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Plains Exploration & Production Company 8-K 2012 Exhibit 99.1
NEWS RELEASE FOR IMMEDIATE RELEASE PXP Announces 2011 Full-Year Results: Realizes Significant Net Income Growth Year-over-Year, Achieves Record Sales Volumes, Generates Double-Digit Cash Flow Growth, and Delivers Solid Reserve Replacement and Substantially Higher Reserve Value PXP Repurchased 12.8 Million Shares of Common Stock, Reducing Shares Outstanding to 128.2 Million as of January 31, 2012 PXP’s Board of Directors Authorizes $1 Billion in Share Repurchases and Extends Program Until January 2016 Fourth-Quarter Statistical Highlights:
Full-Year Statistical Highlights:
2011 Proved Reserves:
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2011 Oil/Liquids Proved Reserves:
Houston, Texas, February 23, 2012—Plains Exploration & Production Company (NYSE:PXP) (“PXP” or the “Company”) announces 2011 fourth-quarter and full-year financial and operating results. PXP reported fourth-quarter revenues of $517.5 million and net income attributable to common stockholders of $97.7 million, or $0.69 per diluted share, compared to revenues of $408.1 million and a net loss of $19.5 million, or $0.14 per diluted share, for the fourth-quarter 2010. Quarterly income was reduced by approximately $0.07 per share due to higher stock-based compensation expense reflecting the impact of a 62% increase in PXP’s share price during the quarter and approximately $0.14 per share due to an increase in the depreciation, depletion and amortization rate. Fourth-quarter net income attributable to common stockholders 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, a $232.3 million unrealized gain on investment in McMoRan Exploration Co. (“McMoRan”) common stock, debt extinguishment costs, and other items. When considering these items, PXP reports net income attributable to common stockholders of $28.6 million, or $0.20 per diluted share (a non-GAAP measure). PXP reported full-year revenues of $2.0 billion and net income attributable to common stockholders of $205.3 million, or $1.44 per diluted share, compared to revenues of $1.5 billion and net income of $103.3 million, or $0.73 per diluted share, for the full-year 2010. Full-year 2011 net income attributable to common stockholders 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, debt extinguishment costs, an unrealized loss on investment in McMoRan, a 2010 impairment of PXP’s relinquished Vietnam oil and gas properties, and other items. When considering these items, PXP reports net income attributable to common stockholders of $223.0 million, or $1.56 per diluted share (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. OPERATIONAL UPDATE PXP’s 2011 fourth-quarter daily sales volumes averaged 105,396 BOE per day, a 13% increase over 92,994 BOE per day in the fourth quarter of 2010. Adjusting for the 2010 and 2011 asset divestments, the 13% sales volume increase would have been 26% and 2011 fourth-quarter daily sales volumes would have averaged 90,349 BOE per day. PXP’s 2011 fourth-quarter oil/liquids daily sales volumes averaged 52,262 barrels per day, a 12% increase over 46,658 barrels per day in the fourth quarter of 2010. Adjusting for the 2010 and 2011 asset divestments, the 12% sales volume increase would have been 16% and 2011 fourth-quarter daily sales volumes would have averaged 47,464 barrels per day. PXP’s 2011 full-year daily sales volumes averaged approximately 98,950 BOE per day, a 12% increase over full-year 2010 volumes of 88,451 BOE per day. Adjusting for the 2010 and 2011 asset divestments, the 12% sales volume increase would have been 23% and 2011 full-year daily sales volumes would have averaged 82,197 BOE per day.
