<PAGE> 1
================================================================================
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: March 15, 1999
(Date of earliest event reported: March 13, 1999)
EL PASO ENERGY CORPORATION
(Exact name of registrant as specified in the charter)
Delaware 1-14365 76-0568816
(State of other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
El Paso Energy Building
1001 Louisiana Street
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 420-2131
================================================================================
<PAGE> 2
ITEM 5. Other Events
On March 13, 1999, El Paso Energy Corporation ("EPEC") and Sonat Inc.
("Sonat") entered into a definitive merger agreement providing for the
merger of Sonat into EPEC. The total value of the transaction is
approximately $6 billion, including approximately $2 billion of
assumed Sonat debt and will be accounted for as a pooling of
interests. In the merger, each Sonat share will be converted into one
share of EPEC common stock. It is expected that the merger will be
completed during the third or fourth quarter of 1999. The total
enterprise value of the combined company, based on EPEC's closing
price on March 12, 1999, would exceed $14 billion.
The combined company will retain the El Paso Energy Corporation name
and be headquartered in Houston, Texas. Sonat is currently
headquartered in Birmingham, Alabama and the headquarters of Sonat's
interstate pipeline, Southern Natural Gas Company, will remain in
Birmingham. William A. Wise, the current chairman, president and chief
executive officer of EPEC, will continue as president and chief
executive officer of the combined company. Ronald L. Kuehn, Jr., who
is currently the chairman, president, and chief executive officer of
Sonat, will become the non-executive chairman of the board for the
combined company. The Board of Directors for the combined company will
consist of 15 directors--nine of whom will be designated by EPEC and
six of whom will be designated by Sonat.
-2-
<PAGE> 3
A copy of the press release further describing the transaction is
attached hereto as Exhibit 99.1 and is incorporated herein by reference.
A copy of the analyst presentation given on March 15, 1999, is attached
hereto as Exhibit 99.2 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
c) Exhibits:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
99.1 Press release dated March 15, 1999
99.2 Analyst presentation given March 15, 1999
</TABLE>
-3-
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EL PASO ENERGY CORPORATION
By: /s/ Jeffrey I. Beason
-----------------------------
Jeffrey I. Beason
Vice President and Controller
Date: March 15, 1999
-4-
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
99.1 Press release dated March 15, 1999
99.2 Analyst presentation given March 15, 1999
</TABLE>
<PAGE> 1
EXHIBIT 99.1
[EL PASO ENERGY LETTERHEAD]
FOR IMMEDIATE RELEASE
EL PASO ENERGY CORPORATION AND SONAT INC.
ANNOUNCE MERGER AGREEMENT
HOUSTON, TEXAS, MARCH 15, 1999--EL Paso Energy Corporation (NYSE:EPG)
and Sonat Inc. (NYSE:SNT) announced today the execution of definitive agreements
for the merger of El Paso Energy and Sonat. The total value of the transaction
is approximately $6 billion, including $2 billion of assumed Sonat debt, In the
merger, each Sonat share will be converted into one share of El Paso Energy
common stock. It is expected that the merger will be completed during the third
or fourth quarter of 1999. The total enterprise value of the combined company,
based on El Paso's closing price on Friday, would exceed $14 billion.
"The merger between El Paso and Sonat will create the preeminent
natural gas company in North America. The combined company will rank among the
leaders in all key sectors of our industry including interstate transmission,
intrastate transmission, gas gathering and processing, energy marketing and
power development," said William A. Wise, chairman, president and chief
executive officer of El Paso Energy. "Our combined interstate transmission
systems alone will consist of an impressive 40,000 miles of pipeline reaching
all the major growth areas in the country and moving more gas than any other
U.S. company--nearly a quarter of all the natural gas transported in the U.S.
every day.
"Both El Paso and Sonat are dynamic organizations that complement each
other operationally and geographically. Our merged interstate pipeline systems
will stretch from Bakersfield to Birmingham and Brownsville to Boston. They will
tap the most prolific supply basins in North America and access the largest and
fastest growing natural gas markets in the United States, including Florida and
other key southeastern states. New gas-fueled
more
<PAGE> 2
EL PASO ENERGY AND SONAT
ANNOUNCE MERGER AGREEMENT
PAGE 2
power generation development is particularly active in these areas. Our ability
to access these new markets will further diversify our market base and allow us
to employ our combined expertise in energy marketing and power generation.
