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Plains Exploration & Production (PXP)

Q4 2010 Earnings Call

February 24, 2011 9:00 am ET

Executives

John Wombwell - Executive Vice President, Secretary and General Counsel

Scott Winters -

James Flores - Chairman, Chief Executive Officer and President

Doss Bourgeois - Executive Vice President of Exploration & Production

Winston Talbert - Chief Financial Officer and Executive Vice President

Analysts

Pearce Hammond - Simmons

Brian Singer - Goldman Sachs Group Inc.

Leo Mariani - RBC Capital Markets, LLC

David Heikkinen - Tudor, Pickering, Holt

Duane Grubert - Susquehanna Financial Group, LLLP

Presentation

Operator

Good morning. My name is Brandy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Plains Exploration 2010 Fourth Quarter and Year-End Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Scott Winters, Vice President of Corporate Communications. Please go ahead, sir.

Scott Winters

Brandy, thank you. Good morning, everybody, and welcome to our conference call. Earlier this morning, we issued our fourth quarter and full year earnings release and filed our 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 pxp.com. We have posted a slide presentation to supplement our comments this morning, and we may refer to the slides during the call. The webcast, slides, 10-K and today's press release are all available on our website in the Investor Information section.

Before we begin today's comments, I'd like to remind everybody 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 present non-GAAP measures. A reconciliation of non-GAAP financial measures to comparable GAAP financial measures is included with the press release.

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, our Executive Vice President and Chief Financial Officer; John Wombwell, our Executive Vice President and General Counsel; and Hance Myers, our Vice President of Investor Relations.

Starting with financial results. For the fourth quarter of 2010, PXP reported a net loss of $19.5 million or $0.14 per diluted share compared to net income of $48.1 million or $0.34 per diluted share for the fourth quarter of 2009. The net loss includes the impact of realized and unrealized gains and losses on our mark-to-market derivative contracts and other items, which affect the comparability of operating results. When considering these items, PXP reported net income for the fourth quarter of 2010 of $28.3 million or $0.20 per diluted share compared to net income of $86.6 million or $0.61 per diluted share for the same period in 2009.

Fourth quarter net cash provided by operating activities was $235.3 million and operating cash flow was $253.6 million. 2010 fourth quarter daily sales volumes averaged approximately 93,000 barrels of oil equivalent per day, an 8% increase over fourth quarter of 2009 average daily sales volumes.

For the fourth quarter of 2010, oil and gas revenues increased 11% to $407.8 million from $367.1 million in the fourth quarter of 2009. Oil revenues increased $36.7 million due to higher oil prices and stronger oil sales price realizations. Natural gas revenues increased approximately $4 million, as higher natural gas sales volumes just offset lower natural gas prices and lower sales price realizations.

Oil sales price realizations before derivative transactions were 86% in the fourth quarter of 2010, compared to 84% in the fourth quarter of 2009. In the fourth quarter of 2010, posted crude oil prices in California strengthened in relation to NYMEX. PXP's average realized oil price increased $8.89 to $73.17 per barrel in 2010 from $64.28 per barrel in 2009.

Natural gas sales price realizations before derivative transactions were 96% in the fourth quarter of 2010 versus 99% in the fourth quarter of 2009. PXP's average realized natural gas price decreased to $0.46 to $3.66 per Mcf in 2010 compared to $4.12 per Mcf in 2009.

Total production costs were $14.24 per BOE for the fourth quarter of 2010 compared to $12.89 per BOE in the fourth quarter of 2009. Lower steam gas costs and production ad valorem taxes per BOE were offset by higher lease operating expenses and gathering and transportation costs per BOE.

For the fiscal year 2010, total production costs per BOE were $14, flat to fiscal year 2009 costs. A quick review of the components of total production costs for the fourth quarter of 2010 compared to fourth quarter of 2009 is as follows: Steam gas costs decreased $2.1 million to $14.3 million in 2010, primarily reflecting the lower cost of gas used in steam generation.

In 2010, we burned approximately four Bcf of natural gas at a cost of $3.56 per MMBtu compared to 3.8 Bcf at a cost of approximately $4.33 per MMBtu in 2009. Production and ad valorem taxes were down slightly to $8.1 million in 2010 from $8.7 million in 2009, primarily reflecting production tax abatements.

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