PXP Acquires Derivatives on 2011 and 2012 Natural Gas Production Volumes

PXP UPDATES STATUS OF ITS GULF OF MEXICO DIVESTMENTS

Dec 01, 2010, 07:26 ET from Plains Exploration & Production Company

HOUSTON, Dec. 1, 2010 /PRNewswire-FirstCall/ -- Plains Exploration & Production Company (NYSE: PXP) ("PXP" or the "Company") provides updates to its derivative positions and its Gulf of Mexico divestments.

DERIVATIVES

PXP has acquired natural gas three-way collars that have a floor price of $4.00 with a limit of $3.00 and a weighted average ceiling price of $4.92 on 200,000 MMBtu per day for 2011. If the index price is below $4.00 per MMBtu, PXP will receive the difference between $4.00 and the index price up to a maximum of $1.00 per MMBtu. If the index price is greater than the ceiling price of $4.92 per MMBtu, PXP will pay the difference between the index price and $4.92 per MMBtu. 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.

Additionally, the Company acquired put option spread contracts on 160,000 MMBtu per day for 2012 with a floor price of $4.30 and a limit of $3.00 per MMBtu. If the index price is below $4.30 per MMBtu, PXP will receive the difference between $4.30 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, PXP only pays the option premium.

PXP has elected not to use hedge accounting for these derivatives and consequently the derivatives will be marked-to-market with fair value gains and losses recognized currently as a gain or loss on mark-to-market derivative contracts on the income statement. A summary of PXP's open commodity derivative positions is included at the end of this release.

GULF OF MEXICO DIVESTMENTS

PXP has informed parties reviewing its deepwater divestment package that PXP will keep the data room open into the first quarter 2011 in order to accommodate existing and several additional participants.  James C. Flores, Chairman, President and CEO of PXP commented, "PXP is extending the process to allow for a complete assessment by all interested parties of PXP's properties.  The divestment is aimed at optimizing the value of PXP's deepwater portfolio and the additional time is an important step in securing the optimum value for PXP shareholders."

Also, on November 23, 2010, McMoRan Exploration Co. ("MMR") announced it will hold a special meeting of its stockholders on December 30, 2010, to vote on the issuance of common stock to PXP in connection with MMR's proposed acquisition of PXP's shallow water Gulf of Mexico shelf assets announced in September 2010.

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 statement. These include statements regarding:

* value and completion of proposed divestments, including receipt of McMoRan shareholder approval of the issuances of securities;

* 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.

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 as required by law, we do not intend to update these forward-looking statements and information.

Plains Exploration & Production Company

Summary of Open Derivative Positions

At December 1, 2010

Average

Instrument

Daily

Average

Deferred

Period (1)

Type

Volumes

Price (2)

Premium

Index

Sales of Crude Oil Production

2010

Dec

Put options

40,000 Bbls

$55.00 Strike price

$5.00 per Bbl (3)

WTI

2011

Jan - Dec

Put options (4)

31,000 Bbls

$80.00 Floor with a $60.00 Limit

$5.023 per Bbl

WTI

Jan - Dec

Three-way collars (5)

9,000 Bbls

$80.00 Floor with a $60.00 Limit

$1.00 per Bbl

WTI

$110.00 Ceiling

2012

Jan - Dec

Put options (4)

40,000 Bbls

$80.00 Floor with a $60.00 Limit

$6.087 per Bbl

WTI

Sales of Natural Gas Production

2010

Dec

Three-way collars (6)

85,000 MMBtu

$6.12 Floor with a $4.64 Limit

$0.034 per MMBtu

Henry Hub

$8.00 Ceiling

2011

Jan - Dec

Three-way collars

200,000 MMBtu

$4.00 Floor with a $3.00 Limit

Henry Hub

$4.92 Ceiling

2012

Jan - Dec

Put options

160,000 MMBtu

$4.30 Floor with a $3.00 Limit

$0.294 per MMBtu

Henry Hub

(1)  All of our derivative instruments are settled monthly.  

(2)  The average strike prices do not reflect the cost to purchase the put options or collars.  

(3)  In addition to the deferred premium, an upfront payment of $3.86 per barrel was paid upon entering into these derivative contracts.  

(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. If the index price is at or above $80 per barrel, we pay only the option premium.  

(5)  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.  

(6)  If the index price is less than the $6.12 per MMBtu floor, we receive the difference between the $6.12 per MMBtu floor and the index price up to a maximum of $1.48 per MMBtu less the option premium.  We pay the difference between the index price and $8.00 per MMBtu plus the option premium if the index price is greater than the $8.00 per MMBtu ceiling.  If the index price is at or above $6.12 per MMBtu but at or below $8.00 per MMBtu, we pay only the option premium.    

SOURCE Plains Exploration & Production Company



RELATED LINKS

http://www.pxp.com