HOUSTON, Feb. 24, 2011 /PRNewswire/ -- Plains Exploration & Production Company (NYSE:PXP) announces 2010 fourth-quarter and full-year financial and operating results.
Fourth-Quarter Statistical Highlights
•Revenues of $408.1 million and net loss of $19.5 million, or $0.14 per diluted share.
•Adjusted net income of $28.3 million, or $0.20 per diluted share < Below my forecast
•Net cash provided by operating activities of $235.3 million.
•Operating cash flow of $253.6 million < Just $3 Million below my forecast
•Average daily sales volumes of 93,000 barrels of oil equivalent (BOE). < 500 boepd below my forecast
Buy any dip as PXP is heavily weighted to oil with significant near-term upside in both the Granite Wash and the Eagle Ford.
PXP
Re: PXP
This is why PXP is in our Growth Portfolio
Grow reserves 15% to 20% per year over the next 3
years
• Grow production 10% to 15% per year over the next
3 years
• Efficiently manage business focusing on cost reduction
and profitability
• Maintain conservative balance sheet with active
hedging program
• Focus drilling on high liquid development projects to
increase total percentage of oil production
30
My updated forecast model will be on the website this weekend. 2011 looks very good.
Grow reserves 15% to 20% per year over the next 3
years
• Grow production 10% to 15% per year over the next
3 years
• Efficiently manage business focusing on cost reduction
and profitability
• Maintain conservative balance sheet with active
hedging program
• Focus drilling on high liquid development projects to
increase total percentage of oil production
30
My updated forecast model will be on the website this weekend. 2011 looks very good.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: PXP
A key point on this one (which I think the market is missing): PXP has 80% of their 2011 oil production hedged with $80/bbl Puts that have no ceilings. They will get a significant boost to earnings and cash flows from the recent run-up in oil prices. Most of their oil is not sold under contracts tied to WTI so they are getting closer to Brent prices.
Plains Exploration & Production Company (PXP) joined the Sweet 16 on January 10. My Fair Value estimate is $50/share, just 6X forecast cash flow per share in 2011. If the company is successful in delivering oil production growth there is significant upside to this valuation.
PXP was founded in December 2002 as a result of a spin-off from Plains Resources Inc. The company produced 32.3 million barrels of oil equivalent (BOE) in 2010, and reported year-end proved reserves of 416.1 million BOE with an additional estimated resource potential of 2.0 billion BOE.
Fourth Quarter 2010 Update:
• 4th quarter = 93,000 BOE average daily sales volumes, up 9% compared to prior year period. The company guidance for full year 2011 is 97,500 BOEPD, up 10.3% year-over-year.
• Adjusted net income was slightly below my forecast but cash flow from operations (what I really care about) was right on forecast.
• 80% of PXP’s oil production is protected by $80/bbl Puts that have no ceilings, so they are able to take full advantage of the recent run-up in oil prices.
• California core areas produced ~40,000 BOE per day and production is forecast to increase 3% to 5% in 2011. An offshore platform is down for planned maintenance in the first quarter, so production will be down a bit in Q1.
• Haynesville Shale gas production up to 146 MMcfepd. 65% of core area (586 production units) now held by production. A record daily sales volume of 155.6 MMcfepd net to PXP was reached in February and average daily sales volumes are expected to increase to approximately 160 MMcfepd by year-end 2011.
• West Texas (Granite Wash) production was 8,000 boepd in the 4th quarter and PXP is now forecasting an increase to 17,000 boepd by year-end 2011. PXP has 5 drilling rigs operating in the play today and they plan to maintain this level of activity throughout 2011.
• PXP now has four rigs running in the Eagle Ford Shale. At the end of January Eagle Ford production was 1,800 boepd with 12 additional wells waiting on completion. Eagle Ford production should be over 2,500 boepd by the end of March and over 5,000 boepd by year-end 2012. They are expecting to add two more drilling rigs to the program this summer. They are looking for ways to get this oil to the Gulf Coast to take advantage of the $10/bbl premium to WTI.
On November 16, 2010 PXP announced it had closed the previously announced acquisitions of oil and gas properties in the Eagle Ford oil and gas condensate windows in South Texas. PXP has a net acreage position of approximately 60,000 acres, an estimated 140 to 175 million BOEs of net resource potential and approximately 500 net well locations. This asset area is poised to be a significant driver of future production and reserve growth for PXP.
On December 30, 2010 PXP announced it had completed the divestment of its Gulf of Mexico shallow water shelf properties to McMoran Exploration Co. At closing and after preliminary closing adjustments, PXP received approximately $86 million in cash, which included $11 million in working capital adjustments, and 51 million shares of McMoRan common stock in exchange for all of PXP's interests in its Gulf of Mexico leasehold located in less than 500 feet of water.
