Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 31, 2010 | May. 03, 2010
| |
Entity Registrant Name | EL PASO CORP/DE | |
Entity Central Index Key | 0001066107 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 703,741,156 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Operating revenues | $1,401 | $1,484 |
Operating expenses | ||
Cost of products and services | 53 | 61 |
Operation and maintenance | 299 | 300 |
Ceiling test charges | 2 | 2,068 |
Depreciation, depletion and amortization | 218 | 256 |
Taxes, other than income taxes | 69 | 68 |
Operating expenses, total | 641 | 2,753 |
Operating income (loss) | 760 | (1,269) |
Earnings from unconsolidated affiliates | 28 | 19 |
Other income, net | 60 | 22 |
Interest and debt expense | (243) | (255) |
Income (loss) before income taxes | 605 | (1,483) |
Income tax (benefit) expense | 186 | (526) |
Net income (loss) | 419 | (957) |
Net income attributable to noncontrolling interests | (31) | (12) |
Net income (loss) attributable to El Paso Corporation | 388 | (969) |
Preferred stock dividends of El Paso Corporation | 9 | 9 |
Net income (loss) attributable to El Paso Corporation's common stockholders | $379 | ($978) |
Basic earnings (loss) per common share | ||
Net income (loss) attributable to El Paso Corporation's common stockholders | 0.54 | -1.41 |
Diluted earnings (loss) per common share | ||
Net income (loss) attributable to El Paso Corporation's common stockholders | 0.51 | -1.41 |
Dividends declared per El Paso Corporation's common share | 0.01 | 0.05 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Current assets | ||
Cash and cash equivalents (include $111 in 2010 and $149 in 2009 held by variable interest entities) | $715 | $635 |
Accounts and notes receivable | ||
Customer, net of allowance of $6 in 2010 and $8 in 2009 | 312 | 346 |
Affiliates | 25 | 92 |
Other | 208 | 115 |
Materials and supplies | 169 | 175 |
Assets from price risk management activities | 337 | 221 |
Deferred income taxes | 204 | 298 |
Other | 125 | 126 |
Total current assets | 2,095 | 2,008 |
Property, plant and equipment, at cost | ||
Pipelines (includes $1,512 in 2010 and $1,179 in 2009 held by variable interest entities) | 20,208 | 19,722 |
Natural gas and oil properties, at full cost | 21,032 | 20,846 |
Other | 323 | 314 |
Total property, plant and equipment, gross | 41,563 | 40,882 |
Less accumulated depreciation, depletion and amortization | 23,124 | 22,987 |
Total property, plant and equipment, net | 18,439 | 17,895 |
Other assets | ||
Investments in unconsolidated affiliates | 1,725 | 1,718 |
Assets from price risk management activities | 156 | 123 |
Other | 776 | 761 |
Total other non-current assets | 2,657 | 2,602 |
Total assets | 23,191 | 22,505 |
Accounts payable | ||
Trade | 427 | 459 |
Affiliates | 5 | 7 |
Other | 410 | 424 |
Short-term financing obligations, including current maturities | 622 | 477 |
Liabilities from price risk management activities | 221 | 269 |
Asset retirement obligations | 155 | 158 |
Accrued interest | 242 | 208 |
Other | 617 | 684 |
Total current liabilities | 2,699 | 2,686 |
Long-term financing obligations, less current maturities | 13,416 | 13,391 |
Other | ||
Liabilities from price risk management activities | 403 | 462 |
Deferred income taxes | 444 | 339 |
Other | 1,460 | 1,491 |
Total other non-current liabilities | 2,307 | 2,292 |
Commitments and contingencies (Note 9) | ||
Preferred stock of subsidiary | 145 | 145 |
El Paso Corporation stockholders' equity: | ||
Preferred stock, par value $0.01 per share; authorized 50,000,000 shares; issued 750,000 shares of 4.99% convertible perpetual stock; stated at liquidation value | 750 | 750 |
Common stock, par value $3 per share; authorized 1,500,000,000 shares; issued 716,159,760 shares in 2010 and 716,041,302 shares in 2009 | 2,148 | 2,148 |
Additional paid-in capital | 4,497 | 4,501 |
Accumulated deficit | (2,804) | (3,192) |
Accumulated other comprehensive loss | (706) | (718) |
Treasury stock (at cost); 14,820,145 shares in 2010 and 14,761,654 shares in 2009 | (284) | (283) |
Total El Paso Corporation stockholders' equity | 3,601 | 3,206 |
Noncontrolling interests | 1,023 | 785 |
Total equity | 4,624 | 3,991 |
Total liabilities and equity | $23,191 | $22,505 |
1_CONDENSED CONSOLIDATED BALANC
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
In Millions, except Share data | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Cash and cash equivalents held by variable interest entities | $111 | $149 |
Allowance for doubtful accounts | 6 | 8 |
Pipelines held by variable interest entities | $1,512 | $1,179 |
Preferred Stock | ||
Par value per share | 0.01 | 0.01 |
Authorized shares | 50,000,000 | 50,000,000 |
Issued shares | 750,000 | 750,000 |
Dividend rate | 4.99% | 4.99% |
Common Stock | ||
Par value per share | $3 | $3 |
Authorized shares | 1,500,000,000 | 1,500,000,000 |
Issued shares | 716,159,760 | 716,041,302 |
Treasury Stock (at cost) | ||
Shares | 14,820,145 | 14,761,654 |
2_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Cash flows from operating activities | ||
Net income (loss) | $419 | ($957) |
Adjustments to reconcile net income (loss) to net cash from operating activities | ||
Depreciation, depletion and amortization | 218 | 256 |
Ceiling test charges | 2 | 2,068 |
