PXP Announces 2008 Second Quarter Earnings of $203 Million or $1.84 Per Diluted Share Representing a 701% Gain Over Same Period in 2007
HOUSTON, Aug. 5 /PRNewswire-FirstCall/ — Plains Exploration & Production Company (“PXP” or the “Company”) today announced financial and operating results for the second quarter 2008.
Highlights: -- Net income increased to $202.9 million in the second quarter 2008 from $25.3 million in the second quarter 2007. -- Operating cash flow was $450.3 million in the second quarter 2008 compared to $111.0 million in the second quarter 2007 (a non-GAAP measure). -- Second quarter 2008 oil and gas sales volumes averaged 87.5 thousand barrels of oil equivalent per day (BOEPD) reflecting the previously announced asset divestitures which closed in February 2008. Sales volumes averaged 91.6 thousand BOEPD for the first six months of 2008. PXP expects sales volumes to average between 92 and 96 thousand BOEPD for the year-ended 2008 and is currently producing within that range. Flatrock and other growth initiatives are expected to contribute to sales volume growth throughout the year. -- Positive drilling results at Flatrock which has four successful wells to date and two producing wells with approximately 30 million cubic feet equivalent per day (MMCFED) net to PXP: - Flatrock No. 2 well commenced production on July 6, 2008. Gross production currently approximates 102 MMCFED, 23 MMCFED net to PXP. - Flatrock No. 3 well logged deeper pay in May 2008. In total, the well encountered 256 feet of net pay. First production is expected in the third quarter of 2008. - Flatrock No. 4 development well logged 116 net feet of pay in June 2008 and is drilling below 16,800 feet to proposed total depth of 18,500 feet. - Flatrock No. 5 well commenced on July 1, 2008 and is currently drilling below 9,700 feet to proposed total depth of 18,400 feet. - Flatrock No. 6 well is expected to commence drilling in the second half of 2008. -- South Timbalier Block 168 ultra-deep exploratory well has been drilled to 32,550 feet and is being evaluated. -- Fredericksburg exploratory prospect, operated by Shell and located on Desoto Canyon Block 486, is currently drilling with results expected in the third quarter. -- Friesian #2 well, operated by PXP and located on Green Canyon Block 643, has a rig on location running anchors, with drilling results expected in the fourth quarter. -- Positive drilling results continue from the Texas Panhandle development program. We began the year producing 6,500 BOEPD and are currently producing approximately 7,600 BOEPD. These production gains are primarily coming from the Courson Ranch and Marvin Lakes areas. We are having better-than-expected results from vertical wells targeting the Mississippian St. Louis formation and horizontal wells targeting the Cleveland formation. Additionally, wells in the Marvin Lakes area targeting the Granite Wash and Atoka Wash formations, where we have a significant inventory of future drilling locations, are contributing to these positive results. -- Acquired a 20% interest in Chesapeake Energy's 550,000 acre leasehold position in the Haynesville Shale, 110,000 acres net to PXP, for $1.65 billion. In addition, PXP has agreed to fund 50% of Chesapeake's 80% share of drilling and completion costs for future Haynesville Shale JV wells over a several year period until an additional $1.65 billion has been paid. This applies to less than 10% of the estimated 6,800 potential future drilling locations. PXP expects average drilling and completion costs of $1.25 per MCFE and total finding and development costs of $1.83 per MCFE. Drilling operations are underway with 6 rigs running and a total of 30 rigs expected by year-end 2009. Production contribution is expected in the fourth quarter 2008. -- Closed the Piceance Basin acquisition in June 2008, expanding an existing PXP growth area by adding approximately 11,000 acres adjacent to our existing position and increasing our overall Piceance drilling inventory to over 3,600 potential well locations. Production from the Piceance Basin properties has increased 155% to 27.5 MMCF per day in the second quarter of 2008 compared to 10.8 MMCF per day in the second quarter 2007. There are 6 rigs running and a total of 7 rigs expected by year-end 2008. -- Received Santa Barbara County Planning Commission approval of the Tranquillon Ridge project in April, one of the necessary government approvals. PXP is currently working to secure approval from the California State Lands Commission. -- In Vietnam we contracted a rig to drill our first well mid-year 2009. -- Increased PXP's commodity price protection by acquiring incremental derivatives on a significant portion of 2008, 2009 and 2010 production volumes with over $100 crude oil floors and $10 by $20 natural gas collars. THREE MONTHS ENDED JUNE 30
PXP reported second quarter 2008 net income of $202.9 million, or $1.84 per diluted share, on revenues of $732.7 million, an increase from second quarter 2007 net income of $25.3 million, or $0.35 per diluted share, on revenues of $255.5 million. Higher revenues during the second quarter of 2008 were primarily due to a 64% increase in sales volumes and a $39.08 per barrel of oil equivalent (BOE) increase in realized prices.
