PXP Announces 2010 Third Quarter Results
- NET INCOME OF $19 MILLION OR 13 CENTS PER DILUTED SHARE
- ADJUSTED NET INCOME OF $41 MILLION OR 29 CENTS PER DILUTED SHARE
- INCOME FROM OPERATIONS OF $97 MILLION, A 30% INCREASE YEAR-OVER-YEAR
- AVERAGE SALES VOLUMES OF 90.6 THOUSAND BARRELS OF OIL EQUIVALENT PER DAY, A 9% INCREASE YEAR-OVER-YEAR
- CONTINUED GRANITE WASH DRILLING SUCCESS
HOUSTON, Nov. 5, 2010 /PRNewswire-FirstCall/ -- Plains Exploration & Production Company (NYSE: PXP) ("PXP" or the "Company") announces 2010 third quarter results and updates drilling activities.
FINANCIAL SUMMARY
For the third quarter 2010, revenues of $387.8 million generated $18.8 million of net income, or $0.13 per diluted share, compared to revenues of $312.2 million and net income of $39.3 million, or $0.30 per diluted share, for the third quarter 2009.
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, which exclude the impact of the derivatives monetized in 2009, and other items. When considering these items, net income for the third quarter 2010 was $41.4 million, or $0.29 per diluted share, compared to $79.3 million, or $0.60 per diluted share, for the same period in 2009 (a non-GAAP measure).
Income from operations was $97.1 million for the third quarter 2010, a 30% increase over third quarter 2009. On a unit of production basis, income from operations increased 19% per barrel oil equivalent (BOE) compared to the third quarter 2009.
Net cash provided by operating activities for the third quarter 2010 was $202.7 million and operating cash flow was $284.4 million compared to net cash provided by operating activities of $168.2 million and operating cash flow of $258.1 million for the third quarter 2009 (a non-GAAP measure).
For the first nine months of 2010, revenues of $1.1 billion generated $122.8 million of net income, or $0.87 per diluted share, compared to revenues of $819.4 million and net income of $88.2 million, or $0.73 per diluted share for the same period in 2009.
Net income includes certain items affecting comparability of operating results. Those items consist of realized and unrealized gains and losses on our mark-to-market derivative contracts, which exclude the impact of the derivatives monetized in 2009, a non-cash impairment charge related to our Vietnam oil and gas properties in 2010, legal recoveries and other items. When considering these items, net income for the first nine months of 2010 was $121.9 million, or $0.86 per diluted share, compared to $161.0 million, or $1.34 per diluted share, for the same period in 2009 (a non-GAAP measure).
Income from operations was $265.7 million for the first nine months of 2010, a 47% increase over the first nine months of 2009. On a unit of production basis, income from operations increased 38% per BOE compared to the first nine months of 2009.
Net cash provided by operating activities for the first nine months of 2010 was $677.2 million and operating cash flow was $723.0 million compared to net cash provided by operating activities of $309.9 million and operating cash flow of $646.9 million for the same period in 2009 (a non-GAAP measure).
A reconciliation of non-GAAP financial measures used in this release to comparable GAAP financial measures is included with the financial tables.
James C. Flores, Chairman, President and CEO of PXP commented, "We delivered solid quarterly financial and operating results as average daily sales volumes, income from operations and cash flow each improved significantly from third quarter last year, and our year-to-date production costs per unit sold remain lower than the same period in 2009. For the remainder of 2010, PXP will remain focused on cost control, operational execution and completing the previously announced acquisition and divestment transactions. As we move into 2011, PXP remains well-positioned to continue growing reserves and production. Our $1.2 billion Board of Director approved 2011 capital budget supports our diversified growth strategy with oil focused drilling programs in our key growth asset areas."
OPERATIONAL UPDATE
* Average daily sales volumes for the third quarter 2010 were 90.6 thousand BOE, or 9% higher than the 83.0 thousand BOE in the third quarter 2009. Fourth-quarter 2010 average daily sales volumes are expected to be in line with third quarter volumes reflecting the impact of the Gulf of Mexico shelf asset sale, downtime on certain California and Texas assets and the previously announced repair work following a fire at the Madden Field in Wyoming.
