USA: El Paso Corporation Provides Outlook for 2011, On Track for 2012 Goals

El Paso Corporation today announced its financial and operational outlook for 2011.

2011 Financial Highlights

— $0.90 – $1.05 Adjusted Earnings Per Diluted Share (EPS)

— $3.3 – $3.5 billion Adjusted Segment Earnings Before Interest, Taxes and Depreciation, Depletion and Amortization (EBITDA)

— $2.2 – $2.4 billion Adjusted Segment Earnings Before Interest and Taxes (EBIT)

— $2.1 – $2.3 billion cash flow from operations

— $3.2 billion capital program

— $1.7 billion — Pipeline Group (includes 100 percent of the Ruby Pipeline Project)

— $1.3 billion — Exploration and Production (E&P)

— $0.2 billion — Midstream and Corporate

Note: Adjusted EPS, Adjusted Segment EBIT and Adjusted Segment EBITDA exclude mark-to-market impacts from financial derivatives and include cash settlement proceeds of E&P financial derivatives based on guidance assumption prices. Adjusted Segment EBIT and Adjusted Segment EBITDA differ from our prior segment profit measures and are defined below under Disclosure of Non-GAAP Financial Measures.

“El Paso’s execution was outstanding in 2010, and our achievements pave the way for further progress in 2011 and beyond,” said Doug Foshee, chairman, president and chief executive officer of El Paso Corporation. “This year we will complete five major pipeline and LNG projects, advance our Eagle Ford and Wolfcamp shale oil programs and continue our balance sheet improvement, primarily through our MLP drop down strategy. Our progress will continue in 2012 when we expect to generate significant free cash flow, regain an investment grade profile, and deliver double-digit earnings growth.”

2011 Guidance Assumptions The 2011 financial highlights above assume commodity prices of $4.25 per MMBtu for natural gas (Henry Hub) and $85.00 per barrel for oil (WTI). El Paso will continue its MLP drop-down strategy, selling assets to El Paso Pipeline Partners, L.P. as capital markets funding permits. Guidance for 2011 assumes two to three drop-down transactions, the proceeds of which will be used primarily for debt reduction.

Business Plan Highlights

Pipelines During 2011, El Paso’s Pipeline Group will complete the balance of its original $8 billion expansion project backlog with the expectation of being within 5 percent of original budget. Projects to go into service during 2011 include the Ruby Pipeline, FGT Phase VIII, TGP 300 Line, Gulf LNG and the second phase of SNG’s South System III expansion. Adjusted Segment EBITDA is expected to be approximately $2.2 billion to $2.3 billion, with a $1.7 billion capital budget. Approximately $1.3 billion of the capital budget is allocated to growth projects with $0.4 billion for pipeline integrity and maintenance capital. Construction on El Paso’s Ruby Pipeline project continues and is on track with previous guidance provided in November 2010. The remainder of the backlog of committed pipeline and LNG projects remains on time and on budget.

Midstream

El Paso’s Midstream Group capital budget is expected to be approximately $100 million, net to El Paso, in 2011 and will be directed primarily at expansions of its Altamont and Eagle Ford assets, both of which support El Paso’s E&P activities as well as third-party volumes. Negotiations continue with prospective customers for the Marcellus Ethane Pipeline and the Camino Real Pipeline projects.

Exploration and Production

El Paso Exploration & Production’s 2011 activities will focus on its four core programs — Eagle Ford (oil), Haynesville, Altamont and Wolfcamp. The 2011 capital budget will be in line with 2010 levels at approximately $1.3 billion, 90 to 95 percent of which will be allocated to domestic programs. More than half of domestic capital will be allocated to oil programs. The remainder of domestic capital will be focused primarily on the Haynesville shale program, which provides solid returns in a sub-$4.00 per Mcf Henry Hub natural gas price environment. El Paso retains the flexibility throughout 2011 to shift capital between the Haynesville and its oil programs as oil and natural gas prices dictate. Adjusted Segment EBITDA is expected to be approximately $1.1 billion to $1.2 billion. The company is evaluating partnership opportunities for the development of the oil portion of its Eagle Ford shale program.

Total production is forecasted to increase by up to 7 percent above 2010 levels to an average of 790 – 840 million cubic feet equivalent per day in 2011. Oil production is expected to grow by 30 to 40 percent from 2010 levels to 17,000 to 18,000 barrels per day. Per-unit cash costs and DD&A rates are expected to be $1.70 – $1.90 per Mcfe and $1.90 – $2.10 per Mcfe, respectively.

Commodity Price Sensitivities

El Paso has significant commodity price protection in 2011 with an estimated 75 percent of domestic natural gas production hedged at $5.95 per MMBtu. In addition, approximately 85 percent of oil production is hedged at approximately $86 – $92 per barrel. A one dollar change in the average annual NYMEX price of natural gas would impact 2011 Adjusted Segment EBITDA and Adjusted EPS by approximately $40 million and $0.04 per share, respectively. A $10 increase in the WTI price for oil would raise 2011 Adjusted Segment EBITDA and Adjusted EPS by approximately $40 million and $0.04 per share, respectively, while a $10 decrease would reduce 2011 Adjusted Segment EBITDA and Adjusted EPS by approximately $5 million and less than $0.01 per share, respectively.

Financing Requirements

Total liquidity at December 31, 2010 was approximately $2.4 billion, excluding cash and credit facility capacity at the MLP and Ruby. Current liquidity and operating cash flow are expected to be sufficient to fund the 2011 capital plan. El Paso plans to continue its MLP drop-down strategy in order to accelerate its balance sheet improvement.

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Source: El Paso Corporation, January 27, 2011;

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