El Paso Corporation reported higher third quarter 2008 earnings compared to third quarter 2007, driven by growth in its pipeline and exploration and production businesses. Earnings were impacted by unrealized mark-to-market gains and losses on derivatives, as well as changes in the fair value of power contracts and legacy indemnifications. While earnings were strong, El Paso also outlined plans to maintain liquidity through asset sales to preserve its future growth opportunities and weather current market conditions.
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el paso EP3Q2008EarningsFINAL(Web)
1. El Paso Corporation
Third Quarter 2008
Financial & Operational Update
November 6, 2008
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, EBITDA, adjusted EBITDA, adjusted EPS, cash costs, 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. Our Purpose
El Paso Corporation provides
natural gas and related energy
products in a safe, efficient, and
dependable manner
3
4. Our Vision & Values
the place to work
the neighbor to have
the company to own
4
5. Maintaining Liquidity While
Preserving Future Growth
ANR sale, EPB IPO and drop down all designed to
provide financial flexibility
Position El Paso to weather current situation
$3 billion 2009 capital budget
Key points of focus:
Provide sufficient liquidity for May maturities
Execute on pipeline backlog
Preserve inventory of E&P opportunities
Will utilize several strengths & benefits:
Strong cash flow
2009 hedges
Capex flexibility
Pipeline investment-grade ratings
5
8. Financial Results:
Quarters Ending September 30
$ Millions, Except EPS
Adjusted Diluted EPS Diluted EPS Adjusted
from Continuing from Continuing EBITDA*
$1,248
$0.35 $0.58
$0.22 $834
$0.20
2008 2007 2008 2007 2008 2007
Higher earnings driven by growth in both core businesses
Realized Natural
EBIT Interest Expense Gas Price ($Mcf)
$881 $228 $8.92
$221 $7.12
$483
2008 2007 2008 2007 2008 2007
Note: Appendix and slides 9 and 10 include details on non-GAAP terms
8
*Reflects El Paso’s proportionate interest in Citrus and Four Star
9. Items Impacting 3Q 2008 Results
$ Millions, Except EPS
Diluted
Pre-tax After-tax EPS
Net income available to common stockholders $ 436 $ 0.58
Adjustments1
Change in fair value of power contracts $ (63) $ (40) $(0.05)
Change in fair value of legacy indemnification 12 8 0.01
Change in fair value of
production-related derivatives in Marketing (14) (9) (0.01)
(0.18)
(215) (138)
Impact of MTM E&P derivatives2
$ 0.35
Adjusted EPS—Continuing operations3
1All
adjustments assume a 36% tax rate and 766 MM diluted shares
2Includes $214 MM of MTM gains on derivatives adjusted for $1 MM of realized losses from cash settlements
3Reflects fully diluted shares of 766 MM and includes income impact from dilutive securities
9
10. Business Unit Contribution
$ Millions
Quarter Ended
September 30, 2008
Adjusted
EBIT DD&A EBITDA EBITDA*
Core Businesses
$ 278 $ 97 $ 375 $ 410
Pipelines
532 191 723 763
E&P
$ 810 $ 288 $1,098 $1,173
Core Businesses Total
Other Businesses
82 – 82 82
Marketing
(6) – (6) (6)
Power
(5) 4 (1) (1)
Corporate & Other
$ 881 $ 292 $1,173 $1,248
Total
*Adjusted Pipeline EBITDA for 50% interest in Citrus and adjusted E&P EBITDA for 49% interest in
Four Star; Appendix includes details on non-GAAP terms
10
11. Cash Flow and Capital Investment
$ Millions
Nine Months Ended
September 30,
2008 2007
$ 855 $ 276
Income from continuing operations
1,408 1,293
Non-cash adjustments
2,263 1,569
Subtotal
