Tabell’s Market Letter – December 24, 1964

Walston &Co. – – – Inc Members New York Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFfiCES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER December 24, 1964 EL PASO NATURAL GAS COMPANY Current Price 21 El Paso Natural Gas has in the past Current Dividend 1. 00 two years, at least, been a rather dis- Current Yield Long Term Debt 4.80/0 851,218,266 appointing holding for the growth-seekin investor. True, it has had a certain at- Minority Interest 10,261,314 traction for those primarily concerned Cum. 1st pfd. stock Conv.Cum. 2nd pfd. stk. -Commori-StocR' .. 755, 750 shs. with income. The 1. 00 dividend has 22,784,263 shs provided a close-to-50/0 yield and this bdei veindleanrdg;e-liyn -traexcaebnlte' yteoa rt hs ea t'least, holder h as as a Total Oper. Rev. 1964-E 512, 000,000 return of capital rather than ordinary Total Oper. Rev. 1963 512,250,000 income. However, its price performanc Earn. per Sh. 1964-E Earn. per Sh. 1963 Mkt. Range 1964-63 1. 50 1. 21 23 1/4 – 17 –the stock has fluctuated between 23 1/ and 15 1/8 since early 1962 — has been singularly uninspiring. Indeed, the present price compares with a 1957 high of Includes 59 million conv. into common at 28. Convertible into common at 26. 67 35 1/2. At the core of this investor disenchantment is, in all probability, the com pany's difficulties. EI Paso is,. of compames, brmgmg gas from Texas and Canada mto the P California. It also has various producing propertiesI') major gas pipeline 1 'c thQ.est and southern n g a t e s some 130/0 oUts gas needs. As a gas'pipeline, however, its rates ration by the Federal and the, financial press over the rs has been replete with stones of rate lncreases dlsallowed and urrently, however, all major rate cases have been settled and with 0 one from the horizon, EI Paso is positiori'to reflect in gas demand in the area which it Recent studies t natural gas demand in the southern California market will expand y e eseeable future. EI Paso has recently been authorize to increase its deliv to i ea on a temporary basis and hearings regarding a perma- nent increase are now The possible award of a certificate for increased delivery to southern California substantially increase the earnings base of EI Paso. Other areas old promise for growth. The company is an important petro-chemical producer and is engaged in a number of highly interesting joint ventures, It jointly owns a polypropylene facility with Rexall Drug & Chemical and it is to participate with Beaunit Corporation in a jOint nylon production venture. Oil and gas production interests are located in the western United States, the Gulf of Mexico area, and the French Sahara. A major question to be resolved in El Paso's future concerns its northwestern division, formerly Pacific Northwes t Pipeline. The courts have ruled that the original Pacific Northwest acquisition was in violation of the anti-trust laws, and the compary must divest itself of the acquired property, There is some question at the moment whether the stock will be spun off, sold, or a combination of the two, but recent experience would indi- cate that, whatever is decided, it will not be unpalatable.to the individual stockholder. Ulti- mately he could find himself the owner of a very valuable piece of property in addition to the present El Paso stock which could probably continue the 1. 00 dividend even after divestitur Meanwhile, recent progress has been gOOd. Earnings for 1964 are estimated at around 1. 50 per share, up from 1. 21 in 1963. Accounting is relatively conservative and although investment credit tax savings are allowed to flow through, tax savings from accel- erated depreciation are offset by a charge against income. The dollar dividend should at least be continued. From a technical point of view the stock has an upside objective of 33 followed by possible higher levels and is being added to our recommended list for inclusion in capital gains accounts. Dow-Jones Noon Indus. 869.69 Dow-Jones Noon Rails 204.40 ANTHONY W. TABELL WALSTON & CO. INC. Thlb rnark('t Jetter IS not, and under no circumstances 8 to be construed as, an offer to sell or a aohclwtlOn to buy any oecurltiC'l referred to 'herem The information ounUlIIll!.d…hereJU…lS nOl l!uarantA!cd as to accuracy or completeness nnd the furnlshwg thereof IS not, and under no clrcumstance9 is to be construed as, a repre9cnta- Iton by Walston & Co. Inc All expressions of oplnlOn are subJect to change Without notice Walston & Co. Inc, and Officers, Directors, Stockholders and Employees thereof, purcha'ie. sell and may have o.n Interest In the securltles mentlOned herem. ThiS market. letter IS Intended and presented merely as a general. Informal commRntary on day to day market news and not as a complete analYSIS. Addltlonal mformatlon WIth respect to any seCUrities referred to herein will he furnlhed upon request WN 301