El Paso will probably restate its financials for five years to eliminate hedge accounting for a number of transactions.
The company stated that it would increase and decrease quarterly earnings within the merchant energy and production segments from 1999 through 2003 as a result of the elimination of the hedges.
El Paso gave assurances that there would be no change in cash flow as a result of the restatement. The company also said it does not expect the restatement for hedge accounting to affect El Paso Production Holding Co. or El Paso CGP Co.
The restatements will also result in incremental ceiling-test charges, primarily during a period of very low natural gas prices in 2001, as a result of the elimination of the hedges from the ceiling-test calculation.
The largest natural gas pipeline operator said the need for further restatements became apparent during a review of its accounting during the periods from 1999 through 2003. The details will be discussed in an upcoming 10-K filing, which it expected out by the end of the third quarter, the company added.
On May 3, El Paso announced that an independent investigation launched by its audit committee found that the 41 percent downward revision to its natural gas and oil reserves that had been announced on Feb. 17 would require a restatement of the financial statements for El Paso Corp. and its subsidiaries El Paso Production Holding Co. and El Paso CGP Co. for the periods from 1999 through 2003.
Those developments caused the company to delay the release of its financial statements for 2003 and first-quarter of 2004.