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Plains Exploration & Production (PXP)

Q4 2012 Earnings Call

February 21, 2013 9:00 am ET


Scott D. Winters - Former Vice President of Corporate Communications

James C. Flores - Chairman, Chief Executive Officer and President


Leo P. Mariani - RBC Capital Markets, LLC, Research Division

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

Duane Grubert - Susquehanna Financial Group, LLLP, Research Division

Pearce W. Hammond - Simmons & Company International, Research Division



Good morning. My name is Brooke, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Plains Exploration Fourth Quarter and Full Year Earnings Results. [Operator Instructions] I will now turn the conference over to Scott Winters, Vice President of Corporate Planning and Research. Thank you, Mr. Winters. You may begin your conference.

Scott D. Winters

Brooke, thank you very much and good morning, everyone, and welcome to our conference call.

Earlier this morning, we issued our fourth quarter and full year earnings release and filed our Form 10-K. Our conference call today is being broadcast live on the Internet and anyone may listen to the call by accessing our company website at The webcast, 10-K and today's press release are available on our company's website in the Investor information section.

Before we begin today's comments, I would like to remind everyone that during this call, there will be forward-looking statements as defined by the SEC. These statements are based on our current expectations and projections about future events and involve certain assumptions, known as well as unknown risks, uncertainties and other factors that could cause our actual results to differ materially. Please refer to our filings with the SEC, including our Form 10-K, for a discussion of these risks.

In our press release and our prepared comments this morning, we will present non-GAAP measures. A reconciliation of non-GAAP financial measures to comparable GAAP financial measures is included in the press release. Please take a minute to review those reconciliations.

References to oil in the press release and in our prepared comments this morning include crude oil, condensate and natural gas liquid volumes.

On the call today is Jim Flores, our Chairman, President and Chief Executive Officer; Doss Bourgeois, our Executive Vice President of Exploration and Production; Winston Talbert, Executive Vice President and Chief Financial Officer; John Wombwell, our Executive Vice President and General Counsel; and Hance Myers, our Vice President of Corporate Information Director.

Fourth quarter and full-year results reflect significant growth in sales volumes, net income and cash flow provided by operating activities, as well as solid reserve replacement and substantially higher reserve value. The results reported this morning include 1 month benefit from the Gulf of Mexico assets, which were acquired on November 30, 2012. After pre-closing adjustments of approximately $219 million from the effective date of October 1, 2012, PXP paid a total of $5.9 billion for those assets.

During the fourth quarter of 2012, total revenues were $869 million compared to $518 million in the fourth quarter of 2011. Total daily sales volumes averaged 132.9 thousand barrels of oil equivalent compared to 105.4 thousand BOE in the fourth quarter of 2011. This represents a 35% increase per diluted share.

Net cash provided by operating activities was $284 million compared to $188 million in the fourth quarter of 2011 and operating cash flow was $536 million compared to $284 million in the fourth quarter of 2011.

Cash expenditures for additions to oil and gas properties and leasehold acquisitions were $491 million, of which $36 million was funded by Plains Offshore Operations Inc., PXP's consolidated subsidiary.

Income from operations was $177 million compared to $102 million in the fourth quarter of 2011. And PXP reported fourth quarter net income attributable to common stockholders of $218.6 million or $1.65 per diluted share, compared to net income attributable to common stockholders of $97.7 million or $0.69 per diluted share for the fourth quarter of 2011.

The fourth quarter net income attributable to common stockholders includes certain items affecting the comparability of operating results. Those items in the fourth quarter of 2012 consist of realized and unrealized gains and losses on our mark-to-market derivative contracts, resulting in a net loss of $15.5 million due to, in large part, increased crude oil forward prices, a $298.9 million unrealized gain on investment on McMoRan Exploration Co. common stock, acquisition, merger and related financing costs of $70.5 million and other items.

When considering these items, PXP reports adjusted net income attributable to common stockholders of $54.8 million or $0.41 per diluted share, compared to $28.6 million or $0.20 per diluted share for the same period in 2011.

The fourth quarter 2012 results include an increase in stock-based compensation expense, which resulted in a $0.05 after-tax decrease in earnings per diluted share. Stock-based compensation increased due to a 30% increase in PXP stock price following the Freeport-McMoran Copper & Gold Inc. merger announcement in December.

Also included in the adjusted quarterly results was an increase in oil and gas depreciation, depletion and amortization rate, which resulted in a $0.29 after-tax decrease in earnings per diluted share. The higher DD&A rate primarily reflects the impact of lower sustained natural gas prices on gas reserves and our Gulf of Mexico acquisition.

Fourth quarter oil revenues increased 91% to $799 million due to higher oil sales volumes, higher oil prices and stronger oil sales price realizations. Oil sales volumes increased 78% due to a 1-month contribution from the acquired deepwater Gulf of Mexico asset, the continued strength of the Eagle Ford Field and steady, consistent performance in California.

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