By Deepa Babington NEW YORK, May 3 (Reuters) - Some El Paso Corp. employees may have knowingly used incorrect estimates to
boost proven natural gas reserves over five years, the natural gas pipeline
operator said on Monday. An independent investigation, which the
El Paso's senior management team, however, did not participate in the reserves overstatement, the investigation found. The questionable booking was done from the beginning of 1999 through the end of 2003. The findings confirmed El Paso's previous warning that it would have to restate financial statements. The company said it would delay its first-quarter reports until the restated books are filed with U.S. regulators. It has yet to report fourth- quarter results. The review, which involved more than 200 interviews and 100,000 documents over the last two months, is continuing, but El Paso said it did not expect any material changes to the findings once it is complete.
El Paso shares fell 13 cents, or less than 2 percent, to $6.88 in late morning trading on the New York Stock Exchange. LONG LINE OF WOES El Paso's reserves overstatement is the latest chapter in a long list of troubles the company has grappled with in recent years. Like most of its peers, the company has struggled with the credit crunch in the industry and the collapse of the energy trading markets triggered by Enron's collapse. But the company has also had to deal with the fallout from the California energy crisis and deal with a shareholder revolt last year. It is now in the midst of selling off assets to slash debt and rebuild its balance sheet.
El Paso said it would discuss its plans to restate its books with the SEC and file the restated financials and its annual report for 2003 as soon as possible. The process will also involve restating the books of its El Paso CGP Co. and El Paso Production Holding Co. units. El Paso said it was cooperating with the U.S. Securities and Exchange, which has been investigating its cut in reserves and the U.S. Attorney's office on the findings. The company also said it is in the process of improving its controls, including forming an internal committee to routinely review oil and natural gas reserves, as well as revising its documentation procedures and controls for estimating proved reserves.
It also said it would continue using an independent third-party engineering firm that will report each year to the Audit Committee.