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PXP Reports Substantially Higher Quarterly Earnings of $493 Million or $4.50 Per Diluted Share

November 6, 2008

HOUSTON, Nov. 6 /PRNewswire-FirstCall/ — Plains Exploration & Production Company (“PXP” or the “Company”) today announced financial and operating results for the third quarter 2008 and filed full-year 2009 operating guidance with the SEC in a Form 8-K.

   Financial Highlights:    -- Net income increased to $493.1 million in the third quarter 2008 from      $32.9 million in the third quarter 2007. Included in third quarter 2008      earnings is an after-tax gain on mark-to-market derivative contracts of      $282.4 million.    -- PXP set its 2009 capital budget at $1.15 billion and lowered 2008      estimated operational capital expenditures from $1.5 billion to $1.2      billion due to lower estimated acreage costs and reductions in      development costs attributed to the Permian and Piceance asset sale.    -- Strong liquidity is maintained with no significant debt maturities for      approximately four years; and pro forma for the Permian and Piceance      Basin properties sale, PXP's liquidity improves to approximately $1.3      billion. In addition, PXP is supported by its positive derivative      position which as of October 31, 2008 had a net value of approximately      $930 million.     Operational Highlights:    Production    -- Oil and gas sales volumes averaged 92.4 thousand barrels of oil      equivalent per day (BOEPD) in the third quarter 2008 compared to 57.1      thousand BOEPD in the third quarter 2007.    -- Hurricane downtime reduced third quarter 2008 volumes by approximately      170 thousand BOE. All production impacted by the hurricanes has been      restored.     Drilling Operations    -- Flatrock development continues delivering positive results with five      successful wells to date and three of these wells currently producing      approximately 37 million cubic feet equivalent per day (MMCFED) net to      PXP.       -- Flatrock No. 4 well production test, through perforations in the         primary Rob-L section, indicated a gross flow rate of approximately         109 MMCFD, 2,500 barrels per day of condensate and zero barrels of         water, approximately 124 MMCFED (27 MMCFED net to PXP). This is in         the same Rob-L sand which continues to produce at approximately 100         MMCFED at the Flatrock No. 2 well.      -- Flatrock No. 5 has encountered 90 net feet of pay as indicated by         wireline logs and is currently drilling below 15,000 feet to a         proposed total depth of 18,400 feet.      -- Flatrock No. 6 commenced drilling in late October 2008.    -- Additional multi-hundred BCFE Flatrock step-out prospects either      currently drilling or preparing to spud are outlined below:       -- Tom Sauk exploratory well, operated by McMoRan and located on         Louisiana State Lease 340, commenced drilling in August 2008 and is         drilling below 12,500 feet towards a proposed total depth of 19,000         feet to evaluate potential Operc and Gyro sands in the Middle and         Lower Miocene. PXP holds a 24.4% working interest.      -- Gladstone East exploration prospect, operated by McMoRan and located         on Louisiana State Lease 340, is expected to commence drilling in         November 2008 and carry over into 2009. This prospect, located in         the Flatrock area, has multiple targets in the Rob-L and Operc sands         in the Middle Miocene. PXP holds a 30% working interest.      -- Ammazzo exploration prospect, operated by McMoRan and located on         South Marsh Island Block 251, is expected to commence drilling in         November 2008 and carry over into 2009. The prospect, also located         in the Flatrock area, has multiple targets in the Rob-L, Operc and         Gyro sands in the Middle and Lower Miocene. PXP holds a 28% working         interest.    -- Plans are underway to complete and test the South Timbalier Block 168      ultra-deep exploratory well operated by McMoRan. The well will be      temporarily abandoned waiting completion. As previously reported, the      well was drilled to a total depth of 32,997 feet and logs indicated      four potential hydrocarbon bearing zones. PXP holds a 35% working      interest.    -- Friesian #2 well, operated by PXP and located on Green Canyon Block      643, is currently drilling below 24,000 feet to a proposed total depth      of 28,000 feet. Drilling results are expected before year end.    -- Drilling operations in the Haynesville Shale now include 14 rigs, up      from six in August, with an average of approximately 26 rigs expected      in 2009. For 2009, PXP allocated 40% of its 2009 capital budget, or      approximately $460 million, to Haynesville activity pursuant to      Chesapeake's, our operator's, 2009 operating plan. Drilling operations      for our Haynesville Shale Joint Venture began in July 2008 and      inaugural production commenced during the third quarter. Currently four      wells are producing 36 MMCFED gross, 5 MMCFED net to PXP. With over      7,000 potential well locations, this asset area is expected to be a      significant driver of future production and reserve growth. PXP holds a      20% interest in Chesapeake's over 550,000 net acre leasehold position.    -- Drilling operations in the South Texas and the Texas Panhandle areas      continue to yield positive results. Production combined from these      areas increased approximately 40% from January to September 2008. In      South Texas, drilling has focused on the Los Mogotes, Lopez Ranch and      Mills Bennett Fields and the area was producing 11,700 net BOEPD at the      end of the third quarter. In the Texas Panhandle, production was      approximately 8,100 net BOEPD at the end of the quarter with ongoing      drilling successes in the Courson Ranch, Wheeler and Marvin Lake      Fields. These asset areas provide multi-year drilling inventories      supporting further reserve and production growth.    -- Los Angeles County Board of Supervisors recently passed enhanced      environmental and safety standards supporting continued development of      the Inglewood Field in the Baldwin Hills area of Los Angeles,      California. This approval gives PXP the ability to drill up to 600 new      wells at the Inglewood Field.    -- The County of San Luis Obispo California recently approved a permit to      construct a water reclamation and treatment facility to improve      operating efficiencies for oil recovery activities in PXP's Arroyo      Grande Field. The new facility will accelerate field development and      production growth at the Arroyo Grande Field, which represents a      significant development for our onshore California production      operations. Construction is expected to begin by year-end 2008 followed      by drilling and steaming operations to enhance the present production      rate of 1,300 BOEPD with a 17% compound average growth rate over the      next 10 years.    -- T-Ridge received final approval from the County of Santa Barbara      California Board of Supervisors on October 7, 2008. This approval is an      important milestone for this significant project. PXP is working to      obtain approvals from the California State Lands Commission, the      California Coastal Commission, and the federal Minerals Management      Service, which would allow drilling to begin as early as the first      quarter 2009.     Divestiture    -- PXP agreed on September 24, 2008 to divest its oil and gas properties      located in the Permian and the Piceance Basins for $1.25 billion to      Occidental Petroleum Corporation. This transaction is expected to close      on December 1, 2008.     THREE MONTHS ENDED SEPTEMBER 30  

