El Paso recorded significant achievements during 2010 by meeting most of our measurable goals for the year and, in some cases, exceeding the high-end of our performance ranges. Our performance delivered value to our shareholders with a total shareholder return that was at the top of our industry peer group.
We are well-prepared to continue our progress throughout 2011, when we will put in service most of the balance of the Pipeline growth backlog. In 2010, we continued to grow El Paso Pipeline Partners at an accelerated pace, completing $2.4 billion in drops during the year. The combination of great operating performance and access to capital through the master limited partnership allowed us to finish the year with sufficient liquidity, so we did not need to access capital markets to fund our 2011 capital spending program.
Delivering Strong Operational and Financial Results
Pipeline Group Performance
Our Pipeline Group placed five expansions in service on-time and $100 million under budget, made significant progress on our Ruby Pipeline project, and launched more expansion projects in the Marcellus Shale. The group continued to meet the needs of customers across the country, and rolled out major initiatives in both the field and office to further improve service and efficiency.
Exploration & Production Company Performance
The E&P Company delivered another year of high-end performance in the face of significant headwinds, including challenging natural gas prices and cost increases from service providers. The team successfully managed our capital program, replicated our Haynesville Shale success in the Eagle Ford Shale, established our Wolfcamp program, and ended the year with a larger, more repeatable, and more valuable inventory.
Midstream Performance
We made significant progress advancing our Midstream strategy in 2010. The year culminated with a strategic joint venture with a private equity investor that purchased a 50 percent interest in our Altamont gathering and processing system located in the Uinta Basin of Utah. With this joint venture established, we are focused on growing our Midstream business in a manner consistent with El Paso’s balance sheet goals.
Shared Services Performance
As an integrated Shared Services organization, the groups worked successfully to deliver strong results through cost-effective services and solutions to our internal and external clients and to each other. They effectively supported the business units’ people, technology, business and financial performance, and legal needs; continued our process, system, and balance sheet improvements; and developed strategies to help increase El Paso’s value.
Financial Performance
During 2010, our operations generated a positive operating cash flow of approximately $1.8 billion. After servicing our debt obligations and returning $65 million of capital to shareholders in the form of dividends, we primarily used the remaining cash to invest in projects or opportunities that are expected to preserve and grow our future cash-generating ability. We ended the year with assets of $25.3 billion and liquidity of $2.4 billion, which placed us in a position to fund our capital plan in 2011 without accessing the capital markets.
El Paso Corporation Five-year Stock Performance
This graph reflects the comparative changes in the value of $100 since December 31, 2005, as invested in El Paso’s common stock, the Standard & Poor’s 500 Stock Index, the Standard & Poor’s 500 Oil & Gas Storage & Transportation Index, and our peer group. The peer group8 we used for this comparison is the same group we use to compare total shareholder return relative to our performance for compensation purposes.
2011 and Beyond
In May 2011, El Paso announced that it plans to spin off its E&P Company from El Paso Corporation by year-end 2011. This marks the beginning of an exciting new chapter in El Paso’s history. As we work to transform an outstanding company into two strong, competitive, and enduring industry leaders, we’re confident that each company will build on a solid foundation of performance based on our shared values and our common purpose to provide natural gas and related energy products in a safe, efficient, and dependable manner.