(212) (76)
Working capital changes and other*
2,051 1,493
Cash flow from continuing operations
– (31)
Discontinued operations
$ 2,051 $1,462
Cash flow from operations
$ 1,905 $1,796
Capital expenditures
$ 362 $1,182
Acquisitions
$ 671 $ 82
Proceeds from divestitures
$ 113 $ 112
Dividends paid
2008 YTD total cash generated > $300 MM
*Includes change in margin collateral of $32 MM in 2008 and $83 MM in 2007
11
12. Marketing Financial Results
$ Millions
Quarters Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
EBIT
Strategic
Change in fair value of
production-related derivatives $ 14 $ 15 $ (59) $ (63)
Other
Change in fair value of natural gas
derivative contracts 7 (4) 18 (26)
Change in fair value of power contracts 63 (11) (83) (43)
Settlements, demand charges, & other 5 (9) 10 (28)
Operating expenses & other income (7) 1 (17) 22
Other total 68 (23) (72) (75)
EBIT $ 82 $ (8) $(131) $(138)
12
14. 2008 Natural Gas and
Oil Hedge Positions
Positions as of October 2, 2008
(Contract Months October 2008 – Forward)
42 TBtu
Ceiling Average cap $10.16/MMBtu
34 TBtu 8 TBtu
2008 Gas $10.77 ceiling/ $7.66
$8.00 floor fixed price
42 TBtu
Floor
Average floor $7.93/MMBtu
Balance at
Market Price
0.8 MMBbls
Ceiling Average cap $80.10/Bbl
0.6 MMBbls
0.2 MMBbls
2008 Oil $88.48
$56.10 ceiling/
fixed price
$55.00 floor
0.8 MMBbls
Floor
Average floor $79.81/Bbl
Attractive hedges for remainder of 2008
Note: See full Production-related Derivative Schedule in Appendix 14
15. 2009 Natural Gas and
Oil Hedge Positions
Positions as of October 2, 2008
(Contract Months October 2008 – Forward)
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 15
16. 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 16
17. 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 17
18. 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
18
20. 3Q Highlights
EBIT: $278 MM
$12 MM hurricane impact
Throughput increased 5% from 2007 YTD
Three growth projects placed in-service
Cheyenne Plains Coral Expansion (Aug. 2008)
SNG SESH Phase I (Sep. 2008)—Spectra operated
WIC Medicine Bow Expansion (Oct. 2008)
20
21. Pipeline Group Financial Results
$ Millions
Quarters Ended Nine Months Ended
September 30, September 30,
2008 2007
2008 2007
EBIT before minority interest1 $275 $ 957
$ 978
$285
Less minority interest – –
24
7
EBIT $275 $ 957
$ 954
$278
EBITDA $369 $ 1,236
$ 1,249
$375
Adjusted EBITDA2 $403 $ 1,338
$ 1,348
$410
Capital expenditures $339 $ 765
$ 830
$375
Acquisitions3 $– $ –
$ 303
$8
Full year capital ~$1.7 billion
13Q 2008 included $12 MM unfavorable impact from Hurricanes Gustav & Ike
2AdjustedPipeline EBITDA for 50% interest in Citrus
3Gulf LNG and TGP Blue Water acquisitions
Note: Appendix includes details on non-GAAP terms
21
22. Continued Throughput Increase
YTD % Increase 2008 vs. 2007
2% Independence Hub
TGP
Impacted by
cooler summer,
hurricanes
Elba deliveries to Florida
2%
SNG
California
EPNG 4%
Rockies supply,
CIG 9% expansions
5% overall increase
Note: CIG includes Colorado Interstate Gas, Cheyenne Plains and Wyoming Interstate
EPNG includes El Paso Natural Gas and Mojave
22
23. TGP Hurricane Impact
e
$80–$120 MM preliminary
L in
800
estimate to repair/abandon
Line
Kinder
500
525 MMcf/d still shut-in
Egan
Johnson Bayou Yscloskey
Grand Chenier
Pecan Island
Port Sulphur
Cocodrie
est Leg
Bluewater W
South
Pass
g
Le
t
as
South Timbalier
rE
ate
ew
VM 245
B lu
Bluewater Header
SS 198
Damaged TGP Facilities
Third Party Platforms (Toppled or Damaged)