PXP reported third quarter 2008 net income of $493.1 million, or $4.50 per diluted share, on revenues of $719.5 million, an increase from third quarter 2007 net income of $32.9 million, or $0.45 per diluted share, on revenues of $299.0 million. Higher revenues during the third quarter of 2008 were primarily due to a 62% increase in sales volumes and a $26.73 per barrel of oil equivalent (BOE) increase in realized prices. Included in third quarter 2008 earnings is an after-tax gain on mark-to-market derivative contracts of $282.4 million.

Sales volumes increased to 92.4 thousand BOEPD during the third quarter 2008 from 57.1 thousand BOEPD in the third quarter 2007 reflecting the acquisitions and divestments in 2007 and first half of 2008, as well as production from the Flatrock project. Third quarter 2008 sales volumes reflect the impacts of shut-in production associated with the recent Gulf of Mexico hurricanes. Hurricane downtime reduced third quarter volumes by approximately 170 thousand BOE. All production impacted by the hurricanes has been restored.

Total production costs per BOE were slightly higher during third quarter 2008 compared to the prior year period due primarily to increased per unit production and ad valorem taxes associated with the properties acquired in 2007. Total general and administrative costs per BOE were lower due primarily to higher sales volumes.

Operating cash flow, a non-GAAP measure, was $423.7 million in the third quarter 2008 compared to $146.0 million in the prior year period. The increase was due primarily 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.

NINE MONTHS ENDED SEPTEMBER 30

Net income for the first nine months of 2008 was $859.6 million, or $7.72 per diluted share, on revenues of $2.1 billion, a significant increase from net income of $78.7 million, or $1.07 per diluted share, on revenues of $779.2 million for the same period a year ago. Higher revenues during the first nine months of 2008 were primarily due to a 70% increase in sales volumes and a $29.32 per BOE increase in realized prices. Included in the nine months ended September 30, 2008 is a $243.9 million after-tax gain on mark-to-market derivative contracts.

Sales volumes for the first nine months of 2008 increased to 91.9 thousand BOEPD from 54.2 thousand BOEPD for the same period in 2007. Higher year-over- year sales volumes primarily reflect the 2007 acquisitions.

Total production costs per BOE were slightly higher for the first nine 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 taxes associated with the properties acquired in 2007. Total general and administrative costs per BOE were lower due to higher sales volumes.

Operating cash flow for the first nine months of 2008, a non-GAAP measure, increased to $1.2 billion from $351.5 million reported in the prior year period. The increase was due primarily to higher sales volumes and stronger commodity prices.

Oil and gas capital expenditures, excluding acquisitions, were $806.4 million for the first nine months of 2008 compared to $573.0 million for the prior year period.

FULL-YEAR 2008 GUIDANCE UPDATE

Due to the pending asset sale, higher service costs and higher natural gas prices, we are revising estimates on certain items of our previously issued full-year 2008 guidance. Production is expected to average about 92 thousand BOEPD for 2008. Lease operating expenses per unit are higher than previously anticipated due primarily to increased well work and stimulation activity and higher service costs accompanied by higher water disposal costs associated with the Pogo and Piceance assets. Lease operating expenses per unit are now estimated to approximate $9.50 per BOE. Steam gas costs per unit are higher than previously anticipated due to significantly higher average natural gas prices and slightly higher volumes of natural gas used in steam generation. Steam gas costs per unit are now estimated to approximate $4.00 per BOE.

LIQUIDITY

On September 30, 2008, the company had approximately $665 million available under its revolving credit facility, which had commitments of $2.7 billion. The commitments are from a diverse syndicate of 23 lenders with no single lender’s commitment representing more than 9% of the total.

Due to the pending $1.25 billion asset sale to Occidental, PXP’s revolving credit facility commitments will be voluntarily reduced from $2.7 billion to $2.3 billion upon closing of the transaction. Pro forma for the asset sale, PXP’s liquidity increases to approximately $1.3 billion and its borrowing base is established at $2.7 billion, well in excess of its commitments.

PXP’s liquidity is further supported by no near-term debt maturities and a material positive derivative position. The senior revolving credit facility matures November 6, 2012 and the next maturity of senior unsecured notes occurs on June 15, 2015. In addition, PXP’s positive derivative position as of October 31, 2008 had a net value of approximately $930 million.

DERIVATIVE POSITION

PXP’s derivatives position remains unchanged. On average 80% of our 2009 and 2010 estimated oil production is protected with floors above $100 and approximately 80% of our estimated natural gas production through year-end 2009 is protected with either physical purchases used in our operations or $10 by $20 collars. On September 30, 2008 PXP’s mark-to-market position had a net value of approximately $338 million. On October 31, 2008 the mark-to-market position had a net value of approximately $930 million. A table summarizing PXP’s open commodity derivative positions as of October 1, 2008 is included at the end of this release.

2009 CAPITAL BUDGET

PXP’s Board of Directors approved a $1.15 billion 2009 capital budget. Approximately 50% of the capital investment is allocated to production and development activities, 40% to the Haynesville and 10% for exploration projects. PXP intends to fund its 2009 capital budget from internally generated funds and has flexibility to adjust spending as market conditions warrant.