Deferred income tax expense (benefit) | 194 | (528) |
Earnings from unconsolidated affiliates, adjusted for cash distributions | (13) | (8) |
Other non-cash income items | (6) | 14 |
Asset and liability changes | (244) | (36) |
Net cash provided by operating activities | 570 | 809 |
Cash flows from investing activities | ||
Capital expenditures | (833) | (759) |
Cash paid for acquisitions, net of cash acquired | (8) | |
Net proceeds from the sale of assets and investments | 1 | 210 |
Other | 1 | 13 |
Net cash used in investing activities | (839) | (536) |
Cash flows from financing activities | ||
Net proceeds from issuance of long-term debt | 775 | 842 |
Payments to retire long-term debt and other financing obligations | (617) | (244) |
Net proceeds from issuance of noncontrolling interests | 231 | |
Dividends paid | (16) | (44) |
Distributions to noncontrolling interest holders | (19) | (10) |
Distributions to holders of preferred stock of subsidiary | (5) | |
Net cash provided by financing activities | 349 | 544 |
Change in cash and cash equivalents | 80 | 817 |
Cash and cash equivalents | ||
Beginning of period | 635 | 1,024 |
End of period | $715 | $1,841 |
3_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (USD $) | ||||||||
In Millions | Preferred stock
| Common stock
| Additional paid-in capital
| Accumulated deficit
| Accumulated other comprehensive loss
| Treasury stock, at cost
| Noncontrolling interests
| Total
|
Balance at beginning of period at Dec. 31, 2008 | $750 | $2,138 | $4,612 | ($2,653) | ($532) | ($280) | $561 | $4,596 |
Dividends | (44) | (44) | ||||||
Other comprehensive income (loss) | (73) | (73) | ||||||
Net income (loss) attributable to El Paso Corporation | (969) | (969) | ||||||
Distributions to noncontrolling interest holders | (10) | (10) | ||||||
Net income attributable to noncontrolling interests (Note 11) | 12 | 12 | ||||||
Other, including stock-based compensation | 14 | 14 | ||||||
Balance at end of period at Mar. 31, 2009 | 750 | 2,138 | 4,582 | (3,622) | (605) | (280) | 563 | 3,526 |
Balance at beginning of period at Dec. 31, 2009 | 750 | 2,148 | 4,501 | (3,192) | (718) | (283) | 785 | 3,991 |
Dividends | (16) | (16) | ||||||
Other comprehensive income (loss) | 12 | 12 | ||||||
Net income (loss) attributable to El Paso Corporation | 388 | 388 | ||||||
Distributions to noncontrolling interest holders | (19) | (19) | ||||||
Net proceeds from issuance of noncontrolling interests | 231 | 231 | ||||||
Net income attributable to noncontrolling interests (Note 11) | 26 | 26 | ||||||
Other, including stock-based compensation | 12 | (1) | 11 | |||||
Balance at end of period at Mar. 31, 2010 | $750 | $2,148 | $4,497 | ($2,804) | ($706) | ($284) | $1,023 | $4,624 |
4_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Net income (loss) | $419 | ($957) |
Pension and postretirement obligations: | ||
Reclassification of actuarial gains during period (net of income taxes of $6 in 2010 and $4 in 2009) | 13 | 7 |
Cash flow hedging activities: | ||
Unrealized mark-to-market gains (losses) arising during period (net of income taxes of $2 in 2010 and $1 in 2009) | (3) | 2 |
Reclassification adjustments for changes in initial value to the settlement date (net of income taxes of $1 in 2010 and $46 in 2009) | 2 | (82) |
Other comprehensive income (loss) | 12 | (73) |
Comprehensive income (loss) | 431 | (1,030) |
Comprehensive income attributable to noncontrolling interests | (31) | (12) |
Comprehensive income (loss) attributable to El Paso Corporation | $400 | ($1,042) |
5_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Reclassification of actuarial gains during period, income taxes | $6 | $4 |
Unrealized mark-to-market gains (losses) arising during period, income tax expense (benefit) | (2) | 1 |
Reclassification adjustments for changes in initial value to the settlement date, income tax expense (benefit) | $1 | ($46) |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | |
3 Months Ended
Mar. 31, 2010 | |
Basis of Presentation and Significant Accounting Policies | 1. Basis of Presentation and Significant Accounting Policies Basis of Presentation We prepared this Quarterly Report on Form 10-Q under the rules and regulations of the United States Securities and Exchange Commission (SEC). Because this is an interim period filing presented using a condensed format, it does not include all of the disclosures required by U.S. generally accepted accounting principles. You should read this report along with our 2009 Annual Report on Form 10-K, which contains a summary of our significant accounting policies and other disclosures. The financial statements as of March31, 2010, and for the quarters ended March31, 2010 and 2009, are unaudited. We derived the condensed consolidated balance sheet as of December31, 2009, from the audited balance sheet filed in our 2009 Annual Report on Form 10-K. In our opinion, we have made adjustments, all of which are of a normal, recurring nature to fairly present our interim period results. Due to the seasonal nature of our businesses, information for interim periods may not be indicative of our operating results for the entire year. Significant Accounting Policies The following is an update of our significant accounting policies and accounting pronouncements issued but not yet adopted as discussed in our 2009 