Texas-based El Paso Corporation (EP) is the largest pipeline operator in the United States. Its pipeline assets are located in close proximity to major consuming markets as well as regions where exploration and production of hydrocarbons is very active. This benefits the company on both the demand and supply side.

Although currently depressed commodity prices have forced producers to scale back production and rig counts, these highly productive regions will provide El Paso’s pipeline business with significant value and growth over the long term. The company also has exploration & production assets in the U.S., Brazil and Egypt. El Paso has proved reserves of nearly 2.5 trillion cubic feet equivalent of natural gas and it ranks among the top 10 independent domestic producers in the U.S.

We believe that El Paso’s management competencies and access to financing will enable the company to successfully execute its industry-leading pipeline backlog going forward while maintaining sufficient liquidity. However, we perceive the present constrained commodity environment to continue weighing on El Paso’s exploration & production business, at least in the near term. As such, we see the stock performing in line with the broader market and rate it as Neutral.
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