- HOUSTON (Reuters) -- Energy
company El Paso Corp. said on Tuesday it had cut its proven natural gas
reserves estimate by 41 percent and would take a $1 billion pretax charge
in the fourth quarter.
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- In reducing its proven reserves estimates, the Houston-based
company joined oil major Royal Dutch/Shell Group, which shocked investors
last month by cutting its reserves estimates by 20 percent.
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- "Nobody's happy about the outcome of our year-end
reserves. It's a big disappointment to say the least," Doug Foshee,
El Paso's chief executive officer and president, said on a conference call.
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- El Paso confirmed late on Tuesday it hired law firm Haynes
& Boone to examine the cause of the $1 billion write-down charge.
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- Burdened by about $24 billion in consolidated debt at
the end of the third quarter, El Paso has struggled to return to health
after failed ventures in the merchant electricity and telecoms businesses
in recent years.
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- El Paso, which had warned investors earlier this month
it would trim its estimates, cut its end-2003 estimates of proven reserves
by 1.824 trillion cubic feet (tcf) of natural gas equivalent to 2.635 tcf
equivalent.
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- Proven reserves are quantities of oil or gas that a company
expects to be commercially recoverable from known fields from a given date.
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- The company, which is the largest U.S. natural gas pipeline
operator, also warned investors it expected more write-down charges in
2004 as natural gas prices weakened.
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- KEEPS OUTPUT GOALS
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- El Paso said its January production averaged about 960
million cubic feet equivalent (MMcfe) per day, and it expected to meet
its goal for average 2004 production of 850 MMcfe to 950 MMcfe production
range based on its capital expenditure plans.
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- The company would not trim its $850 million capital expenditure
program for 2004, Foshee said, although it was reviewing its spending and
reducing investments in areas such as south Texas.
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- That was the region where reserves were trimmed the sharpest,
followed by its coal bed methane operations and Gulf of Mexico production
sites.
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- El Paso's energy production is focused on natural gas,
which generated about five times the revenue of the company's oil output
for the first nine months of 2003.
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- Production levels declined by 32 percent during that
period, with drilling successes in about only one in five deep shelf wells.
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- Last month, El Paso hired Apache Corp's exploration and
production vice president Lisa Stewart to head its production operations.
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- Foshee, who took the helm of El Paso in September, said
the company remained on the path to recovery, and that its asset liquidation
program remained on track to reach $3.3 billion to $3.9 billion by 2006.
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- On Monday, the company announced the sale of El Paso
Oil and Gas Canada to UK's BG Group PLC for $345.6 million, bringing its
asset sales to about $2.9 billion.
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- The company is scheduled to report fourth-quarter results
on March 11.
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- - Additional reporting by Sinead Carew in New York
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- http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=4380235
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