El Paso ( EP) is trying out a new strategy.

The company, attacked for concealing too much information in the past, is exposing more of its problem areas. And the new disclosures aren't exactly flattering.

In an unusually blunt address to analysts Tuesday, El Paso shared some ugly details about its merchant energy division, its enormous debt load and its earnings outlook going forward. The company admitted that energy trading has hurt its bottom line more than expected, that its debt burden is roughly twice what it should be, and that promises for a break-even year will probably be broken.

The market -- clearly hungry for a frank update from the company -- showed it could stomach the news. El Paso shares, which tumbled nearly 6% to $7.21 ahead of Tuesday's earnings call, pushed into green territory after the call ended. The stock ended down 16 cents at $7.50.

Prudential analyst Carol Coale, who has remained surprisingly bullish on El Paso through its many missteps, was quick to compliment the company.

"You had a very thorough call," Coale said. "It looks like a better-than-expected quarter."

Now Back to Earth

In reality, the company actually fell a nickel short -- or 14% -- of delivering expected operating profits of 29 cents a share. It also scaled back its full-year earnings guidance from $1 to the 87 cents Wall Street was already expecting. It blamed the downward revision on unexpectedly high trading losses, which could threaten even its newly lowered guidance.

Overall, El Paso expects to wind up with a net loss for the year. The company, which projected a break-even year just six weeks ago, said it now plans to sell additional "noncore" assets -- including a refinery in Aruba and a telecommunications network in its home state of Texas -- that will trigger big impairment charges and push full-year results into the red. The company said it must take aggressive steps now if it hopes to bring its onerous debt load, totaling more than $25 billion, under control.

"There will be some balance sheet and earnings pain," CFO Dwight Scott said. But "we are dealing with all the things we told you we would deal with."

Stripped of its investment-grade credit rating and saddled with high interest costs, El Paso pledged Tuesday to pay down $7.5 billion worth of debt by the end of next year. But some analysts consider even that reduction inadequate. And the company itself acknowledged Tuesday that the analysts are probably right.

The future debt target is "still higher than we believe it should be," El Paso said on the call. "We think the right number is $14 billion."

Ultimately, analysts believe El Paso must slash spending in order to get its balance sheet -- and its shattered credit -- back into shape. El Paso has promised to make sweeping cuts, totaling $450 million, by the end of next year.

It stands to save millions on executive paychecks alone. Just months after firing embattled CEO William Wise -- one of the best-paid executives in the industry -- El Paso followed up Tuesday by terminating Brent Austin, the company's president and operating chief, along with two other senior executives. Following the latest cuts, El Paso's senior executive staff has dwindled by nearly half.

"They are outstanding people," CEO Ronald Kuehn said of the departing executives. "This action is certainly not a reflection on them. We simply have to reduce costs -- and we will. ... We're starting at the top."

Heating Up

El Paso began accelerating its cutbacks, sacrificing its old CEO first, after powerful shareholders Selim Zilkha and Oscar Wyatt launched a heated proxy fight earlier this year. If the dissidents prevail at next month's shareholder meeting, Kuehn himself will become the first person to follow other fired executives out the door.

In the meantime, at least one ousted El Paso executive has reportedly gained new access to the company. According to a new report published by SNL Financial, El Paso's former trading president Ralph Eads is now serving as a senior adviser to the firm guiding El Paso's restructuring efforts. The report goes on to quote a New York banker who expressed concern about the arrangement.

This "is a tremendous conflict of interest," the banker told SNL Daily Energywatch. "It's like giving Andrew Fastow a contract to help turn Enron around."

Eads, now blamed by some for El Paso's disastrous foray into trading, collected nearly $2 million during the last full year on his old job at El Paso.

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