El Paso Corporation (EP) and its subsidiary El Paso Exploration & Production Company (EPEP) announced that they have made changes to their credit facilities, as they prepare to split into two separate entities by year-end 2011. The credit facilities of both EP and EPEP are set to expire in 2012.
El Paso Corp. amended and restated its revolving credit facility extending the maturity date to 2016 and reducing the available commitments to $1.25 billion from $1.5 billion. Moreover, EP’s facility credit terms now provide more flexibility on collateral support and El Paso Corporation’s general partnership interest in EPB as collateral.
It also provides for an elimination of collateral support upon the loans achieving investment grade status. The EP facility was financed through a syndication of 23 financial institutions.
On the other hand, El Paso Exploration & Production Company only renewed its revolving credit facility, making no material changes to the covenant and collateral package supporting the $1.0 billion borrowing base facility. The EPEP facility was financed through a syndication of 31 financial institutions.
El Paso Corporation had decided to split into two separate publicly traded companies on May 24, 2011. After the break-up, which is set for year-end, El Paso Corporation will consist of El Paso Pipeline Group, Midstream Group and its general and limited partner interests in El Paso Pipeline Partners L.P. (EPB).
The hived-off Exploration and Production (E&P) Group will become a separate publicly traded company and compete with independent oil producers.
Following the separation, El Paso Corporation will become one of the major North American pipeline companies well connected in the major supply and market regions.
The Exploration and Production wing of El Paso, slated to go solo, has more than 10 years of low-risk, repeatable drilling inventory, which will boost and ensure the growth of the new company in the forthcoming years, in our view. El Paso’s current holdings in Eagle Ford and Wolfcamp shales and the Altamont field will also guarantee the viability of the newly emerged E&P business.
El Paso Corporation currently retains a Zacks #3 Rank (short-term Hold rating). The company competes with Exxon Mobil Corporation (XOM) and Williams Companies Inc. (WMB).
Based in Houston, Texas, El Paso Corporation is involved in the natural gas transmission and in the exploration and production sectors of the energy industry. The company primarily operates in United States and has some exposure in Brazil and Egypt.
EL PASO CORP (EP): Free Stock Analysis Report
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