PXP Reports First-Quarter Results: Delivers Strong Oil/Liquids Sales Volume and Revenue Growth, Realizes Substantial Increase in Cash Flows from Operating Activities

Plains Exploration & Production Company

Consolidated Statements of Income

(in thousands, except per share data)

Three Months Ended

March 31,

2012

2011

(Unaudited)

Revenues

Oil sales

$ 467,488

$ 331,843

Gas sales

53,524

96,802

Other operating revenues

3,263

1,669

524,275

430,314

Costs and Expenses

Lease operating expenses

83,006

72,251

Steam gas costs

11,124

15,761

Electricity

11,374

9,720

Production and ad valorem taxes

12,631

11,528

Gathering and transportation expenses

16,272

12,747

General and administrative

38,382

36,023

Depreciation, depletion and amortization

177,697

134,543

Accretion

3,753

4,257

Other operating income

(1,261)

(304)

352,978

296,526

Income from Operations

171,297

133,788

Other (Expense) Income

Interest expense

(45,253)

(32,404)

Loss on mark-to-market derivative contracts

(109,050)

(50,996)

(Loss) gain on investment measured at fair value

(135,930)

67,254

Other (expense) income

(405)

554

(Loss) Income Before Income Taxes

(119,341)

118,196

Income tax (expense) benefit

Current

(19)

(372)

Deferred

46,057

(46,845)

Net (Loss) Income

(73,303)

$ 70,979

Net income attributable to noncontrolling interest
     in the form of preferred stock of subsidiary

(9,016)

Net Loss Attributable to Common Stockholders

$ (82,319)

(Loss) Earnings per Common Share

Basic

$ (0.64)

$ 0.50

Diluted

$ (0.64)

$ 0.49

Weighted Average Common Shares Outstanding

Basic

129,348

140,868

Diluted

129,348

143,416

Plains Exploration & Production Company

Operating Data

Three Months Ended

March 31,

2012

2011

(Unaudited)

Daily Average Volumes

       Oil and liquids sales (Bbls)

49,657

44,068

       Gas (Mcf)

            Production

234,001

269,222

            Used as fuel

4,705

5,788

            Sales 

229,296

263,434

       BOE

            Production

88,657

88,938

            Sales 

87,873

87,974

Unit Economics (in dollars) 

       Average Index Prices

            ICE Brent Price per Bbl

$   118.42

$   105.51

            NYMEX Price per Bbl

103.03

94.60

            NYMEX Price per Mcf

2.73

4.09

       Average Realized Sales Price Before Derivative Transactions

            Oil (per Bbl)

$   103.45

$     83.67

            Gas (per Mcf)

2.56

4.08

            Per BOE

65.16

54.14

       Cash Margin per BOE ⁽¹⁾

            Oil and gas revenues 

$     65.16

$     54.14

            Costs and expenses

               Lease operating expenses

(10.38)

(9.12)

               Steam gas costs

(1.39)

(1.99)

               Electricity

(1.42)

(1.23)

               Production and ad valorem taxes

(1.58)

(1.46)

               Gathering and transportation

(2.03)

(1.61)

               Oil and gas related DD&A

(21.64)

(16.28)

            Gross margin (GAAP)

26.72

22.45

               Oil and gas related DD&A

21.64

16.28

               Realized gain (loss) on derivative instruments

1.08

(1.78)

            Cash margin (non-GAAP)

$     49.44

$     36.95

Oil and gas capital expenditures accrued ($ in thousands) ⁽²⁾

$ 439,939

$ 389,341

⁽¹⁾

Cash margin per BOE (a non-GAAP measure) is calculated by adjusting gross margin per BOE (a GAAP measure) to include the realized gain and loss 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⁾

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 March 31, 2012

Oil

Gas

BOE

(per Bbl)

(per Mcf)

Average Realized Sales Price 

Average realized price before derivative instruments (GAAP)  ⁽¹⁾

$ 103.45

$     2.56

$ 65.16

      Realized (loss) gain on derivative instruments

(1.44)

0.73

1.08

Realized cash price including derivative settlements (non-GAAP)

$ 102.01

$     3.29

$ 66.24

Three Months Ended March 31, 2011

Oil

Gas

BOE

(per Bbl)

(per Mcf)

Average Realized Sales Price

Average realized price before derivative instruments (GAAP)  ⁽¹⁾

$   83.67

$     4.08

$ 54.14

      Realized (loss) gain on derivative instruments

(3.70)

0.03

(1.78)

Realized cash price including derivative settlements (non-GAAP)

$   79.97

$     4.11

$ 52.36

⁽¹⁾

Excludes the impact of production costs and expenses and DD&A.

