EXHIBIT 99.B
elpaso
Production Update
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February 2004
Cautionary Statement Regarding Forward-looking Statements
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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, without limitation, the ability to implement and
achieve our objectives in the long-range plan; the
successful implementation of the settlement related to the
western energy crisis; actions by the credit rating
agencies; the successful close of our financing
transactions; our ability to successfully exit the energy
trading business; our ability to divest of certain assets;
changes in commodity prices for oil, natural gas, and power;
changes in interest and exchange rates; inability to realize
anticipated synergies and cost savings associated with
restructurings and divestitures on a timely basis; changes
in reserves estimates based upon internal and third party
reserve analyses; general economic and weather conditions in
geographic regions or markets served by El Paso Corporation
and its affiliates, or where operations of the company and
its affiliates are located; the uncertainties associated
with governmental regulation; the uncertainties associated
with the outcome of governmental investigations; the
outcome of pending litigation including shareholder
derivative and class actions; political and currency risks
associated with international operations of the company and
its affiliates, especially due to the instability in Brazil
and economic conditions in Mexico; difficulty in integration
of the operations of previously acquired companies,
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.
Long-Range Plan: Keys to Success
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* Streamline organization
- Achieve additional $150 MM of cost savings
* Sell $3.3 billion-$3.9 billion of assets
* Turn around production company
* Continue growth of pipeline group
* Implement new compensation plan
Fit for Purpose Organization
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[Black] Long Term
[Yellow] Medium Term
[White] Short Term
EPC
Holding Company
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Unregulated Businesses Regulated Businesses
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Production and Processing [black] Southern Pipelines [black]
Marketing and Trading [black] (SNG, 50% Cirus)
Brazilian Integrated Business [black] Western Pipelines [black]
EPD/GTM Interest [black] (EPNG, CIG, WIC, Mojave)
Asian Power [yellow] Eastern Pipelines [black]
Global Networks [yellow] (TGP, ANR, Great Lakes)
Domestic, European, and
C. America Power [yellow] Mexico JV Operations [black]
Discontinued Operations [white]
Asset Sales Update
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* Closed a number of transactions since December 1, 2003
- Step 1 in GTM/Enterprise transaction, including receipt of
$333 MM cash (net)
- Completed Eagle Point refinery sale, including receipt of
$246 MM cash
- Remaining $70 MM payment received in Linden sale
* Announced sale of 25 domestic contracted power assets
- $746 MM cash proceeds
- $174 MM non-cash debt reduction
* Announced sale of Aruba refinery for $640 MM
- $265 MM net proceeds after payment of $370 MM lease and
closing costs
* Announced sale of Canadian E&P assets for $346 MM
Production Goals
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* New leadership
* Touch bottom
* Lengthen reserve/production
* Reduce natural declines
* Capital discipline and execution
* Regain credibility
Process Overview
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* Announced in third quarter 2003 10-Q that we switched
to Ryder Scott Co. L.P. as our primary reservoir
engineer
* Provided further update in Long-Range Plan
presentation on December 15, 2003
- Likely negative impact given production performance
- Lower capital program in 2004 and beyond
- Higher DD&A rate expected in 2004
* Announced an expected material negative reserve
revision for 2003 on February 2, 2004
* Ryder Scott issued independent reserve audit letter
on February 13, 2004
Proved Reserve Inventory
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Bcfe
El Paso
El Paso Production
Corporation Holding Co. El Paso CGP
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January 1, 2003 5,233 2,824 2,286
Production (427) (226) (194)
Sales/Purchases (799) (424) (267)
Additions 452 232 220
Revisions (1,824) (865) (951)
December 31, 2003 2,635 1,541 1,094
% Developed 66% 65% 68%
Proved Reserves by Area
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Bcfe
As of December 31, 2003
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El Paso
El Paso Production
Corporation Holding Co. El Paso CGP
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Gulf of Mexico 440 257 183
Central* 451 363 88
Texas Onshore 624 86 538
Coalbed Methane 836 835 1
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Domestic 2,351 1,541 810
International 284 -- 284
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Total 2,635 1,541 1,094
