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Press release from PR Newswire

PXP Reports First-Quarter 2011 Net Income of $71 Million or 49 Cents Per Diluted Share on Higher Year-Over-Year Production and Crude Oil Prices

Thursday, May 05, 2011

PXP Reports First-Quarter 2011 Net Income of $71 Million or 49 Cents Per Diluted Share on Higher Year-Over-Year Production and Crude Oil Prices07:29 EDT Thursday, May 05, 2011HOUSTON, Texas, May 5, 2011 /PRNewswire/ --First-Quarter Statistical Highlights:Revenues of $430.3 million and net income of $71.0 million, or $0.49 per diluted share. Adjusted net income of $52.4 million, or $0.37 per diluted share (a non-GAAP measure). Income from operations of $133.8 million.Net cash provided by operating activities of $290.0 million. Operating cash flow of $243.0 million (a non-GAAP measure). Average daily sales volumes for the quarter of approximately 88 thousand barrels of oil equivalent (BOE), a 3% increase over first-quarter 2010 or 19% increase pro-forma for the 2010 asset sale. Average daily sales volumes for March of approximately 93.6 thousand BOE; California offshore scheduled maintenance completed during the quarter.Crude oil price realizations of 88%.Total production costs per BOE of $15.41.Gross margin per BOE was $22.45 and cash margin per BOE was $36.95 (a non-GAAP measure).Plains Exploration & Production Company (NYSE: PXP) (?PXP? or the ?Company?) announces 2011 first-quarter financial and operating results. PXP reported first-quarter revenues of $430.3 million and net income of $71.0 million, or $0.49 per diluted share, compared to revenues of $384.1 million and net income of $58.5 million, or $0.41 per diluted share, for the first-quarter 2010.First-quarter 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, an unrealized gain on investment, and other items. When considering these items, PXP reports net income of $52.4 million, or $0.37 per diluted share (a non-GAAP measure).First-quarter income from operations was $133.8 million and net cash provided by operating activities was $290.0 million, a 13% and 31% increase over first-quarter 2010, respectively.First-quarter daily sales volumes averaged 88 thousand BOE per day, representing a 3% increase over first-quarter 2010 average daily sales volumes or a 19% increase pro-forma for the 2010 asset sale.First-quarter daily sales volumes also reflect the previously announced downtime associated with the California offshore Platform Irene maintenance conducted during first?quarter 2011 and the unusually harsh winter weather experienced in January and February which slowed drilling and well completion activities in the Texas, Louisiana and Wyoming asset areas. Daily sales volumes for the month of March averaged approximately 93.6 thousand BOE, and we reiterate our full-year 2011 average daily sales volumes range of 95-100 thousand BOE.A reconciliation of non-GAAP financial measures used in this release to comparable GAAP financial measures is included with the financial tables.MANAGEMENT COMMENTJames C. Flores, Chairman, President and CEO of PXP commented, ?We are pleased with first-quarter operating and financial results. Revenues, income from operations and cash flow are stronger than first- quarter 2010 and benefitted from increased production, higher crude oil prices and improved oil price realizations. Sales volumes increased 3%, despite shut-in volumes from planned facility upgrades, weather interruptions and the sale of all of our Gulf of Mexico production in the fourth-quarter 2010, while cash margin increased 8%. If current market conditions continue, using today?s crude oil price outlook and improved crude oil differentials, we expect to see an average increase in our 2011 full-year cash margin of more than 25% compared to first-quarter 2010 and a more than 30% increase compared to the full-year 2010 average. Operationally, our 2011 growth objectives are on track. In each of our core asset areas we are focused on the execution of the onshore oil drilling and expansion plans and results in each of our project areas have been positive, led by the accelerated pace on our Eagle Ford leasehold. PXP is well positioned for a strong 2011.? OPERATIONAL UPDATEIn the Eagle Ford Shale asset area, PXP has 5 drilling rigs operating. First-quarter daily sales volumes averaged approximately 2,240 BOE per day net to PXP and were in excess of 3,000 BOE per day net to PXP at the end of the quarter. The 2011 planned 3 net rig program sales volumes exit rate is expected to be above 5,000 BOE per day net at year-end 2011. However, if the current 6 net rig program continues, PXP expects to exit the year above 10,000 BOE net per day. Currently there are 18 wells waiting on completion or connection to pipelines.In the California asset area, PXP has 4 drilling