Plains Exploration & Production Company

Consolidated Statements of Cash Flows

(in thousands of dollars)

Three Months Ended

March 31,

2012

2011

(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income 

$    (73,303)

$     70,979

Items not affecting cash flows from operating activities

Depreciation, depletion, amortization and accretion

181,450

138,800

Deferred income tax (benefit) expense

(46,057)

46,845

Loss on mark-to-market derivative contracts

109,050

50,996

Loss (gain) on investment measured at fair value

135,930

(67,254)

Non-cash compensation

18,232

16,806

Other non-cash items

1,421

918

Change in assets and liabilities from operating activities

8,688

31,873

Net cash provided by operating activities

335,411

289,963

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to oil and gas properties

(401,311)

(358,472)

Acquisition of oil and gas properties 

(16,573)

(24,511)

Proceeds from sales of oil and gas properties, net of
   costs and expenses

42,656

11,987

Derivative settlements

9,321

(15,021)

Additions to other property and equipment

(2,904)

(2,671)

Net cash used in investing activities

(368,811)

(388,688)

CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings from revolving credit facilities

2,515,500

1,313,850

Repayments of revolving credit facilities

(2,440,500)

(1,808,850)

Proceeds from issuance of Senior Notes

-

600,000

Costs incurred in connection with financing arrangements

(125)

(9,069)

Purchase of treasury stock

(88,490)

-

Distributions to holders of noncontrolling interest in the
   form of preferred stock of subsidiary

(6,750)

-

Other

-

4

Net cash (used in) provided by financing activities

(20,365)

95,935

Net decrease in cash and cash equivalents

(53,765)

(2,790)

Cash and cash equivalents, beginning of period

419,098

6,434

Cash and cash equivalents, end of period

$   365,333

$       3,644

Plains Exploration & Production Company

Consolidated Balance Sheets

(in thousands of dollars)

March 31,

December 31,

2012

2011

ASSETS

(Unaudited)

Current Assets

Cash and cash equivalents

$ 365,333

$ 419,098

Accounts receivable

285,739

302,675

Commodity derivative contracts

17,628

50,964

Inventories

20,668

20,173

Investment

475,741

611,671

Deferred income taxes

199,368

20,723

Prepaid expenses and other current assets

23,228

16,073

1,387,705

1,441,377

Property and Equipment, at cost

Oil and natural gas properties - full cost method

Subject to amortization

12,912,108

12,016,252

Not subject to amortization

1,928,157

2,409,449

Other property and equipment

148,863

145,959

14,989,128

14,571,660

Less allowance for depreciation, depletion, amortization and impairment

(7,022,804)

(6,846,365)

7,966,324

7,725,295

Goodwill

535,140

535,140

Commodity Derivative Contracts

25,706

12,678

Other Assets

73,614

76,982

$ 9,988,489

$ 9,791,472

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable

$ 402,954

$ 385,231

Commodity derivative contracts

53,240

3,761

Royalties and revenues payable

125,918

97,095

Interest payable

70,783

39,342

Other current liabilities

77,395

100,757

730,290

626,186

Long-Term Debt

3,836,551

3,760,952

Other Long-Term Liabilities

Asset retirement obligation

235,193

230,633

Commodity derivative contracts

49,541

823

Other

15,897

15,749

300,631

247,205

Deferred Income Taxes

1,594,485

1,461,897

Equity

Stockholders' equity

Common stock

1,439

1,439

Additional paid-in capital

3,405,409

3,434,928

Retained earnings

249,251

337,991

Treasury stock, at cost

(562,429)

(509,722)

3,093,670

3,264,636

Noncontrolling interest

Preferred stock of subsidiary

432,862

430,596

3,526,532

3,695,232

$ 9,988,489

$ 9,791,472

Plains Exploration & Production Company

Summary of Open Derivative Positions

At April 30, 2012

Average

Instrument

Daily

Average

Deferred

Period ⁽¹⁾

Type

Volumes

Price ⁽²⁾

Premium

Index

Sales of Crude Oil Production

2012

May - Dec

Three-way collars⁽³⁾

40,000 Bbls

$100.00 Floor with an $80.00 Limit

-

Brent

$120.00 Ceiling

2013

Jan - Dec

Put options⁽⁴⁾

17,000 Bbls

$90.00 Floor with a $70.00 Limit

$6.253 per Bbl

Brent

Jan - Dec

Put options⁽⁴⁾

13,000 Bbls

$100.00 Floor with an $80.00 Limit

$6.800 per Bbl

Brent

Jan - Dec

Three-way collars⁽³⁾

25,000 Bbls

$100.00 Floor with an $80.00 Limit

-

Brent

$124.29 Ceiling

Jan - Dec

Three-way collars⁽³⁾

5,000 Bbls

$90.00 Floor with a $70.00 Limit

-

Brent

$126.08 Ceiling

2014

Jan - Dec

Put options⁽⁴⁾

50,000 Bbls

$90.00 Floor with a $70.00 Limit

$5.979 per Bbl

Brent

Sales of Natural Gas Production

2012

May - Dec

Put options⁽⁵⁾

120,000 MMBtu

$4.30 Floor with a $3.00 Limit

$0.298 per MMBtu

Henry Hub

May - Dec

Three-way collars⁽⁶⁾

40,000 MMBtu

$4.30 Floor with a $3.00 Limit

-

Henry Hub

$4.86 Ceiling

2013

Jan - Dec

Swap contracts⁽⁷⁾

110,000 MMBtu

$4.27

-

Henry Hub

2014

Jan - Dec

Swap contracts⁽⁷⁾

100,000 MMBtu

$4.09

-

Henry Hub

⁽¹⁾

All of our derivatives are settled monthly.

