power plants associated with its legacy trading activities. The Company had power contracts that require it to swap locational differences in power prices between three power plants in Pennsylvania-New Jersey-Maryland (PJM) eastern region with the PJM west hub. These contracts require the Company to provide approximately 1,700 thousand megawatt hours of power per year and approximately 71 gigawatts of installed capacity per year in the PJM power pool through April 2016.
Burlington completed the spin-off of El Paso Natural Gas Company on June 30, 1992. William A. Wise was selected to act as president and chief executive of the once again independent El Paso. The 45-year-old Wise had been with El Paso since 1970, working as an attorney and then serving in various management positions. Wise was credited with helping the company make a transition to transport services during the late 1980s and with helping to make El Paso a low-cost industry leader. When El Paso regained its independence, its pipeline consisted of a 20,000 mile network connecting three oil producing regions in Texas, Oklahoma, and New Mexico to buyers primarily in California, Arizona, New Mexico, and Texas. Sales during 1993, its first full year of operation, topped $900 million, about $90 million of which was net income.
El Paso was in a relatively strong position in its industry going into the mid-1990s. It was the largest supplier of natural gas to the state of California and had successfully changed from merchant to transporter in compliance with new (1992) federal regulations. However, it was also facing obstacles. Most notably, the California gas market was becoming glutted, dampening profits in El Paso's most important region. Nevertheless, investors were enthusiastic about El Paso's chances, as evidenced by a doubling of the company's stock price between 1992 and early 1994. El Paso was pinning its long-term hopes on the rapidly expanding Mexican market, to which it had unsurpassed access. It was also engaged in an ambitious effort to vastly increase its access to the northern California natural gas market.
Problems in the Mid-1990s and Beyond
As part of its growth strategy, El Paso embarked on an impressive acquisition journey during the mid- to late 1990s. Three of the company's largest acquisitions significantly added to its holdings. El Paso acquired Tenneco Energy in 1996 in a $4 billion deal. Wise commented on the purchase in a December Inside F.E.R.C. article. "This watershed event unites the strengths of two seasoned organizations and caps 18 months of growth and change in our business." Wise went on to claim that the acquisition solidified the company's "place as a major player in domestic and international natural-gas transmission, gathering, processing and marketing, as well as electric power development." Indeed, as a result of the purchase El Paso gained control of the only coast-to-coast natural gas pipeline in the United States. Shortly after the purchase, the company adopted the El Paso Energy corporate moniker.
El Paso's next big move came in 1999 when it made a $6 billion play for Sonat Inc., a natural gas transporting and marketing firm. In order to clear regulatory hurdles, El Paso was forced to sell off its East Tennessee natural gas pipeline, 17 compressor stations, a liquefied natural gas facility, and Sonat's Sea Robin pipeline and its one-third interest in the Destin pipeline. The joining of El Paso and Sonat created the largest natural gas transmission system in North America. The company rounded out its spending spree with the $24 billion purchase of Coastal Corporation in 2001. Coastal had become an attractive target, mainly because of its natural gas reserves, and El Paso was eager to add it to its growing arsenal.
Over the past six years, El Paso had transformed itself into a leader in natural gas pipelines, gas processing, exploration and production, field services, and merchant energy, and the company planned to expand further into liquefied natural gas and telecommunications. Its revenues had also grown dramatically from $2.9 billion in 1995 to $21.9 billion in 2000. The company changed its name to El Paso Corporation in 2001.
El Paso began to face significant challenges during 2001. The Enron Corporation bankruptcy and the ensuing loss of investor confidence in energy companies forced the company to clean up its balance sheets. At the same time, El Paso came under fire for its alleged involvement in California's energy crisis. An August 2001 BusinessWeek article summed up the situation, reporting, "State and federal regulators are investigating charges that El Paso used its control of a key pipeline to sharply boost the price of natural gas flowing into the state. El Paso says it certainly didn't manipulate the market and blames higher prices on California's unique energy problems." In the end, however, the Federal Energy Regulatory Commission ruled that El Paso had manipulated the supply of natural gas in California in 2001 and early 2002. The company eventually reached a $1.6 billion settlement but continued to assert its innocence in the matter.
