Plains Exploration & Production 8-K Other events

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report : May 15, 2003

(Date of earliest event reported): May 15, 2003

Plains Exploration & Production Company

(Exact Name of Registrant as Specified in Charter)

Delaware (State or Other Jurisdiction of Incorporation) 001-31470 (Commission File Number) 33-0430755 (IRS Employer Identification No.)

500 Dallas Street, Suite 700

Houston, Texas 77002

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (713) 739-6700

1

Item 5.    Other Events.

On February 2, 2003, Plains Exploration & Production Company entered into a definitive Agreement and Plan of Merger with PXP Gulf Coast Inc. and 3TEC Energy Corporation. On May 1, 2003, Plains Exploration & Production Company filed its Registration Statement on Form S-4, which contained pro forma financial information as of and for the year ended December 31, 2002, reflecting, among other things, the effects of the merger. This filing is to update the pro forma financial information filed in the Registration Statement on Form S-4 dated May 1, 2003.

Item 7.    Financial Statements, Pro Forma Financial Information and Exhibits.

(a)    Not applicable.

(b)    Pro Forma Financial Information.

PLAINS EXPLORATION & PRODUCTION COMPANY

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma consolidated statements of income for the three months ended March 31, 2003 and the year ended December 31, 2002 have been prepared based on the historical consolidated statements of income of Plains and 3TEC under the assumptions set forth in the accompanying footnotes. The unaudited pro forma consolidated balance sheet at March 31, 2003 has been prepared based on the historical consolidated balance sheet of Plains under the assumptions set forth in the accompanying footnotes. The reorganization, debt issuance and spin-off transactions described below are reflected in the historical consolidated balance sheet of Plains at March 31, 2003.

On July 3, 2002, as provided in the Separation Agreement, Plains Resources transferred to Plains (previously known as Stocker Resources L.P.) 100% of the capital stock of Arguello Inc., Plains Illinois, Inc., PMCT, Inc. and Plains Resources International Inc. and all amounts payable to it by Plains and its subsidiary companies. These transactions are referred to as the “reorganization.” As part of the reorganization, Plains was converted into a Delaware corporation on September 18, 2002. The effect of the reorganization is reflected in the Reorganization, Debt Issuance and Spin-off Adjustments in the unaudited pro forma consolidated statements of income for the year ended December 31, 2002.

On July 3, 2002 Plains issued $200 million of 8.75% senior subordinated notes due 2012, or the Notes. Also on July 3, Plains entered into a $300.0 million revolving credit facility that provides for a borrowing base of $225.0 million and made initial borrowings of $117.6 million. On July 3, Plains distributed the $195.3 million net proceeds from the Notes and $116.7 million of the initial borrowings under the Plains credit facility to Plains Resources. The effect of these transactions is reflected in the Reorganization, Debt Issuance and Spin-off Adjustments in the unaudited pro forma consolidated statements of income for the year ended December 31, 2002.

On December 18, 2002 Plains Resources distributed all of the issued and outstanding shares of Plains common stock to the holders of Plains Resources common stock on the basis of one share of Plains common stock for every one share of Plains Resources common stock held as of the close of business on December 11, 2002 (the “spin-off”). Prior to the spin-off, Plains Resources made a $47.2 million cash capital contribution to Plains. In addition, prior to the spin-off Plains Resources transferred to Plains certain assets and Plains assumed certain liabilities of Plains Resources, primarily related to land, unproved oil and gas properties, office equipment and pension obligations. The effect of these transactions is reflected in the Reorganization, Debt Issuance and Spin-off Adjustments in the unaudited pro forma consolidated statement of income for the year ended December 31, 2002.

Historically, general and administrative expenses consist of Plains’ direct expenses plus amounts allocated from Plains Resources for various operational, financial, accounting and administrative services provided to Plains. Plains estimates that as a result of the reorganization and the spin-off, its annual general and administrative expenses will increase by approximately $4.1 million over the historical amount for the year ended December 31, 2002 reflecting the incremental costs of operating as a separate, publicly-held company.

