PXP Provides Selected 3Q05 Estimates

Plains Exploration & Production Company reports on the expected earnings impact in the third quarter from mark-to-market derivative transactions and stock-based compensation. The Company also announces estimated third quarter oil and gas production volumes and provides an update on the effects of Hurricanes Katrina and Rita on the Company's operations and production.

Expected Earnings Impact From Mark-to-Market Derivative Transactions

As a result of the increase in oil prices during the third quarter of 2005, and consistent with prior periods in which oil prices have increased, the Company expects to record in the third quarter of 2005 a pre-tax charge to income of $142 million related to mark-to-market derivative contracts. Cash payments related to these contracts that settled in the third quarter totaled $101 million.

The Company expects continued volatility in its reported earnings due to gains and losses on mark-to-market derivative contracts as changes occur in the NYMEX price index. A summary of PXP's current derivative positions is attached.

Stock-based Compensation

The Company expects to recognize pre-tax noncash stock-based compensation costs of $40 million in the third quarter related to stock appreciation rights and restricted stock units.

The Company has issued stock appreciation rights (SARs) to employees and accounting for SARs requires that the Company record an expense or a credit for vested or deemed vested SARs depending on whether, during the period, the stock price either rose or fell, respectively. Accordingly, since the stock price increased from $35.53 per share on June 30, 2005 to $42.82 per share on September 30, 2005 the Company anticipates recording a pre-tax charge of approximately $18 million in the third quarter for SARs. Cash payments for SARs exercised during the third quarter were approximately $4 million. In addition, as previously announced, in the third quarter, the Company expects to recognize approximately $22 million of pre-tax non-cash expense related to the vesting of restricted stock and restricted stock units. During the quarter, the Company issued approximately 0.8 million shares of common stock upon the vesting of restricted stock units.

Operational Update

On a barrel equivalent basis the Company produced approximately 61.5 thousand barrels per day (BOEPD) in the third quarter, which was within the previously announced guidance range. Third quarter production volumes were impacted by the effects of shut-in production from Hurricanes Katrina and Rita. Through October 10 the Company has deferred production of approximately 220 thousand net barrels of oil equivalent due to Hurricanes Katrina and Rita. The current daily production volume that remains shut-in is approximately 4,100 net BOEPD, down from approximately 5,400 net BOEPD on August 31. All production impacted by Hurricane Rita has been restored and repair work is ongoing for a majority of the production affected by Hurricane Katrina. In addition, damage from the hurricanes has caused delays in the drilling and completion of five wells in the third and fourth quarters of 2005 with likely delays in two other planned late 2005 drilling starts. The Company reaffirms the fourth quarter production estimate of 62,000 -- 68,000 BOEPD and the full year 2005 estimate of 64,000 -- 66,000 BOEPD.