By 2002, El Paso was struggling under a mountain debt. As such, the company began a major sell off of its non-core assets. Over $3 billion in assets were jettisoned in 2003. Additional holdings were sold the following year, including part of its interest in GulfTerra Energy Partners, its refinery in Aruba, domestic power plants, various production properties, and chemical operations. At the same time, the company became entangled in a proxy fight with displeased shareholders that had watched the company's stock fall by 90 percent in recent years. Wise was ousted during the turmoil and Doug Foshee was tapped to oversee El Paso's turnaround.
During 2004, Foshee worked to reposition El Paso. According to the company, it planned to focus on pipeline operations in the United States and Mexico, production in the United States and Brazil, and marketing and trading. It also continued to clean up its accounting records. In 2004, the company revised its 1999-2003 figures, which resulted in a $2.7 billion drop in the value of its oil and gas assets. The move left it subject to an investigation by the Securities and Exchange Commission. While the past several years were indeed tumultuous for El Paso, the company appeared to be slowly emerging from the problems it had encountered in the early 2000s.
Principal Divisions: Southern Pipelines; Western Pipelines; Eastern Pipelines; Non-regulated Business.
Principal Competitors: AEP Inc.; Duke Energy Corporation; The Williams Companies Inc.
OVERALL
Beta: 1.17
Market Cap (Mil.): $14,008.31
Shares Outstanding (Mil.): 765.48
Annual Dividend: 0.04
Yield (%): 0.22
FINANCIALS
EP Industry Sector
P/E (TTM): 18.46 14.19 11.44
EPS (TTM): 214.53 -- --
ROI: 4.67 5.80 4.19
ROE: 25.64 12.67 5.51
Statistics:
Public Company
Incorporated: 1928
Employees: 11,855
Sales: $12.1 billion (2002)
Stock Exchanges: New York
Ticker Symbol: EP
NAIC: 486210 Pipeline Transportation of Natural Gas
Key Dates:
1928: Paul Kayser establishes El Paso Natural Gas.
1930: The company's pipeline is finished and put into service.
1957: Part of the operations of Pacific Northwest Pipeline Corporation are acquired.
1969: El Paso reaches a liquefied natural gas agreement with Sonatrach, an Algerian national oil and gas company.
1983: Burlington Northern Inc. buys El Paso.
1992: Burlington completes the spin-off of El Paso Natural Gas Co.
1996: El Paso acquires Tenneco Energy.
1999: Sonat Inc. is purchased.
2001: The company buys Coastal Corporation in a $24 billion deal.
2002: FERC rules that El Paso is guilty of manipulating the California natural gas market.
Name Age Since Current Position
Foshee, Douglas 51 2009 Chairman of the Board, President, Chief Executive Officer
Sult, John 51 2010 Chief Financial Officer, Executive Vice President
Cleary, James 56 2006 President - Western Pipeline Group
Ortenstone, Susan 54 2010 Executive Vice President, Chief Administrative Officer
Baker, Robert 54 2004 Executive Vice President, General Counsel
Leland, D. Mark 49 2009 Executive Vice President; President of Midstream Group
Yardley, James 59 2006 Executive Vice President - Pipeline Group
Smolik, Brent 49 2006 Executive Vice President; President of El Paso Exploration & Production Company
Whitehead, Dane 49 2009 Senior Vice President - Strategy and Enterprise Business Development
Talbert, J. Michael 64 2009 Lead Independent Director
Braniff, Juan 53 1997 Independent Director
Hall, Anthony 66 2001 Independent Director
Goldman, Robert 69 2003 Independent Director
Whitmire, John 70 2003 Independent Director
Hix, Thomas 63 2004 Independent Director
McClean, Ferrell 64 2006 Independent Director
Vagt, Robert 64 2005 Independent Director
Shapiro, Steven 59 2006 Independent Director
Crane, David 54 2009 Independent Director
Probert, Timothy 59 2009 Independent Director
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