====================================
Average Daily
Production
January 2004
(MMcfe/d) 960 510 450
*Includes North Louisiana and Rocky Mountains
Revisions by Area
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* South Texas (-803 Bcfe)
- Expected reserves from the tighter pay sections and
offset drainage in the higher perm sections revised based
upon production performance
- Expected reserves from PUD locations revised based
upon drilling of PUD locations during 2003
- Expected reserves from PUD locations also revised due
to offset performance, depletion concerns and revised
volumetric estimates
* CBM (-511 Bcfe)
- Reserves originally booked on 160 acre volumetrics
revised based upon production performance
- Potential down-spacing to 80 acres is booked as
probable due to lack of contractual and regulatory approvals
- Expected reserves from PUD locations adjusted based on
offset performance
Revisions by Area
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* GOM (-392 Bcfe)
- Expected reserves from producing properties revised
based upon mechanical failure, performance and reprocessed
seismic and geologic interpretations
- PDNP and PUD reserves were reclassified to probable
based upon revised interpretations
* Brazil (-37 Bcfe)
- Lack of gas contract in Camamu basin resulted in
recategorization to probable
* This is a preliminary review of some of the reasons for
the revisions by area. The completion of these reviews
may cause modifications or additions to the reasons for
the revisions
Next Steps
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* Complete production company reorganization
* Complete capital review process
- Review economics and drilling inventory for each region
- Reallocate capital if appropriate
* Provide thorough review of the business plan for the
Production Company in 2Q 2004
Financial Impact
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* Estimated 2003 year-end pre-tax ceiling test charge
(assuming all impact at 12/31/03)*
- El Paso Corp.: approximately $1 billion
- El Paso CGP: approximately $1 billion
- El Paso Production Holdings: no charge
* Expected UOP DD&A rates (assuming all impact at
12/31/03): ($/Mcfe)
4th Qtr. 1st Qtr.
2003 2004
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El Paso Corp. $3.04 $2.68
EPPH $2.14 $2.11
EP CGP $3.93 $2.91
*Based on approximately $6.00 per MMBtu Henry Hub price at
12/31/2003; sensitivity to El Paso Corp. is approximately a
$1.5 billion incremental charge for a $1.00/MMBtu reduction
in natural gas prices
Investor Drilling Program Update
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* October 2003: EP announced a $500 MM drilling venture
* Program is split into 2 packages:
- $230 MM 42 well program (EPCGP)
- $270 MM 82 well program (EPPH)
* Progress to date:
EPCGP EPPH
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Wells 19 31
Capital ($MM) $134 $146
Returns Low Adequate
* Due to less than expected results of the EPCGP program,
one of the third-party investors terminated its
participation and capital spending will now be focused
on the EPPH program
* EP is evaluating the next steps for the EPCGP program
Asset Sales Update
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* Announced sale of Canadian assets to BG Group
- $346 MM sales price
- 115 Bcfe 2003 year-end net reserves
- January average net production of 57 MMcfe/d
- Expect closing in March
* Other sales under way
- Indonesia and miscellaneous international
- Strategic partner for Brazil
2004 Production Target Ranges
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MMcfe/d
SEC
Year-end
2003
High Reserves Low
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Beginning 2004 production
rate(1) 860 860
Annual PDP decline 25%-40% (110) (180)
Production before new
development 750 715(2) 680
New development from $850MM
capital 200 170
Production target ranges 950 850
1 Assumed to be net of Canadian and other planned property
sales
2 Contribution from EPPH of 430 MMcfe/d
Key Metrics
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Metric LRP 2004 Update 2004
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Pipeline
EBIT growth (2)%-2% (2)%-2%
Production
Volumes (MMcfe/d) 850-950 850-950
DD&A rate ($/MMcfe) $1.85-$2.10 $1.85-$2.70
Cash costs ($/MMcfe) $0.95-$1.10 $0.95-$1.10
Power
EBIT growth 0%-5% 0%-5%
Cash recovery through
cash flow
and financing $250 MM $250 MM
Marketing
EBIT contribution $(150)-$(75)MM $(150)-$(75)MM
SUMMARY
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We are still on plan to achieve 2006 goals
* Focused on pipelines and production
* Will sell defined assets, reduce costs, improve results
from production company, invest capital effectively
* Target about $1 per share by 2006, net debt of
approximately $15 billion
* Goals are attainable
* Most keys to success within our control
* Good progress to date on asset sales and debt
reduction
El Paso
Production Update
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February 2004