2

On February 3, 2003 Plains and 3TEC Energy Corporation announced they had entered into a definitive agreement pursuant to which Plains will acquire 3TEC for a combination of cash, stock and assumed debt. Under the terms of the agreement 3TEC stockholders will receive $8.50 in cash and 0.85 shares of Plains common stock for each share of 3TEC common stock, subject to certain adjustments based on Plains’ share price prior to closing. This transaction will be accounted for by Plains using the purchase method of accounting. The effect of this transaction is reflected in the Merger Adjustments in the unaudited pro forma consolidated financial statements.

Plains and a group of lenders have entered into a three-year, $500.0 million senior revolving credit facility with JPMorgan Chase Bank serving as administrative agent. Funding will occur upon closing of the merger. The credit facility provides for an initial borrowing base of $425.0 million. Additionally, the credit facility contains a $50.0 million sub-limit on letters of credit. To secure borrowings, Plains will pledge 100% of the shares of stock of its domestic subsidiaries and will give mortgages covering 80% of the total present value of its domestic oil and gas properties.

The unaudited pro forma consolidated statements of income for the three months ended March 31, 2003 and the year ended December 31, 2002 assume the Reorganization, Debt Issuance, Spin-off and Merger transactions occurred on January 1, 2003 and 2002, respectively. The unaudited pro forma consolidated balance sheet at March 31, 2003 assumes the merger transactions occurred on that date. Plains believes the assumptions used provide a reasonable basis for presenting the significant effects directly attributable to such transactions.

The unaudited pro forma consolidated financial statements do not purport to represent what Plains’ results of operations would have been if such transactions had occurred on such dates. These unaudited pro forma consolidated financial statements should be read in conjunction with the Consolidated Financial Statements of Plains Exploration & Production Company, the Consolidated Financial Statements of 3TEC Energy Corporation and Management’s Discussion and Analysis of Financial Condition and Results of Operations of such companies, included in Plains’ and 3TEC’s filings with the SEC.

3

PLAINS EXPLORATION & PRODUCTION COMPANY

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2003

(in thousands, except per share data)

	Plains Historical			3TEC Historical			Merger Adjustments			Plains Pro forma
Revenues
Oil, gas and plant revenues	$	51,531		$	48,372		$	(41	)(1)	$	99,862
Gain (loss) on sale of properties					59			(59	)(6)		—
Gain (loss) on derivative fair value					583			(583	)(8)		—
Gain (loss) on derivative settlements					(14,993	)		14,993	(8)		—
Other operating revenues		207			53			(53	)(8)		207
		51,738			34,074			14,257			100,069
Costs and expenses
Production expenses		21,013			7,996			—			29,009
Geological and geophysical		—			3,608			(3,608	)(6)		—
Dry hole and impairments		—			2,161			(2,161	)(6)		—
General and administrative		3,076			2,575			(266	)(6)		5,385
								(10,372	)(2)
								6,605	(3)
								(96	)(4)
Depreciation, depletion and amortization		7,723			10,634			250	(9)		14,744
Accretion of asset retirement obligation		582			84			—			666
		32,394			27,058			(9,648	)		49,804
Income from Operations		19,344			7,016			23,905			50,265
Other Income (Expense):
								831	(4)
Interest expense		(4,856	)		(831	)		(1,317	)(5)		(6,173	)
Derivative fair value gain (loss)		—						583	(8)		583
Derivative settlement gain (loss)		—						(14,993	)(8)		(14,993	)
Merger costs		—			(894	)		894	(7)
Interest and other income (expense)		33						53	(8)		86
Income Before Income Taxes and Cumulative Effect of Accounting Change		14,521			5,291			9,956			29,768
Income tax benefit (expense)		(5,918	)		(2,064	)		(3,925	)(10)		(11,907	)
Income Before Cumulative Effect of Accounting Change	$	8,603		$	3,227		$	6,031			17,861
Earnings per share—diluted	$	0.35								$	0.45
Weighted average shares outstanding
Basic		24,015						15,933	(11)		39,948
Diluted		24,225						15,933	(11)		40,158

(footnotes on following page)

4

Merger Adjustments

  (1) Reflects the $0.20 per barrel marketing fee Plains pays to Plains All American Pipeline, L.P.

