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Plains Exploration & Production (PXP)

Q3 2012 Earnings Call

November 01, 2012 9:00 am ET

Executives

Scott D. Winters - Former Vice President of Corporate Communications

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

Winston M. Talbert - Chief Financial Officer and Executive Vice President

Doss R. Bourgeois - Executive Vice President of Exploration & Production

Analysts

David W. Kistler - Simmons & Company International, Research Division

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

Brian Singer - Goldman Sachs Group Inc., Research Division

Marshall H. Carver - Capital One Southcoast, Inc., Research Division

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

Curtis Ryan Trimble - Global Hunter Securities, LLC, Research Division

Eric B. Anderson - Hartford Financial Management, Inc.

Brian M. Corales - Howard Weil Incorporated, Research Division

Presentation

Operator

Good morning. My name is Jessica, and I will be your conference operator today. At this time, I would like to welcome everyone to the PXP Third Quarter Earnings Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Scott Winters, Vice President of Corporate Planning and Research. Mr. Winters, you may begin.

Scott D. Winters

Operator, thank you very much. Good morning, everyone, 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. 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-Q and today's press release are all available on our website, pxp.com, in the Investor Information section.

Before we begin today's comments, I'd 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 and Forms 10-Q 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 in the press release. Please take a minute to review the reconciliations.

Also, references to oil revenue and sales -- and oil sales volumes in the press release and in our prepared comments this morning include natural gas liquid volumes.

On the call today is Jim Flores, our Chairman, President and Chief Executive Officer; Doss Bourgeois, 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, Corporate Information Director.

For the 3 months ended September 30, 2012, PXP reported a net loss attributable to common stockholders of $53.1 million or $0.41 per diluted share compared to a net loss of $88.3 million or $0.62 per diluted share for the 3 months ended September 30, 2011. The third quarter net loss 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, resulting in a net loss of $100.2 million due in large part to increased crude oil forward prices, a $43.1 million unrealized loss on investment in McMoRan Exploration Co.'s common stock and other items.

When considering these items, PXP reports net income attributable to common stockholders of $51.6 million or $0.39 per diluted share. This is a non-GAAP measure. Some quarterly highlights comparing third quarter 2012 to third quarter 2011 results include: oil revenue increased 43%; total daily sales volumes per diluted share increased 10% or 36% pro forma for the December 2011 asset sales; oil daily sales volumes per diluted share increased 36% or 56% pro forma for the December 2011 asset sales; operating cash flow increased 27%, this is a non-GAAP measure; cash margin per BOE increased 28%, this is also a non-GAAP measure.

Oil revenues increased $161.3 million to $540.4 million for 2012 from $379.1 million for 2011, reflecting greater sales volumes and higher average realized prices. Oil sales volumes increased 12.6 thousand barrels per day to 63.5 thousand barrels per day in 2012 from 50.9 thousand barrels per day in 2011, primarily reflecting increased production from our Eagle Ford Shale properties, partially offset by production decrease due to the divestment of our Panhandle properties in December 2011. Excluding the impact of our divestment, sales increased 19.4 thousand barrels per day in 2012. Our average realized price for oil increased $11.48 per barrel to $92.44 per barrel for 2012. The increase was primarily attributable to our new marketing contracts effective January 1, 2012 for our California and Eagle Ford crude oil production.

The average ICE Brent Index price for 2012 was $109.37 per barrel compared to the average NYMEX index price of $89.54 per barrel in 2011. Gas revenues decreased $58.4 million to $62.6 million in 2012 from $121 million in 2011, primarily reflecting lower average realized prices and sales volumes. Our average realized price for gas was $2.70 per Mcf in 2012 compared to $4.10 per Mcf in 2011. Gas sales volumes decreased 69.3 million cubic feet per day to 252 million cubic feet per day in 2012 from 321.3 million cubic feet per day in 2011, primarily reflecting our Panhandle and South Texas properties divested in 2011, lower drilling activity in the Haynesville Shale, which was partially offset by increased production from our Eagle Ford Shale properties. Excluding the impact of our divestment, sales increased 9.5 million cubic feet per day in 2012.

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