"The transaction will also provide exciting opportunities for our El
Paso Field Services business unit. Sonat Exploration has a substantial oil and
gas exploration and production base that spans the southern United States from
Texas to Alabama, including an important presence in the Gulf of Mexico. Our
onshore gathering and processing facilities and Leviathan Gas Pipeline's
offshore gathering operations will provide Sonat Exploration's existing 1.6
trillion cubic feet of natural gas equivalent reserves access to burgeoning
power generation markets and the best interstate pipeline network in the U.S.
"This merger is consistent with our ongoing strategy of maintaining
future growth through seeking significant acquisitions and mergers within our
industry. Three years ago we purchased Tenneco Energy in what has come to be
regarded as the most successful merger within the pipeline industry. We expect
to realize similar benefits from the combination with Sonat. The merger will be
earnings and cash flow accretive in the year 2000, the first full year of
operations, and beyond," Mr. Wise added.
Ronald L. Kuehn, Jr., chairman, president and chief executive officer
of Sonat said, "This is clearly an excellent transaction for our shareholders
and customers. We are creating a company with exceptional natural gas and
electric opportunities across the United States and literally around the world."
The combined company will retain the El Paso Energy name and be
headquartered in Houston, Texas. Sonat is currently headquartered in Birmingham,
Alabama, and the headquarters of Sonat's interstate pipeline, Southern Natural
Gas Company, will remain in Birmingham. William A. Wise, the current chairman,
president and chief executive officer of El Paso Energy, will continue as
president and chief executive officer of the new company. Ronald L. Kuehn, Jr.,
who is currently the chairman, president, and chief executive officer of Sonat,
will become the non-executive chairman of the board for the combined company
until December 31, 2000. The Board of Directors for the combined company will
consist of
more
<PAGE> 3
EL PASO ENERGY AND SONAT
ANNOUNCE MERGER AGREEMENT
PAGE 3
15 directors--nine who will be designated by El Paso and six who will be
designated by Sonat.
The merger is subject to customary conditions, including approval by
the stockholders of Sonat and receipt of certain required governmental
approvals. In order to provide Sonat stockholders greater certainty that the
transaction will be completed, El Paso Energy has agreed that if El Paso
stockholder approval for the common issuance were not obtained, El Paso would
issue 19.9 percent of its outstanding common stock as merger consideration, with
the balance of the merger consideration paid in the form of non-convertible,
long-term preferred stock.
The merger agreement includes customary non-solicitation, termination
fee and expense reimbursement provisions. In addition, each of the companies has
granted the other an option to purchase up to 19.9 percent of its outstanding
common stock, exercisable if the merger is terminated under certain
circumstances. Members of the Zilkha family, who own approximately 21 percent of
the outstanding Sonat shares, have agreed to vote their shares in favor of the
merger.
Donaldson, Lufkin and Jenrette Securities Corporation is acting as El
Paso's financial advisor for the transaction, while Merrill Lynch Corporation is
advisor to Sonat. The law firm of Fried, Frank, Harris, Shriver & Jacobson is El
Paso's legal advisor, and Sonat is represented by the law firm of Wachtel,
Lipton, Rosen & Katz.
With over $10 billion in assets, El Paso Energy Corporation provides
energy solutions through five business units: Tennessee Gas Pipeline Company, El
Paso Natural Gas Company, El Paso Field Services Company, El Paso Energy
Marketing Company, and El Paso Energy International Company. The company owns
the nation's only integrated coast-to-coast natural gas pipeline system and has
operations in natural gas transmission, gas gathering and processing, energy
marketing, power generation and international energy infrastructure development.
Visit El Paso Energy's web site at www.epenergy.com.
more
<PAGE> 4
EL PASO ENERGY AND SONAT
ANNOUNCE MERGER AGREEMENT
PAGE 4
Sonat Inc., headquartered in Birmingham, is a diversified energy
company engaged in exploration and production of oil and natural gas, interstate
transmission of natural gas, and energy services. Visit Sonat's web site at
www.sonat.com.
