HOUSTON (AP) — El Paso Corp. aims to trim operations and cut $7 billion in debt through more asset sales and other cost-cutting measures by the end of 2005, the company announced Monday.
But analysts — who saw few, if any, surprises in a long-range plan focused on natural gas pipelines and exploration and production — remained concerned about the company's burdensome $24 billion in outstanding debt and other long-term financing obligations.
"The long-range plan released today by El Paso has many credit-friendly elements, but considerable risks remain as the company tries to execute the plan," said Standard & Poor's analyst Todd Shipman as the agency lowered the company's already junk corporate credit rating another notch.
If El Paso makes good on its plan its credit profile could improve, but until then a negative outlook will remain, Shipman said.
El Paso shares rose 58 cents, or 8.6 percent, to close at $7.32 on the New York Stock Exchange.
Analysts also said El Paso's biggest immediate hurdle is to improve performance of its exploration and production unit, plagued by depleting production in mature basins and high capital needs. Last month, the company reported a 32 percent drop in production in the third quarter.
"This wasn't a Christmas gift," KDP Investment Advisors Inc. analyst Hope Crifo said of the long-awaited plan. "The company indicated the truth will be in the execution."
The plan announced Monday calls for El Paso to cut its debt to $15 billion primarily by raising up to $3.9 billion from more asset sales. The company began implementing the long-range effort with the simultaneous announcement that El Paso will sell its controlling interest in GulfTerra Energy Partners LP, a natural gas pipeline and processing partnership, to Enterprise Products Partners LP for about $1 billion.
GulfTerra, which earlier this year changed its name from El Paso Energy Partners LP, also announced it will merge with Enterprise, forming the second largest publicly traded master limited partnership behind Kinder Morgan. Enterprise spokesman Randy Burkhalter said Enterprise will pay GulfTerra $3.2 billion and assume $1.7 billion in debt.