24. Projects In-service 2008–2009
2009
($ Millions) 2008
WIC Kanda Lateral IN-SERVICE TGP Carthage
Cheyenne Plains—Coral IN-SERVICE TGP Concord Lateral Expansion
SNG Cypress Phase II IN-SERVICE CIG Totem Storage
SNG SESH Phase I* IN-SERVICE WIC Piceance Lateral Expansion
WIC Medicine Bow IN-SERVICE
CIG High Plains Pipeline 4Q
TGP Blue Water/800 Line Exp 4Q
El Paso operated projects are within budget
Total capital $575 $200
Note: Total capital amounts represent total project costs
*Operated by Spectra Energy 24
25. Executing on $8 Billion Backlog of
Committed Growth
7x run-rate EBITDA
Managing capex risk
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
130 MMcf/d TGP Carthage
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
25
26. Pipeline Summary
Solid YTD performance
Disciplined execution on growth projects
Outlook remains strong
26
28. 3Q Highlights
EBIT significantly increased over same period last
year
Production below expectations
Peoples Energy production
Central
Legacy Texas Gulf Coast
Hurricane Impact
Progress in Haynesville and Cotton Valley programs
International projects advancing
28
29. Hurricane Impact 3Q Update
Production: -41 MMcfe/d
Total repair costs: $30 MM–$35 MM during 2008–2009
Central: -2 MMcfe/d
Edouard
TGC: -5 MMcfe/d
Gustav
Ike
Gulf of Mexico impact: -34 MMcfe/d
Dolly 15 MMcfe/d currently shut-in due to damage at Eugene Island
55 MMcfe/d currently shut-in behind High Island Offshore Systems
25 MMcfe/d shut-in behind Stingray System
29
30. E&P Results
$ Millions
Quarters Ended Nine Months Ended
September 30 September 30
2008 2008
2007 2007
EBIT1 $ 532 $ 232 $ 1,078 $ 646
EBITDA1 723 426 1,678 1,199
Adjusted EBITDA2 763 450 1,784 1,278
Capital expenditures 412 349 1,114 1,084
Acquisition capital 18 911 61 1,180
Full year capital ~$1.8 billion
1Quarter ended includes MTM gains on derivatives of $214 MM in 2008 and $6 MM in 2007. Cash paid related to settlements
of these derivatives were $1 MM and $6 MM, respectively. Year-to-date includes MTM gains on derivatives of $104 MM in
2008 and $4 MM in 2007. Cash paid related to settlements of these derivatives were $19 MM and $25 MM, respectively
2Adjusted E&P EBITDA for equity interest in Four Star
Note: Appendix includes details on non-GAAP terms 30
31. 3Q Production Update
MMcfe/d
Pro Forma* As Reported
848
830 833
834
801 793
11
14
11
11 11
14
134 127 136
206
149 93
227
222 223 222
196 205
156
155 155 156
140
143
313
308
299 311
283 308
3Q 2007 2Q 2008 3Q 2008 3Q 2007 2Q 2008 3Q 2008
Central Western TGC GOM/SLA Intl
Full year estimate 815–825 MMcfe/d, excluding 30 MMcfe/d of hurricane volumes
Note: Includes proportionate share of Four Star equity volumes
Appendix includes details on non-GAAP terms
*Excludes volumes from domestic assets sold in 2008, adjusts volumes for the effects of the hurricanes in 2008 and assumes
31
full year of Peoples volumes in 2007
32. Total Cash Costs
$/Mcfe
$2.01
$1.92 $1.89
$1.77
$0.42 $0.54 $0.50
$0.26
$0.04 $0.04 $0.05
$0.05
$0.64 $0.38
$0.64 $0.63
$1.51 $1.50 $1.47 $1.39
$0.96
$0.82
$0.83 $0.79
3Q 2007 1Q 2008 2Q 2008 3Q 2008
Production Taxes
Taxes Other Than Production & Income
General & Administrative
Direct Lifting Costs
32
33. Domestic Pilot Programs Progressing
Cotton Valley Horizontal
AK
Producing
Lindy Britton #2H (IP @ 7.0 MMcfe/d)
Holly/Logansport
Bethany Longstreet Sample H #5 (IP @ 3.2 MMcfe/d)
Remaining 2008
Weyerhauser 15H #1
TX
Lindy Britton #4H
Means Family Trust 26H
LA
Haynesville Shale
Minden/SE
Producing
Brachfield
