Oil and gas company
Plains Exploration & Production Co.
) continues to protect its oil and natural gas production from
price fluctuation through its effective hedging program. The
company released its current derivative positions. It aims to
secure the majority of its production between 2013 and 2015 through
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The company intends to protect around 90% of its oil production
(for the 2013 to 2015 period) through derivative instruments, like
the three-way collars, swap contracts and put options.
Plains Exploration & Production has strengthened its hedging
position since the second quarter 2012. Being an oil heavy company,
with 92% of the total revenue coming from oil sales in the second
quarter, the need to protect the returns from oil sales is made all
the more acute in this present volatile price scenario.
We believe the recent acquisition of oilfields in the Gulf of
Mexico (GoM) for $5.5 billion from British energy giant
) has also prompted Plains Exploration to add more derivative
contracts to safeguard its increased production volumes from the
acquired assets. These properties were producing 59,500 barrels of
oil equivalent net per day at the end of July 2012.
We believe these contracts will not only safeguard Plains' future
production but also allow it to earn a secured return. This will
further prompt the company to look for strategic future
acquisitions. The Zacks Consensus Estimates for the third quarter
and full year 2012 are 45 cents and $1.99 respectively.
Plains Exploration & Production retains a Zacks #3 Rank (Hold
rating). The company competes with
Newfield Exploration Co.
Denbury Resources Inc.
) among others.
Based in Houston, Texas, Plains Exploration & Production
engages in the acquisition, development, exploration, and
production of oil and gas properties primarily in the United
States. The company was founded in 2002 and has 880 full time