PXP Announces Quarterly Results, Capital Budget, and Guidance

Plains Exploration & Production Company on Thursday announced financial and operating results for the third quarter, a $600 million 2007 capital budget, and operational guidance for the full-year 2007. During 2006, PXP is on track to reduce its share count, increase its shareholders equity and reduce leverage.

Highlights of recent accomplishments include:

--Completed two asset sales worth $1.6 billion to PXP:

In September PXP received $864 million for certain California and Texas producing properties, which accounted for about 11 percent of 2005 year-end proved reserves.

In November PXP received $706 million for two 2006 Gulf of Mexico deepwater Miocene discoveries and one deepwater prospect which have no proved reserves as of year-end 2005.

--Increased operating cash flow by 97 percent year-over-year:

$170.0 million compared to $86.3 million (a non-GAAP measure)

--Increased cash margin per BOE by 82 percent year-over-year:

$36.98 compared to $20.37 (a non-GAAP measure)

--Tendered and redeemed substantially all of the 8.75 percent Senior Subordinated Notes and all of the 7.125 percent Senior Notes.

THREE MONTHS ENDED SEPTEMBER 30

PXP reported revenues of $280.9 million for the third quarter 2006 compared to $262.6 million for the third quarter 2005. Operating cash flow, a non-GAAP measure, increased 97 percent to $170.0 million in the third quarter of 2006 compared to $86.3 million in the prior year period. Cash margin, a non-GAAP measure, was $36.98 per BOE in the third quarter of 2006 compared to $20.37 per BOE in 2005. See the end of this release for an explanation and reconciliation of all non-GAAP financial measures.

PXP reported net income of $272.7 million, or $3.50 per diluted share, compared to a net loss of $31.8 million, or $0.41 per diluted share for the third quarter 2005. Net income for the period includes a $345.5 million pre- tax gain on the sale of oil and gas properties, a $12.3 million pre-tax gain on mark-to-market derivative contracts (cash payments related to the put and call option premiums during the quarter totaled $25.5 million), a $36.5 million pre-tax non cash charge to revenue related to certain oil hedges, and a $13.2 million pre-tax charge related to stock-based compensation.

Without the effects of these items net income for the third quarter of 2006 would have been $70.8 million, or $0.91 per diluted share, compared to $29.0 million, or $0.37 per diluted share in 2005.

Sales volumes during the third quarter 2006 were 60.6 thousand barrels of oil equivalent per day (BOEPD) compared to sales volumes of 59.2 thousand BOEPD during third quarter 2005.

Total production costs were $15.30 per BOE in the third quarter of 2006 compared to $12.50 per BOE in 2005. The increase per unit is primarily attributable to higher lease operating costs, due to general cost increases from service providers and utilities, as well as higher expenditures for repairs, maintenance and well workovers.

NINE MONTHS ENDED SEPTEMBER 30

PXP reported revenues of $810.9 million for the first nine months of 2006 compared to $670.0 million in 2005. Operating cash flow, a non-GAAP measure, nearly doubled to $495.5 million in the first nine months of 2006 compared to $248.0 million reported in the prior year period. Cash margin, a non-GAAP measure, was $36.62 per BOE in the first nine months of 2006 compared to $18.60 per BOE in 2005.

For the first nine months of 2006 PXP reported net income of $213.9 million, or $2.71 per diluted share, compared to a net loss of $284.8 million, or $3.67 per diluted share for the same period a year ago. Net income for the period includes a $345.5 million pre-tax gain on the sale of oil and gas properties, a $299.9 million pre-tax loss on mark-to-market derivative contracts (cash payments related to the put and call option premiums during the period totaled $75.6 million), a $109.6 million pre-tax non cash charge to revenue related to certain oil hedges, a $42.2 million pre-tax charge related to stock-based compensation, and a $37.9 million pre-tax gain on termination of merger agreement between PXP and Stone.

Without the effects of these items net income for the nine months of 2006 would have been $212.0 million, or $2.69 per diluted share, compared to $76.6 million or $0.98 per diluted share in 2005.

Sales volumes for the first nine months of 2006 were 61.0 thousand BOEPD compared to 62.7 thousand BOEPD in 2005. Sales volumes were lower year-over- year primarily due to asset sales in the second quarter 2005.

Total production costs were $14.00 per BOE for the first nine months of 2006 compared to $11.64 per BOE in 2005. The increase per unit is primarily attributable to lower volumes and higher lease operating costs, due to general cost increases from service providers, and higher expenditures for repairs, maintenance and well workovers.

Oil and gas capital expenditures, excluding acquisitions, were $474.3 million for the first nine months of 2006 compared to $315.1 million for the prior year period. The increase is primarily attributed to additional exploratory opportunities in the Gulf of Mexico.

