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El Paso Corp. to scale back its energy trading business

HOUSTON, May 29, 2002 — El Paso Corp. on Wednesday said it would be scaling back its involvement in energy trading, including the elimination of about half its trading staff.

El Paso’s franchise in each segment of the natural gas value chain allows it to distinguish itself from competitors by responding comprehensively and expeditiously to changed market dynamics.

“We are solidifying El Paso’s leading position in the natural gas industry and assuring future earnings growth,” said William A. Wise, chairman, president, and chief executive officer of El Paso Corporation.

The key elements of the strategic repositioning plan announced recently include the following:

Restructuring the Merchant Energy segment.
* Downsize trading and risk management activities.
* Reduce trading personnel by approximately 50%. Achieve $150 million of annualized cost savings.
* Limit working capital investment in trading activities to $1.0 billion.
* Create three separate divisions in Merchant Energy-Power, Petroleum and LNG, and Energy Trading.

Further enhance El Paso’s credit beyond the plan announced in December 2001.
* Issue $1.5 billion of equity securities.
* Sell San Juan Basin natural gas gathering assets to El Paso Energy Partners for an estimated $800 million.
* Reduce company-wide annual operating expenses by at least $300 million (inclusive of Merchant Energy savings).
* Decrease net debt to total capitalization to approximately 49 percent, including the $1.95 billion of guaranteed debt in the Electron and Gemstone financings.

Increase investment in core natural gas assets.
* Increase capital spending in El Paso Production to $2.3 billion to take full advantage of the company’s exceptional portfolio of opportunities.
* Pursue an aggressive LNG strategy as outlined to investors in the company’s first quarter analyst meeting.
* Continue an active infrastructure investment program.
* Reduce non-cash earnings to approximately 5% of 2003 net income.

As a result of implementing this plan, El Paso now expects pro forma earnings per share of $2.60 to $2.75 per share in 2002, and $2.75 to $2.90 in 2003. The range for both years reflects sensitivities to petroleum and energy trading results. The projections are based on projected NYMEX natural gas prices of approximately $4.00 per Mcf for the balance of 2002 and calendar year 2003.

The reduction in pro forma earnings guidance is primarily attributable to lower earnings before interest and taxes (EBIT) from Merchant Energy, which is now expected to be $900 million to $1 billion versus the original projection of $1.5 billion. The reduction is due to a sharp drop in trading and customer origination income due to the planned downsizing of the business and a significant decline in margins at the company’s Aruba refinery. The company expects a severance expense of approximately $70 million after-tax spread over the second and third quarters of 2002.

El Paso Corporation is a provider of natural gas services in North America. The company has core businesses in natural gas production, gathering and processing, and transmission, as well as liquefied natural gas transport and receiving, petroleum logistics, power generation, and merchant energy services.

El Paso Corporation, rich in assets and fully integrated across the natural gas value chain, is committed to developing new supplies and technologies to deliver energy to communities around the world. For more information, visit www.elpaso.com.