Sales volumes increased to 87.5 thousand BOEPD during the second quarter 2008 from 53.5 thousand BOEPD in the second quarter 2007 reflecting the Pogo acquisition and increased production from the Piceance Basin.
Total production costs per BOE were higher during second quarter 2008 compared to the prior year period. Higher commodity prices and the impact from Pogo and Piceance Basin properties increased per unit production and ad valorem tax costs. Additionally, an increase in our stock price during the period resulted in higher per unit lease operating costs due to charges for stock appreciation rights.
Operating cash flow, a non-GAAP measure, increased to $450.3 million in the second quarter 2008 from $111.0 million for the same period a year ago due to higher sales volumes and stronger commodity prices. An explanation and reconciliation of non-GAAP financial measures is included at the end of this release.
SIX MONTHS ENDED JUNE 30
Net income for the first six months of 2008 was $366.4 million, or $3.27 per diluted share, on revenues of $1.4 billion, a significant increase from net income of $45.9 million, or $0.63 per diluted share, on revenues of $480.2 million for the same period a year ago. Higher revenues during the first six months of 2008 were primarily due to a 74% increase in sales volumes and a $30.82 per BOE increase in realized prices.
Sales volumes for the first six months of 2008 increased to 91.6 thousand BOEPD from 52.7 thousand BOEPD for the same period in 2007. Higher year-over-year sales volumes are primarily due to the 2007 acquisitions.
Total production costs per BOE were nearly flat for the first six months of 2008 compared to the same period in 2007. Lower per unit lease operating, steam gas and electricity costs due to increased sales volumes were offset by higher per unit gathering and transportation and production and ad valorem tax costs associated with the addition of the Pogo and Piceance Basin properties.
Operating cash flow, a non-GAAP measure, increased to $800.4 million for the first six months of 2008 from $205.6 million in the prior year period due to higher sales volumes and stronger commodity prices.
Oil and gas capital expenditures, excluding acquisitions, were $449.6 million for the first six months of 2008 compared to $309.8 million for the prior year period.
PXP reaffirms full-year 2008 operating and financial guidance. As previously announced, oil and gas expenditures for 2008 are expected to be approximately $1.5 billion, excluding acquisitions.
SECOND QUARTER CONFERENCE CALL
PXP plans to host its quarterly conference call tomorrow, August 6, 2008, 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 replay will be available through August 20, 2008 and can be accessed by dialing 1-800-642-1687 or 1-706-645-9291. Conference call and replay ID: 54420420.
PXP is an independent oil and gas company primarily engaged in the activities of acquiring, developing, exploring and producing oil and gas in its core areas of operation: California, Rockies, Haynesville Shale/North Louisiana and East Texas, Gulf Coast, Gulf of Mexico, Texas Panhandle, South Texas and the Permian Basin of the United States. 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 statements. 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, * 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 the year ended December 31, 2007, for a discussion of these risks.
All forward-looking statements in this report 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 report 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 for any obligation to disclose material information under the Federal securities laws, we do not intend to update these forward-looking statements and information.
Plains Exploration & Production Company Consolidated Statements of Income (Unaudited) (amounts in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Revenues Oil sales $545,767 $231,583 $1,002,351 $437,101 Gas sales 182,334 23,210 346,403 40,745 Other operating revenues 4,602 754 7,026 2,394 732,703 255,547 1,355,780 480,240 Costs and Expenses Production costs Lease operating expenses 85,248 50,112 159,756 94,775 Steam gas costs 40,599 27,924 72,757 54,281 Electricity 10,661 9,500 22,298 18,267 Production and ad valorem taxes 24,181 5,042 50,409 10,301 Gathering and transportation expenses 2,462 1,220 10,951 1,406 General and administrative 45,203 29,913 85,131 52,410 Depreciation, depletion and amortization 130,749 58,523 271,602 111,201 Accretion 3,223 2,273 6,610 4,535 342,326 184,507 679,514 347,176 Income from Operations 390,377 71,040 