* In the Texas Panhandle Granite Wash development, PXP is currently operating 5 rigs drilling horizontal wells to develop its inventory of over 150 potential locations. PXP plans to spud up to 20 horizontal wells in 2010 and over 25 wells in 2011. Four wells have been drilled, completed and are producing and 4 wells are waiting on completion.
Initial production rates for the two most recent completions are 10.4 million cubic feet per day with 344 barrels of condensate per day and an estimated 1,076 barrels of natural gas liquids per day (2,528 BOE net per day) for the Hanson 29-2H well, and 8.2 million cubic feet per day with 358 barrels of condensate per day and an estimated 773 barrels of natural gas liquids per day (1,993 BOE net per day) for the Sanders 74-1H well.
* In the Haynesville Shale, third quarter 2010 average daily sales volumes were 129 million cubic feet equivalent (MMcfe) per day net to PXP, an approximate 22% increase over the 106 MMcfe net per day average rate for the second quarter of 2010. With interests in 45 active drilling rigs, production from this asset area is expected to exceed 135 MMcfe net per day in the fourth quarter 2010.
* In California, PXP drilled 22 wells in the San Joaquin Valley and 8 wells in the Los Angeles Basin during the third quarter and expects to drill up to 16 wells in the San Joaquin Valley and up to 9 wells in the Los Angeles Basin during the fourth quarter.
* In the South Texas Eagle Ford, the previously announced acquisition is on track for a November closing. Currently, four rigs are operating on the properties and 20 gross wells have been drilled, completed or are producing. Once closed, PXP will have a net acreage position of approximately 60,000 acres, an estimated 140 to 175 million BOEs of net resource potential and approximately 500 net well locations. This asset area is poised to be a significant driver of future production and reserve growth for PXP.
* On September 19, 2010, PXP, together with certain of its subsidiaries, entered into an agreement with McMoRan Exploration Co. (MMR) and certain of its subsidiaries to divest our interest in properties located in the Gulf of Mexico shallow water for a combination of cash and stock. PXP will receive $75 million in cash and 51 million shares of MMR common stock in exchange for its interest in all of its Gulf of Mexico leasehold located in less than 500 feet of water. The transaction is subject to customary closing conditions and adjustments and the approval of MMR's stockholders. The transaction will have an effective date of August 1, 2010 and is expected to close by year-end 2010.
* On September 20, 2010, PXP announced that the data room process for the planned Gulf of Mexico deepwater divestment was underway. PXP expects to set an early December bid date and close the transaction by year-end 2010 or early 2011.
GUIDANCE
PXP plans to issue full-year 2011 operating and financial guidance at the end of this year. The 2011 guidance will reflect the impact of the previously announced Eagle Ford acquisition and Gulf of Mexico divestments.
