UPDATE 3-El Paso 2nd-quarter profit rises; shares move up

Tue Aug 7, 2007 12:28pm EDT

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(Adds analyst comment, changes dateline from NEW YORK, adds comment from conference call)

By Anna Driver

HOUSTON Aug 7 (Reuters) - Natural gas producer and pipeline operator El Paso Corp. EP.N reported an 11 percent increase in second-quarter profit on Tuesday as it boosted its gas output.

The Houston-based company reported a profit of $166 million, or 22 cents per share, compared with $150 million, or 19 cents per share, a year earlier.

Excluding one-time charges and the change in the value of market trading positions, El Paso posted earnings per share of 29 cents, according to Reuters Estimates, topping the 23 cents that analysts, on average, expected the company to earn.

Shares of El Paso climbed 18 cents, or 1.1 percent, to $17.01 on the New York Stock Exchange.

Revenue rose 10 percent to $1.20 billion from $1.09 billion a year ago.

Earnings from the exploration and operations business rose to $235 million from $163 million a year ago as volumes produced rose to 786 million cubic feet equivalent per day from 719 million cfe/day.

Profits from the pipeline group rose to $318 million from $286 million last year.

"In short, we had a very strong second quarter," Doug Foshee, El Paso's chief executive officer, told analysts on a conference call. "Both businesses performed well in the quarter and both are on target to meet our commitments for the year."

Production in the quarter was 857 million cfe/day, an increase of 9 percent over the second quarter a year earlier.

El Paso also received $7.67 per thousand cubic feet of gas during the quarter, up from $6.08 a year ago.

In a note to clients, Pickering Energy Partners said there was "lots to like about the quarter," in particular noting El Paso's production forecast and its plans to divest some exploration and production assets.

El Paso also boosted the low end of its 2007 production forecast to 820 million to 860 million cfe/day. The prior forecast was for 800 million to 860 million cfe/day.

The company also said it plans to divest some properties in the Gulf of Mexico and south Texas areas that are not considered core assets. El Paso said it will market these properties in multiple packages and expects to complete these sales in the first quarter of 2008.

On Monday, El Paso said it is planning to offer $500 million of common units in a master limited partnership (MLP), a larger amount than initially indicated by the company in February.

El Paso is offering a larger amount of units in El Paso Pipeline Partners L.P. to the public after a review of the market and a favorable ruling from a U.S. federal appeals court in May which allows the pipeline company to put more assets into the MLP.

Regarding the financing of the MLP, Foshee assured analysts that the company was not troubled by recent turmoil in credit markets.

"We're very comfortable with our position and our plans with the capital markets as they stand today," he said. (Additional reporting by Matt Daily)

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