The capital plan supports PXP’s growth initiatives by funding drilling programs in each of its key asset areas. Development activities primarily focus on the large, high-free cash flow California oil business and on the Haynesville, California, Texas Panhandle, South Texas and Gulf of Mexico growth areas. Exploration spending funds a number of high-potential projects in the Gulf of Mexico, onshore Gulf Coast and Vietnam asset areas.

Gulf of Mexico exploration projects include the Blackbeard East prospect located in South Timbalier Block 144 and the previously mentioned Ammazzo and Gladstone East prospects.

THIRD QUARTER CONFERENCE CALL

PXP plans to host its quarterly conference call tomorrow, November 7, 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 November 14, 2008 and can be accessed by dialing 1-800-642- 1687 or 1-706-645-9291. Conference call and replay ID: 69777216. A short slide presentation will be available in the Investor Information section of PXP’s website, http://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, Louisiana and the Gulf of Mexico. 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:

   * completion of proposed transaction,   * 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 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    Nine Months Ended                                       September 30,        September 30,                                      2008      2007       2008       2007   Revenues     Oil sales                      $528,787  $276,096  $1,531,138  $713,197     Gas sales                       181,971    22,696     528,374    63,441     Other operating revenues          8,779       177      15,805     2,571                                     719,537   298,969   2,075,317   779,209   Costs and Expenses     Production costs       Lease operating expenses       76,943    52,696     236,699   147,471       Steam gas costs                37,418    22,349     110,175    76,630       Electricity                    14,367    11,197      36,665    29,464       Production and ad valorem        taxes                         27,348     5,118      77,757    15,419       Gathering and transportation        expenses                       4,405     3,026      15,356     4,432     General and administrative       29,374    22,007     114,505    74,417     Depreciation, depletion and      amortization                   139,956    69,731     411,558   180,932     Accretion                         3,258     2,297       9,868     6,832                                     333,069   188,421   1,012,583   535,597   Income from Operations            386,468   110,548   1,062,734   243,612   Other Income (Expense)     Gain on sale of assets              -         -        34,658       -     Interest expense                (32,994)  (18,165)    (87,114)  (35,223)     Debt extinguishment costs        (3,138)      -       (13,401)      -     Gain (loss) on mark-to-market      derivative contracts           451,083   (39,155)    390,175   (75,582)     Other income (expense)          (13,842)     (372)    (12,181)      952   Income Before Income Taxes        787,577    52,856   1,374,871   133,759     Income tax (expense) benefit       Current                      (210,023)    2,183    (312,276)    2,183       Deferred                      (84,409)  (22,179)   (203,031)  (57,194)   Net Income                       $493,145   $32,860    $859,564   $78,748   Earnings per share     Basic                             $4.58     $0.45       $7.87     $1.09     Diluted                           $4.50     $0.45       $7.72     $1.07   Weighted Average Shares    Outstanding     Basic                           107,725    72,859     109,195    72,499     Diluted                         109,617    73,811     111,297    73,526      Plains Exploration & Production Company   Operating Data (Unaudited)                                       Three Months Ended   Nine Months Ended                                          September 30,       September 30,                                          2008     2007       2008     2007   Daily Average Volumes     Oil and liquids sales (Bbls)         55,803   47,482     56,199  47,233     Gas (Mcf)       Production                        225,232   63,768    220,145  48,108       Used as fuel                        5,691    6,096      6,053   6,313       Sales                             219,541   57,672    214,092  41,795     BOE       Production                         93,342   58,110     92,890  55,251       Sales                              92,393   57,094     91,881  54,199   Unit Economics (in dollars)     Average NYMEX Prices       Oil                               $118.22   $75.15    $113.52  $66.19       Gas                                 10.28     6.18       9.76    6.84     Average Realized Sales Price      Before Derivative Transactions       Oil (per Bbl)                     $103.00   $63.19     $99.43  $55.31       Gas (per Mcf)                        9.01     4.28       9.00    5.56       Per BOE                             83.62    56.89      81.81   52.49     Cash Margin per BOE (1)       Oil and gas revenues               $83.62   $56.89     $81.81  $52.49       Costs and expenses         Lease operating expenses         $(9.06) $(10.04)    $(9.40) $(9.96)         Steam gas costs                   (4.40)   (4.26)     (4.38)  (5.18)         Electricity                       (1.69)   (2.13)     (1.46)  (1.99)         Production and ad valorem          taxes                            (3.22)   (0.97)     (3.09)  (1.04)         Gathering and transportation      (0.52)   (0.58)     (0.61)  (0.30)       Gross margin before DD&A (GAAP)     64.73    38.91      62.87   34.02         Cash derivative settlements       (1.81)   (4.88)     (2.17)  (5.10)       Cash margin (Non-GAAP)             $62.92   $34.03     $60.70  $28.92    (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)                                               September 30,      December 31,                                                  2008              2007                      ASSETS                   (Unaudited)   Current Assets     Cash and cash equivalents                    $2,427          $25,446     Restricted cash                                 -             59,092     Accounts receivable                         362,015          304,972     Commodity derivative contracts               79,236            2,186     Inventories                                  29,643           18,394     Deferred income taxes                        19,474          229,893     Other current assets                         12,240           34,937                                                 505,035          674,920   Property and Equipment, at cost     Oil and natural gas properties -      full cost method       Subject to amortization                 7,328,579        7,340,238       Not subject to amortization             3,147,345        1,951,783     Other property and equipment                117,946           85,928                                              10,593,870        9,377,949     Less allowance for depreciation,      depletion and amortization              (1,404,010)      (1,000,722)                                               9,189,860        8,377,227   Goodwill                                      535,280          536,822   Commodity Derivative Contracts                293,439              -   Other Assets                                  112,240          104,382                                             $10,635,854       $9,693,351           LIABILITIES AND STOCKHOLDERS' EQUITY   Current Liabilities     Accounts payable                           $381,603         $319,583     Commodity derivative contracts               30,262           79,938     Royalties and revenues payable              145,411          132,919     Stock appreciation rights                     5,116           63,106     Interest payable                             32,696           25,330     Income taxes payable                        194,965            3,492     Accrued merger expenses                         964           77,980     Other current liabilities                   133,524          115,698                                                 924,541          818,046   Long-Term Debt     Senior revolving credit facility          2,034,131        2,205,000     Senior notes                              1,500,000        1,100,000                                               3,534,131        3,305,000   Other Long-Term Liabilities     Asset retirement obligation                 183,197          184,080     Other                                       125,374           88,547                                                 308,571          272,627   Deferred Income Taxes                       1,931,823        1,959,431   Stockholders'  Equity     Common stock                                  1,128            1,128     Additional paid-in capital                2,729,070        2,711,617     Retained earnings                         1,483,557          623,993     Accumulated other comprehensive      income                                       1,496            1,566     Treasury stock                             (278,463)             (57)                                               3,936,788        3,338,247                                             $10,635,854       $9,693,351      Plains Exploration & Production Company   Consolidated Statements of Cash Flows (Unaudited)   (in thousands of dollars)                                 Three Months Ended       Nine Months Ended                                  September 30,             September 30,                                 2008        2007        2008          2007   CASH FLOWS FROM OPERATING    ACTIVITIES   Net income                  $493,145    $32,860     $859,564      $78,748   Items not affecting cash    flows from operating    activities     Gain on sale of assets         -          -        (34,658)         -     Depreciation,      depletion,      amortization and      accretion                 143,214     72,028      421,426      187,764     Deferred income taxes       84,409     22,179      203,031       57,194     Debt extinguishment      costs                       3,138        -         13,401          -     (Gain) loss on      commodity derivative      contracts                (451,083)    39,155     (390,175)      75,582     Noncash compensation        (1,520)     5,120       38,931       26,741     Other noncash