el paso 11_20_Hopper_BofACreditConferenceFINALv2(Web)


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el paso 11_20_Hopper_BofACreditConferenceFINALv2(Web)

  1. 1. El Paso Corporation John Hopper Vice President & Treasurer Bank of America 2008 Credit Conference November 20, 2008
  2. 2. Cautionary Statement Regarding Forward-looking Statements This presentation includes certain forward-looking statements and projections. 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 release, including, without limitation, changes in unaudited and/or unreviewed financial information; our ability to meet our 2009 debt maturities; volatility in, and access to, the capital markets; our ability to implement and achieve our objectives in our 2008 plan, including achieving our earnings and cash flow targets; the effects of any changes in accounting rules and guidance; our ability to meet production volume targets in our Exploration and Production segment; our ability to comply with the covenants in our various financing documents; our ability to obtain necessary governmental approvals for proposed pipeline and E&P 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; our ability to close asset sales, as well as transactions with partners on one or more of our expansion projects that are included in the plan on a timely basis; credit and performance risk of our lenders, trading counterparties, customers, vendors and suppliers ;changes in commodity prices and basis differentials for oil, natural gas, and power; our ability to obtain targeted cost savings in our businesses; inability to realize anticipated synergies and cost savings on a timely basis or at all; 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, including the risk of a global recession and negative impact on natural gas demand; 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. Certain of the production information in this presentation include the production attributable to El Paso’s 49 percent interest in Four Star Oil & Gas Company (“Four Star”). El Paso’s Supplemental Oil and Gas disclosures, which are included in its Annual Report on Form 10-K, reflect its proportionate share of the proved reserves of Four Star separate from its consolidated proved reserves. In addition, the proved reserves attributable to its proportionate share of Four Star represent estimates prepared by El Paso and not those of Four Star. Cautionary Note to U.S. Investors—The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosures regarding proved reserves in this presentation and the disclosures contained in our Form 10-K for the year ended December 31, 2007, File No. 001-14365, available by writing; Investor Relations, El Paso Corporation, 1001 Louisiana St., Houston, TX 77002. You can also obtain this form from the SEC by calling 1-800-SEC-0330. Non-GAAP Financial Measures This presentation includes certain Non-GAAP financial measures as defined in the SEC’s Regulation G. More information on these Non-GAAP financial measures, including EBIT and EBITDA, and the required reconciliations under Regulation G, are set forth in this presentation or in the appendix hereto. El Paso defines Resource Potential or Resource Inventory as subsurface volumes of oil and natural gas the company believes may be present and eventually recoverable. The company utilizes a net, geologic risk mean to represent this estimated ultimate recoverable amount. 2
  3. 3. Defining Our Purpose El Paso Corporation provides natural gas and related energy products in a safe, efficient, and dependable manner 3
  4. 4. Our Vision & Values the place to work the neighbor to have the company to own 4
  5. 5. Beyond the Credit Crisis Credit crisis is a big issue for entire market El Paso has implemented comprehensive plan Will meet our maturities Will fund our pipeline backlog Will preserve E&P opportunities Looking past the storm Pipeline backlog generates $1.2 billion EBITDA* E&P opportunities have expanded Credit metrics improve *Pro rata to El Paso’s interest 5
  6. 6. Liquidity Update $1.9 billion liquidity at 9/30/08 $1.2 billion cash $0.7 billion revolving credit facilities $2.5 billion in revolving facilities maturing 2012 $1.0 billion in LC facilities Roll-off with collateral needs in 2009 and 2011 Diverse group of 31 banks Primary covenants* Debt to EBITDA < 5.25x LTM 3.4x EBITDA to fixed charges > 2.0x LTM 3.1x *As defined in El Paso Corporation’s $1.5 billion Revolving Credit Agreement 6
  7. 7. Debt Maturity Schedule $ Millions $956* $1,000 $900 $800 $700 $600 $500 $400 $251 $300 $115 $200 $4 $4 $4 $100 $0 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 2010 *Excludes $89 MM of euro hedge gain 7
