Plains Exploration & Production Company (PXP)

[Picassa]

Derivatives

In the first quarter of 2009, we monetized our 2009 and 2010 crude oil put option contracts on 40,000 BOPD.

As a result, we received $389 million in net proceeds on February 20, 2009 and will receive approximately $711 million in net proceeds in March 2009, which we will use to reduce the outstanding balance on our senior revolving credit facility.

We currently are party to crude oil put option contracts on 32,500 BOPD in 2009 and 40,000 BOPD in 2010.

These put options have a strike price of $55 per barrel. Additionally, we are party to natural gas $10 by $20 collars on 150,000 MMbtu in 2009 and natural gas three way collars on 40,000 million British thermal units (MMbtu) per day for 2010.

Under the later arrangement, if the index price is below the floor price of $6.25 per MMbtu, we receive the difference between $6.25 and the index price up to a maximum of $1.45 per MMbtu.

If the index price is greater than the ceiling price of $8.00 per MMbtu, we pay the difference between the index price and $8.00 per MMbtu.

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