Annual Report on Form 10-K. Transfers of Financial Assets. On January 1, 2010, we adopted accounting standard updates for financial asset transfers. Among other items, these updates require the sale of an entire financial asset or a proportionate interest in a financial asset in order to qualify for sale accounting. These changes were effective for sales of financial assets occurring on or after January 1, 2010. In January 2010, we terminated our prior accounts receivable sales programs under which we previously sold senior interests in certain of our pipeline accounts receivable to a third party financial institution (through wholly-owned special purpose entities). As a result, the adoption of these accounting standard updates did not have a material impact on our financial statements. Upon termination of the prior accounts receivable sales programs, we entered into new accounts receivable sales programs under which we sell certain of our pipeline accounts receivable in their entirety to the third party financial institution (through wholly-owned special purpose entities). The transfer of these receivables qualifies for sale accounting under the provisions of these accounting standard updates. We present the cash flows related to the prior and new accounts receivable sales programs as operating cash flows in our statements of cash flows. For further information, see Note 13. Variable Interest Entities. On January 1, 2010, we adopted accounting standard updates for variable interest entities that revise how companies determine the primary beneficiary of these entities, among other changes. Companies are now required to use a qualitative approach based on their responsibilities and power over the entities' operations, rather than a quantitative approach in determining the primary beneficiary as previously required. Additionally, the primary beneficiary is |
Divestitures
Divestitures | |
3 Months Ended
Mar. 31, 2010 | |
Divestitures | 2. Divestitures During the first quarter of 2009, we completed the sale of our interests in the Porto Velho power generation facility in Brazil for total consideration of $179million and the sale of non-core natural gas producing properties located in our Central and Western divisions for approximately $93million. In April2010, we completed the sale of our interests in Mexican pipeline and compression assets for approximately $300million. We currently expect to record a pretax gain of approximately $80million in the second quarter of 2010. |
Ceiling Test Charges
Ceiling Test Charges | |
3 Months Ended
Mar. 31, 2010 | |
Ceiling Test Charges | 3. Ceiling Test Charges We are required to conduct quarterly impairment tests of our capitalized costs in each of our full cost pools. During the quarters ended March31, 2010 and 2009, we recorded the following ceiling test charges: 2010 2009 (In millions) Full cost pool: U.S $ $ 2,031 Brazil 28 Egypt 2 9 Total $ 2 $ 2,068 During the first quarter of 2009, the calculation of these charges was based on spot commodity prices as of March31, 2009, as required at that time. As a result of our adoption of the SEC's final rule on the Modernization of Oil and Gas Reporting, effective December31, 2009, we now use a 12-month average price (calculated as the unweighted arithmetic average of the price on the first day of each month within the 12-month period prior to the end of the reporting period) when performing these ceiling tests. In calculating our ceiling test charges, we are also required to hold prices constant over the life of the reserves, even though actual prices of natural gas and oil are volatile and change from period to period. |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes | 4. Income Taxes Income taxes for the quarters ended March31 were as follows: 2010 2009 (In millions, except rates) Income tax (benefit)expense $ 186 $ (526 ) Effective tax rate 31 % 35 % Effective Tax Rate. We compute interim period income taxes by applying an anticipated annual effective tax rate to our year-to-date income or loss, except for significant unusual or infrequently occurring items. Significant tax items are recorded in the period that the item occurs and changes in tax laws or rates are recorded in the period of enactment. Our effective tax rate is affected by items such as income attributable to nontaxable noncontrolling interests, dividend exclusions on earnings from unconsolidated affiliates where we anticipate receiving dividends, the effect of state income taxes (net of federal income tax effects), and the effect of foreign income which can be taxed at different rates. During the first quarter of 2010, our effective tax rate was lower than the statutory rate primarily due to income attributable to nontaxable noncontrolling interests partially offset by $18 million of additional deferred income tax expense from healthcare legislation enacted in March2010 which reduces the tax deduction for retiree prescription drug expenses to the extent they are reimbursed under the Medicare subsidy program. During the first quarter of 2009, our effective tax rate was relatively consistent with the statutory rate. |
Earnings Per Share
Earnings Per Share | |
3 Months Ended
Mar. 31, 2010 | |