  (2) Reflects the reversal of 3TEC’s historical DD&A expense related to oil and gas properties.

  (3) Reflects the effect of the merger on DD&A expense on oil and gas properties under the full cost method.

  (4) Reflects the reversal of 3TEC’s amortization of deferred debt issue costs and interest expense with respect to 3TEC’s debt that will be retired in the merger.

  (5) Reflects interest expense for the period on $295.1 million of debt incurred in connection with the acquisition net of $.9 million of capitalized interest. Interest expense is based on an estimated borrowing rate under Plains’ senior revolving credit facility (3.0%). Capitalized interest is based on the $65.3 million of purchase price allocated to oil and gas properties not subject to amortization and Plains’ effective average interest rate (5.3% based on pro forma debt). A ¹/8 of 1% change in the interest rate would result in a $0.1 million change in interest expense.

  (6) Reflects the reversal of certain 3TEC’s income items that are charged or credited to income under the successful efforts method of accounting that are capitalized under the full cost method of accounting.

  (7) Reflects the reversal of 3TEC expenses related to the merger.

  (8) Reflects the reclassification of certain 3TEC revenue and expense items to conform to the Plains presentation.

  (9) Reflects amortization of estimated debt issue cost for the period, on a straight-line basis that approximates the interest method over the life of the agreement.

(10) Reflects the adjustment of income tax expense to a post-merger effective rate of 40.0%.

(11) Reflects common shares issued in the merger.

5

PLAINS EXPLORATION & PRODUCTION COMPANY

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2002

(in thousands, except per share data)

	Plains Historical				Reorganization, Debt Issuance and Spin-Off Adjustments			Plains Pro forma			3TEC Historical			Merger Adjustments			Plains Pro forma
Revenues
Oil, gas and plant revenues	$	188,337			$	—		$	188,337		$	103,064		$	(166	)(8)	$	291,235
Gain (loss) on sale of properties		—				—			—			(159	)		159	(14)		—
Gain (loss) on derivative fair value		—				—			—			(6,632	)		6,632	(15)		—
Gain (loss) on derivative settlements		—				—			—			(5,644	)		5,644	(15)		—
															(189	)(14)
Other operating revenues		226							226			473			(284	)(15)		226
		188,563				—			188,563			91,102			11,796			291,461
Costs and expenses
Production expenses		78,451				—			78,451			25,326			188	(15)		103,965
Geological and geophysical		—				—			—			2,683			(2,683	)(14)		—
Dry hole and impairments		—		��		—			—			8,918			(8,918	)(14)		—
Surrendered and expired acreage		—				—			—			860			(860	)(14)		—
															(816	)(14)
General and administrative (7)		15,186				—			15,186			9,970			310	(15)		24,650
															(36,002	)(9)
															28,010	(10)
Depreciation, depletion and						(451	)(2)								(599	)(11)
amortization		30,359				966	(3)		30,874			37,357			1,000	(13)		60,640
		123,996				515			124,511			85,114			(20,370	)		189,255
Income from Operations		64,567				(515	)		64,052			5,988			32,166			102,206
Other Income (Expense)
Expenses of terminated public equity offering		(2,395	)			—			(2,395	)		—			—			(2,395	)
						9,732	(1)
						9,536	(2)
						(20,497	)(4)								3,962	(11)
Interest expense		(19,377	)			1,841	(5)		(18,765	)		(3,962	)		(5,268	)(12)		(24,033	)
Derivative fair value gain (loss)		—				—			—			—			(6,632	)(15)		(6,632	)
Derivative settlement gain (loss)		—				—			—			—			(5,644	)(15)		(5,644	)
Interest and other income															132	(14)
(expense)		174				—			174			(629	)		782	(15)		459
Income Before Income Taxes		42,969				97			43,066			1,397			19,498	(15)		63,961
Income tax benefit (expense)		(16,732	)			(38	)(6)		(16,770	)		(45	)		(8,769	)(16)		(25,584	)
Net Income (18)	$	26,237			$	59		$	26,296		$	1,352		$	10,729			38,377
Earnings Per Share—basic and diluted (18)	$	1.08						$	1.09								$	.96
Weighted Average Shares Outstanding
Basic		24,193							24,193						15,933	(17)		40,126
Diluted		24,201							24,201						15,933	(17)		40,134

(footnotes on following page)

6

Reorganization, Debt Issuance and Spin-off Adjustments

Reorganization

  (1) Reflects the reversal of historical interest expense related to amounts payable to Plains Resources since such amounts payable were contributed to Plains under the terms of the Separation Agreement.

