For more than 80 years, El Paso has been a leader in the energy industry, and we are well-positioned for the next 80 years and beyond. In this fourth edition of Building a Legacy, we take a deeper look into our efforts to meet the expectations of our stakeholders and ensure long-term sustainability across our operations.
The sustainability conversation at El Paso centers on natural gas, the commodity at the heart of our business. Natural gas provides long-term economic, environmental, and energy security solutions for many of the challenges that are facing our nation, making it an ideal, sustainable fuel for our future. Long term, the outlook for natural gas is strong, with a projected 21 percent growth in natural gas demand for North America from 2010 to 2020.
As one of the cleanest burning sources of energy, it will be crucial to serving the growing power generation and transportation needs of our country. And, the development of shale plays throughout the United States has dramatically changed our industry, providing the country long-term, domestic supplies at reasonable prices for future generations.
El Paso’s focus on financial and operational sustainability has positioned each of our businesses to be successful for the long term, while resulting in:
We recently made one of the most important announcements in our history when we communicated plans to spin off our E&P company from El Paso Corporation by year-end 2011. The separation will result in two separate and independent publicly traded companies — El Paso Corporation, which will consist of our Pipeline Group, Midstream Group, and our interest in El Paso Pipeline Partners; and the E&P spinoff company. The separation will provide greater management focus on distinct business strategies, greater flexibility to grow the two businesses, and independent capital structures and credit profiles, which will help fuel that growth. With the completion of what was an $8 billion pipeline backlog, the elevation of our E&P business to one of the top independent producers, outstanding leadership and employees in each of our businesses, and the accelerated improvement of our balance sheet, we are ready to take this important step. - Superior returns to our investors, outstanding service to our customers, jobs to our employees, and sustained contributions to the economic and social development of the communities in which we operate.
- Full-year 2010 financial results at the high-end of our targeted range and a share price that performed at the top of our peer group. El Paso finished fourth against a peer group of 20, placing us in the 87th percentile, and finished 99th in the Fortune 500, outperforming 80 percent of the listed public companies.
- Continued growth of the largest interstate pipeline network in the United States, including nearing the completion of our $8 billion backlog of expansion projects; successful execution in our E&P business, with a significant increase in our inventory of oil and gas reserves; and re-entered the midstream business, where we see significant gathering and processing opportunities with the emergence of new shale plays in the United States.
While sustainability will be an important part of each company’s future, we’re very proud of the strides we made over the past year to address key sustainability issues across our current businesses and drive toward the next generation. Highlights included:
- Steps to ensure the reliability and integrity of our pipeline system for the next 80 years and beyond. As we near the completion of our 10-year pipeline integrity program in which we will have invested more than $1.2 billion, we are already looking to future programs to protect the integrity of our assets and the safety of our employees and the communities in which we are located. We are focused on establishing our key priorities and initiatives for the next decade. In 2010, we created a new senior position in our organization to lead our various pipeline safety and integrity initiatives. We named Dan Martin to lead this effort within the organization. Dan brings 32 years of operations experience with El Paso to this role. He led our Pipeline Operations organization for 10 years and is highly respected among both regulators and industry peers, most recently serving as chairman of the Interstate Natural Gas Association’s Foundation, a nonprofit organization formed in 1990 to advance the use of natural gas for the benefit of the environment and the consuming public.
- A continued focus on a long-term, sustainable strategy and outlook at El Paso E&P Company. Game-changing technological advancements in horizontal drilling and hydraulic fracturing are now allowing our industry to release the value in previously uneconomic shale reserves, unlocking more than 100 years of natural gas supply. In line with these efforts, we continued to maximize efficiencies from our operations in 2010. For example, we drilled wells 20 to 35 percent faster than our competitors in the Haynesville Shale. In April 2011, we announced that one of our wells in North Louisiana was the first natural gas producing well to be completed using the next wave of green technologies for hydraulic fracturing and water treatment. Our use of these technologies is part and parcel of our long-standing approach to conducting our hydraulic fracturing operations in an environmentally-sensitive manner.
- The achievement of significant milestones in the remodeling of our downtown Houston headquarters. In particular, during the spring of 2011, we substantially completed the remodeling of the entry level of our headquarters building, connecting tunnel, street, and second floor levels in the building, incorporating space and energy efficiency into the new area by design. We continue our drive toward Silver Certification of the building through the Leadership in Energy and Environmental Design (LEED) Green Building Rating System in the category of commercial interiors, and we remain focused on our recycling program. In fact, we recycled close to 7,500 tons of materials, or 84 percent of our construction waste, in 2010.
As I traveled the country in support of this effort, participating in various forums designed to advance the energy conversation, I found high levels of interest in the benefits of natural gas. These responses were encouraging. They’re further evidence that, as an industry, we’re getting the natural gas story across to key constituents, including local, state, and federal policymakers, who foresee a key role for natural gas in future energy policy. That’s important for the sustainability of our business. But it is also important for long-term energy sustainability as we continue to evolve from high-carbon, low-tech energy to low-carbon, high-tech energy.
We remain committed to building a legacy of sustainability at El Paso and to pushing ourselves into the next generation. On behalf of the nearly 5,000 members of Team El Paso, I want to thank you for allowing us to be stewards of your company, the environment, and your investment. We will continue our efforts to earn that trust every day.
Chairman, President and Chief Executive Officer