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PXP’s 2011 full-year oil/liquids daily sales volumes averaged 48,964 barrels per day, a 7% increase over 45,943 barrels per day in 2010. Adjusting for the 2010 and 2011 asset divestments, the 7% sales volume increase would have been 8% and 2011 daily sales volumes would have averaged 43,858 barrels per day. The robust volume growth is driven primarily by strong performance in the Eagle Ford Shale and Haynesville Shale asset areas combined with steady, consistent performance in California. In the Eagle Ford Shale, fourth-quarter daily sales volumes averaged approximately 9,123 BOE per day net to PXP, compared to approximately 1,500 BOE per day net to PXP from the November acquisition to the end of fourth-quarter 2010. January 2012 volumes averaged approximately 13,700 BOE per day compared to approximately 1,970 BOE per day net to PXP in January 2011. The Company had 6.9 net rigs operating on its acreage at the end of January. In California, fourth-quarter average daily sales volumes were 40,003 BOE per day, essentially flat compared to the fourth-quarter 2010; and in the Haynesville Shale, fourth-quarter average daily sales volumes were approximately 200 million cubic feet equivalent (MMcfe) net to PXP compared to approximately 146 MMcfe in the fourth-quarter 2010. In the Gulf of Mexico, the operator of the Lucius discovery, Anadarko Petroleum Corporation, announced in December that it, along with its co-venturers, have sanctioned the development of the Lucius project, located in the Keathley Canyon area of the deepwater Gulf of Mexico. Lucius will be developed with a truss spar floating production facility with the capacity to produce in excess of 80,000 barrels of oil per day and 450 million cubic feet of natural gas per day. The spar is currently under construction at Technip’s facility in Pori, Finland and first production is anticipated in 2014. MARKETING UPDATE PXP’s crude oil realized price was 96% of NYMEX for the fourth-quarter of 2011 and 94% for full-year 2011. In January 2012 PXP’s crude oil realized price was 92% of Brent or 102% of NYMEX. This significant increase from 2011 is expected to strengthen crude oil revenue by over 40% compared to 2011 crude oil revenue using current commodity price forecasts. This positive result reflects the impact of higher estimated crude oil volumes and stronger pricing associated with the Company’s marketing contracts in California and the Eagle Ford Shale which became effective January 1, 2012. PROVED RESERVES Year-end estimated proved reserves of 410.9 million BOE, net of asset sales, were 59% oil, 55% developed and had a pre-tax PV-10 value of $7.9 billion, a 58% increase over 2010 PV-10 value. The robust increase in the PV-10 value is primarily attributable to a greater concentration of oil/liquids reserves, higher oil/liquids reference prices and stronger marketing contract terms for oil sales. Pro forma for asset sales, proved reserves increased 16% over 2010 proved reserves. In 2011, PXP added total proved reserves of 81.0 million BOE. The Company reported a total of 75.2 million BOE of extensions and discoveries, including 22.5 million BOE in the Eagle Ford Shale, 19.3 million BOE in the Gulf of Mexico, and 25.5 million BOE in the Haynesville Shale. In addition, PXP reported 4.3 million BOE of acquisitions and 1.5 million BOE of revisions. These reserve additions replaced 222% of 2011 production at a cost of $23.48 per BOE. Pro forma for asset sales, PXP replaced 290% of 2011 production at a cost of $18.01 per BOE.
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Oil/liquids proved reserves increased 9%, or 18% pro forma for asset sales, due primarily to the rapidly expanding Eagle Ford Shale asset area, project sanctioning of the Lucius development located in the Gulf of Mexico, and a higher oil reference price compared to 2010 resulting in positive price-related revisions in California. Natural gas proved reserves decreased 13% due primarily to the 2011 asset sales. With persistent low natural gas prices and a corresponding assumed reduction in the pace of development in the Haynesville Shale, PXP classified 44 million BOE of its Haynesville undeveloped reserves as probable undeveloped. These reserves meet the reasonable certainty, economic and other conditions needed to be classified as proved undeveloped reserves but the slower pace of drilling extends the development of these reserves past five years. PXP’s reserve estimate, the Standardized Measure and PV-10 calculations are based on the twelve-month average of first-day-of-the-month West Texas Intermediate spot oil price of $95.99 per barrel and Henry Hub spot natural gas price of $4.12 per million British thermal unit. All prices were adjusted for energy content, quality and basis differentials by area and were held constant throughout the lives of the properties, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. A summary of the Company’s proved reserve reconciliation and costs incurred for 2011 is included with the financial tables. SHARE REPURCHASE Pursuant to its share repurchase program, during the fourth quarter of 2011 and the first quarter of 2012, PXP repurchased 12.8 million common shares at an average price of $35.16 per share for a total cost of approximately $450 million. In January 2012, PXP’s Board of Directors increased the approval for purchases to $1.0 billion of PXP common stock and extended the program until January 2016. SENIOR REVOLVING CREDIT FACILITY The Company’s borrowing base was recently