El Paso Corp. (EP), the largest U.S. pipeline operator, on Tuesday posted a weaker-than-expected quarterly profit, hurt by weak natural gas production results and hedging losses.

The Houston company, in the midst of a massive reorganization to focus on its pipeline and gas production operations, did manage to reverse a loss from the year-earlier period, largely helped by better results at its pipeline and field services divisions.

The natural gas producer and pipeline company reported earnings of $106 million, or 17 cents per share, in the first quarter, compared with a year-earlier loss of $206 million, or 32 cents per share.

Analysts on average expected the company to report a profit of 23 cents a share, according to Reuters Estimates, and the company's share price sagged.

El Paso narrowly avoided bankruptcy in 2002 as massive debts accumulated from its forays into the telecoms and wholesale power markets. The company has exited telecoms but is still bearing costs from the merchant power market, which collapsed in the wake of Enron Corp.'s downfall and the California power crisis.

Natural gas production results in the first quarter were hit by higher-than-expected costs, which rose to 80 cents per cubic foot equivalent versus the company's forecast of 68 to 79 cents.

Output of 766 million cfe per day also missed its goals, coming in slightly below the fourth quarter's 775 million cfe per day and the year-ago quarter's 901 million cfe.

Gas production was flat to higher in three of the company's four geographic regions, Chief Executive Doug Foshee told a conference call. "Leadership changes" were made in the onshore Texas coast region that saw production decrease, he added.

Its field services segment reported higher earnings, largely due to a gain of $183 million on the sale of a stake.

Overall, operating revenues fell to $1.21 billion from $1.56 billion a year earlier.

The company's marketing and trading division posted a larger-than-expected loss, hurt by $106 million in mark-to-market noncash losses on production-related derivatives due to higher natural gas prices. Results from the segment will continue to be volatile, the company said.

El Paso also said its power contracts suffered $83 million in losses due to changes in natural gas and power prices and the value in a power supply contract.

Losses at its power segment shrunk but were larger than expected, hit by $86 million in impairments at its Asian operations and disputes with Brazilian state oil firm Petrobras (search) on a project.

Foshee said the company's plan to sell its Asian power assets remained on schedule, although he gave no details on when a deal would emerge. Analysts have put an enterprise value of about $1 billion on those assets.

El Paso's net debt dropped to $16.1 billion at the end of the quarter, down $1 billion from the end of the year and $3.4 billion a year ago.

Shares in El Paso fell 2.8 percent or 30 cents to $10.25 near midday on the New York Stock Exchange. The shares, which had reached a peak at $13.10 in February, are virtually unchanged since the beginning of the year.