El Paso Corporation (EP)
Q2 2010 Earnings Conference Call
August 4, 2010 10:00 AM ET
Bruce Connery – Vice President, Investor and Media Relations
Doug Foshee – Chairman and CEO
J.R. Sult – CFO
Jim Yardley – Chairman, Pipeline Group
Brent Smolik – President, E&P Company
Jonathan Lefebvre – Wells Fargo
Xin Liu – JPMorgan
Carl Kirst – BMO
Craig Shere – Tuohy Brother Investors
Kevin Smith – Raymond James
Ella Bjornik – RBC Capital Markets
Faisel Khan – Citigroup
Previous Statements by EP
» 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 second 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 turn the conference over to Mr. Bruce Connery, Vice President of Investor and Media Relations.
Thank you. Mr. Connery, you may begin your conference.
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 three other speakers whose on our call this morning, J.R. Sult, CFO; Jim Yardley, Chairman of our Pipeline Group; and Brent Smolik, President of our E&P Company.
As you know, this morning, we issued our second 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 Investor section of our website elpaso.com.
Also, on our website, you will find a financial and operational reporting package that includes information that we believe will be helpful as well as GAAP financial statements and non-GAAP reconciliations. I hope you’ve downloaded this package, so that you 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 some of our SEC filings. Please take the time to review them.
El Paso does not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Again, thank you for joining our call. And, I’ll now turn the call over to Doug.
Thanks Bruce, and good morning. We’re excited to follow-up a successful first quarter with another very good performance in Q2. We’ve talked a lot about execution since our December 10
Analyst Meeting. And, so far in 2010, we’ve delivered on our execution promises, both operationally and financially.
In the pipes, the projects put in service so far this year, the Elba Expansion and the Elba Express Pipeline were both on time and on budget. And at $900 million in total capital, this is a large part of the backlog that you can now check off as successfully completed.
In a few minutes, Jim will show you that we have more projects to go into service this year, and we think we have a good chance of delivering those projects on time and under budget.
The Ruby Pipeline, our largest single project in our backlog, just reached another milestone, and is now under construction. As important as this step is though, we now start the critical phase of review, the construction of 675 miles of pipe across the Western US. This is a large complex project, one that will employ 5,000 people at its peak, roughly the same number of folks that work at El Paso in total today. So there is no time to take an early victory lap.
We’ll focus now on executing this project safely, on-time, and on budget, and we have the best team of folks on the job; experienced members of team El Paso as well as a cadre of highly skilled contractors.
On Tennessee Gas Pipeline, last week, we announced yet another expansion, to supporting our customers in the Marcellus unconventional shale play. This isn’t a big one, but cumulatively we now have $1.1 billion in growth capital that will leverage our position right in the heart of this important new resource play.
In E&P, we had another very solid quarter. Production has now risen for the last three quarters and the Haynesville continues to lead the way. Unit cash cost were below our first quarter number. And, you’ll recall that, we lowered our cash cost guidance last quarter. We’ve continued to grow our position in the Eagle Ford, adding more inventory, particularly in the liquids rich portion of the play.
Our investment strategy in E&P hasn’t changed at all. E&P is leaving within its means, staying focused on continuous improvements in operations, leading to improvements in unit costs, generating good returns, and continuing to grow our inventory of repeatable low-cost, low-risk growth opportunities for the long term.
On the Midstream front, we continue to evaluate potential projects, particularly in the Eagle Ford and Marcellus. None have reached maturity yet, but we continue to look for projects that we provide synergies with our existing business. Eight projects wouldn’t likely come to service before 2012 and wouldn’t cause us to back away from our free cash target in 2012.