FORWARD-LOOKING STATEMENT
This release includes forward-looking statements and projections, made
in reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The companies have made every reasonable effort to ensure
that the information and assumptions on which these statements and projections
are based are current, reasonable, and complete. However, a variety of factors
could cause actual results to differ materially from the projections,
anticipated results or other expectations expressed in this release, including,
without limitation, oil and gas prices; general economic and weather conditions
in geographic regions or markets served by El Paso and Sonat and their
affiliates, or where operations of the companies and their affiliates are
located; inability to realize anticipated synergies on an efficient basis;
difficulty in integration of operations; and competition. While the companies
make these statements and projections in good faith, neither company nor their
managements can guarantee that the anticipated future results will be achieved.
Reference should be made to the companies' (and their affiliates') Securities
and Exchange Commission filings for additional important factors that may
affect actual results.
# # #
CONTACTS:
EL PASO ENERGY
Media Relations: Paula Delaney (713) 420-6885
Mel Scott (713) 420-3039
Investor Relations: Bridget McEvoy (713) 420-5597
SONAT INC.
Media and Investor Relations: Bruce Connery (205) 325-3898
<PAGE> 5
El Paso Energy Corporation/Sonat Inc. Combined Assets
[MAP OF
EPG transmission
EPG offshore
Sonat transmission
EPG gathering/processing areas
EPG power plants
Sonat storage
Sonat LNG facility
Sonat power plants
Oil and Gas E&P areas
Sonat exploration operations]
<PAGE> 6
El Paso Energy Corporation Merger with Sonat Inc.
Fact Sheet
Combined U.S. Operations: El Paso Energy Corporation and Sonat Inc.
[MAP OF
EPG transmission
EPG offshore
Sonat transmission
EPG gathering/processing areas
EPG power plants
Sonat storage
Sonat LNG facility
Sonat power plants
Oil and Gas E&P areas
Sonat exploration operations]
El Paso Energy Corporation Highlights
o Owns and operates the nation's only integrated coast-to-coast natural gas
pipeline system.
o Employs approximately 3,600 people and is headquartered in Houston, Texas.
o Consists of a holding company--El Paso Energy Corporation--and five
business units that cover key segments of the energy value chain including
operations in natural gas transmission, gas gathering and processing,
energy marketing, power generation, and international energy infrastructure
development:
TENNESSEE GAS PIPELINE: Over 16,400 miles of pipeline transporting natural
gas from Texas, Louisiana and the Gulf of Mexico to the Midwest and eastern
United States.
EL PASO NATURAL GAS: 10,200 miles of pipeline transporting natural gas from
New Mexico, Texas, Oklahoma and Colorado to markets in the Southwestern
U.S.
EL PASO FIELD SERVICES COMPANY: Largest gatherer of offshore natural gas
and the second largest natural gas gatherer industry-wide.
EL PASO ENERGY MARKETING COMPANY: Experienced in short- and long-term
market development, risk management and aggregation services. Skilled in
marketing and trading all forms of energy and fuels.
EL PASO ENERGY INTERNATIONAL: Holds interests in assets on five continents,
including approximately 5,000 miles of pipeline and 6,600 megawatts of
power generation.
<PAGE> 7
El Paso Energy Corporation Merger with Sonat Inc.
Sonat Inc. Highlights
- --------------------------------------------------------------------------------
o Offers a complete line of energy services to natural gas transporters,
producers, electric generators and a variety of end-users.
o Owns interest in more than 14,000 miles of natural gas transmission
pipeline.
o Consists of a holding company--Sonat Inc.--for business segments engaged in
interstate transmission, exploration and production of oil and natural gas,
and energy services:
SOUTHERN NATURAL GAS COMPANY: Interests in over 14,000 miles of natural
gas transmission pipeline. Major natural gas transmission pipeline in the
southeast, with customers in seven states. Owns a 50-percent interest in
Florida Gas Transmission Company and a one-third interest in Destin
Pipeline Company, L.L.C.