  8. 8. 2008–2009 Outlook Projected 2008 EPS ± $1.25 Capital spending slow down underway $3 billion 2009 capital program $1.7 billion Pipelines; $1.3 billion E&P Plan to meet 2009 maturities primarily through capex reductions Minor asset sales Partner(s) on growth projects Do not anticipate need to access capital markets until 2H 2009 Will be opportunistic in capital markets And have numerous additional liquidity options 8
  9. 9. Has the Need for New Infrastructure Changed? No Natural gas fueling most incremental electric generation New infrastructure required to meet producers’ needs Especially in the Rockies Fundamentals remain strong 9
  10. 10. Executing on $8 Billion Backlog of Committed Growth Construct at 7x run rate EBITDA Ruby Pipeline $3 Billion TGP Concord 2011 $21 MM TGP Line 300 Expansion 1.3–1.5 Bcf/d Nov 2009 $750 MM 30 MMcf/d 2010–2011 290 MMcf/d WIC System Expansion CIG High Plains Pipeline $71 MM $216 MM (100%) 2010–2011 Elba Expansion III & Elba November 2008 320 MMcf/d Express 900 MMcf/d $1.1 Billion 2010–2013 WIC Piceance Lateral CIG Totem Storage 8.4 Bcf / 0.9 Bcf/d & 1.2 Bcf/d $62 MM $154 MM (100%) 4Q 2009 July 2009 220 MMcf/d SNG Cypress Phase III 200 MMcf/d $86 MM 2011 CIG Raton 2010 160 MMcf/d Expansion TGP Blue Water / 800 Ln Exp $146 MM $25 MM 2Q 2010 SNG South System III/ Dec 2008 TGP Carthage 130 MMcf/d SESH Phase II 340 MMcf/d Expansion $352 MM / $69 MM $39 MM 2011–2012 May 2009 Gulf LNG 370 MMcf/d / 350 MMcf/d 100 MMcf/d $1+ Billion (100%) 2011 El Paso Pipeline Partners, LP FGT Phase VIII 6.6 Bcf / 1.3 Bcf/d Expansion $2.4 Billion (100%) El Paso Pipeline 2011 800 MMcf/d Note: As of November 6, 2008; El Paso Pipeline Partners owns 25% of SNG & 40% of CIG 10
  11. 11. Pipeline Construction Report Card Remains Excellent 2008 Projects WIC Kanda Lateral In-service Cheyenne Plains—Coral In-service SNG Cypress Phase II In-service WIC Medicine Bow In-service CIG High Plains Pipeline 4Q TGP Blue Water/800 Line Exp 4Q 4 operated pipelines completed—on-budget 11
  12. 12. Construction Risk Management El Paso Capital ($ Billions) Steel Construction Elba Expansion $ 1.1 Fixed-Price EPC Contract Elba Express Fixed United-Priced Gulf LNG (50%) $ 0.5 Fixed-Price EPC Contract Ruby $ 3.0 Fixed Incentive-Based FGT Phase VIII (50%) $ 1.2 Fixed Unit-Priced TGP Line 300 $ 0.8 Fixed Negotiating Backlog has been significantly de-risked 12
  13. 13. E&P 2008 Progress Completed 2007/2008 portfolio high grading Reduced unit LOE and G&A Expanded non-proved resources Cotton Valley horizontals Haynesville shale Niobrara shale Raton in-fill Altamont in-fill 13
  14. 14. Significant Resource Inventory* Infill drilling (CBM, Altamont, Arklatex) Emerging shale gas plays Upside (Niobrara and Haynesville) Potential International exploration leads 2.8 Tcfe 6.1 Tcfe unrisked non-proved resources Unproved 2.0 Tcfe risked unconventional and low risk Inventory Heavily weighted to U.S. Onshore (86%) 2.8 Tcfe Proved 869 Bcfe Proved Undeveloped Reserves Reserves R/P of 9.6 *As of 12/31/2007 adjusted for 2008 domestic divestitures 14
  15. 15. 2009 Program Overview Favor lower-risk, repeatable programs More Onshore, resource-based Less TGC and GOM Delivers production in line with 2008 Generates very predictable cash flow Preserves opportunity for future ramp up 15
  16. 16. Significant Inventory of Lower-Risk Programs Altamont 100% Arlatex Black Warrior Raton 100% 100% 100% Texas Gulf Coast (non-exploration) 94% Note: 2008 success rates through September 30, 2008 16
  17. 17. Continue to Develop Shale Opportunities Haynesville Niobrara CO Marion Ups Claiborne hur Webster Caddo Harrison Bossier NM Travis Lynch #4H Gregg Completed IP 8 MMcfe/d Bienville Rusk Panola Miller 10H #1 Red Desoto River Completed IP 4 MMcfe/d Gamble 24H Current prospective area Drilling Niobrara Shale El Paso operated wellsShe Natchitoches Test well locations Horizontal wells drilled by others lby Approximately 42,500 net acres 3 wells drilled and completed 2 horizontal and 1 vertical 2 wells completed Initial flow rates of 0.4–1.8 MMcfe/d 1 well drilling $2 MM–$3 MM completed well costs Significant resource potential > 300,000 prospective net acres 17
  18. 18. Brazil to Become a Meaningful Contributor Pinaúna (100%) 15–20 MBOE/d peak production Slowed pace of development Brazil Copaiba Well (18%) Drilled and testing Rio de Janeiro Camarupim (24%) 35–50 MMcfe/d in 1Q 2009 Tot Well (35%) Drilling and evaluating 18
