el paso 08_11_Leland_UBS

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el paso 08_11_Leland_UBS

  1. 1. Mark Leland Chief Financial Officer El Paso Update August 11, 2005 the place to work the neighbor to have the company to own
  2. 2. Cautionary Statement Regarding Forward-looking Statements This presentation includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The company has made every reasonable effort to ensure that the information and assumptions on which these statements and projections are based are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this presentation, including, without limitation, our ability to implement and achieve our objectives in the long-range plan, including achieving our debt-reduction targets; changes in reserve estimates based upon internal and third party reserve analyses; our ability to meet production volume targets in our Production segment; uncertainties associated with exploration and production activities; our ability to successfully execute, manage, and integrate acquisitions; uncertainties and potential consequences associated with the outcome of governmental investigations, including, without limitation, those related to the reserve revisions and natural gas hedge transactions; outcome of litigation, including shareholder derivative and class actions related to reserve revisions and restatements; our ability to comply with the covenants in our various financing documents; our ability to obtain necessary governmental approvals for proposed pipeline projects and our ability to successfully construct and operate such projects; the risks associated with recontracting of transportation commitments by our pipelines; regulatory uncertainties associated with pipeline rate cases; actions by the credit rating agencies; the successful close of our financing transactions, including the issuance of equity; our ability to successfully exit the energy trading business; our ability to close our announced asset sales on a timely basis; changes in commodity prices for oil, natural gas, and power; inability to realize anticipated synergies and cost savings associated with restructurings and divestitures on a timely basis; general economic and weather conditions in geographic regions or markets served by the company and its affiliates, or where operations of the company and its affiliates are located; the uncertainties associated with governmental regulation; political and currency risks associated with international operations of the company and its affiliates; competition; and other factors described in the company’s (and its affiliates’) Securities and Exchange Commission filings. While the company makes these statements and projections in good faith, neither the company nor its management can guarantee that anticipated future results will be achieved. Reference must be made to those filings for additional important factors that may affect actual results. The company assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the company, whether as a result of new information, future events, or otherwise. 2
  3. 3. Our Purpose El Paso Corporation provides natural gas and related energy products in a safe, efficient, and dependable manner 3
  4. 4. Turnaround Objectives Focus on 2 core businesses ► – Pipelines – Production Reduce debt ► Address liquidity concerns ► Simplify corporate structure ► Reduce costs ► 4
  5. 5. Significant Progress in Turnaround December 2003 Current Liquidity Stressed Strong ► ► ► Net debt $20.5 billion $15.9 billion* ► ► ► Asset sales Long-Range Plan (LRP) goal: $4.3 billion sold under LRP ► ► ► $3.3 billion–$3.9 billion Incremental goal: $1.2 billion announced or ► ► $1.2 billion–$1.6 billion closed Pipes, E&P, marketing & Pipes, E&P, marketing (out of ► ► Range of businesses ► trading, petroleum, chemical, or exiting all other) domestic & international power, midstream Large corporate center Small corporate center—push ► ► Corporate structure ► functions to Bus 5 divisions ► 2 divisions ► *As of June 30, 2005 5
  6. 6. U.S. Natural Gas Market Macro Overview Demand Growth 2004–2014 35 Domestic supply ► Gas consumption in Consumption and Supply in Tcf 30 the power sector will +5.0 Tcf grow substantially 25 Power Generation – 200 GWs of new gas- 20 based generating +1.0 Tcf Industrial capacity 15 ► Domestic supply grows +0.4 Tcf Commercial 10 slowly +0.7 Tcf Residential 5 ► Large scale LNG imports necessary +0.3 Tcf Other 0 2002 2004 2006 2008 2010 2012 2014 6
  7. 7. Pipeline Group Overview
  8. 8. Leading Natural Gas Infrastructure Great Lakes Gas Transmission (50%) 2,100 miles; 3 Bcf/d Wyoming Interstate 600 miles; 2 Bcf/d Colorado Cheyenne Plains Interstate Gas Pipeline 4,000 miles; 3 Bcf/d 380 miles; 0.6 Bcf/d El Paso ANR Pipeline Natural Gas Tennessee Gas 10,500 miles; 11,000 miles; 6 Bcf/d Pipeline 7 Bcf/d 14,200 miles; 7 Bcf/d Mojave Pipeline Elba Island LNG 400 miles; 4 Bcf 0.4 Bcf/d Mexico Ventures Florida Gas 106 miles; 2 Bcf/d Transmission (50%) 4,800 miles; 2 Bcf/d Southern Natural Gas 8,000 miles; 3 Bcf/d 8
  9. 9. Pipeline Group Key Drivers Expand franchise ► – New wave of opportunities (LNG, Rockies) Successful recontracting ► Capital and operating efficiency ► Management of rate and regulatory issues ► 9