SONAT EXPLORATION COMPANY: One of the largest independent oil and natural
gas exploration and production companies in the United States. Operations
concentrated in the Southeastern United States. Proved reserves total 1.6
trillion cubic feet of natural gas equivalent.
SONAT MARKETING COMPANY L.P. AND SONAT POWER MARKETING: A national leader
in the power marketing industry, which buys and sells more than 4 billion
cubic feet per day of natural gas as well as wholesale power.
<TABLE>
<CAPTION>
Financial Statistics ($ Millions)
- --------------------------------------------------------------------------------
El Paso Sonat Combined
<S> <C> <C> <C>
1998 Revenues $ 5,782 $ 3,710 $ 9,492
1998 EBITDA 913 683 1,596
1998 Net Income 225 152 377
Total Assets $ 10,068 $ 4,370 $ 14,438
</TABLE>
<TABLE>
<CAPTION>
Comparative Ranking of Combined Company (Bcf/d)
- --------------------------------------------------------------------------------
Interstate Physical Power
Interstate Transportation Gas Marketed Marketed
Miles (Bcf/d) (Bcf/d) (MM MWh)
<S> <C> <C> <C> <C>
El Paso/Sonat 40,600 12.4 6.4 18.8
Enron 32,000 8.6 11.4 163.0
Williams 27,000 9.2 3.2 18.7
El Paso Energy 26,600 9.2 3.3 15.7
Duke Energy 26,000 5.7 7.5 37.0
KN Energy 24,600 6.7 3.5 --
Columbia 18,500 2.3 4.2 --
Coastal 18,000 5.6 3.6 20.4
Sonat 14,000 3.2 3.1 3.1
CNG 7,500 1.1 -- --
</TABLE>
Strategic Benefits of Combination
- --------------------------------------------------------------------------------
o Creates the preeminent natural gas company in North America.
o Adds high growth gas and power markets in Southeast and Florida.
o Achieves size and scope of operations necessary for success in power
industry.
o Offers significant operating synergies.
o Interstate pipelines.
o E&P and midstream, marketing and power.
o Obtains 1.6 Tcfe of natural gas reserves at low point in commodity cycle.
<PAGE> 8
Seven Years of
El Paso Energy Growth
$ and Shares Outstanding in Millions
<TABLE>
<CAPTION>
Post IPO Post Tenneco Pro Forma
3/31/92 3/31/97 Sonat Merger
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Total assets $ 2,081 $ 8,746 $ 14,438
Shares outstanding 74 118 230
Equity market value $ 844 $ 3,337 $ 8,223
Total enterprise value $ 1,481 $ 6,371 $ 14,142
</TABLE>
<PAGE> 9
Stock Price Appreciation
As of March 12, 1999
[CHART]
DJ Pipe: 290%
EPG: 276%
S&P 500: 221%
<PAGE> 1
EXHIBIT 99.2
[EL PASO ENERGY LOGO]
<PAGE> 2
FORWARD-LOOKING STATEMENT
Information in this presentation may contain forward-looking statements or
projections. The Company has made every reasonable effort to ensure that the
information on which these projections are based is current, accurate and
complete. However, a variety of factors could cause actual results to differ
materially from the projections contained in the presentation. While the
Company makes these projections in good faith, neither the Company nor its
management can guarantee that the future results predicted in these projections
will be achieved. Reference should be made to the Company's (and its
affiliates') Securities and Exchange Commission filings for important factors
that may affect actual results.
<PAGE> 3
[EL PASO ENERGY LOGO]
El Paso Energy/Sonat Merger
[GRAPHIC -- MAKING HISTORY -- 70 YEARS]
March 1999
<PAGE> 4
Forward-looking Statement
This presentation includes forward-looking statements and projections, made in
reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The company has made every reasonable effort to ensure that
the information and assumptions on which these statements and projections are
based are current, reasonable, and complete. However, a variety of factors
could cause actual results to differ materially from the projections,
anticipated results or other expectations expressed in this presentation,
including, without limitation, oil and gas prices; general economic and weather
conditions in geographic regions or markets served by El Paso and Sonat and
their affiliates, or where operations of the companies and their affiliates are
located; inability to realize anticipated synergies on an efficient basis;
difficulty in integration of operations, and competition. While the company
makes these statements and projections in good faith, neither the company nor
its management can guarantee that the anticipated future results will be
achieved. Reference should be made to the company's (and its affiliates') and
Sonat Inc.'s (and its affiliates') Securities and Exchange Commission filings
for additional important factors that may affect actual results.
