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El Paso Posts Huge Loss on Charge

A big charge related to the sale of a refinery led El Paso (EP) to post a billion-dollar loss in the second quarter. Its shares sold off on Instinet after the results were released.

The Houston energy company lost $1.19 billion, or $1.99 a share, in the latest quarter, compared with a loss of $45 million, or 8 cents a share, last year. Pro forma to exclude numerous charges and write-downs, the latest-quarter loss was $8 million, or 1 cent a share. Revenue fell to $1.68 billion in the quarter from $1.82 billion a year ago.

Analysts were forecasting pro forma earnings of 13 cents a share, according to Thomson First Call.

The latest quarter included a loss of $916 million, or $1.54 a share, from discontinued operations including a charge of $836 million, or $1.40 a share, to cover the impairment of its petroleum business, primarily related to a decision to sell a refinery in Aruba. The latest quarter also included a charge of $264 million, or 44 cents a share, for the impairment of telecom assets and a legal settlement.

Like many other energy companies El Paso is in the process of extricating itself from the energy trading business. It said that segment continued to post results below expectations in the latest quarter, losing a pro forma $95 million before interest and taxes, compared with $132 million last year. El Paso's merchant energy unit earned $76 million before interest and taxes in the latest quarter, down from $123 million last year.

Among its other business lines, El Paso's pipeline group had second quarter EBIT of $145 million, compared with EBIT of $323 million last year. The latest quarter included $154 million of charges primarily related to a legal settlement.

The company's production unit had second-quarter EBIT of $168 million versus $7 million during the second quarter of 2002. The latest quarter included a $234 million charge associated primarily with Canadian and other international natural gas and oil properties. Second quarter equivalent production declined 25% due largely to sales of proved reserves since early 2002.
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