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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 7, 2004
(Date of Earliest Event Reported: September 30, 2004)
EL PASO CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 1-14365 76-0568816
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
El Paso Building
1001 Louisiana Street
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 420-2600
(Registrant's telephone number, including area code)
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Item 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 2004, we completed the previously announced sale of
our ownership interests in GulfTerra Energy Partners, L.P. ("GulfTerra") and
nine processing plants in South Texas to affiliates of Enterprise Products
Partners, L.P. ("Enterprise"). The sales were completed in connection with the
closing of the merger between GulfTerra and Enterprise. This Current Report on
Form 8-K is being filed to provide the pro-forma financial impacts of the sale
on our historical financial statements for the year ended December 31, 2003. We
will file an additional report on Form 8-K to provide the additional pro-forma
financial information on the sale when we file our Form 10-Q for the six months
ended June 30, 2004.
Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS
b. Unaudited Pro Forma Financial Statements
The accompanying unaudited pro forma financial statements are based on
our historical consolidated financial statements as of and for the year ended
December 31, 2003, adjusted for the effects of the sale of our interests in
GulfTerra and the processing plants described above. The unaudited pro forma
balance sheet as of December 31, 2003, assumes these dispositions occurred on
the balance sheet date. The unaudited pro forma statement of income for the year
ended December 31, 2003, assumes these dispositions occurred on January 1, 2003.
The unaudited pro forma financial statements should be read in conjunction with
the historical consolidated financial statements included in our Annual Report
on Form 10-K for the year ended December 31, 2003 and should not be construed to
be indicative of future results or results that actually would have occurred had
the transactions occurred at the dates presented. In addition, these pro forma
financial statements were prepared in accordance with Article 11 of Regulation
S-X. Accordingly, we have not made any assumptions or adjustments for possible
increases or decreases in distributions by GulfTerra Energy Partners or assumed
any cost savings or synergies that might occur related to these transactions.
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EL PASO CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2003
(In millions)
EL PASO PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
ASSETS
Current assets
Cash and cash equivalents $ 1,429 $ 1,010 (a) $ 2,439
Accounts and notes receivable, net 2,492 2,492
Assets held for sale 1,139 (150)(a) 989
Other 3,862 (3)(a) 3,859
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Total current assets 8,922 857 9,779
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Property, plant and equipment, net 18,594 -- 18,594
Other assets
Investments in unconsolidated affiliates 3,551 65 (a)
(418)(a) 3,198
Other 6,017 (660)(a) 5,357
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Total assets $ 37,084 $ (156) $ 36,928
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LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,055 $ 2,055
Short-term financing obligations, including
current maturities 1,457 1,457
Liabilities related to assets held for sale 236 236
Other 3,326 (3)(a) 3,312
(11)(a)
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Total current liabilities 7,074 (14) 7,060
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Long-term debt 20,275 20,275
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Other liabilities
Deferred income taxes 1,571 147 (a) 1,718
Other 3,243 (79)(a) 3,162
(2)(a)
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4,814 66 4,880
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Commitments and contingencies
Securities of subsidiaries 447 (84)(a) 363
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447 (84) 363
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Stockholders' equity
Common stock 1,917 1,917
Additional paid-in capital 4,576 4,576
Retained earnings (1,785) (124)(a) (1,909)
Other (234) (234)
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Total stockholders' equity 4,474 (124) 4,350
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Total liabilities & stockholders' equity $ 37,084 $ (156) $ 36,928
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EL PASO CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2003
(In millions)
EL PASO PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
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Operating revenues $ 6,711 $ (782)(b) $ 5,929
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Operating expenses
Cost of products and services 1,787 (617)(b) 1,170
Operation and maintenance 2,017 (17)(b) 2,000
Depreciation, depletion and amortization 1,207 (12)(b) 1,195
Ceiling test charges 76 76
Loss on long-lived assets 949 (166)(b) 783
Western Energy Settlement 104 104
Taxes, other than income taxes 296 296
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6,436 (812) 5,624
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Operating income (loss) 275 30 305
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Earnings (losses) from unconsolidated affiliates 363 (378)(b) (15)
Other income, net 1 1
Interest and debt expense (1,787) (1,787)
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Distributions on preferred interests of consolidated
subsidiaries (52) (52)
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Loss before income taxes (1,200) (348) (1,548)
Income taxes 584 122 (c) 706
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Loss from continuing operations $ (616) $ (226) $ (842)
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Basic and diluted loss per common share
from continuing operations $ (1.03) $ (1.41)
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Basic and diluted average common
shares outstanding 597 597
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EL PASO CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
EL PASO HISTORICAL
These amounts represent our condensed historical consolidated balance
sheet and income statement derived from our Annual Report on Form 10-K for the
year ended December 31, 2003.
