Oil and gas producer El Paso Corp. (EP) on Thursday reported a 59% fall in profit for the second quarter from last year as lower energy commodity prices more than offset an increase in earnings at the company's pipeline business. Adjusted earnings per share for the quarter declined 36%, yet beat analysts' consensus estimate.
Second-Quarter Results
For the second quarter, the Houston, Texas-based company's net income attributable to common stockholders declined to $79 million, or $0.11 per share, from $191 million, or $0.25 per share, in the year-ago quarter.
Adjusted earnings for the latest quarter were $0.25 per share, down from $0.39 per share in the year-ago quarter. On average, ten analysts polled by Thomson Reuters expected the company to report earnings of $0.21 per share for the quarter. Analysts' estimates typically exclude special items.
Operating revenues for the quarter declined 15% to $973 million from $1.15 billion in the prior-year quarter. Analysts had a consensus revenue estimate for the quarter of $1.14 billion.
The company's results were hurt by the drop in natural gas prices during the second quarter. U.S. gas futures in New York averaged $3.81 per million British thermal units in the second quarter, down 67% from the corresponding period last year.
The company's operating income for the quarter was $391 million, down from $421 million in the same period last year. El Paso reported lower production volumes during the quarter due to a sharp drop in drilling activity in response to lower natural gas and oil prices. Production volumes for the quarter averaged 777 million cubic feet equivalent per day, or MMcfe/d, including 74 MMcfe/d of unconsolidated affiliate volumes. The prior-year quarter's production volumes averaged 833 MMcfe/d, including 71 MMcfe/d of unconsolidated affiliate volumes.
The economic crisis has reduced demand for oil and natural gas and has led to burgeoning stockpiles that brought prices down. Crude prices are 50% down year-over-year, while natural gas prices have declined 65%.
Total per-unit cash operating costs for the quarter decreased to an average of $1.68 per Mcfe from $2.01 per Mcfe in the year-ago period, primarily due to lower lease operating expenses and production taxes, partially offset by lower production volumes.
Peer Performance
Tulsa, Oklahoma-based Williams Companies Inc. (WMB) on Thursday reported a 67% drop in second-quarter profit, hurt by lower energy commodity prices that saw a steep decline in profit at its two major segments. For the second quarter, net income attributable to Williams plunged to $142 million, or $0.24 per share, from $437 million, or $0.73 per share, in the same quarter last year.
DCP Midstream Partners LP (DPM) is slated to report its financial results for the second quarter later in the day. Analysts expect the company to report earnings of $0.19 per share for the quarter on revenues of $268.89 million.
Segmental Results
El Paso's Pipeline Group segment's earnings before interest expense and income taxes, or EBIT, for the quarter were $327 million, up 10.8% from $295 million in the year-ago period.
The results for the latest quarter benefited primarily from several expansion projects that went into service throughout 2008 and were also favorably impacted by increased reservation revenues on the El Paso Natural Gas system, new contracts on El Paso's Rocky Mountain region systems and additional capacity sold in different regions of the Tennessee Gas Pipeline system. Revenue for the segment increased to $650 million from $646 million a year ago.
The exploration & production segment's EBIT for the quarter declined to $61 million from $304 million in the year-ago period, primarily due to lower realized commodity prices and lower production volumes, partially offset by lower cash operating costs, mark-to-market gains associated with derivative hedging contracts and lower DD&A expense. Revenue for the segment dropped to $309 million from $655 million in the year-ago period.
The marketing segment reported EBIT of $10 million for the quarter, compared with an EBIT loss of $153 million for the same period last year. The latest quarter's results include a $21 million mark-to-market gain on remaining Pennsylvania-New Jersey-Maryland power contracts, compared with a loss of $105 million in the prior-year period. Additionally, the year-ago period's results include a $52 million mark-to-market loss on production-related derivative contracts intended to economically hedge the company's natural gas and oil production. The segment reported revenues of $15 million for the quarter, compared to negative revenues of $146 million in the same period last year.
The company's power segment reported EBIT loss for the quarter of $21 million, compared with EBIT of $12 million a year ago. The results for the quarter reflect a loss of $22 million on the sale of notes that were received earlier in the year when the company sold its investment in the Porto Velho power facility in Brazil. During the quarter, the company also sold its investment in the Argentina to Chile pipeline for about $32 million. The year-ago quarter's EBIT was primarily due to a gain recognized on the sale of a power plant in Asia.
The company's "Corporate and Other" segment reported EBIT of $31 million for the quarter, down from $41 million in the year-ago period. The decline in EBIT was due to the change in the fair value of a legacy indemnification from the sale of an ammonia facility, offset by changes in legacy litigation adjustments.
Year-To-Date Results
For the first six months of fiscal year 2009, El Paso reported net loss attributable to common stockholders of $899 million, or $1.29 per share, compared to net income attributable to common stockholders of $391 million, or $0.54 per share, in the year-ago period.
Excluding items, adjusted earnings for the six-month period declined to $0.72 per share from $0.74 per share in the same period last year.
Operating revenues for the half year increased to $2.46 billion from $2.42 billion a year ago.
Stock Quotes
In Thursday's regular trading session, EP is trading at $10.07, down $0.10 or 0.98% on a volume of 2.04 million shares. In the past 52 weeks, the stock has been trading in a range of $5.22-$17.67.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.