Earnings Per Share | 5. Earnings Per Share We calculated basic and diluted earnings (loss)per common share as follows for the quarters ended March31: 2010 2009 Basic Diluted Basic Diluted (In millions, except per share amounts) Net income (loss)attributable to El Paso Corporation $ 388 $ 388 $ (969 ) $ (969 ) Preferred stock dividends of El Paso Corporation (9 ) (9 ) (9 ) Interest on preferred securities 3 Net income (loss)attributable to El Paso Corporation's common stockholders $ 379 $ 391 $ (978 ) $ (978 ) Weighted average common shares outstanding 696 696 695 695 Effect of dilutive securities: Options and restricted stock 6 Convertible preferred stock 58 Trust preferred securities 8 Weighted average common shares outstanding and dilutive securities 696 768 695 695 Basic and diluted earnings (loss)per common share: Net income (loss)attributable to El Paso Corporation's common stockholders $ 0.54 $ 0.51 $ (1.41 ) $ (1.41 ) We exclude potentially dilutive securities from the determination of diluted earnings per share (as well as their related income statement impacts) when their impact on net income attributable to El Paso Corporation per common share is antidilutive. Potentially dilutive securities consist of employee stock options, restricted stock, convertible preferred stock and trust preferred securities. For the quarter ended March31, 2010, certain of our employee stock options were antidilutive. For the quarter ended March31, 2009, we incurred losses attributable to El Paso Corporation and, accordingly, excluded all of our potentially dilutive securities from the determination of diluted earnings per share. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | |
3 Months Ended
Mar. 31, 2010 | |
Fair Value of Financial Instruments | 6. Fair Value of Financial Instruments On January1, 2009, we adopted accounting standard updates regarding how companies should consider their own credit in determining the fair value of their liabilities that have third party credit enhancements related to them and recorded a $34million gain (net of $18million of taxes), or $0.05 per share, in 2009 as a result of adopting these new accounting updates. We use various methods to determine the fair values of our financial instruments and other derivatives that are measured at fair value on a recurring basis. The fair value of an instrument depends on a number of factors, including the availability of observable market data over the contractual term of the underlying instrument. For some of our instruments, the fair value is calculated based on directly observable market data or data available for similar instruments in similar markets. For other instruments, the fair value may be calculated based on these inputs as well as other assumptions related to estimates of future settlements of the instrument. We separate our financial instruments and other derivatives into three levels (Levels 1, 2 and 3) based on our assessment of the availability of observable market data and the significance of non-observable data used to determine fair value. Our assessment of an instrument can change over time based on the maturity or liquidity of the instrument, which could result in a change in the classification of the instruments between levels. Each of these levels is described below: * Level 1 instruments' fair values are based on quoted prices for the instruments in actively traded markets. * Level 2 instruments' fair values are primarily based on pricing data representative of quoted prices for similar assets and liabilities in active markets (or identical assets and liabilities in less active markets). * Level 3 instruments' fair values are partially calculated using pricing data that is similar to Level 2 above, but their fair value also reflects adjustments for being in less liquid markets or having longer contractual terms. During the quarter ended March31, 2010, there have been no changes to the types of instruments or the levels in which they are classified. For a further description of these levels and our corresponding instruments classified by level, see our 2009 Annual Report on Form 10-K. Listed below are the fair values of our financial instruments that are recorded at fair value classified in each level at March31, 2010 and December31, 2009: March 31, 2010 December 31, 2009 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total (In millions) Assets Commodity-based derivatives Production-related natural gas and oil derivatives $ $ 358 $ $ 358 $ $ 169 $ $ 169 Other natural gas derivatives 82 21 103 106 21 127 Power-related der |
Price Risk Management Activitie
Price Risk Management Activities | |
3 Months Ended
Mar. 31, 2010 | |