rigs operating onshore where PXP continues its active development program in the Los Angeles and San Joaquin Basins. Daily sales volumes onshore were just over 31,310 BOE per day net to PXP, flat compared to fourth-quarter 2010. Offshore volumes are back to pre-Platform Irene maintenance levels of approximately 9,000 BOE per day net to PXP. With a large resource inventory identified for this asset area, it will sustain multi-year drilling programs providing future reserves, production and free cash flow. Average daily sales volumes are expected to be above 41,000 BOE net per day by year-end 2011.In the Texas Panhandle asset area, PXP has 5 drilling rigs operating in the Granite Wash trend and expects to continue this level of activity through 2011. First-quarter daily sales volumes averaged approximately 8,940 BOE per day net to PXP, or 12% higher than fourth-quarter 2010. Average daily sales volumes are expected to increase to approximately 17,000 BOE net per day by year-end 2011. There are 4 wells waiting on completion or connection to pipelines.In the Haynesville Shale asset area, PXP?s primary operator is currently operating 33 rigs and expects to reduce the rig count to an average of 25 rigs in 2011, plus PXP expects 15 or more rigs by other operators on its acreage. First-quarter daily sales volumes averaged approximately 162 million cubic feet equivalent (MMcfe) per day net to PXP, or 11% higher than fourth-quarter 2010. The rate of increase in sales volumes is anticipated to slow as the rig count decreases. Average daily sales volumes are expected to be above 170 MMcfe net per day at year-end 2011.In the other asset areas, including the Madden Field in Wyoming and other Texas assets, average daily sales volumes are expected to be above 11,000 BOE net per day by year-end 2011.PXP is making progress on several additional projects. In Wyoming, PXP drilled an initial well on its Mowry Shale position and plans to complete and announce well results in the third quarter. Drilling operations are currently underway on a second well in the Mowry Shale. In California, PXP continues to evaluate the potential resource opportunity of its Miocene shale position; and in the Gulf of Mexico Deepwater, PXP continues to evaluate financing options for its deepwater business.SENIOR REVOLVING CREDIT FACILITYThe borrowing base was increased from $1.45 billion to $1.8 billion until the next redetermination date currently scheduled for May 1, 2012.  The commitments remained unchanged at $1.4 billion.  In addition, PXP amended and extended its senior revolving credit facility. The amendment extends the maturity of the senior revolving credit facility from August 2015 to May 2016 as well as lowers the rate at which borrowings can be made.  On March 31, 2011, the senior revolving credit facility had $125 million outstanding.CONFERENCE CALLPXP will host a conference call today, Thursday, May 5, 2011 at 8:00 a.m. Central time. Investors wishing to participate in the conference call may dial 1-800-567-9836 or 1-973-935-8460. The conference call and replay ID is: 51938874. The replay can be accessed by dialing 1-800-642-1687 or 1-706-645-9291. A live webcast of the conference call and a slide presentation will be available in the Investor Information section of PXP's website at www.pxp.com.PXP is an independent oil and gas company primarily engaged in the activities of acquiring, developing, exploring and producing oil and gas in California, Texas, and Louisiana. PXP is headquartered in Houston, Texas.ADDITIONAL INFORMATION & FORWARD-LOOKING STATEMENTS This press release contains forward-looking information regarding PXP that is intended to be covered by the safe harbor "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. All statements included in this press release that address activities, events or developments that PXP expects, believes or anticipates will or may occur in the future are forward-looking statement. These include statements regarding: * reserve and production estimates, * oil and gas prices, * the impact of derivative positions, * production expense estimates, * cash flow estimates, * future financial performance, * capital and credit market conditions, * planned capital expenditures, and * other matters that are discussed in PXP's filings with the SEC. These statements are based on our current expectations and projections about future events and involve known and unknown risks, uncertainties, and other factors that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. Please refer to our filings with the SEC, including our Form 10-K, for a discussion of these risks. References to quantities of oil or natural gas may include amounts that the Company believes will ultimately be produced, but that are not yet classified as "proved reserves" under SEC