BALANCE SHEET UPDATE

PXP completed property sales transactions in September and November 2006 generating approximately $1.6 billion of cash proceeds. The proceeds were used to repay the balance outstanding on its senior revolving credit facility and short-term credit facility, redeem all $250 million outstanding principal of its 7.125 percent Senior Notes, purchase substantially all $275 million outstanding principal of its 8.75 percent Senior Subordinated Notes, and complete the previously announced $605 million hedge liability termination.

Through July 2006 PXP repurchased 2,461,900 common shares at a cost of $100.8 million with $399.2 million remaining under the $500 million authorization. The Company expects to continue repurchasing shares from time to time in open market transactions or privately negotiated transactions at its discretion, subject to market conditions and other factors.

DEVELOPMENT - OPERATIONS UPDATE

In the Los Angeles Basin, PXP's exit rate for the third quarter was approximately 16,200 net BOEPD. A total of 60 of the 68 planned wells have been drilled through the end of the third quarter. Drilling activity this year has been concentrated in the Inglewood Field on the Vickers-Rindge waterflood zone with 49 of the 60 wells drilled and expanding the development in the Moynier and Rubel formations. The remaining wells for the 2006 plan will focus on the Moynier and Rubel zones and the Las Cienegas Field.

In the San Joaquin Valley, PXP's exit rate for the third quarter 2006 was approximately 25,500 net BOEPD. A total of 130 of the 155 planned wells have been drilled through the end of the third quarter. In the Midway Sunset Field, 51 wells have been drilled with 17 planned for the fourth quarter. In the Cymric Field, 70 wells have been drilled as of the end of the third quarter, which ends the 2006 drilling program at Cymric. Drilling will begin in November at the Arroyo Grande Field with a total of 8 wells planned for the fourth quarter.

Offshore California, PXP's exit rate for the third quarter 2006 was approximately 13,600 net BOEPD. At PXP's Point Pedernales Field, three of four planned in-fill wells are producing and completion operations for the fourth well are now underway.

In the Gulf Coast region, PXP's exit rate for the third quarter 2006 was approximately 6,100 net BOEPD. PXP is participating in one additional well this year.

PXP completed the sale of certain California and Texas producing properties on September 29, 2006. The transaction is effective October 1, 2006. The Company's exit rate for the third quarter excluding the properties sold was 54,000 net BOEPD.

EXPLORATION - OPERATIONS UPDATE

PXP completed the previously announced sale of two 2006 Gulf of Mexico Miocene trend discoveries on November 1, 2006 for total cash consideration of $706 million. The transaction is effective September 1, 2006 and the Company expects to record a gain in the fourth quarter.

In the Gulf of Mexico Miocene trend, PXP is currently participating in two deepwater exploratory tests, the Friesian Prospect (Shell operator: PXP 20%) and the Norman Prospect (Anadarko operator: PXP 15%).

2007 CAPITAL BUDGET

The Board of Directors approved a $600 million 2007 capital budget with approximately 50 percent to be utilized for continued development of the Company's California oil fields and the balance for high impact exploration projects, primarily targeting the Miocene trend in the Gulf of Mexico. Depending on project timing, as much as $55 million of the 2007 capital budget may be spent in late 2006.

As part of its balanced approach to creating shareholder value, PXP plans to drill approximately 200 development wells in its legacy oil fields located in the Los Angeles, San Joaquin, and Santa Maria Basins onshore and offshore California. These projects have solid economic returns, provide reserve additions, and generate substantial cash flow per share. The drilling success for development projects so far in 2006 has been 99 percent. PXP will continue to develop the large Inglewood Field complex, including Las Cienegas, in the Los Angeles Basin with waterflood development drilling. The San Joaquin Valley fields, Cymric, Midway Sunset, South Belridge, and Arroyo Grande area drilling includes expansion of existing tertiary recovery steamfloods, as well as development of new steam projects.

Continuing with the exploration success PXP has had in the Gulf of Mexico Miocene trend, the Company's current inventory now includes up to 30 to 35 high impact prospects. PXP intends to continue focusing its exploration expertise in the Miocene trend by participating in 10 of these prospects during 2007. These consist of Gulf of Mexico deepwater prospects and prospects located near existing infrastructure. The Miocene prospects near infrastructure are part of a recent agreement with McMoRan Exploration whereby PXP plans to participate in up to 9 exploratory tests in 2007.

OUTLOOK

The Company reaffirms its previously issued fourth quarter 2006 operational guidance and issues full-year 2007 operational guidance as attached at the end of this release. Full-year 2007 financial guidance will be issued in early 2007.

PXP is an independent oil and gas company primarily engaged in the upstream activities of acquiring, developing, exploiting, exploring and producing oil and gas in its core areas of operation: onshore and offshore California, and the Gulf Coast region of the United States. PXP is headquartered in Houston, Texas.

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