<PAGE> 5
Agenda
o Transaction Overview and Strategic Benefits
o Financial Review
o Operations Review
o Pipelines
o E&P
o Power and Marketing
o Summary
<PAGE> 6
[EL PASO ENERGY LOGO]
Transaction Overview and Strategic Benefits
[GRAPHIC -- MAKING HISTORY -- 70 YEARS]
<PAGE> 7
Transaction Overview
o Stock-for-stock merger
o One-for-one exchange ratio
o Pooling of interests accounting
o Approximately $6 billion value
o $4 billion equity issued
o $2 billion debt assumed
<PAGE> 8
Leading U.S. Natural Gas Asset Base
[MAP OF
EPG transmission
EPG offshore
Sonat transmission]
<PAGE> 9
Leading U.S. Natural Gas Asset Base
[MAP OF
EPG transmission
EPG offshore
Sonat transmission
EPG power plants
Sonat power plants]
<PAGE> 10
Leading U.S. Natural Gas Asset Base
[MAP OF
EPG transmission
EPG offshore
Sonat transmission
EPG gathering/processing
EPG power plants
Sonat storage
Sonat LNG facility
Sonat power plants
Oil and Gas E&P areas
Sonat exploration operations]
<PAGE> 11
Strategic Benefits of Combination
o Creates the preeminent natural gas company in North America
o Adds high growth gas and power markets in Southeast and Florida
o Achieves size and scope of operations necessary for success in power
industry
o Offers significant operating synergies
o Interstate pipelines
o E&P and midstream, marketing and power
o Obtains 1.6 Tcfe of natural gas reserves at low point in commodity cycle
<PAGE> 12
Strategic Linkage with E&P
o Pipelines
o Adds supply sources
o Midstream
o Enhanced gathering and processing opportunities
o Added project opportunities for Leviathan
o Gas marketing
o Equity production for wholesale business
o Complementary geographic fit with existing platform
o Power generation
o Hedges long-term gas needs of power generation
o Expands development opportunities
<PAGE> 13
Relative Size of Combined Company
$ Millions
<TABLE>
<CAPTION>
Equity
1998 Net 1998 Market Enterprise
Income EBITDA Value Value
-------- ------- ------- ----------
<S> <C> <C> <C> <C>
Gas companies:
Enron $ 681 $ 2,385 $ 22,661 $ 34,968
Williams Cos. 331 1,870 14,571 22,132
El Paso/Sonat 377 1,596 8,223 14,142
Coastal 438 1,369 7,232 11,533
Utilities:
Southern Co. 977 3,487 17,799 32,163
Duke Energy 1,230 3,517 21,356 29,027
PG&E 719 3,680 11,861 23,776
Reliant Energy 544 2,239 8,285 16,718
</TABLE>
<PAGE> 14
Ranking of Combined Company
<TABLE>
<CAPTION>
Interstate Interstate Physical Power E&P
Miles of Trans. Gas Marketed Marketed Percentage
Pipeline (Bcf/d) (Bcf/d) (MM MWh) of EBIT
---------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
El Paso/Sonat 40,600 12.4 6.4 18.8 9.9%
Enron 32,000 8.6 11.4 163.0 7.9
Williams 27,000 9.2 3.2 18.7 5.6
El Paso 26,600 9.2 3.3 15.7 --
Duke Energy 26,000 5.7 7.5 37.0 --
