Adjusted net income beat my forecast. The asset sale will shore up their balance sheet. I'm working on an updated forecast model that will be on the website this afternoon. - Dan
Third-Quarter Statistical Highlights:
•Revenues of $501.8 million.
•Net loss of $88.3 million, or $0.62 per diluted share.
•Adjusted net income of $64.9 million, or $0.45 per diluted share (a non-GAAP measure).
•Income from operations of $168.6 million, a 74% increase over third-quarter 2010.
•Net cash provided by operating activities of $345.2 million, a 70% increase over third-quarter 2010.
•Average daily sales volumes of approximately 104.4 thousand barrels of oil equivalent (BOE), a 15% increase compared to third-quarter 2010 or 26% increase pro-forma for the 2010 asset sale.
•Average daily liquids sales volumes of approximately 50.9 thousand barrels of oil, a 9% increase compared to third-quarter 2010 or 16% pro-forma for the 2010 asset sale.
•Total production costs per BOE of $13.84, a 3% decrease from third-quarter 2010.
•Gross margin per BOE of $21.35 and cash margin per BOE of $36.73 (a non-GAAP measure), an increase of 27% and 18% over third-quarter 2010, respectively.
PXP
Re: PXP
PXP announced today that it and certain of its subsidiaries have entered into definitive purchase and sale agreements to sell all of its working interests in oil and gas properties located in the Texas Panhandle and its conventional natural gas properties in South Texas for $785 million cash. Proceeds are expected to reduce debt.
PXP agreed to sell all of its working interests in its Texas Panhandle properties to an affiliate of Linn Energy, LLC (NASDAQ:LINE - News) for $600 million. PXP's aggregate working interest in the Texas Panhandle properties generated total sales volumes of approximately 84 MMcfe per day during the third quarter of 2011 and had 263 billion cubic feet equivalent (Bcfe) of estimated proved reserves as of December 31, 2010. This sale is expected to close in December 2011 with an effective date of November 1, 2011. Barclays Capital Inc. acted as financial advisor to PXP and J.P. Morgan Securities LLC rendered a fairness opinion on this transaction.
PXP also agreed to sell all of its working interests in its South Texas conventional natural gas properties to a third party for $185 million. PXP's aggregate working interest in these properties generated total sales volumes of approximately 39 MMcfe per day during the third quarter of 2011 and had 120 Bcfe of estimated proved reserves as of December 31, 2010. This sale is expected to close in December 2011 with an effective date of September 1, 2011. Barclays Capital Inc. acted as financial advisor to PXP and Simmons & Company International rendered a fairness opinion on this transaction.
Winston M. Talbert, Executive Vice President and Chief Financial Officer of PXP commented, "The asset sales are part of a broader strategy to increase revenues through the previously announced marketing contracts, decrease deferred premium costs through the previously announced derivative enhancements, and lower total interest costs by lowering debt levels. Over the next eighteen months, PXP has $2.1 billion of high coupon debt that is callable. With the current low interest rate environment, PXP sees a unique opportunity to reduce its interest costs 30% to 40% by year-end 2012 thereby increasing profitability, shareholder return and cash flow."
PXP agreed to sell all of its working interests in its Texas Panhandle properties to an affiliate of Linn Energy, LLC (NASDAQ:LINE - News) for $600 million. PXP's aggregate working interest in the Texas Panhandle properties generated total sales volumes of approximately 84 MMcfe per day during the third quarter of 2011 and had 263 billion cubic feet equivalent (Bcfe) of estimated proved reserves as of December 31, 2010. This sale is expected to close in December 2011 with an effective date of November 1, 2011. Barclays Capital Inc. acted as financial advisor to PXP and J.P. Morgan Securities LLC rendered a fairness opinion on this transaction.
PXP also agreed to sell all of its working interests in its South Texas conventional natural gas properties to a third party for $185 million. PXP's aggregate working interest in these properties generated total sales volumes of approximately 39 MMcfe per day during the third quarter of 2011 and had 120 Bcfe of estimated proved reserves as of December 31, 2010. This sale is expected to close in December 2011 with an effective date of September 1, 2011. Barclays Capital Inc. acted as financial advisor to PXP and Simmons & Company International rendered a fairness opinion on this transaction.
Winston M. Talbert, Executive Vice President and Chief Financial Officer of PXP commented, "The asset sales are part of a broader strategy to increase revenues through the previously announced marketing contracts, decrease deferred premium costs through the previously announced derivative enhancements, and lower total interest costs by lowering debt levels. Over the next eighteen months, PXP has $2.1 billion of high coupon debt that is callable. With the current low interest rate environment, PXP sees a unique opportunity to reduce its interest costs 30% to 40% by year-end 2012 thereby increasing profitability, shareholder return and cash flow."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
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bearcatbob
Re: PXP
The fate of MMR should be determined in December. DJ is to be flow tested. Guess the results correctly IMO and get rich - either long or short should do it - depending on results of DJ.dan_s wrote:PXP's writedown on the MMR shares were based on the 9-30-2011 share price of $9.93
MMR is trading for over $13/share today and I think it has a lot of upside.