Miller Land Co 10H #1 (IP @ 4.5 MMcfe/d)
Travis Lynch GU #4-H (IP @ 8.0 MMcfe/d)
Haynesville Shale Outline
Remaining 2008
El Paso Acreage
RF Gamble 24H #1
Cotton Valley Horizontal
Blake 10H #1
Haynesville Shale
Remaining 2008 locations
33
34. Brazil Update
Camarupim (Bia)
Expect first gas 1Q 2009
Finalizing commercial agreements
Advancing drilling programs
Pinaúna
Environmental milestone—Terms of Reference
Start-up linked to the timing of remaining environmental approvals
Plan to slow pace of development
Exploration
Copaiba—currently evaluating well
34
35. 2009 Capital Program
$1.3 billion capital program 2008 vs. 2009
Capital Spending
~ 30% below 2008 ($ Millions)
Increase focus on programs $2,000
with significant inventory and
repeatability $1,500
Cotton Valley Horizontal,
$1,000
Altamont oil
Haynesville, Niobrara (Pierre), $500
New Albany shales
$0
Black Warrior Basin CBM
2008 2009
Reduced spending in Texas Gulf
Coast and Gulf of Mexico Domestic International
2009 production essentially flat with 2008
35
36. E&P Summary
Strong 3Q financial performance
Continued focus on low-risk programs with
significant inventory
Lower 2009 capital will result in essentially
flat production
Preserve drilling inventory
36
37. Outlook
Capital plan
Addresses 2009 maturities
Fulfills Pipeline growth program
Preserves future E&P opportunities
Additional options available to address
potential liquidity needs
No change in longer-term earnings potential
37
38. El Paso Corporation
Third Quarter 2008
Financial & Operational Update
November 6, 2008
40. 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. Adjusted EBITDA is defined as EBITDA including the proportional share of
EBITDA less our recorded equity earnings from our equity investments in Citrus and Four Star. The company believes that adjusted EBITDA is useful
to its investors because it allows them to evaluate more effectively the performance of our businesses regardless of the type of ownership structure.
Exploration and Production per-unit total cash costs or cash operating costs equal total operating expenses less DD&A, cost of products and services,
transportation costs, and ceiling test charges divided by total production. It is a valuable measure of operating efficiency. For 2008, Adjusted EPS is
earnings per share from continuing operations excluding the loss related to the change in fair value of an indemnification from the sale of an ammonia
plant in 2005, the gain related to an adjustment of the liability for indemnification of medical benefits for retirees of the Case Corporation, gain related
to the disposition of a portion of the company’s investment in its telecommunications business, loss on other legacy litigation adjustments, changes
in fair value of power contracts, changes in fair value of the production-related derivatives in the Marketing segment and the impact of MTM E&P
derivatives. For 2007, Adjusted EPS is earnings per share from continuing operations excluding changes in fair value of production-related derivatives
in Marketing, the loss related to Brazilian power impairments, the gain related to the crude oil trading liability, the loss related to an adjustment of the
liability for indemnification of medical benefits for retirees of the Case Corporation, debt repurchase costs, and the effect of the change in the number
of diluted shares. Adjusted EPS is useful in analyzing the company’s on-going earnings potential.
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.