CONFERENCE CALL
PXP will host a conference call today, Friday, November 5, 2010 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 number is 17620650. 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, 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:
* completion of the proposed acquisition,
* value and completion of the proposed divestments, including the receipt of McMoRan shareholder approval of the issuance of securities,
* oil and gas prices,
* results of drilling activities,
* development schedules,
* 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 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 | ||||||||||
Consolidated Statements of Income (Unaudited) | ||||||||||
(in thousands, except per share data) | ||||||||||
Three Months Ended | Nine Months Ended | |||||||||
September 30, | September 30, | |||||||||
2010 | 2009 | 2010 | 2009 | |||||||
Revenues | ||||||||||
Oil sales | $ 276,423 | $ 249,619 | $ 828,690 | $ 625,822 | ||||||
Gas sales | 110,510 | 62,428 | 305,927 | 192,233 | ||||||
Other operating revenues | 890 | 141 | 1,849 | 1,326 | ||||||
387,823 | 312,188 | 1,136,466 | 819,381 | |||||||
Costs and Expenses | ||||||||||
Lease operating expenses | 67,668 | 60,276 | 187,707 | 194,564 | ||||||
Steam gas costs | 17,146 | 10,956 | 52,166 | 37,425 | ||||||
Electricity | 10,093 | 10,585 | 31,242 | 33,895 | ||||||
Production and ad valorem taxes | 9,082 | 7,917 | 21,357 | 29,995 | ||||||
Gathering and transportation expenses | 15,311 | 10,349 | 37,642 | 25,667 | ||||||
General and administrative | 34,278 | 36,419 | 101,969 | 111,066 | ||||||
Depreciation, depletion and amortization | 133,207 | 101,755 | 379,410 | 280,691 | ||||||
Impairment of oil and gas properties | - | - | 59,475 | - | ||||||
Accretion | 4,420 | 3,541 | 13,238 | 10,628 | ||||||
Legal recovery | - | - | (8,423) | (87,272) | ||||||
Other operating (income) expense | (467) | (4,403) | (4,981) | 1,553 | ||||||
290,738 | 237,395 | 870,802 | 638,212 | |||||||
Income from Operations | 97,085 | 74,793 | 265,664 | 181,169 | ||||||
Other (Expense) Income | ||||||||||
Interest expense | (26,514) | (16,355) | (75,606) | (54,287) | ||||||
Debt extinguishment costs | (461) | (1,183) | (1,189) | (12,093) | ||||||
(Loss) gain on mark-to-market derivative contracts | (42,600) | 14,795 | 23,240 | 13,217 | ||||||
Other income | 1,704 | 569 | 14,245 | 761 | ||||||
Income Before Income Taxes | 29,214 | 72,619 | 226,354 | 128,767 | ||||||
Income tax benefit (expense) | ||||||||||
Current | 75,169 | (21,696) | 67,759 | (33,757) | ||||||
Deferred | (85,535) | (11,597) | (171,362) | (6,837) | ||||||
Net Income | $ 18,848 | $ 39,326 | $ 122,751 | $ 88,173 | ||||||
Earnings per Share | ||||||||||
Basic | $ 0.13 | $ 0.30 | $ 0.87 | $ 0.74 | ||||||
Diluted | $ 0.13 | $ 0.30 | $ 0.87 | $ 0.73 | ||||||
Weighted Average Shares Outstanding | ||||||||||
Basic | 140,601 | 131,701 | 140,304 | 119,288 | ||||||
Diluted | 141,609 | 132,725 | 141,706 | 120,003 | ||||||
Plains Exploration & Production Company | |||||||||||
Operating Data (Unaudited) | |||||||||||
Three Months Ended | Nine Months Ended | ||||||||||
September 30, | September 30, | ||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||
Daily Average Volumes | |||||||||||
Oil and liquids sales (Bbls) | 46,478 | 47,399 | 45,702 | 48,521 | |||||||
Gas (Mcf) | |||||||||||
Production | 270,072 | 220,103 | 252,635 | 204,605 | |||||||
Used as fuel | 5,396 | 6,443 | 5,327 | 6,678 | |||||||
Sales | 264,676 | 213,660 | 247,308 | 197,927 | |||||||
BOE | |||||||||||
Production | 91,490 | 84,083 | 87,807 | 82,622 | |||||||
