Natural Gas Firm El Paso Energy Reports 57% Rise in Profit
El Paso Energy Corp., owner of the biggest U.S. network of interstate natural-gas pipelines, said Monday that fourth-quarter profit rose 57% because of higher earnings from energy trading and increased gas sales to California and the Northeast.
Profit from operations climbed to $176 million, or 73 cents a share, from $112 million, or 48 cents, a year earlier, spokeswoman Bridget McEvoy said. The company was expected to earn 67 cents a share, the average estimate of analysts surveyed by First Call/Thomson Financial. Revenue tripled to $7.54 billion from $2.46 billion.
The Houston-based company has used cash brought in from shipping gas to help finance expansion into less regulated businesses such as energy trading. Profit before interest and taxes at El Paso’s merchant energy unit, which handles trading, more than quadrupled to $211 million from $45 million.
“Their merchant energy business, both in gas and electricity, has been growing throughout the country,” said UBS Warburg analyst Ronald Barone, who rates the company a “strong buy.” “They are emerging into a major energy company.”
El Paso expects its merchant unit to make at least $500 million a year in North America, “irrespective of market conditions,” Ralph Eads, executive vice president, said. “We feel good about the prospects of doing better than that.”
The average gas price in California more than quadrupled during the quarter from a year earlier to $12.63 per million British thermal units. Prices rose as high as $53.38 per million BTUs in early December, according to Bloomberg Energy Service statistics.
Shares of El Paso rose 16 cents to close at $63.10 on the New York Stock Exchange. They have doubled in the last year.
El Paso said it is owed about $50 million by California utilities owned by Edison International, PG&E; Corp. and Sempra Energy, not enough to affect earnings.
At a Glance
* AES Corp., which operates several California power plants, said fourth-quarter profit almost doubled because of strong business in the U.S. and Latin America. Net income rose to $221 million, or 46 cents a share, from $112 million, or 26 cents, a year earlier. Sales rose 70% to $1.92 billion.
Arlington, Va.-based AES said its generating and retail electricity operations lost $11 million in California, where record prices are creating high profits for some electricity generators. The loss includes a one-time charge of $17 million in environmental fines.