Debt Issuance

  (2) Reflects the reversal of historical amortization of debt issue costs and interest expense.

  (3) Reflects amortization of debt issue costs for the period, on a straight line basis that approximates the interest method, over the life of the 8.75% Notes and Plains credit facility.

  (4) Reflects interest expense for the period on the 8.75% Notes ($17.7 million) and the Plains credit facility ($5.2 million). Interest expense with respect to the 8.75% Notes includes $0.2 million of amortization of original issue discount. Interest expense with respect to the Plains credit facility is computed based on Plains’ average borrowing rate under the terms of the agreement (3.0%). A ¹/8 of 1% change in the interest rate with respect to the Plains credit facility would result in a $0.1 million change in interest expense. Pro forma amount reflects interest expense after capitalization of $2.4 million.

Spin-off

  (5) Reflects the reversal of interest expense for the period on debt retired in December 2002 using the proceeds from $47.2 million of capital contributions by Plains Resources. Interest expense is based on Plains’ average borrowing rate under the Plains credit facility (3.0%). A ¹/8 of 1% change in the interest rate would result in less than a $0.1 million change in interest expense.

Income Taxes

  (6) Reflects the income tax effect of (i) the Reorganization Adjustments ($3.8 million expense); (ii) the Debt Issuance Adjustments ($4.5 million benefit); and (iii) the Spin-off Adjustments ($0.7 million expense) based on Plains’ historical effective income tax rate.

Stock Appreciation Rights

  (7) When the spin-off occurred, Plains employees holding options to acquire Plains Resources common stock received an equal number of stock appreciation rights, or SARs, with respect to Plains common stock. The exercise price of the SARs is based on the relationship between the price of Plains Resources common stock and Plains common stock at the time of the spin-off. With respect to the SARs that were in-the-money at the time of the spin-off, Plains recognized an initial accounting charge of $2.7 million in December 2002 as compensation expense equal to the aggregate in-the-money value of the SARs deemed vested at that time. In addition, Plains recognized a $1.0 million accounting charge to reflect the movement in its common stock price and the vesting deemed to have occurred from the spin-off date to December 31, 2002.

SARs are subject to variable accounting treatment. As a result, at the end of each quarter, Plains will compare the closing price of Plains common stock to the exercise price of each SAR. To the extent the closing price exceeds the exercise price of each SAR that is vested or for accounting purposes is deemed vested during the incremental period, Plains will recognize such excess as an accounting charge to the extent such excess had not been recognized in previous quarters. If such excess is less than the extent to which accounting charges had been recognized in previous quarters, Plains will recognize the difference as income in the quarter. These quarterly charges and income will make Plains’ results of operations depend, in part on fluctuations in the price of Plains common stock and could have a material adverse effect on Plains’ results of operations.

7

Merger Adjustments

(8) Reflects the $0.20 per barrel marketing fee Plains pays to Plains All American Pipeline, L.P.

(9) Reflects the reversal of 3TEC’s historical DD&A expense related to oil and gas properties.

(10) Reflects the effect of the merger on DD&A expense on oil and gas properties under the full cost method.

(11) Reflects reversal of 3TEC’s amortization of deferred debt issue costs and interest expense with respect to 3TEC’s debt that will be retired in the merger.

(12) Reflects interest expense for the period on $295.1 million of debt incurred in connection with the acquisition net of $3.4 million of capitalized interest. Interest expense is based on estimated borrowing rate under Plains’ senior revolving credit facility (3.0%). Capitalized interest is based on the $65.3 million of purchase price allocated to oil and gas properties not subject to amortization and Plains’ effective average interest rate (5.26% based on pro forma debt). A ¹/8 of 1% change in the interest rate would result in a $0.4 million change in interest expense.

