PXP Announces Quarterly Earnings of $164 Million Up 695% on Higher Volumes and Improved Price Realizations

HOUSTON, May 7 /PRNewswire-FirstCall/ -- Plains Exploration & Production Company (NYSE:PXP) ("PXP" or the "Company") today announced financial and operating results for the first quarter 2008.

Highlights:

-- Reported significant improvements in first quarter 2008 performance
metrics compared to first quarter 2007:
-- Net income increased 695%;
-- Oil and gas daily sales volumes increased 84%;
-- Realized oil prices increased to 89% of NYMEX prices from 83%. The
average NYMEX oil price was $97.82 per barrel for the first quarter
2008;
-- Production costs per barrel of oil equivalent decreased 4%; and
-- Operating cash flow increased 270% (a non-GAAP measure).

-- Continued positive results from the Flatrock area indicating a major
discovery:
-- Flatrock No. 1 discovery well commenced production on January 28,
2008. Gross production currently approximates 50 million cubic feet
equivalent per day (MMCFED), 11 MMCFED net to PXP.
-- Flatrock No. 2 encountered 8 pay sands totaling 289 net feet of pay
confirmed by wireline logs in January 2008. A successful production
test in April 2008 resulted in a gross rate of 114 MMCFED, 26 MMCFED
net to PXP. First production expected in mid-2008.
-- Flatrock No. 3 encountered 3 pay sands totaling 126 net feet of pay
confirmed by wireline logs in February 2008. The well has been
sidetracked to 17,100 feet and has a proposed total depth of
18,800 feet.
-- Flatrock No. 4 well commenced drilling on April 9, 2008 and is
currently drilling below 8,100 feet to proposed total depth of
18,500 feet. Additional wells are being planned in the Flatrock
area.

-- Commenced drilling the Mound Point East exploratory well on
Louisiana State Lease 340 on March 31, 2008. Currently drilling
below 12,700 feet to a proposed total depth of 18,050 feet. PXP's
working interest is 43.4%.

-- Commenced drilling operation by re-entering the wellbore at South
Timbalier Block 168 on March 18, 2008 and currently drilling below
30,900 feet to evaluate potentially significant Miocene exploratory
targets. As announced by the operator, wireline logs have indicated the
well has encountered a potential hydrocarbon bearing zone, which will
be further evaluated after the well is drilled deeper. The well has
been repermitted to a proposed total depth of 33,000 feet to evaluate
additional targets. PXP's working interest is 35%.

-- Received Santa Barbara County Planning Commission approval of the
Tranquillon Ridge project Final Development Plan in April, one of the
necessary government approvals for such a project.

-- Closed the XTO and OXY asset divestment transactions in February 2008
for total cash proceeds of $1.7 billion. Closed the South Texas
property acquisition in April 2008 for $288 million.

-- Reduced long-term debt by $1.1 billion during the first quarter. Total
debt to capitalization was 40% on March 31, 2008 compared to 50% on
December 31, 2007.

-- Repurchased approximately 5% of outstanding common shares or
5.77 million for $304 million in the first quarter 2008. Approximately
$696 million is remaining under the $1 billion stock buyback
authorization approved December 2007.

FIRST QUARTER 2008

PXP reported first quarter 2008 net income of $163.5 million, or $1.43 per diluted share, on revenues of $623.1 million, compared to first quarter 2007 net income of $20.6 million, or $0.28 per diluted share, on revenues of $224.7 million. Higher revenues were due primarily to the 2007 acquisitions of Pogo Producing Company (Pogo) and Piceance Basin properties and an increase in realized prices of $23.55 per barrel of oil equivalent. Net income for the 2008 period includes a $34.7 million pre-tax gain on the sale of 50% of PXP's interest in Collbran Valley Gas Gathering, a $10.3 million pre-tax charge for extinguishment of debt, and $4.5 million in pre-tax merger expenses included in general and administrative expense.