PRO FORMA ADJUSTMENTS
These amounts represent the historical results and balances related to
certain of our interests in GulfTerra which were accounted for as equity
investments and the nine processing plants sold to Enterprise as of and for the
periods presented. The pro forma adjusting entries reflect the following
transactions:
o The sale of 100 percent of our interest in the general partner of
GulfTerra, which includes the elimination of a minority ownership in
the general partner that arose from the interest previously sold to
Enterprise in December 2003,
o The redemption of our Series B units of GulfTerra which occurred in
October 2003,
o The elimination of all effects of our common units and Series C units
of GulfTerra, with the exception of the amounts related to the units
retained by us, and
o The elimination of all non-affiliated effects of the nine processing
plants sold
PRO FORMA ADJUSTING ENTRIES
(a) To reflect the pro forma effects of the sale of our GulfTerra interests
and South Texas processing assets on our consolidated balance sheet. The
pro forma effects include the following:
(1) Receipt of net proceeds of $1.01 billion from the sale of our
remaining 50 percent interest in the general partner of GulfTerra,
10.9 million Series C units, 2.9 million common units, and nine
processing plants in South Texas. In addition to the cash proceeds,
we received a 9.9 percent interest in the general partner of the
combined organization that has an estimated fair value of $65
million;
(2) Reduction of our net investment in GulfTerra by $418 million;
(3) Elimination of goodwill included in our Field Services segment of
$480 million as a result of the completion of the sale and $180
million of intangible assets associated with the assets sold;
(4) Elimination of a portion of the previously deferred gains on prior
transactions with GulfTerra of $82 million ($79 million of which
was included in non-current liabilities);
(5) Elimination of minority interest of $84 million related to the
previous sale of an effective 50 percent interest in GulfTerra to
Enterprise in December 2003;
(6) Elimination of the carrying value as of December 31, 2003 of the
nine South Texas processing plants which were classified as assets
held for sale of $150 million, $3 million of inventory, and related
liabilities of $13 million, ($11 million of which was part of
current liabilities);
(7) Recording a $124 million net loss associated with the sale
transaction. The amount consists of a $23 million pretax gain on
the sale and income taxes of $147 million related to the gain on
the sale. This amount reflects the non-deductibility of goodwill
eliminated in the sale transaction.
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(b) To reflect the pro forma effects of the sale of our GulfTerra interests
and South Texas processing assets on our consolidated income statement.
The pro forma effects include the following:
(1) Reduction of earnings from unconsolidated affiliates of
approximately $112 million for (i) our general partner interests,
(ii) all Series C units, (iii) all Series B units redeemed by
GulfTerra during 2003, and (iv) the proportional share of income on
GulfTerra common units sold.
(2) Elimination of gains (losses) recorded in earnings from
unconsolidated affiliates during 2003 on sales of our GulfTerra
interests, including:
(i) the net gain on the sale of an effective 50% general
partner interest to Enterprise in the fourth quarter of
2003 of $269 million,
(ii) an $8 million realized gain related to our sale in 2003
of GulfTerra common units, and
(iii) an $11 million realized loss on GulfTerra's redemption
of our Series B units.
(3) Adjustment for the historical results of operations for our South
Texas Processing Plants, including a $166 million impairment charge
recorded during 2003 on these assets
(c) To reflect income taxes related to income statement adjustments at a
statutory tax rate of 35 percent.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EL PASO CORPORATION
By: /s/ JEFFREY I. BEASON
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Jeffrey I. Beason
Senior Vice President and Controller
(Principal Accounting Officer)
Date: October 7, 2004
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