lowered its 2002 and 2003 earnings outlook, saying it plans to limit its investment in and exposure to energy trading and cut its trading staff by 50%.
The natural gas services provider said it now expects to see pro forma earnings per share of $2.60 to $2.75 in 2002 and $2.75 to $2.90 in 2003. Analysts polled by Thomson Financial/First Call had been expecting $3.33 in 2002 and $3.70 in 2003.
In a press release, El Paso said its repositioning plan will allow it to concentrate on developing its natural gas reserves, limiting exposure to the volatility of the energy trading market and "assuring future earnings growth." The company plans to restructure its merchant energy segment, reducing personnel by about 50% and limiting working capital investment in trading activities to $1 billion. The restructuring is expected to create annual cost savings of about $150 million.
The company plans to increase its investment in natural gas assets by adding $2.3 billion to its production capital spending and to reduce noncash earnings to about 5% of 2003 net income.
El Paso's plan also calls for an enhancement of its credit position. The company will issue $1.5 billion of new equity securities, sell its San Juan Basin natural gas gathering assets for $800 million, and reduce companywide expenses by at least $300 million.
Shares of El Paso were recently plunging 17% to $29.25 in premarket trading on the news after closing at $35.27 Tuesday.