Stone Energy to be Acquired by Plains Exploration and Production

Stone Energy announced the signing of a definitive agreement to be acquired by Plains Exploration and Production Company in a stock- for-stock transaction. Under terms of the agreement, Stone shareholders will receive 1.25 shares of PXP common stock for each Stone share they own. This represents a transaction value of $1.46 billion and the assumption of $483 million of debt. Based on PXP's closing share price on Friday, April 21, 2006 this represents a per share value of $52.46 per share of Stone common stock.

CEO of Stone, Dave Welch, said: "The Board of Directors and I are enthusiastic about combining our high cash flow assets and attractive Rockies development opportunities with PXP's long life assets. The combined company will have strong leverage to oil prices and the ability to grow production profitably. Stockholders of both companies will benefit from the robust portfolio of near term and long term growth opportunities."

The combined company will have an estimated proved reserve base of approximately 500 million barrels of oil equivalent, 80% of which are oil. Principal operations will be in California, the Gulf of Mexico, Rocky Mountains and Texas with 207,643 net developed acres and 992,822 net undeveloped acres. The reserve-to-production ratio will be 12-14 years and 70-75% of the production will be oil.


If the acquisition is approved by stockholders, PXP will issue approximately 34.5 million shares to Stone stockholders and assume $483 million of debt net of cash on the balance sheet at year-end 2005. Under the terms of the definitive agreement, Stone stockholders will receive 1.25 shares of PXP common stock for each share of Stone common stock. The transaction is expected to qualify as a tax-free reorganization under Section 368 (a) and is expected to be tax free to Stone stockholders.

The Boards of Directors of both companies have approved the merger agreement and have agreed to recommend it to their respective stockholders for approval. The transaction will remain subject to stockholder approval from both companies and other customary conditions. Both companies intend to hold stockholder meetings. Dates for these meetings will be announced as soon as possible. The companies anticipate completing the transaction in the third quarter of 2006. Post closing, it is anticipated that Stone stockholders will own approximately 30 percent of the combined company and PXP stockholders will own approximately 70 percent of the combined company.

Randall & Dewey, a division of Jefferies & Company, acted as financial advisor to Stone. Lehman Brothers Inc. acted as lead financial advisor to PXP and J.P. Morgan acted as financial advisor and rendered a fairness opinion to PXP.


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