-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, COfzhXvA4Cnmjluo/ircDUz2/OCzHAIoUPJS39LxPosAzRchqFb5J8bxYzuvBRKi 9mAbLwnclB15eq5AFp7kqw== 0000950129-02-002810.txt : 20020530 0000950129-02-002810.hdr.sgml : 20020530 20020530121642 ACCESSION NUMBER: 0000950129-02-002810 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020530 ITEM INFORMATION: FILED AS OF DATE: 20020530 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EL PASO CORP/DE CENTRAL INDEX KEY: 0001066107 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 760568816 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14365 FILM NUMBER: 02665830 BUSINESS ADDRESS: STREET 1: 1001 LOUISIANA ST, SUITE 2955A STREET 2: EL PASO BLDG CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7134202600 MAIL ADDRESS: STREET 1: 1001 LOUISIANA ST STREET 2: SUITE 2955A CITY: HOUSTON STATE: TX ZIP: 77002 FORMER COMPANY: FORMER CONFORMED NAME: EL PASO ENERGY CORP/DE DATE OF NAME CHANGE: 19980716 8-K 1 h97385e8vk.txt EL PASO CORPORATION - MAY 30, 2002 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: May 30, 2002 (Date of Earliest Event Reported: May 29, 2002) Commission File Number 1-4874 EL PASO CORPORATION (Exact name of Registrant as specified in its charter) Delaware 1-14365 76-0568816 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation or organization) Identification No.) El Paso Building 1001 Louisiana Street Houston, Texas 77002 (Address of principal executive offices) (Zip Code) (713) 420-2600 (Registrant's telephone number, including area code) ================================================================================ Item 9. Regulation FD Disclosure On May 29, 2002, we participated in a meeting discussing our strategic repositioning plan with institutional analysts that was simultaneously webcast and accessible by telephone for all investors. Attached as Exhibit 99.1 is a slide presentation used at that meeting. It is not filed, but furnished to comply with Regulation FD. The information disclosed in this Item 9 Current Report on Form 8-K is not considered "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 and is not subject to the liabilities of that section. Because this presentation was in the form of a slide presentation, the text on each page of the presentation was kept to a minimum to facilitate visual communication and to emphasize the major points of our plan. The presentation materials are also currently available on our website, http://www.elpaso.com, in the section marked "For Investors". (a) Exhibits Exhibit Number Description 99.1 El Paso Strategic Repositioning Plan slide presentation dated May 29, 2002. -2- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. EL PASO CORPORATION By: /s/ JEFFREY I. BEASON --------------------------------- Jeffrey I. Beason Senior Vice President and Controller (Principal Accounting Officer) Date: May 30, 2002 -3- EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 99.1 El Paso Strategic Repositioning Plan slide presentation dated May 29, 2002.
EX-99.1 3 h97385exv99w1.txt EL PASO STRATEGIC REPOSITIONING PLAN PRESENTATION EXHIBIT 99.1 [EL PASO LOGO] STRATEGIC REPOSITIONING PLAN MAY 29, 2002 1 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS - ---------------------------------------------------------------- [EL PASO LOGO] 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 the company's success in implementing the strategic repositioning plan discussed here. While the company makes these statements and projections in good faith, neither the company nor its management can guarantee that the anticipated future results will be achieved. Reference should be made to the company's (and its affiliates') Securities and Exchange Commission filings for additional important factors that may affect actual results. This presentation does not constitute an offer of any securities for sale. 2 EL PASO'S SITUATION - ---------------------------------------------------------------- [EL PASO LOGO] o El Paso is extremely well positioned for long-term trends in the natural gas industry o E&P results are very good and drilling backlog is excellent. LNG strategy offers significant long-term growth; strong demand for new U.S. infrastructure o Merchant Energy has grown rapidly and has established leading position in natural gas trading arena o Trading activity too large given credit requirements and attractive portfolio of natural gas investments o Stronger balance sheet needed in light of current environment and to pursue growth opportunities 3 STRATEGIC REPOSITIONING PLAN - ---------------------------------------------------------------- [EL PASO LOGO] o Restructure Merchant Energy - Limit energy trading's call on credit and liquidity; investment in trading portfolio no more than $1 billion - Downsize trading staff by 50% and reduce costs by $150 MM - Separate into three division: Power, Petroleum and LNG, Energy Trading - Move towards limiting future non-cash mark-to-market earnings to approximately 5% of total corporate earnings 4 MERCHANT ENERGY RESTRUCTURING OBJECTIVES - ---------------------------------------------------------------- [EL PASO LOGO] o Limit financial commitment to energy marketing and trading activities o Improve earnings quality - Increase recurring earnings - Simplify financial reporting o Narrow scope of