definitions. All forward-looking statements in this press release are made as of the date hereof, and you should not place undue reliance on these statements without also considering the risks and uncertainties associated with these statements and our business that are discussed in this press release and our other filings with the SEC. Moreover, although we believe the expectations reflected in the forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any deviations will not be material. Except as required by law, we do not intend to update these forward-looking statements and information. Plains Exploration & Production CompanyConsolidated Statements of Income(in thousands, except per share data)Three Months EndedMarch 31,2011 2010 (Unaudited)RevenuesOil sales$ 331,843$ 276,004Gas sales 96,802107,739Other operating revenues1,669307430,314384,050Costs and ExpensesLease operating expenses72,25162,503Steam gas costs15,76119,663Electricity9,72010,034Production and ad valorem taxes11,5288,447Gathering and transportation expenses12,7479,419General and administrative36,02337,390Depreciation, depletion and amortization134,543122,393Accretion4,2574,411Legal recovery-(8,423)Other operating income(304)(569)296,526265,268Income from Operations133,788118,782Other (Expense) Income Interest expense(32,404)(21,053)Debt extinguishment costs-(728)(Loss) gain on mark-to-market derivative contracts(50,996)7,856Gain on investment measured at fair value67,254-Other income5541,306Income Before Income Taxes118,196106,163Income tax expense   Current(372)(4,738)   Deferred(46,845)(42,897)Net Income $   70,979$   58,528Earnings per ShareBasic$       0.50$       0.42Diluted$       0.49$       0.41Weighted Average Shares OutstandingBasic140,868139,741Diluted143,416141,940Plains Exploration & Production CompanyOperating Data (Unaudited)Three Months EndedMarch 31,20112010Daily Average VolumesOil and liquids sales (Bbls)44,06845,217Gas (Mcf)   Production269,222244,594   Used as fuel5,7885,313   Sales 263,434239,281BOE   Production88,93885,983   Sales 87,97485,097Unit Economics (in dollars) Average NYMEX Prices   Oil$     94.60$     78.88   Gas4.095.27Average Realized Sales Price Before Derivative Transactions   Oil (per Bbl)$     83.67$     67.82   Gas (per Mcf)4.085.00   Per BOE54.1450.11Cash Margin per BOE (1)   Oil and gas revenues $     54.14$     50.11   Costs and expenses      Lease operating expenses(9.12)(8.16)      Steam gas costs(1.99)(2.57)      Electricity(1.23)(1.31)      Production and ad valorem taxes(1.46)(1.10)      Gathering and transportation(1.61)(1.23)      Oil and gas related DD&A(16.28)(15.33)   Gross margin (GAAP)22.4520.41      Oil and gas related DD&A16.2815.33      Realized losses on derivative instruments(1.78)(1.62)   Cash margin (Non-GAAP)$     36.95$     34.12Oil and gas capital expenditures accrued ($ in thousands) (2)$ 389,341$ 223,416(1)  Cash margin per BOE (a non-GAAP measure) is calculated by adjusting gross margin per BOE (a GAAP measure) to include realized gains and losses on derivative instruments and to exclude DD&A.  Management believes this presentation may be helpful to investors as it represents the cash generated by our oil and gas production that is available for, among other things, capital expenditures and debt service.  PXP management  uses this information to analyze operating trends for comparative purposes within the industry.  This measure is not intended to replace the GAAP statistic but rather to provide additional information that may be helpful in evaluating trends and performance.     (2)  Additions to oil and gas properties reported in our consolidated statement of cash flows differ from the accrual basis amounts reflected above due to the timing of cash payments.  Excludes acquisitions.   Plains Exploration & Production CompanyReconciliation of GAAP to Non-GAAP MeasureThree Months Ended March 31, 2011OilGasBOE(per Bbl)(per Mcf)Average Realized Sales Price Average realized price before derivative instruments (GAAP) (1)$   83.67$      4.08$ 54.14     Realized (losses) gains on derivative instruments(3.70)0.03(1.78)Realized cash price including derivative settlements (non-GAAP)$   79.97$      4.11$ 52.36Three Months Ended March 31, 2010OilGasBOE(per Bbl)(per Mcf)Average Realized Sales PriceAverage realized price before derivative instruments (GAAP) (1)$   67.82$      5.00$ 50.11     Realized (losses) gains on derivative instruments (4.29)0.24(1.62)Realized cash price including derivative settlements (non-GAAP)$   63.53$      5.24$ 48.49(1)  Excludes the impact of production costs and expenses and DD&A.   