Sales | 90,591 | 83,009 | 86,920 | 81,509 | |||||||
Unit Economics (in dollars) | |||||||||||
Average NYMEX Prices | |||||||||||
Oil | $ 76.21 | $ 68.24 | $ 77.69 | $ 57.32 | |||||||
Gas | 4.39 | 3.40 | 4.57 | 3.91 | |||||||
Average Realized Sales Price Before Derivative Transactions | |||||||||||
Oil (per Bbl) | $ 64.65 | $ 57.26 | $ 66.42 | $ 47.24 | |||||||
Gas (per Mcf) | 4.54 | 3.18 | 4.53 | 3.56 | |||||||
Per BOE | 46.43 | 40.86 | 47.82 | 36.76 | |||||||
Cash Margin per BOE (1) | |||||||||||
Oil and gas revenues | $ 46.43 | $ 40.86 | $ 47.82 | $ 36.76 | |||||||
Costs and expenses | |||||||||||
Lease operating expenses | (8.12) | (7.89) | (7.91) | (8.75) | |||||||
Steam gas costs | (2.06) | (1.43) | (2.20) | (1.68) | |||||||
Electricity | (1.21) | (1.39) | (1.32) | (1.52) | |||||||
Production and ad valorem taxes | (1.09) | (1.04) | (0.90) | (1.35) | |||||||
Gathering and transportation | (1.84) | (1.36) | (1.59) | (1.15) | |||||||
Oil and gas related DD&A | (15.33) | (12.66) | (15.33) | (11.89) | |||||||
Gross margin (GAAP) | 16.78 | 15.09 | 18.57 | 10.42 | |||||||
Oil and gas related DD&A | 15.33 | 12.66 | 15.33 | 11.89 | |||||||
Realized (losses) and gains | |||||||||||
on derivative instruments (2) | (0.89) | 10.07 | (1.11) | 11.06 | |||||||
Cash margin (Non-GAAP) | $ 31.22 | $ 37.82 | $ 32.79 | $ 33.37 | |||||||
Oil and gas capital expenditures accrued ($ in thousands) (3) | $ 273,182 | $ 446,630 | $ 781,351 | $ 1,249,048 | |||||||
(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) | The 2009 realized gain excludes all cash settlements for the $106 crude oil puts and the $54 crude oil swaps monetized in the first quarter of 2009. Cash receipts on these instruments were $121.4 million prior to the $1.1 billion monetization in the first quarter 2009. | ||||||||||
(3) | 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 Company | |||||||
Reconciliation of GAAP to Non-GAAP Measure | |||||||
Three Months Ended September 30, 2010 | |||||||
Oil | Gas | BOE | |||||
(per Bbl) | (per Mcf) | ||||||
Average Realized Sales Price | |||||||
Average realized price before derivative instruments (GAAP) (1) | $ 64.65 | $ 4.54 | $ 46.43 | ||||
Realized (losses) gains on derivative instruments | (4.18) | 0.43 | (0.89) | ||||
Realized cash price including derivative settlements (non-GAAP) | $ 60.47 | $ 4.97 | $ 45.54 | ||||
Three Months Ended September 30, 2009 | |||||||
Oil | Gas | BOE | |||||
(per Bbl) | (per Mcf) | ||||||
Average Realized Sales Price | |||||||
Average realized price before derivative instruments (GAAP) (1) | $ 57.26 | $ 3.18 | $ 40.86 | ||||
Realized (losses) gains on derivative instruments | (2.11) | 4.38 | 10.07 | ||||
Realized cash price including derivative settlements (non-GAAP) | $ 55.15 | $ 7.56 | $ 50.93 | ||||
Nine Months Ended September 30, 2010 | |||||||
Oil | Gas | BOE | |||||
(per Bbl) | (per Mcf) | ||||||
Average Realized Sales Price | |||||||
Average realized price before derivative instruments (GAAP) (1) | $ 66.42 | $ 4.53 | $ 47.82 | ||||
Realized (losses) gains on derivative instruments | (4.25) | 0.40 | (1.11) | ||||
Realized cash price including derivative settlements (non-GAAP) | $ 62.17 | $ 4.93 | $ 46.71 | ||||
Nine Months Ended September 30, 2009 | |||||||
Oil | Gas | BOE | |||||
(per Bbl) | (per Mcf) | ||||||
Average Realized Sales Price | |||||||
Average realized price before derivative instruments (GAAP) (1) | $ 47.24 | $ 3.56 | $ 36.76 | ||||
Realized gains on derivative instruments (2) | 0.92 | 4.33 | 11.06 | ||||
Realized cash price including derivative settlements (non-GAAP) | $ 48.16 | $ 7.89 | $ 47.82 | ||||