Price Risk Management Activities | 7. Price Risk Management Activities Our price risk management activities relate primarily to derivatives entered into to hedge or otherwise reduce (i)the commodity price exposure on our natural gas and oil production and (ii) interest rate exposure on our long-term debt. We also hold other derivatives not intended to hedge these exposures. When we enter into derivative contracts, we may designate the derivative as either a cash flow hedge or a fair value hedge. Hedges of cash flow exposure are designed to hedge forecasted sales transactions or limit the variability of cash flows to be received or paid related to a recognized asset or liability. Hedges of fair value exposure are entered into to protect the fair value of a recognized asset, liability or firm commitment. Financial Statement Presentation. For a detailed description on how our derivatives are reflected and accounted for on our balance sheet and statements of income, comprehensive income and cash flow, see our 2009 Annual Report on Form 10-K. The following table presents the fair value of our derivatives on a gross basis by contract type. We have not netted these contracts for counterparties where we have a legal right of offset or for cash collateral associated with these derivatives. At March31, 2010 and December31, 2009, cash collateral held was not material. Fair Value of Derivative Assets Fair Value of Derivative Liabilities March 31, 2010 December 31, 2009 March 31, 2010 December 31, 2009 (In millions) Derivatives Designated as Hedges: Interest rate derivatives Cash flow hedges $ 1 $ 1 $ (16 ) $ (17 ) Fair value hedges 10 10 Total derivatives designated as hedges 11 11 (16 ) (17 ) Derivatives not Designated as Hedges: Commodity-based derivatives Production-related 421 239 (88 ) (112 ) Other natural gas 358 519 (497 ) (678 ) Power-related 30 57 (350 ) (406 ) Total commodity-based derivatives 809 815 (935 ) (1,196 ) Interest rate derivatives 13 10 (13 ) (10 ) Total derivatives not designated as hedges 822 825 (948 ) (1,206 ) Impact of master netting arrangements (1) (340 ) (492 ) 340 492 Total assets (liabilities)from price risk management activities 493 344 (624 ) (731 ) Other derivatives (31 ) (31 ) Total derivatives $ 493 $ 344 $ (655 ) $ (762 ) (1) Includes adjustments to net assets or liabilities to reflect master netting arrangements we have with our counterparties. Commodity-Based Derivatives Production-Related Derivatives. We attempt to mitigate commodity price risk and stabiliz |
Debt, Other Financing Obligatio
Debt, Other Financing Obligations and Other Credit Facilities | |
3 Months Ended
Mar. 31, 2010 | |
Debt, Other Financing Obligations and Other Credit Facilities | 8. Debt, Other Financing Obligations and Other Credit Facilities March 31, December 31, 2010 2009 (In millions) Short-term financing obligations, including current maturities $ 622 $ 477 Long-term financing obligations 13,416 13,391 Total $ 14,038 $ 13,868 Changes in Financing Obligations. During the quarter ended March31, 2010, we had the following changes in our financing obligations: Cash Book Value Received Company Interest Rate Increase (Decrease) (Paid) (In millions) Issuances Elba Express Company L.L.C. credit facility variable $ 19 $ 19 Ruby Holding Company loan commitment 7.000% 144 143 El Paso Pipeline Partners L.P. notes due 2020 6.500% 425 420 El Paso revolving credit facility variable 193 193 Increases through March31, 2010 $ 781 $ 775 Repayments, repurchases, and other El Paso Exploration and Production Company revolving credit facility variable $ (419 ) $ (419 ) El Paso revolving credit facility variable (193 ) (193 ) Other various 1 (5 ) Decreases through March31, 2010 $ (611 ) $ (617 ) Credit Facilities. We have various credit facilities in place which allow us to borrow funds or issue letters of credit as noted in the table above or further discussed below. As of March31, 2010, we had total available capacity under these facilities (not including capacity available under the El Paso Pipeline Partners, L.P. (EPB) $750million revolving credit facility and all project financings) of approximately $1.9billion. The availability of borrowings under our credit agreements and our ability to incur additional debt is subject to various financial and non-financial covenants and restrictions. These restrictions include potential limitations in the credit agreements of certain of our subsidiaries on their ability to declare and pay dividends and loan funds to us. Additionally, the revolving credit facility of our exploration and production subsidiary is collateralized by certain of our natural gas and oil properties and has a borrowing base subject to revaluation on a semi-annual basis. There have been no significant changes to our restrictive covenants from those disclosed in our 2009 Annual Report on Form 10-K, and as of March31, 2010, we were in compliance with all of our debt covenants. Letters of Credit. We enter into letters of credit in the ordinary course of our operating activities as well as periodically in conjunction with the sales of assets or businesses. As of March31, 2010, we increased the total letter of credit capacity under certain existing letter of credit facilities to $350million with a weighted average fixed facility fee of 6.50% and maturities ranging from December2013 to September2014. As of March31, 2010, we had total outstanding letters of credit issued under all of |
Commitments and Contingencies