Plains Exploration & Production CompanyConsolidated Statements of Cash Flows(in thousands of dollars)Three Months EndedMarch 31,20112010(Unaudited)CASH FLOWS FROM OPERATING ACTIVITIESNet income$     70,979$  58,528Items not affecting cash flows from operating activities   Depreciation, depletion, amortization and accretion138,800126,804   Deferred income tax expense 46,84542,897   Debt extinguishment costs-728   Loss (gain) on mark-to-market derivative contracts50,996(7,856)   Gain on investment measured at fair value(67,254)-   Non-cash compensation16,80616,900   Other non-cash items9181,371Change in assets and liabilities from operating activities31,873(17,594)Net cash provided by operating activities289,963221,778CASH FLOWS FROM INVESTING ACTIVITIESAdditions to oil and gas properties(358,472)(267,015)Acquisition of oil and gas properties (1)(24,511)51,065Proceeds from sales of oil and gas properties, net of costs and expenses11,987-Derivative settlements(15,021)(9,460)Additions to other property and equipment(2,671)(2,137)Net cash used in investing activities(388,688)(227,547)CASH FLOWS FROM FINANCING ACTIVITIESBorrowings from revolving credit facilities1,313,850625,935Repayments of revolving credit facilities(1,808,850)(855,935)Proceeds from issuance of Senior Notes600,000300,000Costs incurred in connection with financing arrangements(9,069)(5,344)Other4-Net cash provided by financing activities95,93564,656Net (decrease) increase in cash and cash equivalents(2,790)58,887Cash and cash equivalents, beginning of period6,4341,859Cash and cash equivalents, end of period$       3,644$  60,746(1)  Cash inflow in 2010 is associated with an adjustment to the final settlement of the $1.1 billion payment in September 2009 related to the prepayment of the Haynesville drilling carry.    Plains Exploration & Production CompanyConsolidated Balance Sheets(in thousands of dollars)March 31,December 31,20112010ASSETS(Unaudited)Current AssetsCash and cash equivalents$        3,644$            6,434Accounts receivable253,626269,024Inventories22,10424,406Deferred income taxes90,95374,086Prepaid expenses and other current assets22,52028,937392,847402,887Property and Equipment, at costOil and natural gas properties - full cost methodSubject to amortization10,387,6949,975,056Not subject to amortization3,288,5763,304,554Other property and equipment139,821137,15013,816,09113,416,760Less allowance for depreciation, depletion, amortization and impairment(6,327,976)(6,196,008)7,488,1157,220,752Goodwill535,142535,144Investment731,600664,346Other Assets76,32971,808$ 9,224,033$     8,894,937LIABILITIES AND STOCKHOLDERS' EQUITYCurrent LiabilitiesAccounts payable$    313,564$        284,628Commodity derivative contracts81,42352,971Royalties and revenues payable70,65370,990Interest payable58,79349,127Other current liabilities84,12375,973608,556533,689Long-Term Debt3,451,1313,344,717Other Long-Term LiabilitiesAsset retirement obligation234,672225,571Commodity derivative contracts32,43124,740Other22,75028,205289,853278,516Deferred Income Taxes1,418,7591,355,050Stockholders' EquityCommon stock1,4391,439Additional paid-in capital3,399,6963,427,869Retained earnings204,275148,620Treasury stock, at cost(149,676)(194,963)3,455,7343,382,965$ 9,224,033$     8,894,937Plains Exploration & Production CompanySummary of Open Derivative PositionsAt April 1, 2011AverageInstrumentDailyAverageDeferredPeriod (1)TypeVolumesPrice (2)PremiumIndexSales of Crude Oil Production2011Apr - DecPut options (3)31,000 Bbls$80.00 Floor with a $60.00 Limit$5.023 per BblWTIApr - DecThree-way collars (4)9,000 Bbls$80.00 Floor with a $60.00 Limit$1.00 per BblWTI$110.00 Ceiling2012Jan - DecPut options (3)40,000 Bbls$80.00 Floor with a $60.00 Limit$6.087 per BblWTISales of Natural Gas Production2011Apr - DecThree-way collars (5)200,000 MMBtu$4.00 Floor with a $3.00 Limit-Henry Hub$4.92 Ceiling2012Jan - DecPut options (6)160,000 MMBtu$4.30 Floor with a $3.00 Limit$0.294 per MMBtuHenry Hub(1)  All of our derivatives are settled monthly.   (2)  The average strike prices do not reflect the cost to purchase the put options or collars.   (3)  If the index price is less than the $80 per barrel floor, we receive the difference between the $80 per barrel floor and the index price up to a maximum of $20 per barrel less the option premium. If the index price is at or above $80 per barrel, we pay only the option premium.   (4)  If the index price is less than the $80 per barrel floor, we receive the difference between the $80 per barrel floor and the index price up to a maximum of $20 per barrel less the option premium. We pay the difference between the index price and $110 per barrel plus the option premium if the index price is greater than the $110 per barrel ceiling. If the index price is at or above $80 per barrel but at or below $110 per barrel, we pay only the option premium.   (5)  If the index price is less than the $4.00 per MMBtu floor, we receive the difference between the $4.00 per MMBtu floor and the index price up to a maximum of $1.00 per MMBtu. We pay the difference between the index price and $4.92 per MMBtu if the index price is greater than the $4.92 per MMBtu ceiling. If the index price is at or above $4.00 per MMBtu but at or below $4.92 per MMBtu, no cash settlement is required.   (6)  If the index price is less than the $4.30 per MMBtu floor, we receive the difference between the $4.30 per MMBtu floor and the index price up to a maximum of $1.30 per MMBtu less the option premium. If the index price is at or above $4.30 per MMBtu, we pay only the option premium.   Plains Exploration & Production CompanyDerivative Settlements (in thousands of dollars)The following table reflects cash (payments) receipts for derivatives attributable to the stated production periods.Three Months EndedMarch 31,20112010    Oil sales $ (14,682)$ (17,466)    Natural gas sales6205,089$ (14,062)$ (12,377)Plains Exploration & Production CompanyReconciliation of GAAP to Non-GAAP MeasureThe following table reconciles net income (GAAP) to adjusted net income (non-GAAP) for the three months ended March 31, 2011 and 2010. Adjusted net income excludes certain items affecting the comparability of operating results and the related tax effects.  Management believes this presentation may be helpful to investors.  PXP management uses this information to analyze operating trends and for comparative purposes within the industry. This measure is not intended to replace the GAAP statistic but rather to provide additional information that may be helpful in evaluating the Company's operational trends and performance.Three Months EndedMarch 31,20112010(millions of dollars)Net income (GAAP)$ 71.0$ 58.5Unrealized losses (gains) on mark-to-market derivative contracts51.0(7.9)Realized losses on mark-to-market derivative contracts (1)(14.1)(12.4)Unrealized gain on investment measured at fair value(67.3)-Legal recovery -(8.4)Adjust income taxes (2)11.813.7Adjusted net income (non-GAAP)$ 52.4$ 43.5(1)  The amounts presented in the above table differ from the adjustments reflected in the calculation of operating cash flow on the following page due to the accrued amounts reflected in the income statement versus the actual cash received or paid reflected in the consolidated statement of cash flows.    (2)  Tax rates assumed based upon adjusted earnings are 40% and 44% for the three months ended March 31, 2011 and 2010, respectively. Tax rates exclude the effects of nonrecurring tax related expenses and benefits.   Plains Exploration & Production CompanyReconciliation of GAAP to Non-GAAP MeasureThe following tables reconcile Net Cash Provided by Operating Activities (GAAP) to Operating Cash Flow (non-GAAP) for the three months ended March 31, 2011 and 2010.  Management believes this presentation may be useful to investors.  PXP management uses this information for comparative purposes within the industry and as a means of measuring the Company's ability to fund capital expenditures and service debt. This measure is not intended to replace the GAAP statistic but rather to provide additional information that may be helpful in evaluating the Company's operational trends and performance.Operating cash flow is calculated by adjusting net income to add back certain non-cash and non-operating items, including unrealized gains and losses on mark-to-market derivative contracts, to include derivative cash settlements for realized gains and losses on mark-to-market derivative contracts that are classified as investing activities for GAAP purposes, to exclude the unrealized gain on the investment measured at fair value and to exclude certain items.  Three Months Ended March 31,2011 2010 (millions of dollars)Net income$   71.0$   58.5Items not affecting operating cash flowsDepreciation, depletion, amortization and accretion138.8126.8Deferred income tax expense 46.842.9Debt extinguishment costs-0.7Unrealized losses (gains) on mark-to-market derivative contracts51.0(7.8)Gain on investment measured at fair value(67.3)-Non-cash compensation16.816.9Other non-cash items0.91.4Realized losses on mark-to-market derivative contracts(15.0)(9.5)Legal recovery-(8.4)Current income taxes attributable to derivative contracts-4.7Operating cash flow (non-GAAP)$ 243.0$ 226.2Reconciliation of non-GAAP to GAAP measureOperating cash flow (non-GAAP)$ 243.0$ 226.2Legal recovery and other0.18.4Changes in assets and liabilities from operating activities31.9(17.6)Realized losses on mark-to-market derivative contracts 15.09.5Current income taxes attributable to derivative contracts-(4.7)Net cash provided by operating activities (GAAP)$ 290.0$ 221.8SOURCE Plains Exploration & Production CompanyFor further information: Investors, Hance Myers, +1-713-579-6291, hmyers@pxp.com, or Media, Scott Winters, +1-713-579-6190, swinters@pxp.com, both of Plains Exploration & Production Company