PXP Says 3Q05 Production Lower Due to Hurricanes
Plains Exploration & Production Company today reported third quarter 2005 production of 61.5 thousand barrels of oil equivalent per day (BOEPD), in line with production guidance for the third quarter of 2005 of 61.0 to 63.0 thousand BOEPD. Production was lower year-over-year due to the previously announced asset sales in the fourth quarter 2004 and in the second quarter 2005 as well as the shut-in production due to Hurricanes Katrina and Rita.
Due primarily to a previously disclosed mark-to-market charge for derivative fair value losses associated with the rise in oil prices during the third quarter of 2005, PXP reported a net loss of $31.8 million, or $0.41 per share, for the quarter compared to a net loss of $47.9 million, or $0.62 per share, for the third quarter 2004. The results for the third quarter 2005 reflect the following items:
* $141.6 million pre-tax loss on mark-to-market derivative contracts. Cash payments related to the mark-to-market derivative contracts that settled during the quarter totaled $101.4 million; * $25.3 million pre-tax non cash charge to revenue related to certain oil and gas hedges; * $40.1 million pre-tax non cash charge related to stock-based compensation; and * An effective tax rate of 47 percent to reflect a change in the Company's estimated annual effective tax rate from 36 to 38 percent.
Without the effects of these items, and applying the 38 percent estimated annual effective tax rate, net income for the third quarter would have been $28.3 million, or $0.36 per share. See the end of this release for an explanation and reconciliation of non-GAAP financial measures.
Operating cash flow, a non-GAAP measure, was $86.2 million in the third quarter of 2005 compared to $59.5 million in the third quarter of 2004.
"The third quarter results were negatively impacted by the hurricanes by lowering production and increasing unit costs but we've made good progress on restoring production and expect to have most of our remaining shut-in production back on line by year end," commented James C. Flores, PXP's Chairman, President and Chief Executive Officer.
The average realized sales price per barrel of oil equivalent (BOE) before hedging and derivative transactions was $51.03 during the third quarter of 2005 compared to $36.03 in the third quarter of 2004. Cash payments related to hedging and derivative transactions that settled during the quarter were $18.16 per BOE in 2005 compared to $11.59 in 2004.
Total production costs were $12.50 per BOE in the third quarter of 2005, compared to $10.96 per BOE in 2004. The year-over-year increase per unit is primarily attributable to higher steam gas costs, higher than expected lease operating costs due to workover activity and lost volumes associated with shut-in production from Hurricanes Katrina and Rita.
General and administrative costs for the quarter, excluding stock-based compensation, were $12.6 million. As previously announced, the Company recognized pre-tax non cash stock-based compensation costs of $40.1 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 recorded a pre-tax charge of approximately $18.2 million in the third quarter for SARs. Cash payments for SARs exercised during the quarter were approximately $4.4 million. In addition, the Company recognized approximately $21.9 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.
For the first nine months of 2005 PXP reported production of 65.1 thousand BOEPD compared to 57.6 thousand BOEPD for the first nine months of 2004. Operating cash flow, a non-GAAP measure, was $247.9 million in the first nine months of 2005 compared to $150.5 million in the prior year period.
Due primarily to a mark-to-market charge for derivative fair value losses associated with the rise in oil prices during the first nine months, PXP reported a net loss of $284.8 million, or $3.67 per share. During the first nine months, PXP recognized the following items:
* $629.6 million pre-tax loss on mark-to-market derivative contracts. Cash payments related to the mark-to-market derivative contracts that settled during the period totaled $189.3 million; * $59.2 million pre-tax non cash charge to revenue related to certain oil and gas hedges; and * $72.7 million pre-tax non cash charge related to stock-based compensation.
Without the effects of these items, and applying the 38 percent estimated annual effective tax rate, net income for the first nine months of 2005 would have been $74.8 million, or $0.97 per share.
The average realized sales price per BOE before hedging and derivative transactions was $44.08 during the first nine months of 2005 compared to $34.28 in the first nine months of 2004. Cash payments related to hedging and derivative transactions that settled during the first nine months were $13.84 per BOE in 2005 compared to $9.46 in 2004.
Oil and gas capital expenditures for the third quarter were $112.5 million compared to $57.7 million for the prior year period. For the nine months ended September 30, 2005, oil and gas capital expenditures were $315.1 million compared to $146.5 million for the prior year period. These amounts exclude the cost of acquisitions.
At PXP's Rocky Point development program offshore California, the third extended reach development well has just been brought on to sales after side-track drilling and completion operations. The initial test rate is approximately 2,800 BOEPD. PXP's income interest is 57.7 percent. This well was re-drilled in a near horizontal trajectory through the reservoir resulting in approximately 3,100 feet of pay zone exposure to the wellbore. The second Rocky Point development well is available for a similar type of sidetrack if warranted based on sustained performance of the initial side-track test.
During 2005 in the San Joaquin Valley (SJV) of California, PXP has drilled 223 wells through the end of October consisting of 74 wells in Midway Sunset Field, 86 wells in Cymric Field, 56 wells in South Belridge Field with the remainder in other SJV fields. The wells are a mix of vertical and horizontal cyclic steam producers and vertical continuous steam injectors. Pay zone targets are both sands and diatomite reservoirs in further development of existing thermal projects as well as expansion into new "cold" reservoir sections. PXP's working interest in its leases in the Midway Sunset, Cymric, and South Belridge Fields is typically 100 percent.
In PXP's Deep Inglewood Project in the Los Angeles Basin, PXP has completed a total of 38 wells below the Vickers-Rindge water-flood horizon as of October 31. Included in that total are 24 wells in the Sentous Formation which is typically the deepest productive zone and an additional 14 wells in the Moynier Formation, a new water-flood target. Moynier water injection started in August, 2005. Present Moynier water-flood pattern production is about 300 BOEPD from five completed producers. PXP is continuing to operate three drilling rigs in the Inglewood Field. PXP's working interest in the Inglewood Field is 100 percent.
In PXP's Eastern Development Unit, a second discovery in the Queen Bess Isle Field in Jefferson Parish, Louisiana was made in the third quarter. The well is on line to sales at a gross rate of 9.9 million cubic feet per day (MMCFD) and 220 barrels of condensate per day. PXP operates the well with an income interest of approximately 56 percent. This is PXP's second successful Queen Bess well following on the initial Queen Bess discovery made earlier this year. A third Queen Bess Field area prospect is currently drilling. In the greater Breton Sound area of Louisiana, three new drills originally anticipated for the second half of 2005 have been pushed back due to Hurricane Katrina. One is now anticipated to begin later in the fourth quarter and the remaining two are expected to be drilled in the first quarter of 2006. Total production deferred due to the impacts of Hurricanes Katrina and Rita is approximately 280 net MBOE through October 31, 2005. Current PXP net shut-in volume is approximately 1,710 BOEPD, down from 5,400 net BOEPD immediately after Hurricane Katrina.
In the Miocene Trend of the Green Canyon-Walker Ridge portion of the deep water Gulf of Mexico, PXP is currently participating in two exploratory wells. The Pathfinder Prospect operated by Shell is currently waiting on rig repairs due to damage from Hurricane Katrina. The Bigfoot Prospect operated by Chevron is currently drilling. An additional well at the Caesar Prospect operated by
Kerr-McGee is expected to start in late 2005 or early 2006.
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