Sales volumes increased 84% to 95.7 thousand BOEPD during the first quarter 2008 compared to 51.9 thousand BOEPD in the first quarter 2007 reflecting the Pogo and Piceance Basin acquisitions. Piceance Basin gross volumes increased 6% in the first quarter 2008 compared to the fourth quarter 2007 and 61% since the acquisition in second quarter 2007. The Flatrock discovery well commenced production on January 28, 2008. Gross production currently approximates 50 MMCFED, 11 MMCFED net to PXP. First production is expected to commence at the Flatrock No. 2 and Cottonwood Point wells in mid-2008.

Operating cash flow, a non-GAAP measure, increased 270% to $350.2 million in the first quarter 2008 from $94.6 million in the prior year period due to higher sales volumes and stronger commodity prices. An explanation and reconciliation of non-GAAP financial measures is included at the end of this release.

Production costs on a per unit basis improved 4% to $17.57 per BOE during the first quarter 2008 compared to $18.25 per BOE in the first quarter 2007. Per unit lease operating, steam gas and electricity costs were lower due to stronger oil and gas sales volumes but were partially offset by higher per unit gathering & transportation and production & ad valorem tax costs associated with the addition of the Pogo and Piceance Basin properties.

SOUTH TEXAS PROPERTY ACQUISITION

On April 17, 2008, PXP closed the previously announced acquisition of oil and gas producing properties from Samson Lone Star, LLC and PYR Energy Corporation covering 52,648 gross acres/28,024 net acres in South Texas. After the exercise of third party preferential rights and preliminary closing adjustments, PXP paid $288 million in cash for the properties. PXP funded the acquisition primarily with proceeds from recently completed divestments through the use of a tax deferred like-kind exchange.

OUTLOOK

PXP reaffirms full-year 2008 operating and financial guidance issued December 2007 and updated in March 2008 to reflect the impact of the South Texas property acquisition.

FIRST QUARTER CONFERENCE CALL

PXP plans to host its quarterly conference call tomorrow, May 8, 2008 at 2:00 p.m. Central time. Investors wishing to participate in the conference call may dial 1-800-567-9836 or 1-973-935-8460. The replay will be available through Thursday, May 22, 2008 and can be accessed by dialing 1-800-642-1687 or 1-706-645-9291. Conference call and replay ID: 42178456.

PXP is an independent oil and gas company primarily engaged in the activities of acquiring, developing, exploring and producing oil and gas in its core areas of operation: California, Rockies, Gulf Coast, Gulf of Mexico, Texas Panhandle, South Texas and the Permian Basin of the United States. PXP is headquartered in Houston, Texas.

ADDITIONAL INFORMATION & FORWARD LOOKING STATEMENTS This press release contains forward-looking information regarding PXP that is intended to be covered by the safe harbor "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. All statements included in this press release that address activities, events or developments that PXP expects, believes or anticipates will or may occur in the future are forward-looking statements. These include statements regarding:

* reserve and production estimates,
* oil and gas prices,
* the impact of derivative positions,
* production expense estimates,
* cash flow estimates,
* future financial performance,
* planned capital expenditures, and
* other matters that are discussed in PXP's filings with the SEC.

These statements are based on our current expectations and projections about future events and involve known and unknown risks, uncertainties, and other factors that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. Please refer to our filings with the SEC, including our Form 10-K for the year ended December 31, 2007, for a discussion of these risks.

All forward-looking statements in this report are made as of the date hereof, and you should not place undue reliance on these statements without also considering the risks and uncertainties associated with these statements and our business that are discussed in this report and our other filings with the SEC. Moreover, although we believe the expectations reflected in the forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any deviations will not be material. Except for any obligation to disclose material information under the Federal securities laws, we do not intend to update these forward-looking statements and information.

Plains Exploration & Production Company
Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)

Quarter Ended March 31,
2008 2007
Revenues
Oil sales $456,584 $205,518
Gas sales 164,069 17,535
Other operating revenues 2,424 1,640
623,077 224,693
Costs and Expenses
Production costs
Lease operating expenses 74,508 44,663
Steam gas costs 32,158 26,357
Electricity 11,637 8,767
Production and ad valorem taxes 26,228 5,259
Gathering and transportation
expenses 8,489 186
General and administrative 39,928 22,497
Depreciation, depletion and
amortization 140,853 52,678
Accretion 3,387 2,262
337,188 162,669
Income from Operations 285,889 62,024
Other Income (Expense)
Gain on sale of assets 34,658 - Interest expense (30,609) (5,360)
Debt extinguishment costs (10,263) - Loss on mark-to-market derivative
contracts (9,481) (20,590)
Interest and other income (expense) (25) 577
Income Before Income Taxes 270,169 36,651
Income tax expense
Current (40,537) - Deferred (66,131) (16,081)
Net Income $163,501 $20,570
Earnings per Share
Basic $1.46 $0.28
Diluted $1.43 $0.28
Weighted Average Shares Outstanding
Basic 112,171 72,463
Diluted 114,156 73,490

