Reliant Maintains Margin; El Paso Halves Gas Estimate, Williams Thins Losses

Reliant Resources reported a $29 million loss for fourth-quarter 2003 while taking a total loss of $1.43 billion for all of last year. For the same quarter in 2002, the company posted a loss of $176 million. In its February 17 earnings report, Reliant also announced it had cut more than 10 percent of its workforce. The company continues to lose money on wholesale energy, but far less than last year. In this sector, Reliant posted a loss of $44 million, compared to $188 million in the same quarter a year ago. According to the company, its Western assets had a gross margin of $28 million in fourth-quarter 2003. A year earlier, they brought in $49 million during the same quarter. That includes a $19 million increase in reserves for California but also an $18 million hit for Federal Energy Regulatory Commission and Commodity Futures Trading Commission settlements. The company holds more than 2,500 MW in its Coolwater, Mandalay, and Ormond Beach power plants in Southern California. It has shut down plants in Etiwanda primarily because of the cost of retrofitting for pollution controls. Reliant announced this week that it would retire more than 600 MW in the Northeast. Meanwhile, the pipeline company that feeds much of the state?s gas-fired power plants, El Paso Corp., had some bad news for buyers this week. Exhibiting the corporate equivalent of government agencies? grim outlook on natural gas supplies, El Paso said it had recalculated its ?proved reserve? estimates, cutting them in half from last year?from 5.22 tcf equivalent in January 2003 to 2.63 tcf equivalent in December 2003. As a result, El Paso will take a $1 billion charge in fourth-quarter 2003 to account for the drop. The company will ?go back to the drawing board? to move its more uncertain reserves ?back to the ?proved? category,? according to a company executive. El Paso?s production goals included ?reducing declines? and ?regaining credibility.? Although El Paso announced it made a deal to sell its Oil & Gas Canada to BG Group for $346 million, the sale did little in the short term to buoy El Paso stock prices. The transaction, which is expected to close in March, covers all of El Paso?s Canadian assets with the exception of the Caribou natural gas processing plant, firm capacity on the Alliance pipeline system, and interests in Nova Scotia. El Paso will use the proceeds from this transaction to repay debt and for other corporate purposes. The company intends to sell up to $3.9 billion in assets?so far, in holdings outside the U.S.?while continuing growth in its pipeline business in the U.S. and Mexico. Biting into El Paso?s bottom line is a $1.5 billion settlement over alleged pipeline market manipulation with FERC, the California Public Utilities Commission, and the state attorney general. The settlement was finalized earlier this year. On February 19, Williams reported a $66 million loss in the last quarter of 2003, which was significantly smaller than in the previous year. The loss reported for the fourth quarter in 2002 was $219 million, a 44-cent drop in share price. The company also announced an unaudited loss of $504 million for 2003, which was $250 million less than the year before. Williams?s gas business was a strong performer, producing a $1.24 billion segment profit last year, which was on par with 2002 earnings. The profit for fourth-quarter 2003 was $244.4 million, compared to $176.6 million in 2002. Its power business operations produced a profit of $134 million last year, compared to a $624 million loss for 2002. The three companies? financial reports reflect the dismal trend in the energy business, particularly in 2002. Profits at major energy companies across the country in 2002 were the lowest since 1998, according to the federal Energy Information Administration. ?Net income for oil and gas operations was down by more than $4 billion, a 21 percent drop, largely due to the excess supply of natural gas in the United States in the first half of 2002,? the EIA stated February 19. Meanwhile, Mirant expects to file its bankruptcy reorganization plan with the court on February 24. The company filed for protection under Chapter 11 last July.

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Reliant Maintains Margin; El Paso Halves Gas Estimate, Williams Thins Losses

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