KN Energy 24,600 6.7 3.5 -- --
Columbia 18,500 2.3 4.2 -- 6.4
Coastal 18,000 5.6 3.6 20.4 12.4
Sonat 14,000 3.2 3.1 3.1 28.9
CNG 7,500 1.1 -- -- 22.1%
</TABLE>
Source: Gas Daily 3Q98 Ranking and DLJ Research
<PAGE> 15
KEY FINANCIAL IMPACTS
o Accretive to earnings and cash flow per share in 2000 and beyond
o Enhanced growth opportunities
o Pipeline expansions
o Power generation
o Gathering and processing
o Gas and power marketing
o Improved debt coverage ratios and overall balance sheet flexibility
<PAGE> 16
[EL PASO ENERGY LOGO]
Financial Review
[GRAPHIC -- MAKING HISTORY -- 70 YEARS]
<PAGE> 17
Combined Financial Statistics
$ and Shares Outstanding in Millions
<TABLE>
<CAPTION>
Pro Forma
El Paso Sonat Combined
------- ----- ---------
<S> <C> <C> <C>
Total assets $ 10,068 $ 4,370 $ 14,438
1998 EBITDA 913 683 1,596
1998 net income 225 152 377
Total debt 3,364 1,930 5,294
Equity market value* 4,290 3,307 8,223
1998 YE shares outstanding 120 110 230
</TABLE>
*Based on 3/12/99 closing prices of $35.75 for EPG and $30.0625 for SNT
<PAGE> 18
Valuation Metrics:
$6.0 Billion Deal
$ Billions
<TABLE>
<CAPTION>
Implied Valuation
Segment Value Method
- ------- ------- ---------
<S> <C> <C>
Pipelines $ 3.5 20.5x 1999E pipeline earnings
Power, Marketing 0.5 Discounted Cash Flow
& Other
Proved reserves 1.6 $1.00 per Mcfe
Non-proved reserves, 0.4 Market value of seismic/acreage
seismic/acreage and risked reserves
-----
Subtotal E&P $ 2.0
-----
Total $ 6.0
=====
</TABLE>
<PAGE> 19
2000 EBIT Contribution
<TABLE>
<CAPTION>
Before Merger After Merger
- ------------- ------------
<S> <C>
67% Regulated 62% Regulated
33% Non-Regulated 38% Non-Regulated
</TABLE>
<PAGE> 20
Pro Forma
Credit Impact Analysis
<TABLE>
<CAPTION>
Standalone Pro Forma
---------- ---------
<S> <C> <C>
Total Debt/Total Capital 55.2% 58.3%
Total Debt/EBITDA 3.7x 3.3x
EBITDA/Interest 3.4x 4.1x
</TABLE>
<PAGE> 21
Unhedged Commodity Price
Sensitivity Analysis
<TABLE>
<CAPTION>
Standalone Pro Forma
---------- ---------
<S> <C> <C>
EPS change / $.10 Mcf 1.5 cents 7.0 cents
EPS change / $1 Bbl -- 2.3 cents
EPS change / $.01/gal. NGL 1.3 cents 0.7 cents
</TABLE>
<PAGE> 22
[EL PASO ENERGY LOGO]
Operations Review
[GRAPHIC -- MAKING HISTORY -- 70 YEARS]
Pipelines
<PAGE> 23
Sonat Pipeline System
[MAP OF
Southern Natural Gas Co.
Florida Gas Transmission Co. (50%)
Sea Robin Pipeline Co.
South Georgia Natural Gas Co.
Destin Pipeline
Underground Storage
Southern Energy LNG Terminal]
<PAGE> 24
Excellent Gas Supply
and Market Fit
[MAP OF
Midwestern Gas Transmission
Tennessee Gas Pipeline
East Tennessee Natural Gas
Sonat Pipeline System]
<PAGE> 25
Key Attributes
o Growing markets
o Leading position in rapidly growing markets in southeastern U.S.
