HOUSTON, April 19 /PRNewswire-FirstCall/ -- Plains
Exploration & Production Company (NYSE: PXP) ("PXP" or the
"Company") today announced it has acquired crude oil put option
spread contracts on 31,000 barrels of oil per day in 2011 and
40,000 barrels of oil per day in 2012. Both the 2011 and 2012 put
options have a floor price of $80
with a limit of $60 per barrel. If
the index price is below $80 per
barrel, PXP will receive the difference between $80 and the index price up to a maximum of
$20 per barrel less the option
premium. If the index price is at or above $80 per barrel, PXP only pays the option
premium.
PXP also acquired crude oil three-way collars that have a floor
price of $80 with a limit of
$60 and a ceiling price of
$110 on 9,000 barrels of oil per day
for 2011. If the index price is below $80 per barrel, PXP will receive the difference
between $80 and the index price up to
a maximum of $20 per barrel less the
option premium. If the index price is greater than $110 per barrel, PXP will pay the difference
between the index price and $110 per
barrel plus the option premium. If the index price is at or above
$80 per barrel but at or below
$110 per barrel, PXP only pays the
option premium.
Winston M. Talbert, Executive
Vice President and Chief Financial Officer of PXP commented, "We
acquired incremental derivatives on a significant portion of our
2011 and 2012 crude oil production volumes during the recent strong
oil price market. We continue to deploy our hedge strategy using a
combination of put options and three-way collars to protect our
cash flows through 2012 and retain exposure to substantially all
oil price upside potential. These derivatives enhance our credit
position and underpin our capital expenditure program thereby
providing PXP greater flexibility to deliver its double-digit
production and reserve growth targets."
A summary of PXP's open commodity derivative positions is as
follows:
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Average
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Instrument
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Daily
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Average
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Deferred
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Period
(1)
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Type
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Volumes
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Price
(2)
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Premium
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Index
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Sales of Crude Oil
Production
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2010
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Apr - Dec
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Put options
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40,000 Bbls
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$55.00 Strike price
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$5.00 per Bbl (3)
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WTI
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2011
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Jan - Dec
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Put options
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31,000 Bbls
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$80.00 Floor with a
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$5.023 per Bbl
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WTI
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$60.00 Limit
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Jan - Dec
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Three-way
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9,000 Bbls
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$80.00 Floor with a
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$1.00 per Bbl
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WTI
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collars
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$60.00 Limit
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$110.00 Ceiling
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2012
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Jan - Dec
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Put options
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40,000 Bbls
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$80.00 Floor with a
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$6.087 per Bbl
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WTI
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$60.00 Limit
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Sales of Natural Gas
Production
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2010
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Apr - Dec
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Three-way
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85,000
MMBtu
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$6.12 Floor with a
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$0.034 MMBtu
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Henry
Hub
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collars (4)
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$4.64 Limit
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$8.00 Ceiling
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(1) All of our derivative
instruments are settled monthly.
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(2) The average strike prices do
not reflect the cost to purchase the put options or
collars.
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(3) In addition to the deferred
premium, a premium averaging $3.86 per barrel was paid from the
proceeds of
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our first quarter
2009 derivative monetization upon entering into these derivative
contracts.
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(4) If the index price is less
than the $6.12 per MMBtu floor, we receive the difference between
the $6.12 per
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MMBtu floor and
the index price up to a maximum of $1.48 per MMBtu. We pay
the difference between the
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index price and
$8.00 per MMBtu if the index price is greater than the $8.00
ceiling.
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PXP has elected not to use hedge accounting for these
derivatives and consequently the derivatives will be
marked-to-market each quarter with fair value gains and losses
recognized currently as a gain or loss on mark-to-market derivative
contracts on the income statement.
PXP is an independent oil and gas company primarily engaged in
the activities of acquiring, developing, exploring and producing
oil and gas in California,
Texas, Louisiana and the Gulf of Mexico. 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 statement. 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,
- capital and credit market conditions,
- 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 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 as required by
law, we do not intend to update these forward-looking statements
and information.
SOURCE Plains Exploration & Production Company