activity to most attractive businesses o Align cost structure with more limited strategy 5 STRATEGIC REPOSITIONING PLAN - ---------------------------------------------------------------- [EL PASO LOGO] o Strengthen credit profile further - Issue $1.5 billion of equity - Sell San Juan gathering assets to EPN (approximately $800 million) - Implement company-wide annualized cost reductions of $300 MM (including Merchant) 6 STRATEGIC REPOSITIONING PLAN - ---------------------------------------------------------------- [EL PASO LOGO] o Concentrate investment in core natural gas assets - Increase investment in E&P to $2.3 billion in 2002 and 2003 - Pursue active LNG strategy - Continue aggressive pipeline and midstream infrastructure investment program - Target hedging at less than 50% one year forward 7 SIGNIFICANT PROGRESS ON BALANCE SHEET ENHANCEMENT PROGRAM - ---------------------------------------------------------------- [EL PASO LOGO] o Issued $862 MM of common equity o Eliminated ratings triggers on $3 billion of securities o Completed sale of $1 billion of oil and gas assets o Completed sale of $750 MM of assets to EPN o Reduced net capital expenditures to $3 billion in 2002 o Downsized trading portfolio 8 EARNINGS PER SHARE IMPACT OF PLAN - ---------------------------------------------------------------- [EL PASO LOGO]
2002 2003 ---------- ---------- Current estimate $3.30 $3.70 Revised projection $2.60-2.75 $2.75-2.90
9 KEY FINANCIAL METRICS - ---------------------------------------------------------------- [EL PASO LOGO] o Principal financial objectives - Double-digit average EPS growth over next five years - High returns on equity o Maintain strong investment grade credit rating o Increase leverage to natural gas prices
REVISED PREVIOUS PLAN -------- ------- 2002 EPS change for $.10/Mcf change $0.015 $0.025 2003 EPS change for $.10/Mcf change 0.030 0.050
10 MERCHANT ENERGY REVIEW [EL PASO LOGO] CURRENT MERCHANT ENERGY ENVIRONMENT - ---------------------------------------------------------------- [EL PASO LOGO] o Energy trading and marketing business undergoing tremendous change o Outlook for energy trading is less favorable - Cost of capital increasing significantly - Reduced value of long-term risk management business - Liquidity has decreased o Merchant Energy restructuring will reduce earnings - Less long-term business - Reduced capital investment 12 RECONCILIATION OF 2002E MERCHANT EBIT - ---------------------------------------------------------------- [EL PASO LOGO] $ MILLIONS
REVISED ESTIMATE ORIGINAL -------------- ESTIMATE LOW HIGH COMMENTS -------- ----- ------ ----------------------------- Power assets $ 775 $ 660 $ 660 Brazilian power prices and no Argentine contribution Petroleum/LNG assets 95 (160) (60) Weak refining margins, coal write-down $27 MM Trading and marketing 630 400 425 Downsize of business, 10-year liquidity standard ------ ----- ------ Total $1,500 $ 900 $1,025 ====== ===== ======
13 2002E EARNINGS PER SHARE RECONCILIATION - ---------------------------------------------------------------- [EL PASO LOGO] PRIOR GUIDANCE $3.30 $3.30 MERCHANT ENERGY - Refining margins (.28) (.16) - Weaker trading/customer activity (.25) (.22) - International power (.12) (.12) EQUITY ISSUANCE (.05) (.05) ----- ----- REVISED PROJECTION $2.60 $2.75 ===== =====
14 KEY CONSOLIDATED FINANCIAL RESULTS [EL PASO LOGO] EBIT PROJECTIONS - ---------------------------------------------------------------- [EL PASO LOGO] $ MILLIONS
2002E 2003E ------------ ------------ Pipelines $1,400 $1,490 Production 950 1,170 Power 660 460 Petroleum/LNG (160)-(60) 15-115 Trading 400-425 400-425 ------------ ------------ Subtotal Merchant 900-1,025 875-1,000 Field Services 235 190 Corporate and Other (50) (70) ------------ ------------ Total $3,435-3,560 $3,655-3,780 ============ ============
16 CASH FLOW PROJECTIONS - ---------------------------------------------------------------- [EL PASO LOGO] $ MILLIONS
2002E 2003E ------ ------ Pro format net income* $1,540 $1,710 DD&A 1,555 1,500 Deferred taxes 520 650 ------ ------ Total after-tax cash flow $3,615 $3,860 ====== ======
- ---------- * Assumes mid-point of projected EPS range. 17 PROJECTED 2002E NET CAPITAL SPENDING - ---------------------------------------------------------------- [EL PASO LOGO] $ MILLIONS
MAINTENANCE DISCRETIONARY TOTAL ----------- ------------- ------ Pipelines $ 420 $ 560 $ 980 Production 885 1,440 2,325 Merchant 280 (830)* (550) Field Services 80 80 160 Corporate and Other 60 40 100 ------ ------ ------ Total $1,725 $1,290 $3,015 ====== ====== ======
- ---------- * Includes non-recourse project financing in Brazil and asset sales in Merchant activities. 18 PROJECTED BALANCE SHEET - ---------------------------------------------------------------- [EL PASO LOGO] $ BILLIONS
03/31/02 ADJUSTMENTS(1) 12/31/02E -------- -------------- --------- Net debt $16.5 $(3.5) $13.0 Minority interest + preferred 4.2 (0.4) 3.8 Common equity 9.4 2.5 11.9 Total equity 13.5 2.2 15.7 Total capitalization 30.0 -- 28.7 Net debt/capital 55% 45% Net debt + Electron and Gemstone/capital 58% 49%
- ---------- (1) Includes equity offering, asset sales, conversion of Feline Prides, and results of operating activities. 19 [EL PASO LOGO] STRATEGIC REPOSITIONING PLAN MAY 29, 2002 20 -----END PRIVACY-ENHANCED MESSAGE-----