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Plains Exploration & Production (PXP)

Q1 2011 Earnings Call

May 05, 2011 9:00 am ET

Executives

Scott Winters -

James Flores - Chairman, Chief Executive Officer and President

Winston Talbert - Chief Financial Officer and Executive Vice President

Analysts

Philip McPherson - Global Hunter Securities, LLC

Jeffrey Robertson - Barclays Capital

Brian Singer - Goldman Sachs Group Inc.

David Kistler - Simmons & Company International

Leo Mariani - RBC Capital Markets, LLC

Anne Cameron - JP Morgan

David Heikkinen - Tudor, Pickering, Holt

Brian Corales - Howard Weil Incorporated

Nicholas P. Pope

Duane Grubert - Susquehanna Financial Group, LLLP

Gary Stromberg - Barclays Capital

Unknown Analyst -

Presentation

Operator

Good morning. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to PXP's 2011 First Quarter Earnings Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Scott Winters, Vice President of Corporate Communications. Please go ahead, sir.

Scott Winters

Tiffany, thank you. Good morning, everybody, and welcome to our conference call. Earlier this morning, we issued our earnings release and filed our 10-Q. 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've posted a slide presentation to supplement our comments this morning, and we may refer to these slides during the call. The webcast, slides, 10-Q and today's press release are 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, slide presentation 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, Chief Executive Officer; Doss Bourgeois, 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 Investor Relations.

For the first quarter of 2011, PXP reported net income of $71 million or $0.49 per diluted share, compared to net income of $58.5 million or $0.41 per diluted share for the first quarter of 2010. Net income includes the impact of realized and unrealized gains and losses on our mark-to-market derivative contracts and unrealized gain on investment and other items, which affect the comparability of operating results.

When considering these items, PXP reported net income of $52.4 million or $0.37 per diluted share compared to net income of $43.5 million or $0.31 per diluted share for the same period in 2010.

First quarter income from operations was $133.8 million and net cash provided by operating activities was $290 million, representing a 13% and a 31% increase over first quarter 2010, respectively.

2011 first quarter daily sales volumes averaged approximately 88,000 barrels of oil per day, that is a 3% increase over first quarter 2010 average daily sales volume, despite shut-in volumes from planned facility upgrades, weather interruptions and the sale of all of our Gulf of Mexico production in the fourth quarter of 2010.

Pro forma for the asset sale, 2011 first quarter sales volumes increased 19%. With the downtime associated with the California offshore, Platform Irene completed in the January and February, harsh winter weather gone, March daily sales volumes averaged approximately 93,600 barrels of oil equivalent per day.

We reiterate our full year 2011 average daily sales volume range of 95,000 to 100,000 barrels of oil equivalent. For the first quarter of 2011, oil and gas revenues increased 12% compared to first quarter of 2010. Oil revenues increased approximately $56 million due to higher average realized oil prices benefited by California crude postings, which remain strong relative to NYMEX. Gas revenues decreased approximately $11 million reflecting lower average realized gas prices, partially offset by higher sales volumes.

Total production costs were $15.41 per BOE for the first quarter of 2011 compared to $14.37 per BOE in the first quarter of 2010. Lower steam gas costs and electricity per BOE were offset by higher lease operating, production and ad valorem taxes and gathering and transportation costs per BOE.

A quick review of the component with total production costs for the first quarter of 2011 compared to the first quarter of 2010 is as follows: Steam gas costs decreased approximately $4 million primarily reflecting the lower cost of gas used in steam generation, partially offset by higher volumes.

In 2011, we've earned approximately 4.1 Bcf of natural gas at a cost of approximately $3.88 per MMBtu compared to 3.7 Bcf at a cost of approximately $5.35 per MMBtu in 2010. Lease operating expenses increased approximately $10 million, reflecting scheduled repair and maintenance expenditures, primarily at our California property, and an increased number of producing well at our Eagle Ford Shale and Panhandle property.

Production and ad valorem taxes increased $3 million in 2011, reflecting higher ad valorem taxes due to an increase in the number of wells drilled at our Haynesville Shale property, and higher production taxes resulting from increased production, primarily from our Panhandle property.

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