El Paso CEO Discusses Q3 2010 Results – Earnings Call Transcript
El Paso Corporation (
)
Q3 2010 Earnings Conference Call
November 3, 2010 10:00 AM ET
Executives
Bruce Connery – VP, Investor and Media Relations
Doug Foshee – Chairman and CEO
J.R. Sult – CFO
Jim Yardley – Chairman, Pipeline Group
Mark Leland – President, Midstream Group
Brent Smolik – President, E&P Company
Analysts
Steve Maresca – Morgan Stanley
Carl Kirst – BMO Capital
Xin Liu – JPMorgan
Jonathan Lefebvre – Wells Fargo
Craig Shere – Tuohy Brothers
Faisel Khan – Citigroup
Holly Stewart – Howard Weil
Kevin Smith – Raymond James
Ted Durbin – Goldman Sachs
Presentation
Operator
Compare to:
Previous Statements by EP
»
El Paso Corporation Q2 2010 Earnings Call Transcript
»
El Paso Corporation Q1 2010 Earnings Call Transcript
»
El Paso Corporation Q4 2009 Earnings Call Transcript
»
El Paso Corp. Q3 2009 Earnings Conference Call
Good morning. My name is Brooke and I will be your conference operator today. At this time, I would like to welcome everyone to the El Paso Corporation third quarter 2010 earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions).
I will now introduce Mr. Bruce Connery, Vice President of Investor and Media Relations.
Thank you. Mr. Connery, you may begin your conference.
Bruce Connery
Good morning. Thank you for joining our call. In just a moment, I will turn the call over to Doug Foshee, Chairman and Chief Executive Officer of El Paso. You’ll hear from four other speakers on our call this morning, J.R. Sult, our CFO; Jim Yardley, Chairman of our Pipeline Group;
Mark Leland, President of our Midstream Group and Brent Smolik, President of our El Paso Exploration and Production Company.
As you know, this morning, we issued our third quarter earnings press release and filed it with the SEC. During this morning’s call, we will be referring to slides that are available in the Investor section of our website at elpaso.com.
Also, on our website, you will find a financial and operational reporting package that includes information that we believe you will find helpful as well as GAAP financial statements and non-GAAP reconciliations. I hope you’ve downloaded this package, so that you will have all relevant financial information available to you.
During this conference call, we will make a number of forward-looking statements and projections. We’ve 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, there are a variety of factors that could cause actual results to differ materially from the statements and projections expressed during this call. You will find those factors listed under the cautionary statement regarding forward-looking statements on slide two of this morning’s presentation as well as in other SEC filings. Please take the time to review them.
We do not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Finally I’d like to ask those of you who will be participating in Q&A to limit yourselves to two questions so that we can give more people an opportunity to ask questions. Thank you for your help on this. I’ll now turn the call over to Doug.
Doug Foshee
Thanks Bruce, and good morning. We have a lot of things to cover on the operational side this morning. So in the interest of time, I’ll keep my opening comments brief. We made substantial progress against our goals this quarter and made several moves designed to position us for long-term success. In the pipes, we’re definitely in execution mode right now with several key projects under construction.
We expect our 2010 in-service projects to come in on-time and substantially under budget like 25% under budget. On Ruby, we’re under construction of making good progress. As Jim will share with you in a minute, our delays getting started mean that we now expect to be over our original budget by 10% to 15%. We never like a project to be over but the fact is we are on this on.
As we told you from the beginning though, we view our backlog as a portfolio and when you look at the entirety of the backlog, much of which is already completed or under construction, we expect to be within 5% or less of our original budget overall. We think that will put us at the ahead of the class in terms of new project execution and Jim will go into more detail on that later.
In E&P, we just continued to hit on all cylinders. Another good quarter operationally with volumes ahead of plan, unit costs trending down as our efforts of continuous improvement payoff and those same efforts in our drilling operations work to offset cost inflation. And in Midstream, Mark and his team continue to make progress both with existing assets that he now has dominion over, as well as with key new projects in the Marcellus and the Eagle Ford that we continue to move closer to the finish line.
In addition to these more tactical things though we made some strategic moves during the quarter that’s serve to increase our competitiveness and better position us for the long-term. First we added a new core area in E&P during the quarter with our substantial acreage acquisition in the emerging Wolfcamp play. This combined with our Eagle Ford position and our consolidated position in Altamont gives substantial increase in drilling inventory and at the same time a substantial increase in inventory with oil exposure.
Second, we added to an already enviable price risk management position during the quarter improving our line on gas in 2011 and 2012 and adding some hedges on oil in 2011, all in favorable prices that adds certainty to our ability to generate the cash flow needed to fund both maintenance and growth capital, even in a poor gas price environment.
And finally, we continue to accelerate our balance sheet improvement during the quarter redeeming a large portion of the five year financing we did at the height of the financial crisis in late 2008, and continuing to grow El Paso Pipeline Partners or MLP. The combination of steps we’ve already taken combined with planed actions between now and the end of the year, mean that we’ll end the year having completely funded our 2011 plans, another key step as we move towards free cash in 2012.
With those comments to set the stage, I’ll turn it over to J.R. to review our financial performance. J.R.?
J.R. Sult
Thanks Doug and good morning. As Doug just mentioned, we did have another good quarter with continued progress towards our long-term goals. During last quarter’s call, I told you that we would not let our foot off the accelerator to our MLP strategy and we haven’t.
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