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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: Think4Yourself who wrote (30051)	2/19/2004 11:01:09 PM
From: jim_p	Read Replies (3) of 206089

John, Congrats on the marriage!! Life is more fun when their is someone special to share it with. EP's numbers are hard to follow mostly due to the accounting games and booking non-cash earnings with mark to market accounting. The cash flow numbers should be good. The way I see it cash flow has been averaging about $427MM a quarter over the last year. 3Q was down to $361MM from $583MM in Q2. Part of the reason was $129MM in higher interest costs in Q3. I suspect interest cost are up for two reasons, first they borrowed an additional $3B in the first half of 03 used mostly to finance $2.3B of stock buy backs and dividends and second due to higher borrowing costs on refinanced debt. The way I see EP is even if all the stars are aligned in their favor they are still dying a slow death. It takes about $650MM to $900MM per Q in cap-X just to maintain the pipelines and replace the depleting reserves. Cash flow was only $361MM last Q and that was with very high NG prices. With the additional debt downgrades, interest costs will rise even higher. No one is going to loan EP money to dig themselves a deeper hole and just try to maintain operations. Without fresh capital the E & P side of the business will continue to under perform and cash flow will continue to fall even lower. EP is in the position of borrowing more money (if they could) is a killer and not having fresh capital is a killer. Either way EP is dead meat. I don't think they have enough assets to sell to make a meaningful change in their outlook. The only hope EP had was to be able to sell all the oil and gas properties for $9-10B and lower debt down to a level that the pipelines would be able to service the debt. With the reserves now 1.8 Tcfe less, that reduces the value by about $3-4B. If they sold all the oil and gas properties for $5-6B, the remaining debt would still be $18-19B which is too high for EP to be a survivor. Now we have the class action suits to add to the misery which will take up managements time not to mention the costs. Any way you look at it, it just doesn't add up in the current capital structure. JMHO, Jim

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