Commitments and Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Commitments and Contingencies | 9. Commitments and Contingencies Legal Proceedings Cash Balance Plan Lawsuit. In December2004, a purported class action lawsuit entitled Tomlinson, et al.v. El Paso Corporation and El Paso Corporation Pension Plan was filed in U.S. District Court for Denver, Colorado. The lawsuit alleges various violations of the Employee Retirement Income Security Act (ERISA)and the Age Discrimination in Employment Act as a result of our change from a final average earnings formula pension plan to a cash balance pension plan. The trial court has dismissed the claims that our plan violated ERISA. Our costs and legal exposure related to this lawsuit are not currently determinable. Retiree Medical Benefits Matters. In 2002, a lawsuit entitled Yolton et al. v. El Paso Tennessee Pipeline Co. and Case Corporation was filed in a federal court in Detroit, Michigan filed on behalf of a group of retirees of Case Corporation (Case) that alleged they are entitled to retiree medical benefits under a medical benefits plan for which we serve as plan administrator pursuant to a merger agreement with Tenneco Inc. Although we had asserted that our obligations under the plan were subject to a cap pursuant to an agreement with the union for Case employees, the trial court ruled that the benefits were vested and not subject to the cap. As a result, we were obligated to pay the amounts above the cap, but intend to pursue appellate options following the determination by the trial court of any damages incurred by the plaintiffs during the period when premium payments above the cap were paid by the retirees. We believe our accruals established for this matter are adequate. Price Reporting Litigation. Beginning in 2003, several lawsuits were filed against El Paso Marketing L.P. (EPM)alleging that El Paso, EPM and other energy companies conspired to manipulate the price of natural gas by providing false price information to industry trade publications that published gas indices. While some of the cases have been agreed to, settled, and paid, several of the cases are in various stages of appellate proceedings as further described in our 2009 Annual report on Form 10-K. In this regard, in April2010, the Tennessee Supreme Court dismissed the lawsuit entitled Leggett, et al. v. Duke Energy Corporation, et al. Our costs and legal exposure related to the remaining lawsuits and claims which have not yet been settled and paid are not currently determinable. Gas Measurement ClassAction. In 1999, a purported class action lawsuit entitled Will Price, et al. v. Gas Pipelines and Their Predecessors, et al., was filed in the District Court of Stevens County, Kansas against a number of our subsidiaries. The complaint alleges that the defendants inaccurately measured the volume and heating content of gas that resulted in the underpayment of royalties to royalty owners on non-federal and non-Native American lands in Kansas, Wyoming and Colorado. The court has denied motions for class certification, and the deadline for an appeal of this order has now passed. Our costs and legal exposure related to this lawsuit and claim are not currently determinable. MTBE. Certain of our subsidiar |
Retirement Benefits
Retirement Benefits | |
3 Months Ended
Mar. 31, 2010 | |
Retirement Benefits | 10. Retirement Benefits Net Benefit Cost. The components of net benefit cost for our pension and postretirement benefit plans for the quarters ended March31, are as follows: Other Pension Postretirement Benefits Benefits 2010 2009 2010 2009 (In millions) Service cost $ 5 $ 4 $ $ Interest cost 28 30 8 9 Expected return on plan assets (39 ) (43 ) (3 ) (3 ) Amortization of net actuarial loss (gain) 19 11 (1 ) Net benefit cost $ 13 $ 2 $ 4 $ 6 |
Equity and Preferred Stock of S
Equity and Preferred Stock of Subsidiary | |
3 Months Ended
Mar. 31, 2010 | |
Equity and Preferred Stock of Subsidiary | 11. Equity and Preferred Stock of Subsidiary Common and Preferred Stock Dividends. The table below shows the amount of dividends paid and declared (in millions, except per share amount): Common Stock Convertible Preferred Stock ($0.01/Share) (4.99%/Year) Amount paid through March31, 2010 $ 7 $ 9 Amount paid in April2010 $ 7 $ 9 Declared in April2010: Date of declaration April 1, 2010 April 1, 2010 Payable to shareholders on record June 4, 2010 June 15, 2010 Date payable July 1, 2010 July 1, 2010 Dividends on our common stock and preferred stock are treated as a reduction of additional paid-in-capital since we currently have an accumulated deficit. For the remainder of 2010, we expect dividends paid on our common and preferred stock will be taxable to our stockholders because we anticipate that these dividends will be paid out of current or accumulated earnings and profits for tax purposes. Our ability to pay dividends can be impacted by certain restrictions as further described in our 2009 Annual Report on Form 10-K. Noncontrolling Interests. In March2010, we contributed a 51percent interest in both Southern LNG, L.L.C. (SLNG), which owns the Elba Island LNG receiving terminal, and El Paso Elba Express Company, L.L.C. (Elba Express), which owns the Elba Express Pipeline, to EPB in exchange for $810 million which included cash and 5.3million EPB common units. EPB raised the funds for the acquisition through the issuance of 9.9million common units and the proceeds from a March2010 debt offering. As of March31, 2010, our ownership interest in EPB is 64percent, including our 2 percent general partner interest. EPB makes quarterly distributions of available cash to its unitholders in accordance with its partnership agreement. During the quarters ended March31, 2010 and 2009, EPB made cash distributions of $19million and $10million to its non-affiliated common unitholders. During the quarters