El Paso gets back to midstream

Four years after it sold-off its midstream business El Paso Corp. said it is now recreating the business (although you’d hardly know it from this release), which it will call its natural gas gathering and processing business.
Mark Leland, El Paso’s current chief financial officer and former COO of the old midstream business (GulfTerra Energy Partners) will head the new unit.
This return to a previous line of business is making El Paso look a bit more like its old self, in the early days of this decade when there were lots of so-called merchant energy companies (i.e. Enron, Dynegy, Williams). It’s unlikely they’re going to start a big trading floor again or begin buying power plants, but the company is certainly making a better showing in the exploration and production business these days, too.
El Paso appeared to be moving away from E&P a few years ago to focus on the massive natural gas pipeline business, but when Brent Smolik took over E&P three years ago it really started to take off. During a recent interview Smolik told us there was not an intentional shift within the company to put more emphasis on E&P but rather the growth opportunities arose when commodity prices spiked in recent years. This simply made existing project economics even better.
For example, El Paso has sizeable acreage in the Haynesville shale that they held thanks to long-standing production in the area (some of it dates back to the 1970s). So they didn’t have to spend a penny more to get a good foothold in what is turning out to be a huge gas field.
“The biggest shift for our E&P business have been to invest in larger projects with repeatable results, that can deliver the economics you’re looking for more consistently,” Smolik said. In others words big projects with less risk. That’s pretty much the definition of many shale plays these days.