(1) | Excludes the impact of production costs and expenses and DD&A. | ||||||
(2) | The 2009 realized gain excludes all cash settlements for the $106 crude oil puts and the $54 crude oil swaps monetized in the first quarter of 2009. Cash receipts on these instruments were $121.4 million prior to the $1.1 billion monetization in the first quarter 2009. | ||||||
Plains Exploration & Production Company | |||||
Consolidated Statements of Cash Flows (Unaudited) | |||||
(in thousands of dollars) | |||||
Nine Months Ended | |||||
September 30, | |||||
2010 | 2009 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income | $ 122,751 | $ 88,173 | |||
Items not affecting cash flows from operating activities | |||||
Depreciation, depletion, amortization and accretion | 392,648 | 291,319 | |||
Impairment of oil and gas properties | 59,475 | - | |||
Deferred income tax expense | 171,362 | 6,837 | |||
Debt extinguishment costs | 1,189 | 12,093 | |||
Gain on mark-to-market derivative contracts | (23,240) | (13,217) | |||
Noncash compensation | 36,356 | 47,816 | |||
Other noncash items | 2,467 | 4,479 | |||
Change in assets and liabilities from operating activities | (85,836) | (127,614) | |||
Net cash provided by operating activities | 677,172 | 309,886 | |||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Additions to oil and gas properties | (805,744) | (1,242,698) | |||
Acquisition of oil and gas properties (1) | 35,350 | (1,137,142) | |||
Proceeds from sales of oil and gas properties | 6,350 | - | |||
Derivative settlements | (23,546) | 1,457,232 | |||
Additions to other property and equipment | (7,115) | (12,167) | |||
Other | - | 162 | |||
Net cash used in investing activities | (794,705) | (934,613) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Borrowings from revolving credit facilities | 1,486,610 | 2,315,090 | |||
Repayments of revolving credit facilities | (1,636,610) | (3,545,090) | |||
Proceeds from issuance of Senior Notes | 300,000 | 916,439 | |||
Costs incurred in connection with financing arrangements | (22,649) | (19,441) | |||
Derivative settlements | - | 1,392 | |||
Issuance of common stock | - | 648,035 | |||
Other | 31 | 28 | |||
Net cash provided by financing activities | 127,382 | 316,453 | |||
Net increase (decrease) in cash and cash equivalents | 9,849 | (308,274) | |||
Cash and cash equivalents, beginning of period | 1,859 | 311,875 | |||
Cash and cash equivalents, end of period | $ 11,708 | $ 3,601 | |||
(1) | The net cash inflow in 2010 is primarily 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 Company | ||||||
Consolidated Balance Sheets | ||||||
(in thousands of dollars) | ||||||
September 30, | December 31, | |||||
2010 | 2009 | |||||
ASSETS | (Unaudited) | |||||
Current Assets | ||||||
Cash and cash equivalents | $ 11,708 | $ 1,859 | ||||
Accounts receivable | 227,222 | 258,585 | ||||
Commodity derivative contracts | 9,304 | 11,952 | ||||
Inventories | 21,471 | 19,934 | ||||
Prepaid expenses | 36,805 | 11,586 | ||||
Other current assets | 6,582 | 2,719 | ||||
313,092 | 306,635 | |||||
Property and Equipment, at cost | ||||||
Oil and natural gas properties - full cost method | ||||||
Subject to amortization | 10,161,418 | 9,044,146 | ||||
Not subject to amortization | 2,952,846 | 3,279,537 | ||||
Other property and equipment | 128,455 | 125,667 | ||||
13,242,719 | 12,449,350 | |||||
Less allowance for depreciation, depletion, amortization and impairment | (6,044,294) | (5,616,628) | ||||
7,198,425 | 6,832,722 | |||||
Goodwill | 535,223 | 535,237 | ||||
Commodity Derivative Contracts | 7,416 | - | ||||
Other Assets | 73,013 | 60,137 | ||||