ended March31, 2010 and 2009, we have recorded $26million and $12million in net income attributable to noncontrolling interest holders on our income statement which represents the non-affiliated common unitholders share of EPB's income. Preferred Stock of Subsidiary. During 2009, Global Infrastructure Partners (GIP), our partner on our Ruby pipeline project, contributed $145million to our subsidiary, Ruby Pipeline Holding Company, L.L.C. (Ruby) and received a convertible preferred equity interest in Ruby that was simultaneously exchanged for a convertible preferred equity interest in Cheyenne Plains Gas Pipeline Company, L.L.C. (Cheyenne Plains). The preferred stock in Cheyenne Plains has been classified between liabilities and equity on our balance sheet since the events that require redemption of the preferred interest are not entirely within our control. The preferred dividend associated with GIP's preferred interest of $5million was paid during the first quarter of 2010 and is reflected in net income attributable to noncontrolling interests on our income statement. For a further discussion of the Ruby transaction, see Note 13. |
Business Segment Information
Business Segment Information | |
3 Months Ended
Mar. 31, 2010 | |
Business Segment Information | 12. Business Segment Information As of March31, 2010, our business consists of two core segments, Pipelines and Exploration and Production, as well as our Marketing segment. Our segments are strategic business units that provide a variety of energy products and services. They are managed separately as each segment requires different technology and marketing strategies. Prior to 2010, we also had a Power segment which has been combined into our corporate and other activities for all periods presented. A further discussion of each segment and our corporate and other activities follows. Pipelines. Our Pipelines segment provides natural gas transmission, storage, and related services, primarily in the United States. As of March31, 2010, we conducted our activities primarily through seven wholly or majority owned interstate pipeline systems and equity interests in four transmission systems. In addition to the storage capacity in our wholly and majority owned pipelines systems, we also own or have interests in three underground natural gas storage facilities and two LNG terminal facilities, one of which is under construction. Exploration and Production. Our Exploration and Production segment is engaged in the exploration for and the acquisition, development and production of natural gas, oil and NGL, in the United States, Brazil and Egypt. Marketing. Our Marketing segment markets and manages the price risks associated with our natural gas and oil production as well as manages our remaining legacy trading portfolio. Corporate and Other. Our corporate and other activities include our general and administrative functions as well as a number of miscellaneous businesses. Our management uses earnings before interest expense and income taxes (EBIT)as a measure to assess the operating results and effectiveness of our business segments which consist of both consolidated businesses and investments in unconsolidated affiliates. We believe EBIT is useful to our investors because it allows them to evaluate more effectively the operating performance using the same performance measure analyzed internally by our management. We define EBIT as net income (loss)adjusted for items such as (i)interest and debt expense, (ii)income taxes, and (iii)net income attributable to noncontrolling interests so that our investors may evaluate our operating results without regard to our financing methods or capital structure. EBIT may not be comparable to measures used by other companies. Additionally, EBIT should be considered in conjunction with net income (loss), income (loss)before income taxes and other performance measures such as operating income or operating cash flows. Below is a reconciliation of our EBIT to our net income (loss)for the periods ended March31: 2010 2009 (In millions) Segment EBIT $ 828 $ (1,237 ) Corporate and Other (11 ) (3 ) Consolidated EBIT 817 (1,240 ) Interest and debt expense (243 ) (255 ) Income tax benefit (expense) (186 ) 526 Net income (loss)attributable to El Paso Corporation 388 (969 ) Net in |
Variable Interest Entities and
Variable Interest Entities and Accounts Receivable Sales Programs | |
3 Months Ended
Mar. 31, 2010 | |
Variable Interest Entities and Accounts Receivable Sales Programs | 13. Variable Interest Entities and Accounts Receivable Sales Programs Ruby. We consolidate our investment in Ruby Pipeline Holding Company, L.L.C. (Ruby) as its primary beneficiary. In July2009, we entered into an agreement with GIP whereby they agreed to invest up to $700million and acquire a 50percent equity interest in Ruby subject to certain conditions. As part of this agreement, GIP: (i)has entered into a loan commitment to provide $405 million of project funding to Ruby, $360million of which has been borrowed as of March31, 2010, (ii)has contributed $145million in exchange for a convertible preferred equity interest in Ruby that was simultaneously exchanged for a convertible preferred equity interest in a holding company of Cheyenne Plains, and (iii)will provide an additional $150million of