PXP Announces $1.25 Billion Divestiture of Permian and Piceance Basin Properties
HOUSTON, Sept. 25 /PRNewswire-FirstCall/ -- Plains Exploration & Production Company (NYSE: PXP) ("PXP" or the "Company") announced today it has executed a definitive purchase and sale agreement to sell its interests in oil and gas properties located in the Permian and Piceance Basins for $1.25 billion to Occidental Petroleum Corporation (NYSE: OXY).
"Pursuant to our commitment to strengthen PXP's financial profile, this transaction increases the Company's oil weighting for both reserves and production for 2009 and protects a significant portion of our remaining production with our superior hedge put position insuring positive cash flow even in a lower commodity price environment. Additionally, this transaction reduces our corporate debt by at least $1 billion and enables us to lower our projected 2009 capital expenditures to $1.35 billion plus have a pro forma target compounded annual production growth rate in excess of 15% for 2008-2012," commented Mr. James C. Flores, Chairman, President and Chief Executive Officer of PXP.
"This divestment facilitates PXP's rotation from assets with moderate growth and challenging differentials to the unparalleled high growth Haynesville Shale play which is proving to have stronger operating metrics and growth attributes with higher wellhead realizations. PXP has a 20% interest in Chesapeake's as reported 550,000 acre leasehold position holding an estimated 40 trillion cubic feet equivalent of gross un-risked resource potential. With an expanding drilling program and production beginning in the fourth quarter of this year, the Haynesville Shale will become a key driver to our production and reserve growth for most of the next decade while bolstering our return on investment. The Company's core assets remain our strong California oil production, Texas and Gulf Coast gas assets, long-life Madden field, dynamic Haynesville Shale play and high-impact exploration in the Gulf of Mexico, Offshore California and Vietnam.
"The refocusing of our asset base will increase our high margin, oil weighting and will target a strong organic production growth rate while remaining fiscally disciplined and preserving commodity price upside for our stakeholders," commented Mr. Flores.
The properties to be sold generate sales volumes net to PXP of approximately 13,000 barrels of oil equivalent per day and had approximately 92 million barrels of oil equivalent proved reserves net to PXP as of December 31, 2007. Pro forma for this transaction, PXP's oil and gas mix for 2009 estimated production will increase to 56% oil and to 70% oil for estimated year-end 2008 reserves while on average 75% of our 2009 and 2010 estimated oil production is protected with floors above $100 and approximately 85% of our estimated natural gas production through year-end 2009 is protected with either physical purchases used in our operations or $10 by $20 collars.
The transaction effective date is December 1, 2008 and is expected to close during the fourth quarter 2008 subject to customary closing conditions and adjustments. J.P. Morgan Securities Inc., Banc of America Securities LLC and Barclays Capital Inc. acted as financial advisors to PXP on this transaction.
OUTLOOK
PXP plans to update full-year 2008 operating and financial guidance and provide full-year 2009 operating and financial guidance on November 6, 2008 when third quarter earnings are released.
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.
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