PXP is currently attempting to sell its deep-water assets in the Gulf of Mexico. More details on the sales process are expected in March.
Plains recently announced a $1.2 billion capital budget for 2011. This capital will be split between the Eagle Ford Shale, Granite Wash, Haynesville Shale (primarily to protect acreage and maintain production) and their properties in California. 73% of the capital will be directed towards plays that produce oil and other liquid hydrocarbons. Our forecast indicates that the 2011 capital budget should be funded entirely by operating cash flows.
Plains will focus on increasing their oil and other liquids production and proven reserves in 2011. This is a significant shift away from an emphasis on natural gas and the primary reason it is being considered for an addition to our Sweet 16 Growth Portfolio.
The company plans to maintain production levels at its core areas in California. Emerging positions in the Granite Wash and Eagle Ford are the focus of this year’s drilling program. The sale of their GOM shelf assets has significantly improved the PXP balance sheet.
I'm expecting PXP to generate double digit production growth in both 2011 and 2012.
Plains Exploration & Production Company (PXP) joined the Sweet 16 on January 10. My Fair Value estimate is $50/share, just 6X forecast cash flow per share in 2011. If the company is successful in delivering oil production growth there is significant upside to this valuation.
PXP was founded in December 2002 as a result of a spin-off from Plains Resources Inc. The company produced 32.3 million barrels of oil equivalent (BOE) in 2010, and reported year-end proved reserves of 416.1 million BOE with an additional estimated resource potential of 2.0 billion BOE.
Fourth Quarter 2010 Update:
• 4th quarter = 93,000 BOE average daily sales volumes, up 9% compared to prior year period. The company guidance for full year 2011 is 97,500 BOEPD, up 10.3% year-over-year.
• Adjusted net income was slightly below my forecast but cash flow from operations (what I really care about) was right on forecast.
• 80% of PXP’s oil production is protected by $80/bbl Puts that have no ceilings, so they are able to take full advantage of the recent run-up in oil prices.
• California core areas produced ~40,000 BOE per day and production is forecast to increase 3% to 5% in 2011. An offshore platform is down for planned maintenance in the first quarter, so production will be down a bit in Q1.
• Haynesville Shale gas production up to 146 MMcfepd. 65% of core area (586 production units) now held by production. A record daily sales volume of 155.6 MMcfepd net to PXP was reached in February and average daily sales volumes are expected to increase to approximately 160 MMcfepd by year-end 2011.
• West Texas (Granite Wash) production was 8,000 boepd in the 4th quarter and PXP is now forecasting an increase to 17,000 boepd by year-end 2011. PXP has 5 drilling rigs operating in the play today and they plan to maintain this level of activity throughout 2011.
• PXP now has four rigs running in the Eagle Ford Shale. At the end of January Eagle Ford production was 1,800 boepd with 12 additional wells waiting on completion. Eagle Ford production should be over 2,500 boepd by the end of March and over 5,000 boepd by year-end 2012. They are expecting to add two more drilling rigs to the program this summer. They are looking for ways to get this oil to the Gulf Coast to take advantage of the $10/bbl premium to WTI.
On November 16, 2010 PXP announced it had closed the previously announced acquisitions of oil and gas properties in the Eagle Ford oil and gas condensate windows in South Texas. PXP has a net acreage position of approximately 60,000 acres, an estimated 140 to 175 million BOEs of net resource potential and approximately 500 net well locations. This asset area is poised to be a significant driver of future production and reserve growth for PXP.
On December 30, 2010 PXP announced it had completed the divestment of its Gulf of Mexico shallow water shelf properties to McMoran Exploration Co. At closing and after preliminary closing adjustments, PXP received approximately $86 million in cash, which included $11 million in working capital adjustments, and 51 million shares of McMoRan common stock in exchange for all of PXP's interests in its Gulf of Mexico leasehold located in less than 500 feet of water.
PXP is currently attempting to sell its deep-water assets in the Gulf of Mexico. More details on the sales process are expected in March.
Plains recently announced a $1.2 billion capital budget for 2011. This capital will be split between the Eagle Ford Shale, Granite Wash, Haynesville Shale (primarily to protect acreage and maintain production) and their properties in California. 73% of the capital will be directed towards plays that produce oil and other liquid hydrocarbons. Our forecast indicates that the 2011 capital budget should be funded entirely by operating cash flows.
Plains will focus on increasing their oil and other liquids production and proven reserves in 2011. This is a significant shift away from an emphasis on natural gas and the primary reason it is being considered for an addition to our Sweet 16 Growth Portfolio.
The company plans to maintain production levels at its core areas in California. Emerging positions in the Granite Wash and Eagle Ford are the focus of this year’s drilling program. The sale of their GOM shelf assets has significantly improved the PXP balance sheet.
I'm expecting PXP to generate double digit production growth in both 2011 and 2012.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group