  10. 10. Portfolio of Growth Projects ANR Wisconsin 2006 Expansion TGP Distrigas $46 MM $35 MM 2006 WIC Medicine Bow 2007 168 MMcf/d Expansion 72 MMcf/d $58 MM ANR Northleg 2007–2009 $13 MM TGP 560 MMcf/d 2005 Northeast ANR Westleg 110 MMcf/d ConneXion $48 MM WIC Mainline New England 2004 Expansion $102 MM 218 MMcf/d 0.2 $63 MM 2008 2007 136 MMcf/d 198 MMcf/d ANR Eastleg Cheyenne Plains $17 MM $416 MM TGP Northeast 2005 WIC Piceance Lateral 2004-2007 ConneXion 142 MMcf/d Expansion 0.5 961 MMcf/d NY/NJ $120 MM $24 MM December 2005 2006 333 MMcf/d CIG Raton Basin Expansion 41 MMcf/d $91 MM 2005–2008 SNG North and 175 MMcf/d South System EPNG Cadiz to Ehrenberg $445 MM SNG Elba Island (Line 1903) 2002–2003–2004 Expansion $74 MM 699 MMcf/d SNG Cypress EPNG 0.6 $157 MM December 2005 Expansion Phoenix East Valley Line 1Q 2006 372 MMcf/d $240 MM $49 MM 3.5 Bcf TGP/ANR 2007 September 2005 Eugene Island 371 220 MMcf/d 305 MMcf/d $14 MM EPNG Line 2000 Power Up April 2006 $136 MM 350 MMcf/d June 2004 FGT Phase VII TGP LPG Reynosa TGP/ANR Supply 320 MMcf/d $63 MM $44 MM (50%) Attachment Projects May 2007 TGP 2006 $113 MM TGP/EPNG Sonora Project 100 MMcf/d LA Deepwater Link 30,000 Bbl/d 2005-2009 $TBD $28 MM 2009 April 2007 TBD MMcf/d 850 MMcf/d Seafarer Pipeline $354 MM 2008 Completed Projects Signed PA’s 800 MMcf/d 10 FERC Certificated Future Projects
  11. 11. Pipeline Outlook Fundamentals remain excellent ► Growth projects driven by: ► – Access to new natural gas supplies – Market growth Recontracting progress has been good ► Portfolio effect of franchise is evident ► Near-term cost increases overshadowing underlying growth ► 11
  12. 12. Production Company Overview
  13. 13. Early Culture Shifts/Focus Items Old New Basin dominance Best in basin ► ► Inadequate pre-investment Consistent and disciplined risk ► ► analysis and reserve determination Poor portfolio management Comprehensive mapping with ► ► life-of-property exploitation plans Deep exploration emphasis Capital allocation to full risk ► ► spectrum Production growth through Short-term focus on existing ► ► capex properties and base production. Long-term emphasis on value creation 13
  14. 14. Production Summary Potiguar Basin Brazil Brazil UnoPaso acquisition performing well ► Substantial exploration potential ► Camamu/ Almada Basin Espírito Santo Onshore Basin Large inventory of low-risk ► Santos prospects Basin Closed $179 MM East Texas ► acquisition in February 2005 Medicine Bow pending ► Texas Gulf Coast Closed $32 MM South Texas ► acquisition in January Gulf of Mexico Developing lower-risk ► inventory Realigned drilling program ► yields results—West Cameron 75 and 62 14
  15. 15. Capital Management System Managing Our Drilling Program Adjust program Monitor pre/post- Pre-drill Monthly post- based on monthly drill assumptions evaluation drill analysis results and results Present Value Ratio (PVR): After-tax PV of future cash flows discontinued at 12% Total Investment 15
  16. 16. 0 200 400 600 800 1000 1200 1400 1600 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 and San Juan Dec-03 Jan-04 Sale of Weatherford Production Profile Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Canada sale Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 MMcfe/d 16
  17. 17. Draft Stabilizing E&P Average Daily Production (MMcfe/d) 860–900 901 810+ 814 8% 3% 7% 41% 25% 34% 27% 20% 26% 34% 35% 47% 40% 28% 25% 70 Equity Equity 24 1Q2004 2004 2005E 2005 Exit Onshore TGC GOM International 17
  18. 18. Stabilizing E&P $ Millions Operations fund base capital $2,000 $1,800 75 45 140 $1,600 $1,324 180 $1,282 $1,200 Acquisition $749 $1,100 $800 63 1,360 1,324 88 1,282 143 $400 224 231 $0 2 Capex 1 EBITDA Capex EBITDA 2004 2005 Onshore GOM TGC Int'l Other 1Cash basis less discontinued ops less cash received from UnoPaso acquisition 21H05 annualized 18
  19. 19. Stabilizing E&P R/P has lengthened… Year-end Year-end Year-end reserves: reserves: reserves: 2,520 Bcfe 2,184 Bcfe 2,706 Bcfe Pro Forma 2004E 1 2003 2004 Full-year Full-year Full-year production: production: production: 410 Bcfe 303 Bcfe 369 Bcfe R/P Ratio: 6.1 7.2 7.4 …and should lengthen further as Onshore assets are developed 1ProForma represents 2005 acquired reserves at time of purchase plus production from 1/1/05 to purchase date; production is full year 2004 19
  20. 20. Governance Update Continued Board evolution ► 8 of 12 new since January 2003 ► 7 of 8 have significant upstream experience ► 2 of 8 qualify as financial experts ► Guidelines exemplify good corporate governance ► – No staggered board – No pill – 11 of 12 board members are independent – Separate Chairman and CEO positions 20
  21. 21. Summary Will build upon recent success ► 2005 measured by: ► – Positioning company to generate meaningful free cash flow – Completing turnaround of production business – Meeting $15 billion net debt target – Achieving further cost reduction 21
  22. 22. Appendix
  23. 23. Asset Sales Completed Incremental Non-recourse ($ Millions) 1/1/05 to 3/15/05 Asset Sales Debt Cedar Brakes I & II $ 94 $575 Enterprise investment 425 – S. Louisiana processing plants 75 – Other 56 – $650 $575 Field Services (pending) $ 500 Korean power plant 284 Lakeside telecom facility 140 Asian power plants (pending) 109 Chinese power plant (pending) 71 Montreal paraxylene plant 74 London power plant 47 Turbine sales 16 $ 1,240 Remaining Incremental Assets: ► Domestic merchant plants ► Asian power plant ► Midland Cogeneration interest ► Central American power plants ► Mohawk River Funding II ► Midstream plant Incremental $1.2 billion to $1.6 billion expected proceeds in 2005/2006 23
  24. 24. Mark Leland Chief Financial Officer El Paso Update August 11, 2005 the place to work the neighbor to have the company to own

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