$ 8,127,169 | $ 7,734,731 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current Liabilities | ||||||
Accounts payable | $ 209,402 | $ 248,454 | ||||
Commodity derivative contracts | 16,925 | 59,176 | ||||
Royalties and revenues payable | 66,785 | 78,590 | ||||
Interest payable | 58,713 | 45,743 | ||||
Deferred income taxes | 18,418 | 153,473 | ||||
Other current liabilities | 68,095 | 97,115 | ||||
438,338 | 682,551 | |||||
Long-Term Debt | 2,803,475 | 2,649,689 | ||||
Other Long-Term Liabilities | ||||||
Asset retirement obligation | 230,604 | 214,231 | ||||
Other | 23,114 | 55,531 | ||||
253,718 | 269,762 | |||||
Deferred Income Taxes | 1,242,864 | 933,748 | ||||
Stockholders' Equity | ||||||
Common stock | 1,439 | 1,439 | ||||
Additional paid-in capital | 3,414,353 | 3,381,566 | ||||
Retained earnings | 169,062 | 51,204 | ||||
Treasury stock, at cost | (196,080) | (235,228) | ||||
3,388,774 | 3,198,981 | |||||
$ 8,127,169 | $ 7,734,731 | |||||
Plains Exploration & Production Company | ||||||||||||
Summary of Open Derivative Positions | ||||||||||||
At October 1, 2010 | ||||||||||||
Average | ||||||||||||
Instrument | Daily | Average | Deferred | |||||||||
Period (1) | Type | Volumes | Price (2) | Premium | Index | |||||||
Sales of Crude Oil Production | ||||||||||||
2010 | ||||||||||||
Oct - 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 | ||||||||||||
Oct - 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 | ||||||||||||
(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. | |||||||||||
Plains Exploration & Production Company | |||||
Reconciliation of GAAP to Non-GAAP Measure | |||||
The following table reconciles net income (GAAP) to adjusted net income (non-GAAP) for the three and nine months ended September 30, 2010 and 2009. 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 Ended | |||||
September 30, | |||||
2010 | 2009 | ||||
(millions of dollars) | |||||
Net income (GAAP) | $ 18.8 | $ 39.3 | |||
Unrealized loss (gain) on mark-to-market derivative contracts | 42.6 | (14.8) | |||
Realized (loss) gain on mark-to-market derivative contracts (1) | (7.4) | 76.9 | |||
Adjust income taxes (2) | (12.6) | (22.1) | |||
Adjusted net income (non-GAAP) | $ 41.4 | $ 79.3 | |||
Nine Months Ended | |||||
September 30, | |||||
2010 | 2009 | ||||
(millions of dollars) | |||||
Net income (GAAP) | $ 122.8 | $ 88.2 | |||
Unrealized gain on mark-to-market derivative contracts | (23.2) | (13.2) | |||
Realized (loss) gain on mark-to-market derivative contracts (1) (3) | (26.3) | 246.0 | |||
Impairment of oil and gas properties | 59.5 | - | |||
Legal recovery | (8.4) | (87.3) | |||
Other non-operating income | (8.1) | - | |||
Adjust income taxes (2) | 5.6 | (72.7) | |||
Adjusted net income (non-GAAP) | $ 121.9 | $ 161.0 | |||
(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 36% and 41% for the three months ended September 30, 2010 and 2009, respectively. Tax rates assumed based upon adjusted earnings are 45% and 41% for the nine months ended September 30, 2010 and 2009. Tax rates exclude the effects of nonrecurring tax related expenses and benefits. | ||||
(3) | The 2009 realized gain excludes all cash settlements for the $106 crude oil puts and the $54 crude oil swaps monetized in the first quarter of 2009. Cash receipts on these instruments were $121.4 million prior to the $1.1 billion monetization in the first quarter 2009. | ||||
Plains Exploration & Production Company | ||||||||||
Reconciliation of GAAP to Non-GAAP Measure | ||||||||||