increased from $1.8 billion to $2.3 billion until the next redetermination date currently scheduled for May 1, 2013. The commitments remained unchanged at $1.4 billion. MANAGEMENT COMMENT James C. Flores, Chairman, President and CEO of PXP commented, “PXP finished the year strong as sales volumes, net income attributable to common stockholders and operating cash flow each recorded significant gains compared to fourth-quarter 2010. For the full year, the Company’s 2011 net income attributable to common stockholders was up nearly 100% compared to 2010 and PXP achieved record sales volumes. Oil/liquids sales revenue as a percentage of total revenue was 78% in 2011 and is expected to be approximately 90% in 2012. Along with double-digit growth in average daily sales volumes, PXP delivered stronger operating cash flow, improved cash margins, solid reserve replacement and substantially higher proved reserve value. These attributes are the building blocks for sustained value creation and align with our fundamental asset intensity philosophy. In late December and early January, PXP repurchased a sizeable number of its outstanding shares thereby compressing the share count exposed to the forecasted increase in oil volumes and corresponding cash flow. PXP’s focus remains on increasing its margins while targeting a strong organic oil/liquids growth rate, balancing its natural gas focused capital spending with natural gas generated operating cash flow, and preserving commodity price upside while protecting the downside risk for its shareholders.”
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2012 FULL-YEAR GUIDANCE PXP updated its 2012 full-year operational and financial guidance. Due to curtailment in drilling activity by operators in the Haynesville Shale, PXP plans to re-direct capital from the Haynesville Shale to the Eagle Ford Shale development. Total capital expenditures and the full-year total production sales volume range of 92 – 96 thousand BOE per day remain unchanged. However, due to the shift in capital allocation, oil/liquids sales volumes, as a percentage of total volumes, are now expected to account for 58% to 61% of total volumes up from 55% estimated in previous guidance. PXP has revised its production costs per BOE to reflect higher forecasted oil/liquids volumes and lower forecasted natural gas prices. The new cost estimates are incorporated in the updated 2012 full-year operational and financial guidance included at the end of this release. Full year guidance also reflects the following new information: depreciation, depletion and amortization expense per BOE, general and administrative expense, the current interest rate schedule for long-term debt, an effective tax rate and the weighted average equivalent shares outstanding. CONFERENCE CALL PXP will host a conference call today, Thursday, February 23, 2012 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 is: 42174570. 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. 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: * 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 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.
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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. Contact: Hance Myers: hmyers@pxp.com; 713.579.6291
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Plains Exploration & Production Company Consolidated Statements of Income (in thousands, except per share data)
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Plains Exploration & Production Company Operating Data
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Plains Exploration & Production Company Reconciliation of GAAP to Non-GAAP Measure
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Plains Exploration & Production Company Consolidated Statements of Cash Flows (in thousands of dollars)
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Plains Exploration & Production Company Consolidated Balance Sheets (in thousands of dollars)
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Plains Exploration & Production Company Summary of Open Derivative Positions At February 22, 2012
Derivative Settlements (in thousands of dollars) The following tables reflect cash (payments) receipts for derivatives attributable to the stated production periods.
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Plains Exploration & Production Company Reconciliation of GAAP to Non-GAAP Measure The following tables reconcile net income (GAAP) to adjusted net income and adjusted net income attributable to common stockholders (non-GAAP) for the three and twelve months ended December 31, 2011 and 2010. 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.
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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 twelve months ended December 31, 2011 and 2010. 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 debt extinguishment costs, 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 and to exclude certain other items.
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Plains Exploration & Production Company Proved Reserves, Reserve Replacement Ratio, PV-10 to Standardized Measure Reconciliation
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Plains Exploration & Production Company Costs Incurred & Finding and Development Costs
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Plains Exploration & Production Company Full-Year 2012 Operating and Financial Guidance
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