El Paso cuts staff, sells assets
HOUSTON (AP) – El Paso Corp. is cutting its trading staff by about half, as it seeks to reduce its dealings in the embattled energy trading sector, which has come under intense scrutiny for possible sham trades. The Houston-based company said Wednesday it will increase investment in its core natural gas businesses and sell off other assets. El Paso hopes to cut costs by at least $300 million in the process. But the moves also will sharply cut into earnings.
The company did not say how many jobs would be affected, and officials did not immediately return calls. Reducing trading personnel by about 50 percent, the company said in a prepared statement, would help achieve $150 million in annualized cost savings.
“By limiting our investment in trading and its demand on corporate credit and liquidity, this plan allows El Paso to utilize its strengthened balance sheet and credit profile to take advantage of significant growth opportunities in the natural gas arena,” El Paso Corp. chairman, president and chief executive William A. Wise said.
The company said it will increase capital spending in El Paso Production to $2.3 billion.
The announcement comes amid turmoil in the energy trading sector as federal regulators probe simultaneous power swaps between energy traders that artificially boosted trading volume and, in some cases, added to revenue.
El Paso said it would limit its cash investment in trading activities to $1 billion and divide the segment into three separate divisions.
Another part of the restructuring involves a plan to issue $1.5 billion in stock and the sale of San Juan Basin natural gas gathering assets to El Paso Energy Partners for an estimated $800 million. The partnership produces oil and gas in the Gulf of Mexico and owns interests in pipelines.
The company, as a result of implementing the plans, expects earnings per share of $2.60 to $2.75 per share in 2002, and $2.75 to $2.90 in 2003. The range for both years reflects sensitivities to petroleum and energy trading results. That is down sharply from the $3.30 to $3.45 range issued in January. For 2003, El Paso expects to earn $2.75 to $2.90 a share. Analysts had estimated the company would earn $3.33 a share in 2002 and $3.70 a share in 2003, according to Thomson Financial/First Call.