The following tables reconcile Net Cash Provided by Operating Activities (GAAP) to Operating Cash Flow (non-GAAP) for the three and nine months ended September 30, 2010 and 2009. 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 either investing or financing activities for GAAP purposes and to exclude certain items. | ||||||||||
Three Months Ended | Nine Months Ended | |||||||||
September 30, | September 30, | |||||||||
2010 | 2009 | 2010 | 2009 | |||||||
(millions of dollars) | ||||||||||
Net income | $ 18.8 | $ 39.3 | $ 122.8 | $ 88.2 | ||||||
Items not affecting operating cash flows | ||||||||||
Depreciation, depletion, amortization and accretion | 137.6 | 105.3 | 392.6 | 291.3 | ||||||
Impairment of oil and gas properties | - | - | 59.5 | - | ||||||
Deferred income tax expense | 85.5 | 11.6 | 171.4 | 6.8 | ||||||
Debt extinguishment costs | 0.5 | 1.2 | 1.2 | 12.1 | ||||||
Unrealized loss (gain) on mark-to-market derivative contracts | 42.6 | (14.8) | (23.2) | (13.2) | ||||||
Noncash compensation | 13.4 | 15.3 | 36.3 | 47.8 | ||||||
Other noncash items | 0.8 | 1.6 | 2.4 | 4.5 | ||||||
Realized (loss) gain on mark-to-market derivative contracts (1) | (7.4) | 76.9 | (23.5) | 262.9 | ||||||
Legal recovery and other | - | - | (16.5) | (87.3) | ||||||
Current income taxes attributable to derivative contracts | (7.4) | 21.7 | - | 33.8 | ||||||
Operating cash flow (non-GAAP) | $ 284.4 | $ 258.1 | $ 723.0 | $ 646.9 | ||||||
Reconciliation of non-GAAP to GAAP measure | ||||||||||
Operating cash flow (non-GAAP) | $ 284.4 | $ 258.1 | $ 723.0 | $ 646.9 | ||||||
Legal recovery and other | - | - | 16.5 | 87.3 | ||||||
Changes in assets and liabilities from operating activities | (96.5) | 8.7 | (85.8) | (127.6) | ||||||
Realized loss (gain) on mark-to-market derivative contracts (1) | 7.4 | (76.9) | 23.5 | (262.9) | ||||||
Current income taxes attributable to derivative contracts | 7.4 | (21.7) | - | (33.8) | ||||||
Net cash provided by operating activities (GAAP) | $ 202.7 | $ 168.2 | $ 677.2 | $ 309.9 | ||||||
(1) | The 2009 realized gain excludes all cash settlements for the $106 crude oil puts and the $54 crude oil swaps monetized in the first quarter of 2009. Cash receipts on these instruments were $121.4 million prior to the $1.1 billion monetization in the first quarter 2009. | |||||||||
Plains Exploration & Production Company | |||||||||
Derivative Settlements | |||||||||
(in thousands of dollars) | |||||||||
The following tables reflect cash (payments) receipts for derivatives attributable to the stated production periods. | |||||||||
Three Months Ended | Nine Months Ended | ||||||||
September 30, | September 30, | ||||||||
2010 | 2009 | 2010 | 2009 | ||||||
Oil sales (1) | $ (17,854) | $ (9,199) | $ (52,980) | $ 12,120 | |||||
Gas sales | 10,461 | 86,110 | 26,711 | 233,871 | |||||
$ (7,393) | $ 76,911 | $ (26,269) | $ 245,991 | ||||||
2010 | 2009 | ||||||||
Amortization of monetized derivatives (2) | |||||||||
First Quarter | $ 123,730 | $ 57,211 | |||||||
Second Quarter | 125,105 | 167,943 | |||||||
Third Quarter | 126,479 | 169,788 | |||||||
Fourth Quarter | 126,479 | 169,788 | |||||||
$ 501,793 | $ 564,730 | ||||||||
(1) | Excludes all cash settlements for the $106 crude oil puts and the $54 crude oil swaps monetized in the first quarter of 2009. Cash receipts on these instruments were $121.4 million prior to the $1.1 billion monetization in the first quarter 2009. | ||||||||
(2) | Represents the net receipts for derivatives monetized in the first quarter of 2009 attributable to their production periods, net of accrued interest on our deferred premiums. | ||||||||
SOURCE Plains Exploration & Production Company
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