Tennessee Gas Pipeline Company, a wholly owned subsidiary of El Paso Corporation (EP) entered into a 20-year agreement with Chesapeake Energy Marketing, Inc., a wholly owned subsidiary of Chesapeake Energy Corporation (CHK) and StatOil Natural Gas LLC, a wholly owned subsidiary of StatOil (STO), for 100% of the capacity for its Northeast Upgrade Project.

This pipeline project extends the natural gas distributor’s presence in the growing Marcellus Shale play. The $400 million Northeast Upgrade Project will provide 636,000 dekatherms per day of incremental firm transportation capacity from Pennsylvania to an interconnection in New Jersey to serve growing markets in the Northeast. The company expects most capital spending to take place in 2013.

Between the 300 Line and the upgrade project, the company plans to add approximately 1 billion cubic feet per day of new firm capacity to serve the key Northeast markets.

The company plans to file the upgrade project with the Federal Energy Regulatory Commission in 2011 with an anticipated service date of November 1, 2013. An open season is expected to begin in February 2010 with final capacity awarded in March 2010.

El Paso reported total proved reserves at year-end 2009 up 8% to 2.75 trillion cubic feet equivalent (Tcfe), including its 48.8% interest in Four Star Oil & Gas Company. Proved reserves at the end of 2008 totaled 2.55 Tcfe.

The company’s total reserve additions during the year were 573 billion cubic feet equivalent (Bcfe), with a reserve replacement ratio of 212%. Total company reserve replacement costs were $2.04 per million cubic feet equivalent (Mcfe). Domestic reserve replacement costs, before price-related revisions, totaled $1.57 per Mcfe.

Based in Houston, Texas, El Paso is a major player in both the natural gas transmission and exploration & production space in the U.S. The company principally operates in two business lines – Pipelines and E&P – which collectively account for the lion’s share of its revenues, incomes and cash flows.

El Paso’s high-grade Exploration & Production assets and large inventory of pipeline projects offer significant value in the long run. We believe that El Paso’s management competencies and access to financing will enable successful execution of its industry-leading pipeline backlog going forward.
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