Bob
Re: PXP
S&P on PXP
Highlights
On a 65% rise in Haynesville volumes, 2010 production rose 7%, and PXP targets a 15% compound annual growth rate (CAGR) through 2015. PXP is operating 21 rigs at Haynesville, down from 31 in August on weak gas prices and the end of leasehold requirements. We see volumes increasing at core California (45% of 2010 volume) oil assets in 2011. At the Eagle Ford Shale, where PXP continues to add acreage, PXP plans to run a 7-9 rig program in 2012. In all, we see production growth of 13% in 2011 and 17% in 2012. In November, PXP sold $785 million in assets in the Texas Panhandle and South Texas. PXP is seeing better realized pricing, as much of its production is benchmarked at a premium to WTI crude prices.
PXP sees capex of $1.8 billion for 2011, with 73% for liquids, and has indicated a 2012 budget of $1.6 billion, with 55% allocated to California and Eagle Ford.We see asset sale proceeds of over $2 billion redirected to liquids-rich Granite Wash and Eagle Ford plays. PXP is targeting a 30%-40% reduction in interest costs in 2012.
We see EPS of $1.78 in 2011 (vs. $1.19 in 2010) on production growth, notably from oil, and higher prices; and $2.30 in 2012.
Investment Rationale/Risk
We believe PXP, with over $5 billion in asset purchases, asset sales of close to $4 billion and a JV with Chesapeake Energy, is in better position to increase reserves, production and cash flow with more exposure to new resources. PXP plans to allocate future capital to California, Haynesville, Eagle Ford and the Gulf of Mexico as it transitions to an onshore producer with a good mix of liquids and gas (about 51/49 of production).We expect continued initiatives to reduce costs and strengthen its balance sheet, with sale proceeds possibly used to reduce debt and buy back shares. In October, PXP received $450 million in financing for a 20% stake in its GOM business.
Risks to our recommendation and target price include a substantial decline in oil and gas prices, an inability to replace reserves at reasonable costs, and production declines.
PXP has traded at a discount to E&P peers on a highly leveraged balance sheet and transitioning portfolio. We think it is entering a period of growth. Our 12-month target price of $42 blends our NAV estimate of $44 with relative metrics, including a target enterprise value-to-2012 EBITDA ratio of 6X, in line with similar peers.
Highlights
On a 65% rise in Haynesville volumes, 2010 production rose 7%, and PXP targets a 15% compound annual growth rate (CAGR) through 2015. PXP is operating 21 rigs at Haynesville, down from 31 in August on weak gas prices and the end of leasehold requirements. We see volumes increasing at core California (45% of 2010 volume) oil assets in 2011. At the Eagle Ford Shale, where PXP continues to add acreage, PXP plans to run a 7-9 rig program in 2012. In all, we see production growth of 13% in 2011 and 17% in 2012. In November, PXP sold $785 million in assets in the Texas Panhandle and South Texas. PXP is seeing better realized pricing, as much of its production is benchmarked at a premium to WTI crude prices.
PXP sees capex of $1.8 billion for 2011, with 73% for liquids, and has indicated a 2012 budget of $1.6 billion, with 55% allocated to California and Eagle Ford.We see asset sale proceeds of over $2 billion redirected to liquids-rich Granite Wash and Eagle Ford plays. PXP is targeting a 30%-40% reduction in interest costs in 2012.
We see EPS of $1.78 in 2011 (vs. $1.19 in 2010) on production growth, notably from oil, and higher prices; and $2.30 in 2012.
Investment Rationale/Risk
We believe PXP, with over $5 billion in asset purchases, asset sales of close to $4 billion and a JV with Chesapeake Energy, is in better position to increase reserves, production and cash flow with more exposure to new resources. PXP plans to allocate future capital to California, Haynesville, Eagle Ford and the Gulf of Mexico as it transitions to an onshore producer with a good mix of liquids and gas (about 51/49 of production).We expect continued initiatives to reduce costs and strengthen its balance sheet, with sale proceeds possibly used to reduce debt and buy back shares. In October, PXP received $450 million in financing for a 20% stake in its GOM business.
Risks to our recommendation and target price include a substantial decline in oil and gas prices, an inability to replace reserves at reasonable costs, and production declines.
PXP has traded at a discount to E&P peers on a highly leveraged balance sheet and transitioning portfolio. We think it is entering a period of growth. Our 12-month target price of $42 blends our NAV estimate of $44 with relative metrics, including a target enterprise value-to-2012 EBITDA ratio of 6X, in line with similar peers.
Re: PXP
PXP is in the Sweet 16 because it has double digit growth locked in and it is now focused on increasing liquids production, primarily from the Eagle Ford and Granite Wash.
PXP owns 32% of McMoRan (MMR). We are currently working up a company profile on MMR. It has a lot of upside, giving PXP a significant catalyst in the near future.
My Fair Value estimate is a lot higher than S&P's $42 price target.
In the last 30 days, First Call's 2012 EPS forecast for PXP has gone up from $2.84 to $3.40. In my forecast model, I have to assume $100/bbl realized oil price for all of 2012 to get that high. It could happen since PXP now sells most of their oil at a premium to WTI.
PXP owns 32% of McMoRan (MMR). We are currently working up a company profile on MMR. It has a lot of upside, giving PXP a significant catalyst in the near future.
My Fair Value estimate is a lot higher than S&P's $42 price target.
In the last 30 days, First Call's 2012 EPS forecast for PXP has gone up from $2.84 to $3.40. In my forecast model, I have to assume $100/bbl realized oil price for all of 2012 to get that high. It could happen since PXP now sells most of their oil at a premium to WTI.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group