items          1,344        251        4,230          220   Change in assets and    liabilities from    operating activities        264,930    (27,082)      31,189     (140,488)   Net cash provided by    operating activities        537,577    144,511    1,146,939      285,761   CASH FLOWS FROM INVESTING    ACTIVITIES   Additions to oil and gas    properties                 (247,082)  (218,132)    (688,205)    (476,314)   Acquisition of oil and    gas properties           (1,681,676)    (1,532)  (2,012,969)    (975,407)   Acquisition of Pogo    Producing Company            (1,801)       -        (76,645)         -   Derivative settlements        (6,619)   (25,616)     (36,212)     (74,759)   Proceeds from property    sales, net of costs and    expenses                     18,278        -      1,736,059          -   Decrease in restricted    cash                            -          -         59,092          -   Additions to other    property and equipment       (7,005)    (4,424)     (34,448)     (28,588)   Other, net                      (442)    (7,438)      (1,671)     (10,869)   Net cash used in    investing activities     (1,926,347)  (257,142)  (1,054,999)  (1,565,937)   CASH FLOWS FROM FINANCING    ACTIVITIES   Revolving credit    facilities     Borrowings               7,263,596    533,315   11,501,352    1,989,565     Repayments              (5,840,465)  (428,315) (11,672,221)  (1,745,065)   Proceeds from issuance of    long-term debt                  -          -        400,000    1,100,000   Costs incurred in    connection with    financing arrangements      (19,384)      (265)     (25,448)     (18,182)   Derivative settlements       (11,009)       -        (24,097)         -   Purchase of treasury    stock                           -          -       (304,192)     (47,485)   Other                         (4,035)     1,700        9,647        5,041   Net cash provided by    (used in) financing    activities                1,388,703    106,435     (114,959)   1,283,874   Net (decrease) increase    in cash and cash    equivalents                     (67)    (6,196)     (23,019)       3,698   Cash and cash    equivalents, beginning    of period                     2,494     10,793       25,446          899   Cash and cash    equivalents, end of    period                       $2,427     $4,597       $2,427       $4,597      Plains Exploration & Production Company   Summary of Open Derivative Positions   at October 1, 2008               Instrument       Daily     Period      Type         Volumes       Average Price (1)     Index    Sales of Crude Oil Production    2008   Oct - Dec  Put options   42,000 Bbls   $55.00 Strike price      WTI   Oct - Dec  Collar         2,500 Bbls   $60.00 Floor - $80.13    WTI                                            Ceiling    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   Oct - Dec  Collar       15,000 MMBtu   $8.00 Floor - $12.11   Henry Hub                                            Ceiling   Oct - Dec  Collar      150,000 MMBtu   $10.00 Floor - $20.00  Henry Hub                                            Ceiling   2009    Jan - Dec  Collar      150,000 MMBtu   $10.00 Floor - $20.00  Henry Hub                                            Ceiling    (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 nine months ended September 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 the effect of current income taxes attributable to the taxable gain on the anticipated sale of our remaining interest in the Permian and Piceance Basin properties which is expected to close in December 2008 and 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 September 30,                                                   2008          2007                                                 (millions of dollars)   Net cash provided by operating    activities (GAAP)                             $537.6        $144.5     Changes in operating assets and      liabilities                                 (264.9)         27.1     Current income taxes on the tax gain      on sale of oil and gas properties            168.6             -     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                      (17.6)        (25.6)   Operating cash flow (Non-GAAP)                 $423.7        $146.0                                             Nine Months Ended September 30,                                                   2008          2007                                                 (millions of dollars)   Net cash provided by operating    activities (GAAP)                           $1,146.9        $285.8     Changes in operating assets and      liabilities                                  (31.2)        140.5     Current income taxes on the tax gain      on sale of oil and gas properties            168.6             -     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                      (60.3)        (74.8)   Operating cash flow (Non-GAAP)               $1,224.0        $351.5  

Plains Exploration & Production Company

CONTACT: investors, Hance Myers, +1-713-579-6291, hmyers@pxp.com, ormedia, Scott Winters, +1-713-579-6190, swinters@pxp.com, both of PlainsExploration & Production Company

Web site: http://www.pxp.com/




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