Plains Exploration & Production Company
Operating Data (Unaudited)

Quarter Ended March 31,
2008 2007
Daily Average Volumes
Oil and liquids sales (Bbls) 57,646 47,350
Gas (Mcf)
Production 234,788 33,943
Used as fuel 6,457 6,432
Sales 228,331 27,511
BOE
Production 96,777 53,008
Sales 95,701 51,936
Unit Economics (in dollars)
Average NYMEX Prices
Oil $97.82 $58.27
Gas 8.02 6.78
Average Realized Sales Price Before
Derivative Transactions
Oil (per Bbl) $87.03 $48.22
Gas (per Mcf) 7.90 7.08
Per BOE 71.27 47.72
Cash Margin per BOE (1)
Oil and gas revenues $71.27 $47.72
Costs and expenses
Lease operating expenses $(8.56) $(9.56)
Steam gas costs (3.69) (5.64)
Electricity (1.34) (1.88)
Production and ad valorem taxes (3.01) (1.13)
Gathering and transportation (0.97) (0.04)
Gross margin before DD&A (GAAP) 53.70 29.47
Cash derivative settlements (1.89) (5.25)
Cash margin (Non-GAAP) $51.81 $24.22

(1) Cash margin (a non-GAAP measure) is calculated by adjusting gross
margin before DD&A (a GAAP measure) to deduct cash derivative
settlements. Management believes this presentation may be helpful to
investors as it represents the cash generated by our oil and gas
production that is available for, among other things, capital
expenditures and debt service. PXP management uses this information to
analyze operating trends and for comparative purposes within the
industry. This measure is not intended to replace the GAAP statistic
but to provide additional information that may be helpful in
evaluating trends and performance.

Plains Exploration & Production Company
Consolidated Balance Sheets
(in thousands of dollars)
March 31, December 31,
2008 2007
ASSETS (Unaudited)
Current Assets
Cash and cash equivalents $8,309 $25,446
Restricted cash 59,617 59,092
Accounts receivable 280,716 304,972
Inventories 21,474 18,394
Deferred income taxes 170,896 229,893
Other current assets 19,047 37,123
560,059 674,920
Property and Equipment, at cost
Oil and natural gas properties - full cost method
Subject to amortization 6,550,559 7,340,238
Not subject to amortization 1,309,790 1,951,783
Other property and equipment 108,617 85,928
7,968,966 9,377,949
Less allowance for depreciation,
depletion and amortization (1,141,114) (1,000,722)
6,827,852 8,377,227
Goodwill 533,412 536,822
Cash Held in Escrow 280,357 - Other Assets 95,342 104,382
$8,297,022 $9,693,351

LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts payable $233,833 $319,583
Commodity derivative contracts 73,737 79,938
Royalties and revenues payable 132,035 132,919
Stock appreciation rights 15,177 63,106
Interest payable 20,031 25,330
Income taxes payable 29,594 3,492
Accrued merger expenses 65,761 77,980
Other current liabilities 85,376 115,698
655,544 818,046
Long-Term Debt
Revolving credit facility 1,060,000 2,205,000
7 3/4% Senior Notes 600,000 600,000
7% Senior Notes 500,000 500,000
2,160,000 3,305,000
Other Long-Term Liabilities
Asset retirement obligation 173,824 184,080
Commodity derivative contracts 24,749 33,821
Other 77,328 54,726
275,901 272,627
Deferred Income Taxes 1,959,811 1,959,431
Stockholders' Equity
Common stock 1,128 1,128
Additional paid-in capital 2,704,951 2,711,617
Retained earnings 787,494 623,993
Accumulated other comprehensive
income 1,542 1,566
Treasury stock (249,349) (57)
3,245,766 3,338,247
$8,297,022 $9,693,351