40
43. Financial Results
Quarters Ended Nine Months Ended
September 30, September 30,
($ Millions, Except EPS) 2008 2007 2008 2007
$ 1,169
$ 881 $ 1,980
$ 483
EBIT
(742)
(221) (675)
(228)
Interest and debt expense
427
660 1,305
255
Income before income taxes
151
215 450
100
Income taxes
276
445 855
155
Income from continuing operations
674
– –
–
Discontinued operations, net of income taxes
950
445 855
155
Net income
Preferred stock dividends 28
9 28
9
Net income available to common stockholders $ 922
$ 436 $ 827
$ 146
Diluted EPS from continuing operations $ 0.35
$ 0.58 $ 1.12
$ 0.20
Diluted EPS from discontinued operations 0.96
– –
–
Total diluted EPS $ 1.31
$ 0.58 $ 1.12
$ 0.20
Diluted shares (millions) 699
766 767
759
43
44. 2008 Analysis of
Working Capital and Other Changes
$ Millions
Nine Months Ended
September 30, 2008
Margin collateral $ 32
Changes in price risk management activities 177
Settlements of derivative instruments (381)
Net changes in trade receivable/payable (62)
Settlement of liabilities (56)
Other 78
Total working capital changes & other $(212)
44
45. Items Impacting YTD 2008 Results
$ Millions, Except EPS
Pre-tax After-tax Diluted EPS
Net income available to common stockholders $827 $ 1.12
Adjustments1
Change in fair value of power contracts $ 83 $ 53 $ 0.07
Change in fair value of legacy indemnification 46 29 0.04
Case Corporation indemnification (65) (27) (0.04)
Gain on sale of portion of telecommunications business (18) (12) (0.01)
Other legacy litigation adjustments (27) (29) (0.04)
Change in fair value of
production-related derivatives in Marketing 59 38 0.05
Impact of MTM E&P derivatives2 (123) (79) (0.10)
Adjusted EPS—Continuing operations3 $ 1.09
1Alladjustments assume a 36% tax rate, except Case Corporation indemnification and other legacy litigation adjustments,
and 767 MM diluted shares
2Includes $104 MM of MTM gains on derivatives adjusted for $19 MM of realized losses from cash settlements
3Reflects fully diluted shares of 767 MM and includes income impact from dilutive securities
45
46. Items Impacting 3Q 2007 Results
$ Millions, Except EPS
Diluted
Pre-tax After-tax EPS
Net income available to common stockholders $146 $ 0.20
Adjustments1
Brazilian power impairments $ 65 $ 65 $ 0.09
Crude oil trading liability (77) (49) (0.07)
Case Corporation indemnification 11 7 0.01
Change in fair value of
production-related derivatives in Marketing (15) (10) (0.01)
Adjusted EPS—Continuing operations2 $ 0.22
1All adjustments assume a 36% tax rate, except for Brazilian power impairments, and 759 MM diluted shares
2Reflects diluted shares of 759 MM and includes income impact from dilutive securities
46
47. Items Impacting YTD 2007 Results
$ Millions, Except EPS
Diluted
Pre-tax After-tax EPS
Net income available to common stockholders $ 922 $ 1.31
Adjustments1
Brazilian power impairments $ 65 $ 65 $ 0.09
Crude oil trading liability (77) (49) (0.07)
Case Corporation indemnification 11 7 0.01
Debt repurchase costs 287 184 0.26
Change in fair value of
production-related derivatives in Marketing 63 40 0.06
Sale of ANR and related assets (1,043) (674) (0.96)
Effect of change in number of diluted shares2 (0.01)
Adjusted EPS—Continuing operations2 $ 0.69
1Adjustments assume 36% tax rate, except for Brazilian power impairments and discontinued operations, and
699 MM diluted shares
2Based upon 757 MM diluted shares and includes the income impact from dilutive securities
47
48. Business Unit Contribution
$ Millions
Quarter Ended
September 30, 2007
Adjusted
EBIT DD&A EBITDA EBITDA*
Core Businesses
$ 403
$ 369
$ 94
$ 275
Pipelines
450
426
