UPDATE 1-El Paso sees cash flow signficantly above forecast

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HOUSTON, May 15 (Reuters) - El Paso Corp (EP.N: Quote, Profile, Research, Stock Buzz), a natural gas producer and pipeline company, said on Thursday its 2008 cash flow will top its prior forecast if energy prices remain high.

El Paso's board of directors also approved $300 million share buyback and raised its annual dividend 25 percent. The dividend will be paid in the 2008 fourth quarter.

Shares of the Houston company's stock rose to the highest level in nearly six years after the news.

Exploration and production companies have seen corporate coffers swell in recent months as natural gas and crude oil prices soar.

For example so far this year, natural gas futures traded on the New York Mercantile Exchange have risen about 45 percent.

"We're on track for an outstanding year in 2008, and if current commodity prices hold, we expect to generate significantly more cash flow than our original 2008 guidance," Doug Foshee, president and chief executive officer of El Paso, said in a statement.

Previously, the Houston company forecast 2008 cash flow before taxes of $300 million to $400 million, a company spokesman said.

Shares of El Paso climbed 1.5 percent, or 33 cents, to $19.98 on the New York Stock Exchange. So far this year, the stock is up nearly 16 percent, underperforming the American Stock Exchange index of natural gas companies .XNG. That index is up 24 percent. (Reporting by Anna Driver in Houston; Editing by Derek Caney)