By OGJ editors
HOUSTON, Dec. 15 -- El Paso Corp., Houston, Monday announced a long-range plan that envisions selling more than $3 billion in assets to help reduce debt to $15 billion by Dec. 31, 2005, compared with $22 billion in debt as of Sept. 30.
It was the first long-range plan unveiled by Doug Foshee, who was named El Paso president and CEO earlier this year (OGJ, Aug. 4, 2003, p. 32).
"The plan is clear, achievable, and is the first step to making El Paso a strong natural gas provider that generates long-term value for our shareholders," Foshee said.
The debt reduction program calls for $3.3 billion to $3.9 billion of asset sales, the sale of restructured power contracts, the recovery of up to $600 million in working capital, and the conversion of the company's 9% equity security units ($575 million).
In a separate announcement, El Paso announced plans to raise $1 billion from the sale of its 50% stake in GulfTerra Energy Partners LP to Enterprise Products Partners LP, all Houston companies.
El Paso has been struggling along with the energy merchant segment in general since Enron Corp. filed for Chapter 11 bankruptcy protection on Dec. 2, 2001, in a federal court in New York City (OGJ, Jan. 14, 2002, p. 34).
Plan highlights
The plan calls for El Paso's core businesses to be natural gas pipelines in the US and Mexico, oil and natural gas production operations in the US and Brazil, and a marketing and physical trading group focused primarily on gas and oil production.
El Paso said it will streamline its operations into a new corporate structure organized around regulated and unregulated businesses. The regulated businesses involves of the company's three pipeline divisions.
The unregulated businesses will include production and processing; the company's Brazilian integrated business; Asian power operations; US, European, and Central American power operations; marketing and trading; and the company's ownership in GulfTerra.
Assuming it meets its goals, El Paso's forecast 2006 net income of $500 million to $725 million, or earnings per share of 75¢ to $1.10. It also forecast cash flow from operations of $1.9 billion to $2.2 billion.
"El Paso expects to maintain significant liquidity through 2005, based upon operating cash flow generation, $2.1 billion of available cash and lines of credit on Nov. 30, and the completion of planned asset sales," a news release said.
The company identified potential sources of earnings volatility over the next several years. In addition, El Paso said its restructuring activities might impact earnings through severance and restructuring costs, asset impairments, and gains and losses on asset sales.