194
232
E&P
$ 853
$ 795
$ 288
$ 507
Core Businesses Total
Other Businesses
(8)
(8)
–
(8)
Marketing
(66)
(66)
1
(67)
Power
55
55
4
51
Corporate & Other
$ 834
$ 776
$ 293
$ 483
Total
*Adjusted Pipeline EBITDA for 50% interest in Citrus and adjusted E&P EBITDA for 49% interest in
Four Star; Appendix includes details on non-GAAP terms
48
49. Business Unit Contribution
$ Millions
Nine Months Ended
September 30, 2008
Adjusted
EBIT DD&A EBITDA EBITDA*
Core Businesses
$ 954 $ 295 $1,249 $1,348
Pipelines
1,078 600 1,678 1,784
E&P
$2,032 $ 895 $2,927 $3,132
Core Businesses Total
Other Businesses
(131) – (131) (131)
Marketing
4 – 4 4
Power
75 8 83 83
Corporate & Other
$1,980 $ 903 $2,883 $3,088
Total
*Adjusted Pipeline EBITDA for 50% interest in Citrus and adjusted E&P EBITDA for 49% interest in
Four Star; Appendix includes details on non-GAAP terms
49
50. Reconciliation of EBIT/EBITDA
$ Millions
Quarters Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
$2,019
$2,883
EBITDA $1,173 $ 776
850
903
Less: DD&A 292 293
1,169
1,980
EBIT 881 483
(742)
(675)
Interest and debt expense (221) (228)
427
1,305
Income before income taxes 660 255
151
450
Income taxes 215 100
276
855
Income from continuing operations 445 155
674
–
Discontinued operations, net of taxes – –
950
855
Net Income 445 155
28
28
Preferred stock dividends 9 9
Net income available to
$ 922
$ 827
common stockholders $ 436 $ 146
50
51. Reconciliation of
Adjusted Pipeline EBITDA
$ Millions
Quarters Ended Nine Months Ended
September 30, September 30,
2008 2007
2007
2008
Citrus equity earnings $ 20 $ 52
$ 21 $ 65
50% Citrus DD&A 13 40
13 38
50% Citrus interest 10 28
9 28
50% Citrus income taxes 12 32
13 39
Other* – (1)
(1) (3)
50% Citrus EBITDA $ 55 $ 151
$ 55 $ 167
El Paso Pipeline EBITDA $ 375 $1,249
$ 369 $1,236
Add: 50% Citrus EBITDA 55 151
55 167
Less: Citrus equity earnings 20 52
21 65
Adjusted Pipeline EBITDA $ 410 $1,348
$ 403 $1,338
Citrus debt at September 30 (50%) $ 542 $ 479
*Other represents the excess purchase price amortization and differences between the estimated and actual
equity earnings on our investment 51
52. Reconciliation of
Adjusted E&P EBITDA
$ Millions
Quarters Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Four Star equity earnings $ 10 $ 2 $ 36 $ 4
Proportionate share of Four Star DD&A 6 5 17 16
Proportionate share of Four Star interest – – – –
Proportionate share of Four Star income taxes 21 9 49 26
Other* 13 10 40 37
Proportionate share of Four Star EBITDA $ 50 $ 26 $ 142 $ 83
El Paso E&P EBITDA $ 723 $ 426 $1,678 $ 1,199
Add: Proportionate share of Four Star EBITDA 50 26 142 83
Less: Four Star equity earnings 10 2 36 4
Adjusted E&P EBITDA $ 763 $ 450 $1,784 $ 1,278
*Represents the excess purchase price amortization
Note: In the third quarter of 2007, E&P increased its interest in Four Star from 43% to 49%
52
53. E&P Cash Costs
3Q 2007 1Q 2008 2Q 2008 3Q 2008
Total Per Unit Total Per Unit Total Per Unit Total Per Unit
($ MM) ($/Mcfe) ($ MM) ($/Mcfe) ($ MM) ($/Mcfe) ($ MM) ($/Mcfe)
Total operating expense $ 347 $ 4.79 $ 377 $ 5.11 $ 374 $ 5.40 $ 353 $ 5.35
Depreciation, depletion and amortization (194) (2.69) (212) (2.87) (197) (2.84) (191) (2.89)
Transportation costs (19) (0.26) (19) (0.26) (21) (0.31) (23) (0.35)
Costs of products (6) (0.07) (5) (0.06) (10) (0.15) (13) (0.20)
Other – – – – (7) (0.09) (1) (0.02)
Per unit cash costs1 $ 1.77 $ 1.92 $ 2.01 $ 1.89
Total equivalent volumes (MMcfe)1,2 72,392 73,762 69,366 66,033
1Excludes volumes and costs associated with equity investment in Four Star
2Approximately 41 MMcfe/d was lost in 3Q 2008 due to hurricane impact 53