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el paso 08_11_Leland_UBS
1. Mark Leland
Chief Financial Officer
El Paso Update
August 11, 2005
the place to work
the neighbor to have
the company to own
2. Cautionary Statement Regarding
Forward-looking Statements
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, our ability to implement and achieve our objectives in the long-range plan,
including achieving our debt-reduction targets; changes in reserve estimates based upon internal and third
party reserve analyses; our ability to meet production volume targets in our Production segment;
uncertainties associated with exploration and production activities; our ability to successfully execute,
manage, and integrate acquisitions; uncertainties and potential consequences associated with the outcome
of governmental investigations, including, without limitation, those related to the reserve revisions and
natural gas hedge transactions; outcome of litigation, including shareholder derivative and class actions
related to reserve revisions and restatements; our ability to comply with the covenants in our various
financing documents; our ability to obtain necessary governmental approvals for proposed pipeline projects
and our ability to successfully construct and operate such projects; the risks associated with recontracting of
transportation commitments by our pipelines; regulatory uncertainties associated with pipeline rate cases;
actions by the credit rating agencies; the successful close of our financing transactions, including the
issuance of equity; our ability to successfully exit the energy trading business; our ability to close our
announced asset sales on a timely basis; changes in commodity prices for oil, natural gas, and power;
inability to realize anticipated synergies and cost savings associated with restructurings and divestitures on a
timely basis; general economic and weather conditions in geographic regions or markets served by the
company and its affiliates, or where operations of the company and its affiliates are located; the uncertainties
associated with governmental regulation; political and currency risks associated with international operations
of the company and its affiliates; 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.
2
3. Our Purpose
El Paso Corporation provides
natural gas and related energy
products in a safe, efficient, and
dependable manner
3
5. Significant Progress in Turnaround
December 2003 Current
Liquidity Stressed Strong
► ► ►
Net debt $20.5 billion $15.9 billion*
► ► ►
Asset sales Long-Range Plan (LRP) goal: $4.3 billion sold under LRP
► ► ►
$3.3 billion–$3.9 billion
Incremental goal: $1.2 billion announced or
► ►
$1.2 billion–$1.6 billion closed
Pipes, E&P, marketing & Pipes, E&P, marketing (out of
► ►
Range of businesses
►
trading, petroleum, chemical, or exiting all other)
domestic & international
power, midstream
Large corporate center Small corporate center—push
► ►
Corporate structure
►
functions to Bus
5 divisions
►
2 divisions
►
*As of June 30, 2005
5
6. U.S. Natural Gas Market
Macro Overview
Demand
Growth
2004–2014
35
Domestic supply
► Gas consumption in
Consumption and Supply in Tcf
30
the power sector will
+5.0 Tcf
grow substantially 25
Power Generation
– 200 GWs of new gas- 20
based generating +1.0 Tcf
Industrial
capacity 15
► Domestic supply grows +0.4 Tcf
Commercial
10
slowly
+0.7 Tcf
Residential
5
► Large scale LNG
imports necessary +0.3 Tcf
Other
0
2002 2004 2006 2008 2010 2012 2014
6
8. Leading Natural Gas Infrastructure
Great Lakes Gas
Transmission (50%)
2,100 miles; 3 Bcf/d
Wyoming Interstate
600 miles; 2 Bcf/d
Colorado
Cheyenne Plains
Interstate Gas
Pipeline
4,000 miles; 3 Bcf/d
380 miles; 0.6 Bcf/d
El Paso
ANR Pipeline
Natural Gas Tennessee Gas
10,500 miles;
11,000 miles; 6 Bcf/d Pipeline
7 Bcf/d
14,200 miles; 7 Bcf/d
Mojave
Pipeline Elba Island LNG
400 miles; 4 Bcf
0.4 Bcf/d
Mexico Ventures Florida Gas
106 miles; 2 Bcf/d Transmission (50%)
4,800 miles; 2 Bcf/d
Southern
Natural Gas
8,000 miles; 3 Bcf/d
8
9. Pipeline Group Key Drivers
Expand franchise
►
– New wave of opportunities (LNG, Rockies)
Successful recontracting
►
Capital and operating efficiency
►
Management of rate and regulatory issues
►
9
10. Portfolio of Growth Projects
ANR Wisconsin 2006
Expansion TGP Distrigas
$46 MM $35 MM
2006
WIC Medicine Bow 2007
168 MMcf/d
Expansion 72 MMcf/d
$58 MM
ANR Northleg
2007–2009
$13 MM TGP
560 MMcf/d
2005 Northeast
ANR Westleg
110 MMcf/d ConneXion
$48 MM
WIC Mainline New England
2004
Expansion $102 MM
218 MMcf/d
0.2
$63 MM 2008
2007 136 MMcf/d
198 MMcf/d ANR Eastleg
Cheyenne Plains
$17 MM
$416 MM TGP Northeast
2005
WIC Piceance Lateral 2004-2007 ConneXion
142 MMcf/d
Expansion 0.5 961 MMcf/d NY/NJ
$120 MM $24 MM
December 2005 2006
333 MMcf/d CIG Raton Basin Expansion 41 MMcf/d
$91 MM
2005–2008
SNG North and