⁽²⁾

The average strike prices do not reflect any premiums to purchase the put options.

⁽³⁾

If the index price is less than the per barrel floor, we receive the difference between the per barrel floor and the index price up to a maximum of $20 per barrel.  We pay the difference between the index price and the per barrel ceiling if the index price is greater than the per barrel ceiling.  If the index price is at or above the per barrel floor but at or below the per barrel ceiling, no cash settlement is required.

⁽⁴⁾

If the index price is less than the per barrel floor, we receive the difference between the 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 the per barrel floor, we pay only the option premium.

⁽⁵⁾

If the index price is less than the per MMBtu floor, we receive the difference between the per MMBtu floor 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 the per MMBtu floor, we pay only the option premium.

⁽⁶⁾

If the index price is less than the per MMBtu floor, we receive the difference between the per MMBtu floor and the index price up to a maximum of $1.30 per MMBtu.  We pay the difference between the index price and the per MMBtu ceiling if the index price is greater than the per MMBtu ceiling.  If the index price is at or above the per MMBtu floor but at or below the per MMBtu ceiling, no cash settlement is required.

⁽⁷⁾

If the index price is less than the fixed price ($4.27 per MMBtu for the 2013 contracts and $4.09 per MMBtu for the 2014 contracts), we receive the difference between the fixed price and the index price.  We pay the difference between the index price and the fixed price if the index price is greater than the fixed price.

Derivative Settlements 

(in thousands of dollars)

The following table reflects cash (payments) receipts for derivatives attributable to the stated production periods.

Three Months Ended

March 31,

2012

2011

Oil sales 

$                            (6,509)

$                             (14,682)

Natural gas sales

15,177

620

$                             8,668

$                             (14,062)

Plains Exploration & Production Company

Reconciliation of GAAP to Non-GAAP Measure

The following table reconciles net (loss) income (GAAP) to adjusted net income and adjusted net income attributable to common stockholders (non-GAAP) for the three months ended March 31, 2012 and 2011. Adjusted net income and adjusted net income attributable to common stockholders exclude 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

March 31,

2012

2011

(millions of dollars)

Net (loss) income (GAAP)

$ (73.3)

$ 71.0

Unrealized loss on mark-to-market derivative contracts

109.1

51.0

Realized gain (loss) on mark-to-market derivative contracts ⁽¹⁾

8.7

(14.1)

Unrealized loss (gain) on investment measured at fair value

135.9

(67.3)

Adjust income taxes ⁽²⁾

(94.4)

11.8

 Adjusted net income (non-GAAP) 

$  86.0

$ 52.4

           Net income attributable to noncontrolling interest in the form of preferred stock of subsidiary 

(9.0)

 Adjusted net income attributable to common stockholders (non-GAAP) 

$  77.0

⁽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 40% for the three months ended March 31, 2012 and 2011, respectively. Tax rates exclude the effects of nonrecurring tax related expenses and benefits.

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 months ended March 31, 2012 and 2011.  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 the unrealized gain and loss on mark-to-market derivative contracts, to include derivative cash settlements for the realized gain and loss on mark-to-market derivative contracts that are classified as investing activities for GAAP purposes, to exclude the unrealized gain and loss on the investment measured at fair value, to include distributions to holders of noncontrolling interest in the form of preferred stock of subsidiary that are classified as financing activities for GAAP purposes and to exclude certain other items.  

Three Months Ended

March 31,

2012

2011

(millions of dollars)

Net (loss) income 

$        (73.3)

$            71.0

Items not affecting operating cash flows

  Depreciation, depletion, amortization and accretion

181.4

138.8

  Deferred income tax (benefit) expense

(46.0)

46.8

  Unrealized loss on mark-to-market derivative contracts

109.1

51.0

  Unrealized loss (gain) on investment measured at fair value

135.9

(67.3)

  Non-cash compensation

18.2

16.8

  Other non-cash items

1.4

0.9

Realized gain (loss) on mark-to-market derivative contracts

9.3

(15.0)

Distributions to holders of noncontrolling interest in the 

   form of preferred stock of subsidiary

(6.8)

-

Operating cash flow (non-GAAP)

$        329.2

$          243.0

Reconciliation of non-GAAP to GAAP measure

Operating cash flow (non-GAAP)

$        329.2

$          243.0

Changes in assets and liabilities from operating activities

8.7

31.9

Realized (gain) loss on mark-to-market derivative contracts

(9.3)

15.0

Distributions to holders of noncontrolling interest in the 

   form of preferred stock of subsidiary

6.8

-

Other

-

0.1

Net cash provided by operating activities (GAAP)

$        335.4

$          290.0