o Expansion opportunities in existing markets, North Carolina and
Florida
o Strong regulatory position
o Growing rate base
o No major contract expirations until 2002
o Complements existing assets
<PAGE> 26
Expansion Opportunities
[MAP OF
Palmetto Interstate Pipeline
Joint venture with CP&L
200-300 MMcf/dr
S200-250 MM
In-service 2002
North Alabama Expansion
75 MMcf/d
S67 MM
In-service 1999
FGT Phase IV Expansion
Joint venture with Enron
272 MMcf/d
$350 MM
In-service May 2001]
<PAGE> 27
[EL PASO ENERGY LOGO]
Operations Review
[GRAPHIC -- MAKING HISTORY -- 70 YEARS]
E&P
<PAGE> 28
Geographically Diversified
E&P Areas of Operation
[MAP OF
1.6 Tcfe of proved reserves
89% natural gas
80% onshore; 20% offshore
Seven year reserve life
Annual production of approximately 227 Bcf (620 MMcf/d)
Oil and Gas E&P Areas
Sonat Exploration Operations]
<PAGE> 29
PRODUCTION AND RESERVES
BY AREA
<TABLE>
<CAPTION>
1998 EOY 1998 Reserves
Production Reserves Reserve as a % of
(Bcfe) (Bcfe) Life Total
---------- -------- ------- ---------
<S> <C> <C> <C> <C>
North Louisiana/
East Texas 84 614 7.3 38.8%
Anadarko 29 328 11.3 20.7
Gulf of Mexico 82 328 4.0 20.7
Coal Gas 19 197 10.4 12.5
Gulf Coast Onshore 6 20 3.3 1.3
West Texas 7 95 13.5 6.0
--------- -------- ------- ---------
Total 227(1) 1,582(2) 7.0 100%
========= ======== ======= =========
</TABLE>
(1) Excludes 49 Bcfe of production associated with properties sold in 1998.
(2) Does not reflect 19 Bcfe in royalties. Total proved reserves = 1,600 Bcfe.
<PAGE> 30
Enhanced Midstream Opportunities with Gulf of Mexico E&P
[MAP OF
Tejas Power Systems
Leviathan Gas Pipeline
Sea Robin Pipeline
Destin Pipeline
Sonat Producing Properties
Sonat Undeveloped Properties
Sonat 3-D Seismic
1.7 MM net acres/94% undeveloped
6,232 blocks of 3-D seismic]
<PAGE> 31
El Paso E&P Strategy
o Manage for value creation and return, not reserve and production growth
o Strict criteria
o Earnings focus
o Aggressively hedge price risk
o Build synergies with other El Paso segments
<PAGE> 32
[EL PASO ENERGY LOGO]
Operations Review
[GRAPHIC -- MAKING HISTORY -- 70 YEARS]
Power and Marketing
<PAGE> 33
Unique Convergence
Strategy
o Leading presence in highest growth power markets
o Superior access to natural gas supplies
o Pipeline supply
o Equity gas
o Over 4,000 MW of domestic power generation in place
o No slow growth gas or electric distribution assets
o Merger should accelerate growth
<PAGE> 34
Combined Power and
Marketing Operations
[MAP OF
EPG pipelines
EPG power plants
EPG primary liquidity points
Sonat pipelines
Sonat power plants
Sonat primary liquidity points]
<PAGE> 35
Proposed Merchant Plants
1996 to 2002
[MAP OF
Total Generation 64,000 MW
Gas Fired 93%]
<PAGE> 36
NERC Region Coverage
Presence in Nine of Ten NERC Regions
[MAP OF
WSCC
MAPP
SPP
ERCOT
MAIN
ECAR
NPCC
MAAC
SERC
FRCC]
<PAGE> 37
[EL PASO ENERGY LOGO]
Summary
[GRAPHIC -- MAKING HISTORY -- 70 YEARS]
<PAGE> 38
Seven Years of
El Paso Energy Growth
$ and Shares Outstanding in Millions
<TABLE>
<CAPTION>
Post IPO Post Tenneco Pro Forma
3/31/92 3/31/97 Sonat Merger
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total assets $ 2,081 $ 8,746 $ 14,438
Shares outstanding 74 118 230
Equity market value $ 844 $ 3,337 $ 8,223
Total enterprise value $ 1,481 $ 6,371 $ 14,142
</TABLE>
<PAGE> 39
Stock Price Appreciation
As of March 12, 1999
[CHART]
DJ Pipe
290%
EPG
276%
S&P 500
221%