175 MMcf/d
South System
EPNG Cadiz to Ehrenberg $445 MM
SNG Elba Island
(Line 1903) 2002–2003–2004
Expansion
$74 MM 699 MMcf/d
SNG Cypress
EPNG
0.6 $157 MM
December 2005
Expansion
Phoenix East Valley Line 1Q 2006
372 MMcf/d
$240 MM
$49 MM 3.5 Bcf
TGP/ANR 2007
September 2005
Eugene Island 371 220 MMcf/d
305 MMcf/d
$14 MM
EPNG Line 2000 Power Up
April 2006
$136 MM
350 MMcf/d
June 2004 FGT Phase VII
TGP LPG Reynosa TGP/ANR Supply
320 MMcf/d $63 MM
$44 MM (50%) Attachment Projects
May 2007
TGP
2006 $113 MM
TGP/EPNG Sonora Project 100 MMcf/d
LA Deepwater Link
30,000 Bbl/d 2005-2009
$TBD $28 MM
2009 April 2007
TBD MMcf/d 850 MMcf/d Seafarer Pipeline
$354 MM
2008
Completed Projects Signed PA’s 800 MMcf/d
10
FERC Certificated Future Projects
11. Pipeline Outlook
Fundamentals remain excellent
►
Growth projects driven by:
►
– Access to new natural gas supplies
– Market growth
Recontracting progress has been good
►
Portfolio effect of franchise is evident
►
Near-term cost increases overshadowing underlying growth
►
11
13. Early Culture Shifts/Focus Items
Old New
Basin dominance Best in basin
► ►
Inadequate pre-investment Consistent and disciplined risk
► ►
analysis and reserve determination
Poor portfolio management Comprehensive mapping with
► ►
life-of-property exploitation
plans
Deep exploration emphasis Capital allocation to full risk
► ►
spectrum
Production growth through Short-term focus on existing
► ►
capex properties and base
production. Long-term
emphasis on value creation
13
14. Production Summary
Potiguar
Basin
Brazil
Brazil
UnoPaso acquisition performing well
►
Substantial exploration potential
► Camamu/
Almada
Basin
Espírito
Santo
Onshore Basin
Large inventory of low-risk
►
Santos
prospects Basin
Closed $179 MM East Texas
►
acquisition in February 2005
Medicine Bow pending
►
Texas Gulf Coast
Closed $32 MM South Texas
►
acquisition in January
Gulf of Mexico
Developing lower-risk
►
inventory Realigned drilling program
►
yields results—West
Cameron 75 and 62
14
15. Capital Management System
Managing Our Drilling Program
Adjust program
Monitor pre/post-
Pre-drill Monthly post-
based on monthly
drill assumptions
evaluation drill analysis
results
and results
Present Value Ratio (PVR):
After-tax PV of future cash flows
discontinued at 12%
Total Investment
15
16. 0
200
400
600
800
1000
1200
1400
1600
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
Oct-03
Nov-03
and San Juan
Dec-03
Jan-04
Sale of Weatherford
Production Profile
Feb-04
Mar-04
Apr-04
May-04
Jun-04
Jul-04
Aug-04
Sep-04
Oct-04
Canada sale
Nov-04
Dec-04
Jan-05
Feb-05
Mar-05
Apr-05
May-05
Jun-05
MMcfe/d
16
18. Stabilizing E&P
$ Millions
Operations fund base capital
$2,000 $1,800
75
45 140
$1,600
$1,324
180
$1,282
$1,200
Acquisition
$749 $1,100
$800 63 1,360 1,324
88 1,282
143
$400 224
231
$0
2
Capex 1 EBITDA Capex EBITDA
2004 2005
Onshore GOM TGC Int'l Other
1Cash basis less discontinued ops less cash received from UnoPaso acquisition
21H05 annualized
18
19. Stabilizing E&P
R/P has lengthened…
Year-end Year-end Year-end
reserves: reserves: reserves:
2,520 Bcfe 2,184 Bcfe 2,706 Bcfe
Pro Forma 2004E 1
2003 2004
Full-year Full-year Full-year
production: production: production:
410 Bcfe 303 Bcfe 369 Bcfe
R/P Ratio: 6.1 7.2 7.4
…and should lengthen further as Onshore assets are developed
1ProForma represents 2005 acquired reserves at time of purchase plus production from 1/1/05 to
purchase date; production is full year 2004
19
20. Governance Update
Continued Board evolution
►
8 of 12 new since January 2003
►
7 of 8 have significant upstream experience
►
2 of 8 qualify as financial experts
►
Guidelines exemplify good corporate governance
►
– No staggered board
– No pill
– 11 of 12 board members are independent
– Separate Chairman and CEO positions
20
21. Summary
Will build upon recent success
►
2005 measured by:
►
– Positioning company to generate meaningful
free cash flow
– Completing turnaround of production
business
– Meeting $15 billion net debt target
– Achieving further cost reduction
21
23. Asset Sales
Completed Incremental Non-recourse
($ Millions) 1/1/05 to 3/15/05 Asset Sales Debt
Cedar Brakes I & II $ 94 $575
Enterprise investment 425 –
S. Louisiana processing plants 75 –
Other 56 –
$650 $575
Field Services (pending) $ 500
Korean power plant 284
Lakeside telecom facility 140
Asian power plants (pending) 109
Chinese power plant (pending) 71
Montreal paraxylene plant 74
London power plant 47
Turbine sales 16
$ 1,240
Remaining Incremental Assets:
► Domestic merchant plants ► Asian power plant
► Midland Cogeneration interest ► Central American power plants
► Mohawk River Funding II ► Midstream plant
Incremental $1.2 billion to $1.6 billion expected proceeds in 2005/2006
23
24. Mark Leland
Chief Financial Officer
El Paso Update
August 11, 2005
the place to work
the neighbor to have
the company to own