  19. 19. Significant Value in 2009 Hedges Positions as of October 2, 2008 151 TBtu Ceiling Average cap $14.97/MMBtu 143 TBtu 168 TBtu 8 TBtu 2009 Gas $15.41 $9.10 $7.33 ceiling floor fixed price 176 TBtu Floor Balance at Average floor $9.02/MMBtu Market Price 3.4 MMBbls 2009 Oil $109.93 fixed price ~70% of domestic natural gas and ~60% domestic oil production hedged* 2009 hedge program valued at ~$500 MM at November 3, 2008 Note: See full Production-related Derivative Schedule in Appendix * Includes proportionate share of Four Star equity volumes 19
  20. 20. Summary Will meet 2009 maturities Will execute pipeline backlog While preserving E&P opportunities Long-term growth potential in tact 20
  21. 21. El Paso Corporation John Hopper Vice President & Treasurer Bank of America 2008 Credit Conference November 20, 2008
  22. 22. Appendix
  23. 23. Disclosure of Non-GAAP Financial Measures The SEC’s Regulation G applies to any public disclosure or release of material information that includes a non-GAAP financial measure. In the event of such a disclosure or release, Regulation G requires (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. The required presentations and reconciliations are attached. Additional detail regarding non-GAAP financial measures can be reviewed in El Paso’s full operating statistics, which will be posted at www.elpaso.com in the Investors section. El Paso uses the non-GAAP financial measure “earnings before interest expense and income taxes” or “EBIT” to assess the operating results and effectiveness of the company and its business segments. The company defines EBIT as net income (loss) adjusted for (i) items that do not impact its income (loss) from continuing operations, such as extraordinary items and discontinued operations; (ii) income taxes; and (iii) interest and debt expense. The company excludes interest and debt expense so that investors may evaluate the company’s operating results without regard to its financing methods or capital structure. EBITDA is defined as EBIT excluding depreciation, depletion and amortization. El Paso’s business operations consist of both consolidated businesses as well as investments in unconsolidated affiliates. As a result, the company believes that EBIT, which includes the results of both these consolidated and unconsolidated operations, is useful to its investors because it allows them to evaluate more effectively the performance of all of El Paso’s businesses and investments. El Paso believes that the non-GAAP financial measures described above are also useful to investors because these measurements are used by many companies in the industry as a measurement of operating and financial performance and are commonly employed by financial analysts and others to evaluate the operating and financial performance of the company and its business segments and to compare the operating and financial performance of the company and its business segments with the performance of other companies within the industry. These non-GAAP financial measures may not be comparable to similarly titled measurements used by other companies and should not be used as a substitute for net income, earnings per share or other GAAP operating measurements. 23
  24. 24. Reserves Pro Forma Reconciliation Onshore Central Western TGC GOM Int’l Total Reserves (Bcfe)1 Ending reserves 1/1/08 1,328 715 550 269 247 3,109 Adjustments2 (58) (40) (93) (118) – (309) Pro forma ending reserves 1/1/08 1,270 675 457 151 247 2,800 1 Reserves data includes proportionate share of Four Star 2 Adjustments reflect elimination of divestiture properties and addition of Peoples for full-year 2007 24
  25. 25. Production-Related Derivative Schedule 2008 2009 2010 2011–2012 Notional Avg. Hedge Notional Avg. Hedge Notional Avg. Hedge Notional Avg. Hedge Natural Gas Volume Price Volume Price Volume Price Volume Price (TBtu) ($/MMBtu) (TBtu) ($/MMBtu) (TBtu) ($/MMBtu) (TBtu) ($/MMBtu) Designated—EPEP Fixed price—Legacy 1.1 $ 3.49 4.6 $ 3.56 4.6 $3.70 6.8 $3.88 Fixed price 5.3 $ 8.37 Ceiling 27.5 $ 10.87 101.0 $ 14.58 Floor 27.5 $ 8.00 125.8 $ 8.93 Economic—EPEP Fixed price 1.8 $ 8.24 3.6 $ 12.06 Ceiling 6.5 $ 10.32 41.9 $ 17.40 Floor 6.5 $ 8.00 41.9 $ 9.61 Avg. ceiling 42.2 $ 10.16 151.1 $ 14.97 4.6 $3.70 6.8 $3.88 Avg. floor 42.2 $ 7.93 175.9 $ 9.02 4.6 $3.70 6.8 $3.88 2008 2009 Notional Avg. Hedge Notional Avg. Hedge Crude Oil Price Volume Volume Price ($/Bbl) (MMBbls) (MMBbls) ($/Bbl) Designated—EPEP Fixed price 0.43 $ 88.57 1.39 $110.00 Economic—EPEP Fixed price 0.20 $ 88.28 2.04 $109.87 Economic—EPM Ceiling 0.22 $ 56.10 Floor 0.22 $ 55.00 Avg. ceiling 0.85 $ 80.10 3.43 $109.93 Avg. floor 0.85 $ 79.81 3.43 $109.93 25 Note: Positions are as of October 2, 2008 (Contract months: Oct 2008–Forward)