Exhibit 99.A
News
For Immediate Release
El Paso Corporation Announces Findings of Independent Review
HOUSTON, TEXAS, May 3, 2004-El Paso Corporation (NYSE:EP)
announced today the findings of the independent review of the
Audit Committee of the company's board of directors concerning
revisions to its oil and natural gas reserves.
On February 17, 2004, El Paso announced that its proved oil and
natural gas reserves were being revised lower by approximately
1.8 trillion cubic feet of natural gas equivalent (Tcfe).
Concurrently, the Audit Committee initiated an independent review
to determine the factors that contributed to the revisions. The
review has been conducted by independent counsel, Haynes and
Boone, LLP, over the last two months. The review was intended to
assess the reasons for the revisions, evaluate and make
recommendations on any improvements in the internal controls
associated with the booking of reserves, and determine if there
were any instances of misconduct. The review has included the
completion of more than 200 interviews and the review of more
than 100,000 documents. While a limited number of interviews and
document reviews are still being conducted, the company does not
expect that the findings made as of today will change materially.
El Paso will provide an update if additional material findings
arise with the completion of the review.
The review of Haynes and Boone has found that during the period
from the beginning of 1999 through the end of 2003, certain
employees used aggressive and, at times, unsupportable methods to
book proved reserves. In addition, certain employees provided
proved reserve estimates that they knew or should have known were
incorrect at the time they were reported.
The independent review confirms El Paso's previous assessment
that the financial statements for El Paso Corporation, El Paso
CGP Company (EPCGP), and El Paso Production Holding Company
(EPPH) should be restated. As announced earlier, investors
should not rely on previously filed reports for these registrants
until further notice from the company. The company will discuss
with the Securities and Exchange Commission (SEC) its plans for
such restatements and will work to file its Form 10-K for 2003
and any required restated financial statements for prior periods
as soon as possible. Currently, the company plans to restate
the financial statements of El Paso Corporation, EPCGP, and EPPH
from 1999 through 2003. The first quarter 2004 Form 10-Qs for
these registrants will be delayed pending the filing of the Form
10-Ks.
Independent counsel to the Audit Committee also discussed the
roles of current senior executive management in the reserve
revisions. Independent counsel advised the Audit Committee that
the current senior executive management team of El Paso
Corporation did not participate in the inaccurate booking and the
resulting overstatement of reserves. Independent counsel also
advised the Audit Committee that the process conducted to
estimate El Paso's proved reserves at December 31, 2003 was sound
and that the reserves the company recently announced were
estimated in accordance with applicable guidelines.
"El Paso's board of directors fully accepts the findings of the
independent review," said Ronald L. Kuehn, Jr., chairman of the
board of El Paso Corporation. "This process is an important
milestone for all stakeholders as we take the necessary steps to
ensure the integrity of the company's reserve reporting process."
The board of directors is actively working to implement controls
and procedures that will ensure the integrity of the company's
reserve booking process. The following controls are either in
place or are being implemented:
(1) formation of an internal committee of the company to
routinely review the company's oil and natural gas reserves,
which will be staffed with appropriate technical, financial
reporting, and legal expertise;
(2) continued use of an independent third-party engineering
firm that will be selected by and report annually to the Audit
Committee of the board of directors with a subsequent report
by the Audit Committee to the full board of directors of the
company;
(3) formation of a centralized reserve reporting function that
is separated from the operating divisions and reports directly
to the president of Production and Nonregulated Operations;
(4) revisions in the company's documentation procedures and
controls for estimating proved reserves;
(5) improved training regarding SEC guidelines for booking
proved reserves; and
(6) enhanced internal audit reviews.
In addition, there have been significant changes already
implemented in the organization. These changes include the
addition of individuals with extensive exploration and production
experience, including five new board members and three new
members of the company's executive management team. The changes
in the company's executive management include the appointment of
Doug Foshee as the president and chief executive officer of
El Paso Corporation, Lisa Stewart as the president of Production
and Nonregulated Operations, and Jeff Sherrick as the senior
vice president of the company's production business in charge of
the reserve estimation process.
The company continues to cooperate with the SEC and the U.S.
Attorney's office on the results of these reviews.
El Paso Corporation provides natural gas and related energy
products in a safe, efficient, dependable manner. The company
owns North America's largest natural gas pipeline system and one
of North America's largest independent natural gas producers.
For more information, visit www.elpaso.com.
Note to Editors:
Total proved reserves at December 31, 2003 were estimated to be
approximately 2.6 Tcfe. A copy of the company's February 17,
2004 press release can be viewed on its web site at
http://www.elpaso.com/press/newsquery.asp?sId=4252. In addition,
an audio replay of El Paso's February 17, 2004 webcast
along with charts used during that webcast is available at
http://www.elpaso.com/investor/presentations.shtm.
Cautionary Statement Regarding Forward-Looking Statements
This release 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 release, including, without limitation, any
developments arising from additional reviews of the reserve
revisions performed internally or by independent counsel to the
Audit Committee; the extent and time periods involved in the
restatement of our prior years' financial results; the upcoming
discussions with the SEC regarding the company's plan for
restatement of prior years' financial results; the potential
impact of the restatement of financial results on our access to
capital (including borrowings under credit arrangements); the
availability of certain information required to complete some
alternative forms of restatement associated with the reserve
revisions; further changes in reserve estimates based upon
internal and third party reserve analyses; uncertainties
associated with the outcome of governmental investigations;
outcome of litigation including shareholder derivative and class
actions related to reserve revisions and restatements;
consequences arising from the delay in filing of our periodic
reports; 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.
El Paso Contacts
Investor and Public Relations
Bruce L. Connery, Vice President
Office: (713) 420-5855
Fax: (713) 420-4417
Media Relations
Kim Wallace, Manager
Office: (713) 420-6330
Fax: (713) 420-6341