Plains Exploration & Production Company
Consolidated Statements of Cash Flows (Unaudited)
(in thousands of dollars)

Three Months Ended
March 31,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $163,501 $20,570
Items not affecting cash flows from
operating activities
Gain on sale of assets (34,658) - Depreciation, depletion,
amortization and accretion 144,240 54,940
Deferred income taxes 66,131 16,081
Debt extinguishment costs 10,263 - Commodity derivative contracts 9,481 20,590
Noncash compensation 12,073 5,904
Other noncash items 950 (7)
Change in assets and liabilities
from operating activities (87,227) (98,124)
Net cash provided by operating
activities 284,754 19,954
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to oil and gas properties (274,568) (144,901)
Derivative settlements (16,647) (23,528)
Proceeds from property sales, net of
costs and expenses 1,709,880 - Increase in restricted cash and cash
held in escrow (280,882) - Additions to other property and
equipment (22,689) (4,390)
Other, net (14,242) - Net cash provided by (used in)
investing activities 1,100,852 (172,819)
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit facilities
Borrowings 3,154,441 336,775
Repayments (4,299,441) (572,275)
Proceeds from issuance of long-term
debt - 500,000
Cost incurred in connection with
financing arrangements (137) (7,945)
Derivative settlements (5,190) - Purchase of treasury stock (271,807) (32,292)
Other 19,391 1,879
Net cash (used in) provided by
financing activities (1,402,743) 226,142
Net (decrease) increase in cash and
cash equivalents (17,137) 73,277
Cash and cash equivalents, beginning
of period 25,446 899
Cash and cash equivalents, end of
period $8,309 $74,176

Plains Exploration & Production Company
Summary of Open Derivative Positions
at April 1, 2008

Instrument Daily Average
Period Type Volumes Price Index
Sales of Crude Oil
Production
2008
Apr - Dec Put options 42,000 Bbls $55.00 Strike price WTI
Apr - Dec Collar 2,500 Bbls $60.00 Floor - WTI
$80.13 Ceiling

2009
Jan - Dec Put options 32,500 Bbls $55.00 Strike price WTI

Sales of Natural
Gas Production
2008
Apr - Dec Collar 15,000 MMBtu $8.00 Floor - Henry Hub
$12.11 Ceiling

Plains Exploration & Production Company
Reconciliation of GAAP to Non-GAAP Measure

The following chart reconciles Net Cash Provided by Operating Activities
(GAAP) to Operating Cash Flow (non-GAAP) for the quarters ended March 31,
2008 and 2007. Management believes this presentation may be useful to
investors because it is illustrative of the impact of the Company's
derivative contracts. PXP management uses this information for comparative
purposes within the industry and as a means of measuring the Company's
ability to fund capital expenditures and service debt. This measure is not
intended to replace the GAAP statistic but to provide additional
information that may be helpful in evaluating the Company's operational
trends and performance.

Operating cash flow is calculated by adjusting the GAAP measure of cash
provided by operating activities to exclude changes in operating assets
and liabilities and include derivative cash flows that are classified as
financing or investing activities in the statement of cash flows. Pursuant
to GAAP certain cash payments with respect to our derivative instruments
are required to be reflected as financing or investing activities.

Quarter Ended March 31,
2008 2007
(millions of dollars)

Net cash provided by operating activities
(GAAP) $284.8 $20.0
Changes in operating assets and liabilities 87.2 98.1
Cash payments for commodity derivative
contracts that settled during the period
that are reflected as investing or
financing cash flows in the
statement of cash flows (21.8) (23.5)
Operating cash flow (Non-GAAP) $350.2 $94.6

First Call Analyst:
FCMN Contact: jpankey@pxp.com

Source: Plains Exploration & Production Company

CONTACT: Investors, Hance Myers, Vice President, Investor Relations,
+1-713-579-6291, or Media, Scott Winters, Vice President, Corporate
Communications, +1-713-579-6190, both of Plains Exploration & Production
Company, 1-800-934-6083

Web site: http://www.pxp.com/

2008-05-07 19:18:27 0355913 PRNEWSWIRE