preferred equity contributions to Ruby after obtaining all FERC approvals as well as securing approximately $1.4 billion of third party financing. In April2010, we received certification from the FERC authorizing the project. In May2010, we closed $1.5billion of third party project financing; however, the drawing on this financing is contingent on certain conditions. Cheyenne Plains is also a variable interest entity we consolidate as its primary beneficiary. GIP will hold their interest in Cheyenne Plains until certain conditions are satisfied including placing the Ruby pipeline project in service. GIP has the right to convert its preferred equity to common equity in Ruby at any time; however, the preferred equity is subject to mandatory conversion to Ruby common equity upon the satisfaction of certain conditions, including Ruby entering into additional firm transportation agreements. If all conditions to closing are satisfied or waived, GIP would own a 50percent equity interest in Ruby and all ownership in Cheyenne Plains would be transferred back to us. However, if certain conditions are not satisfied including placing the Ruby pipeline project in service by August2011 and/or completing financing, GIP has the option to convert its Cheyenne Plains preferred interest to a common interest and/or be repaid in cash for its remaining investment. Our obligation to repay these amounts is secured by our equity interests in Ruby, Cheyenne Plains, and approximately 50million common units we own in EPB. For a further discussion of our Ruby transaction, refer to our 2009 Annual Report on Form 10-K. We also hold interests in other variable interest entities that we account for as investments in unconsolidated affiliates. These entities do not have significant operations and accordingly do not have a material impact to our financial statements. Accounts Receivable Sales Programs. During 2009, several of our pipeline subsidiaries had agreements to sell senior interests in certain of their accounts receivable (which are short-term assets that generally settle within 60 days) to a third party financial institution (through wholly-owned special purpose entities), and we retained subordinated interests in those receivables. The sale of these senior interests qualified for sale accounting and was conducted to accelerate cash from these receivables, the p |
Investments in, Earnings from a
Investments in, Earnings from and Transactions with Unconsolidated Affiliates | |
3 Months Ended
Mar. 31, 2010 | |
Investments in, Earnings from and Transactions with Unconsolidated Affiliates | 14. Investments in, Earnings from and Transactions with Unconsolidated Affiliates We hold investments in unconsolidated affiliates which are accounted for using the equity method of accounting. The earnings from unconsolidated affiliates reflected in our income statement include (i)our share of net earnings directly attributable to these unconsolidated affiliates, and (ii)impairments and other adjustments recorded by us. The information below related to our unconsolidated affiliates includes (i)our net investment and earnings (losses)we recorded from these investments, (ii)summarized financial information of our proportionate share of these investments, and (iii)revenues and charges with our unconsolidated affiliates. Earnings (Losses) from Investment Unconsolidated Affiliates March 31, December 31, Quarter Ended March 31, 2010 2009 2010 2009 (In millions) (In millions) Net Investment and Earnings (Losses) Four Star (1) $ 437 $ 450 $ $ (10 ) Citrus 644 630 15 14 Gulf LNG(2) 279 285 Gasoductos de Chihuahua(3) 190 184 6 6 Bolivia-to-Brazil Pipeline 109 105 5 4 Other 66 64 2 5 Total $ 1,725 $ 1,718 $ 28 $ 19 (1) We recorded amortization of our purchase cost in excess of the underlying net assets of Four Star of $10million and $12million for the quarters ended March31, 2010 and 2009. (2) As of March31, 2010 and December31, 2009, we had outstanding advances and receivables of $63million and $56million, not included above, related to our investment in Gulf LNG. (3) In April2010, we completed the sale of our interest in this investment. See Note 2. Quarter Ended March 31, 2010 2009 (In millions) Summarized Financial Information Operating results data: Operating revenues $ 132 $ 123 Operating expenses 73 68 Income from continuing operations and net income 38 35 We received distributions and dividends from our unconsolidated affiliates of $15million and $12million for the quarters ended March31, 2010 and 2009. Included in these amounts are returns of capital of less than $1million and approximately $1million for the quarters ended March31, 2010 and 2009. Our revenues and charges with unconsolidated affiliates were not material during the quarters ended March31, 2010 and 2009. Other Investment-Related Matters. We currently have outstanding disputes and other matters related to an investment in a Brazilian power plant facility (Manaus/Rio Negro) formerly owned by us. We have filed a lawsuit to collect amounts due to us (approximately $65million of Brazilian reais-denominated accounts receivable). The power utility that purchased the power from these facilities and its parent have asserted counterclaims that would largely offset our accounts receivable. We also have a dispute with respect to wheth |