676,266 133,064 Other Income (Expense) Gain on sale of assets - - 34,658 - Interest expense (23,511) (11,698) (54,120) (17,058) Debt extinguishment costs - - (10,263) - Loss on mark-to-market derivative contracts (51,427) (15,837) (60,908) (36,427) Interest and other income 1,686 747 1,661 1,324 Income Before Income Taxes 317,125 44,252 587,294 80,903 Income tax expense Current (61,716) - (102,253) - Deferred (52,491) (18,934) (118,622) (35,015) Net Income $202,918 $25,318 $366,419 $45,888 Earnings per share Basic $1.88 $0.35 $3.33 $0.63 Diluted $1.84 $0.35 $3.27 $0.63 Weighted Average Shares Outstanding Basic 107,707 72,171 109,939 72,316 Diluted 110,138 73,275 112,147 73,382 Plains Exploration & Production Company Operating Data (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Daily Average Volumes Oil and liquids sales (Bbls) 55,153 46,865 56,399 47,106 Gas (Mcf) Production 200,358 46,285 217,573 40,148 Used as fuel 6,015 6,415 6,236 6,423 Sales 194,343 39,870 211,337 33,725 BOE Production 88,546 54,579 92,662 53,798 Sales 87,543 53,510 91,622 52,727 Unit Economics (in dollars) Average NYMEX Prices Oil $123.80 $65.02 $111.12 $61.67 Gas 10.90 7.55 9.50 7.17 Average Realized Sales Price Before Derivative Transactions Oil (per Bbl) $108.74 $54.31 $97.65 $51.27 Gas (per Mcf) 10.31 6.40 9.01 6.68 Per BOE 91.40 52.32 80.89 50.07 Cash Margin per BOE (1) Oil and gas revenues $91.40 $52.32 $80.89 $50.07 Costs and expenses Lease operating expenses (10.70) (10.29) (9.58) (9.93) Steam gas costs (5.10) (5.73) (4.36) (5.69) Electricity (1.34) (1.95) (1.34) (1.91) Production and ad valorem taxes (3.04) (1.04) (3.02) (1.08) Gathering and transportation (0.31) (0.25) (0.66) (0.15) Gross margin before DD&A (GAAP) 70.91 33.06 61.93 31.31 Cash derivative settlements (2.86) (5.20) (2.35) (5.23) Cash margin (Non-GAAP) $68.05 $27.86 $59.58 $26.08 (1) Cash margin (a non-GAAP measure) is calculated by adjusting gross margin before DD&A (a GAAP measure) to deduct cash derivative settlements. 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 and for comparative purposes within the industry. This measure is not intended to replace the GAAP statistic but to provide additional information that may be helpful in evaluating the Company's operational trends and performance. Plains Exploration & Production Company Consolidated Balance Sheets (in thousands of dollars) June 30, December 31, 2008 2007 ASSETS (Unaudited) Current Assets Cash and cash equivalents $2,494 $25,446 Restricted cash - 59,092 Accounts receivable 406,745 304,972 Inventories 24,291 18,394 Deferred income taxes 175,793 229,893 Other current assets 12,946 37,123 622,269 674,920 Property and Equipment, at cost Oil and natural gas properties - full cost method Subject to amortization 7,087,870 7,340,238 Not subject to amortization 1,384,611 1,951,783 Other property and equipment 110,955 85,928 8,583,436 9,377,949 Less allowance for depreciation, depletion and amortization (1,267,019) (1,000,722) 7,316,417 8,377,227 Goodwill 535,296 536,822 Other Assets 103,433 104,382 $8,577,415 $9,693,351 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $284,148 $319,583 Commodity derivative contracts 101,825 79,938 Royalties and revenues payable 169,196 132,919 Stock appreciation rights 23,977 63,106 Interest payable 19,228 25,330 Accrued merger expenses 2,764 77,980 Other current liabilities 79,483 119,190 680,621 818,046 Long-Term Debt Senior revolving credit facility 611,000 2,205,000 Senior notes 1,500,000 1,100,000 2,111,000 3,305,000 Other Long-Term Liabilities Asset retirement obligation 179,665 184,080 Commodity derivative contracts 31,428 33,821 Other 143,460 54,726 354,553 272,627 Deferred Income Taxes 2,006,433 1,959,431 Stockholders' Equity Common stock 1,128 1,128 Additional paid-in capital 2,710,212 2,711,617 Retained earnings 990,412 623,993 Accumulated other comprehensive income 1,519 1,566 Treasury stock (278,463) (57) 3,424,808 3,338,247 $8,577,415 $9,693,351 Plains Exploration & Production Company Consolidated Statements of Cash Flows (Unaudited) (in thousands of dollars) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES Net income $202,918 $25,318 $366,419 $45,888 Items not affecting cash flows from operating activities Gain on sale of assets - - (34,658) - Depreciation, depletion, amortization and accretion 133,972 60,796 278,212 115,736 Deferred income taxes 52,491 18,934 118,622 35,015 Debt extinguishment costs - - 10,263 - Loss on commodity derivative contracts 51,427 15,837 60,908 36,427 Noncash compensation 28,378 15,717 40,451 21,621 Other noncash items 1,936 (24) 2,886 (31) Change in assets and liabilities from operating activities (146,514) (15,282) (233,741) (113,406) Net cash provided by operating activities 324,608 121,296 609,362 141,250 CASH FLOWS FROM INVESTING ACTIVITIES Additions to oil and gas properties (186,423) (113,281) (441,123) (258,182) Acquisition of oil and gas properties (311,136) (973,875) (331,293) (973,875) Acquisition of Pogo Producing Company (62,625) - (74,844) - Derivative settlements (12,946) (25,615) (29,593) (49,143) Proceeds from property sales, net of costs and expenses 7,901 - 1,717,781 - Decrease in restricted cash and cash held in escrow 339,974 - 59,092 - Additions to other property and equipment (4,754) (19,774) (27,443) (24,164) Other, net 505 (3,431) (1,229) (3,431) Net cash provided by (used in) investing activities (229,504) (1,135,976) 871,348 (1,308,795) CASH FLOWS FROM FINANCING ACTIVITIES Revolving credit facilities Borrowings 1,083,315 1,119,475 4,237,756 1,456,250 Repayments (1,532,315) (744,475) (5,831,756) (1,316,750) Proceeds from issuance of long-term debt 400,000 600,000 400,000 1,100,000 Costs incurred in connection with financing arrangements (5,927) (9,972) (6,064) (17,917) Derivative settlements (7,898) - (13,088) - Purchase of treasury stock (32,385) (15,193) (304,192) (47,485) Other (5,709) 1,462 13,682 3,341 Net cash (used in) provided by financing activities (100,919) 951,297 (1,503,662) 1,177,439 Net (decrease) increase in cash and cash equivalents (5,815) (63,383) (22,952) 9,894 Cash and cash equivalents, beginning of period 8,309 74,176 25,446 899 Cash and cash equivalents, end of period $2,494 $10,793 $2,494 $10,793 Plains Exploration & Production Company Summary of Open Derivative Positions at July 1, 2008 Instrument Daily Period Type Volumes Average Price (1) Index Sales of Crude Oil Production 2008 July - Dec Put options 42,000 Bbls $55.00 Strike price WTI July - Dec Collar 2,500 Bbls $60.00 Floor - $80.13 Ceiling WTI 2009 Jan - Dec Put options 32,500 Bbls $55.00 Strike price WTI Jan - Dec Put options 40,000 Bbls $106.16 Strike price WTI 2010 Jan - Dec Put options 40,000 Bbls $111.49 Strike price WTI Sales of Natural Gas Production 2008 July - Dec Collar 15,000 MMBtu $8.00 Floor - $12.11 Ceiling Henry Hub July - Dec Collar 150,000 MMBtu $10.00 Floor - $20.00 Ceiling Henry Hub 2009 Jan - Dec Collar 150,000 MMBtu $10.00 Floor - $20.00 Ceiling Henry Hub (1) The average strike prices do not reflect the cost to purchase the put options or collars. Plains Exploration & Production Company Reconciliation of GAAP to Non-GAAP Measure The following table reconciles Net Cash Provided by Operating Activities (GAAP) to Operating Cash Flow (Non-GAAP) for the three and six months ended June 30, 2008 and 2007. Management believes this presentation may be useful to investors because it is illustrative of the impact of the Company's derivative contracts. 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 to provide additional information that may be helpful in evaluating the Company's operational trends and performance. Operating cash flow is calculated by adjusting the GAAP measure of cash provided by operating activities to exclude changes in operating assets and liabilities and include derivative cash flows that are classified as financing or investing activities in the statement of cash flows. Pursuant to GAAP certain cash payments with respect to our derivative instruments are required to be reflected as financing or investing activities. Three Months Ended June 30, 2008 2007 (millions of dollars) Net cash provided by operating activities (GAAP) $324.6 $121.3 Changes in operating assets and liabilities 146.5 15.3 Cash payments for commodity derivative contracts that settled during the period that are reflected as investing or financing cash flows in the statement of cash flows (20.8) (25.6) Operating cash flow (Non-GAAP) $450.3 $111.0 Six Months Ended June 30, 2008 2007 (millions of dollars) Net cash provided by operating activities (GAAP) $609.4 $141.3 Changes in operating assets and liabilities 233.7 113.4 Cash payments for commodity derivative contracts that settled during the period that are reflected as investing or financing cash flows in the statement of cash flows (42.7) (49.1) Operating cash flow (Non-GAAP) $800.4 $205.6
Plains Exploration & Production Company
CONTACT: Investors, Hance Myers, Vice President Investor Relations+1-713-579-6291 or 1-800-934-6083, or Media, Scott Winters, Vice PresidentCorporate Communications, +1-713-579-6190 or 1-800-934-6083, both of PlainsExploration & Production Company
Web site: http://www.pxp.com/