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El Paso Pipeline Partners L.P. Reports Operating Results (10-K)

February 27, 2012 | About:

El Paso Pipeline Partners L.P. (EPB) filed Annual Report for the period ended 2011-12-31.

El Paso Piplin has a market cap of $7.82 billion; its shares were traded at around $38.01 with a P/E ratio of 18.72 and P/S ratio of 5.82. The dividend yield of El Paso Piplin stocks is 5.26%.

Highlight of Business Operations:

Transportation Revenues and Expenses. During 2011, we experienced an $18 million decrease in reservation revenue primarily driven by nonrenewal of expiring contracts on CIG, WIC and SNG and increased competition in the Rockies region. We also experienced lower usage and interruptible revenues of $8 million when compared to 2010 primarily due to record cold weather conditions in the southeast U.S. during the first quarter of 2010.

During 2010, our SNG system experienced higher revenues of $54 million when compared to 2009 as a result of higher tariff rates which became effective September 1, 2009 pursuant to its rate case settlement as discussed in Other Regulatory Matters below. Additionally, our revenues increased during 2010 when compared to 2009 due to higher reservation revenue of $16 million on WICs mainline system which was offset by $16 million in higher expenses as a result of increased third party capacity commitments. During 2009, our EBIT was negatively impacted by a $4 million transportation contract buy-out cost on CIG and an $8 million decrease in usage revenues on CIG and WIC.

Operational Gas, Revaluations and Processing Revenues. During 2011, we experienced $3 million unfavorable gas balance revaluations on our SNG system due to lower prices and higher retained volumes in 2011 when compared to 2010. During 2010, we experienced $9 million favorable gas balance revaluations on CIG and WIC when compared to 2009. We also benefited from the implementation of SNGs fuel volumetric tracker by $5 million in 2010 as part of SNGs rate case settlement which was offset by a $7 million unfavorable impact due to the elimination of SNGs fuel sharing mechanism. During 2009, WIC recorded a $10 million unfavorable fuel tracker adjustment which was partially offset by CIGs $7 million favorable fuel tracker adjustment pursuant to the 2009 FERC orders. On July 31, 2009 and October 1, 2009, the FERC issued orders to CIG and WIC, respectively, which retroactively unwound the non-volumetric provisions of the fuel and gas cost recovery mechanisms, which exposes us to both positive and negative fluctuations in gas prices related to gas balance items. The price volatility impacts our earnings on the CIG, WIC and SNG systems through the monthly non-cash revaluation of our gas balances. We continue to seek options with the FERC and shippers to minimize the price volatility associated with these operational activities.

In addition, our processing revenue at CIG is largely offset by expenses associated with the gas consumed in processing the liquids. CIG experienced $5 million lower processing revenues in 2011 compared to 2010 due to decreased demand partially offset by favorable prices of natural gas liquids. This decrease was largely offset by lower gas processing expenses in 2011 due to lower gas prices. CIG experienced $8 million higher processing revenues in 2010 compared to 2009 due to increased demand and favorable prices of natural gas liquids partially offset by $7 million higher gas processing expenses as a result of unfavorable gas prices.

For the year ended December 31, 2011, we generated cash flow from operations of $748 million compared to $672 million in the same period in 2010. Our operating cash flow in 2011 increased as compared to 2010 primarily due to higher revenue from our WIC System Expansion, Raton 2010 Expansion, Elba III Phase A Expansion and Elba Express pipeline which were placed in service in 2010. Phases I and II of the South System III expansion project, which were placed in service in 2011 also contributed to the increase. Those increases were partially offset by lower transportation revenue driven by nonrenewal of expiring contracts in both the southeast U.S. and Rockies regions and increased competition in the Rockies. In addition, higher operating, general and administrative expenses driven by increased contractor and material costs from field repairs and higher payroll and benefit costs also offset the cash flow from expansion projects placed in service. Our 2010 operating cash flows were burdened primarily due to SLNGs conversion into a limited liability company and the related pre-acquisition settlement of its current and deferred tax balances. During 2011 we received $968 million in net proceeds from the issuance of additional common and general partner units, $789 million of net proceeds from SNGs and EPPOCs debt offerings and approximately $1.0 billion in borrowings under our new revolving credit facility. In addition, El Paso contributed $30 million to us to fund their share of expansion capital expenditures for SNG and CIG.

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