PXP Receives $450 Million in Financing for 20% Equity Interest in Its Gulf of Mexico Business

HOUSTON, Oct. 28, 2011 /PRNewswire/ -- Plains Exploration & Production Company (NYSE: PXP) ("PXP" or the "Company") announced today it has executed a securities purchase agreement with EIG Global Energy Partners ("EIG") in which PXP will receive $450 million of cash proceeds in exchange for a 20% equity interest in Plains Offshore Operations Inc. ("Plains Offshore"), a wholly owned subsidiary of PXP established to hold all of PXP's Gulf of Mexico assets, including the Lucius oil development project, a well-appraised discovery with first production anticipated in 2014. The proceeds raised are expected to be used to fund Plains Offshore's share of capital investment in the Lucius development and the Phobos prospect exploratory drilling planned for 2012.

Under the agreement, Plains Offshore will issue to EIG managed funds and accounts 8% convertible preferred stock and non-detachable warrants to purchase Plains Offshore's common stock. The 8% convertible preferred stock will pay quarterly cash dividends of 6% per annum and an additional 2% per annum dividend, which may be deferred and accumulated quarterly until paid. Plains Offshore also intends to enter into a $300 million revolving credit facility with a bank group.

Plains Offshore's oil-focused Gulf of Mexico portfolio includes 100 blocks covering approximately 570,000 gross acres and a number of de-risked near-term exploration prospects targeting the Pliocene trend with additional Miocene potential.

The transaction is expected to close during the fourth quarter 2011 subject to customary closing conditions, and Plains Offshore will reimburse PXP for any costs attributable to the Gulf of Mexico assets incurred since July 1, 2011. Jefferies & Company, Inc., J.P. Morgan Securities LLC and Barclays Capital Inc. acted as financial advisors to PXP on this transaction.

MANAGEMENT COMMENT

James C. Flores, Chairman, President and CEO of PXP commented, "This transaction represents a major accomplishment in our plan to deliver maximum asset value to our shareholders. Our growing onshore oil business combined with PXP's well-capitalized Gulf of Mexico oil business, anchored by the Lucius development, is expected to increase total company oil/liquids sales volumes at greater than 15% compounded average growth rate through 2016. While this transaction values our Gulf of Mexico business at $2.25 billion (including cash), the financing provides the capital for the development of Lucius, drilling of Phobos and other high potential prospects going forward."

EARNINGS CONFERENCE CALL

PXP will host a conference call on Friday, November 4, 2011 at 8:00 a.m. Central time to discuss this development as well as third quarter operating and financial results. Investors wishing to participate in the conference call may dial 1-800-567-9836 or 1-973-935-8460. The conference call and replay ID is: 17181828. The replay can be accessed by dialing 1-855-859-2056 or 1-404-537-3406. 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.

EIG Global Energy Partners specializes in private investments in energy, energy-related infrastructure and resources. EIG has $9.2 billion currently under management and a 29-year history investing in the sector. EIG is headquartered in Washington, DC, with offices in Houston, New York, London, Hong Kong and Sydney. Further information is available at www.eigpartners.com.

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 deepwater financing,
* reserve and production estimates,
* oil and gas prices,
* 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 press release are made as of the date hereof, and you should not place undue reliance on these statements without also considering the risks and uncertainties associated with these statements and our business that are discussed in this press release and our other filings with the SEC. Moreover, although we believe the expectations reflected in the forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any deviations will not be material. Except as required by law, we do not intend to update these forward-looking statements and information.

SOURCE Plains Exploration & Production Company