PXP Delivers 'Solid' Results in 3Q10

Plains Exploration & Production announced 2010 third quarter results and updates drilling activities.

FINANCIAL SUMMARY

For the third quarter 2010, revenues of $387.8 million generated $18.8 million of net income, or $0.13 per diluted share, compared to revenues of $312.2 million and net income of $39.3 million, or $0.30 per diluted share, for the third quarter 2009.

Net income includes certain items affecting the comparability of operating results. Those items consist of realized and unrealized gains and losses on our mark-to-market derivative contracts, which exclude the impact of the derivatives monetized in 2009, and other items. When considering these items, net income for the third quarter 2010 was $41.4 million, or $0.29 per diluted share, compared to $79.3 million, or $0.60 per diluted share, for the same period in 2009 (a non-GAAP measure).

Income from operations was $97.1 million for the third quarter 2010, a 30% increase over third quarter 2009. On a unit of production basis, income from operations increased 19% per barrel oil equivalent (BOE) compared to the third quarter 2009.

Net cash provided by operating activities for the third quarter 2010 was $202.7 million and operating cash flow was $284.4 million compared to net cash provided by operating activities of $168.2 million and operating cash flow of $258.1 million for the third quarter 2009 (a non-GAAP measure).

For the first nine months of 2010, revenues of $1.1 billion generated $122.8 million of net income, or $0.87 per diluted share, compared to revenues of $819.4 million and net income of $88.2 million, or $0.73 per diluted share for the same period in 2009.

Net income includes certain items affecting comparability of operating results. Those items consist of realized and unrealized gains and losses on our mark-to-market derivative contracts, which exclude the impact of the derivatives monetized in 2009, a non-cash impairment charge related to our Vietnam oil and gas properties in 2010, legal recoveries and other items. When considering these items, net income for the first nine months of 2010 was $121.9 million, or $0.86 per diluted share, compared to $161.0 million, or $1.34 per diluted share, for the same period in 2009 (a non-GAAP measure).

Income from operations was $265.7 million for the first nine months of 2010, a 47% increase over the first nine months of 2009. On a unit of production basis, income from operations increased 38% per BOE compared to the first nine months of 2009.

Net cash provided by operating activities for the first nine months of 2010 was $677.2 million and operating cash flow was $723.0 million compared to net cash provided by operating activities of $309.9 million and operating cash flow of $646.9 million for the same period in 2009 (a non-GAAP measure).

A reconciliation of non-GAAP financial measures used in this release to comparable GAAP financial measures is included with the financial tables.

James C. Flores, Chairman, President and CEO of PXP commented, "We delivered solid quarterly financial and operating results as average daily sales volumes, income from operations and cash flow each improved significantly from third quarter last year, and our year-to-date production costs per unit sold remain lower than the same period in 2009. For the remainder of 2010, PXP will remain focused on cost control, operational execution and completing the previously announced acquisition and divestment transactions. As we move into 2011, PXP remains well-positioned to continue growing reserves and production. Our $1.2 billion Board of Director approved 2011 capital budget supports our diversified growth strategy with oil focused drilling programs in our key growth asset areas."

OPERATIONAL UPDATE

  • Average daily sales volumes for the third quarter 2010 were 90.6 thousand BOE, or 9% higher than the 83.0 thousand BOE in the third quarter 2009. Fourth-quarter 2010 average daily sales volumes are expected to be in line with third quarter volumes reflecting the impact of the Gulf of Mexico shelf asset sale, downtime on certain California and Texas assets and the previously announced repair work following a fire at the Madden Field in Wyoming.
  • In the Texas Panhandle Granite Wash development, PXP is currently operating 5 rigs drilling horizontal wells to develop its inventory of over 150 potential locations. PXP plans to spud up to 20 horizontal wells in 2010 and over 25 wells in 2011. Four wells have been drilled, completed and are producing and 4 wells are waiting on completion.
  • Initial production rates for the two most recent completions are 10.4 million cubic feet per day with 344 barrels of condensate per day and an estimated 1,076 barrels of natural gas liquids per day (2,528 BOE net per day) for the Hanson 29-2H well, and 8.2 million cubic feet per day with 358 barrels of condensate per day and an estimated 773 barrels of natural gas liquids per day (1,993 BOE net per day) for the Sanders 74-1H well.
  • In the Haynesville Shale, third quarter 2010 average daily sales volumes were 129 million cubic feet equivalent (MMcfe) per day net to PXP, an approximate 22% increase over the 106 MMcfe net per day average rate for the second quarter of 2010. With interests in 45 active drilling rigs, production from this asset area is expected to exceed 135 MMcfe net per day in the fourth quarter 2010.
  • In California, PXP drilled 22 wells in the San Joaquin Valley and 8 wells in the Los Angeles Basin during the third quarter and expects to drill up to 16 wells in the San Joaquin Valley and up to 9 wells in the Los Angeles Basin during the fourth quarter.
  • In the South Texas Eagle Ford, the previously announced acquisition is on track for a November closing. Currently, four rigs are operating on the properties and 20 gross wells have been drilled, completed or are producing. Once closed, PXP will have a net acreage position of approximately 60,000 acres, an estimated 140 to 175 million BOEs of net resource potential and approximately 500 net well locations. This asset area is poised to be a significant driver of future production and reserve growth for PXP.
  • On September 19, 2010, PXP, together with certain of its subsidiaries, entered into an agreement with McMoRan Exploration Co. (MMR) and certain of its subsidiaries to divest our interest in properties located in the Gulf of Mexico shallow water for a combination of cash and stock. PXP will receive $75 million in cash and 51 million shares of MMR common stock in exchange for its interest in all of its Gulf of Mexico leasehold located in less than 500 feet of water. The transaction is subject to customary closing conditions and adjustments and the approval of MMR's stockholders. The transaction will have an effective date of August 1, 2010 and is expected to close by year-end 2010.
  • On September 20, 2010, PXP announced that the data room process for the planned Gulf of Mexico deepwater divestment was underway. PXP expects to set an early December bid date and close the transaction by year-end 2010 or early 2011.
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