(13) Reflects amortization of estimated debt issue cost for the period, on a straight-line basis that approximates the interest method over the life of the agreement.

(14) Reflects the reversal of certain 3TEC income items that are charged or credited to income under the successful efforts method of accounting that are capitalized under the full cost method of accounting.

(15) Reflects the reclassification of certain 3TEC revenue and expense items to conform to the Plains presentation.

(16) Reflects the adjustment of income tax expense to a post-merger effective rate of 40.0%.

(17) Reflects common shares issued in the merger.

Asset Retirement Obligations

(18) Effective January 1, 2003, Plains and 3TEC adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). If SFAS 143 had been applied effective January 1, 2002, Plains’ pro forma adjusted net income and diluted earnings per share would have been $39.2 million and $0.98, respectively.

8

PLAINS EXPLORATION & PRODUCTION COMPANY

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AT MARCH 31, 2003

(in thousands of dollars)

	Plains Historical			Merger Adjustments(1)			Plains Pro forma Adjusted
ASSETS
Current Assets
Cash and cash equivalents	$	1,002		$	(72,700	)	$	2,848
					1,846
Accounts receivable—Plains All American Pipeline, L.P.		25,722			—			25,722
Other accounts receivable		3,545			25,386			28,931
Commodity hedging contracts		1,623			—			1,623
Inventories		5,993			—			5,993
Other current assets		1,133			3,004			4,137
		39,018			30,236			69,254
Property and Equipment, at cost
Oil and gas properties—full cost method
Subject to amortization		661,769			336,022			997,791
Not subject to amortization		30,779			65,267			96,046
Other property and equipment		2,286			2,269			4,555
		694,834			403,558			1,098,392
Allowance for depreciation, depletion and amortization		(145,174	)		—			(145,174	)
		549,660			403,558			953,218
Goodwill		—			112,795			112,795
Other assets		19,047			3,735			22,782
	$	607,725		$	550,324		$	1,158,049
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and other current liabilities	$	62,782		$	19,990		$	82,772
Commodity hedging contracts		24,012			2,968			26,980
Current maturities on long-term debt		511			—			511
		87,305			22,958			110,263
Long-Term Debt		229,919			295,065			524,984
Asset Retirement Obligation		26,240			4,835			31,075
Other Long-Term Liabilities		9,464			—			9,464
Deferred Income Taxes		61,932			76,581			138,513
Stockholders’ Equity
Stockholders’ equity		208,351			150,885			359,236
Accumulated other comprehensive income (loss)		(15,486	)		—			(15,486	)
		192,865			150,885			343,750
	$	607,725		$	550,324		$	1,158,049

(footnotes on following page)

9

Merger Adjustments

(1) Reflects the estimated pro forma allocation of the purchase price using the purchase method of accounting. The following is a calculation and allocation of the purchase price to assets acquired and liabilities assumed based on their relative fair value (in thousands, except as noted):

Calculation of Estimated Purchase Price:
Number of shares to be issued		15,933
Average Plains common stock price per share	$	9.47
Fair Value of common stock to be issued	$	150,885
Cash to 3TEC stockholders		174,065
3TEC debt retired in the merger		106,000
Deferred tax liability related to the merger		76,581
Estimated merger costs		15,000
Estimated purchase price	$	522,531
Allocation of Estimated Purchase Price:
Current assets	$	30,236
Oil and gas properties and equipment
Subject to amortization		336,022
Not subject to amortization (a)		65,267
Other properties and equipment		2,269
Goodwill		112,795
Other assets		3,735
Current liabilities		(22,958	)
Asset retirement obligation		(4,835	)
Estimated purchase price	$	522,531

(a) In the process of allocating the purchase price, Plains reviewed 3TEC’s exploration opportunities targeting probable and possible reserves. Based on its assessment of the 3TEC exploration opportunities, Plains’ internal staff assigned 13.9 MMBOE of probable and possible reserves with estimated future net revenues of $179 million (undiscounted) to the properties acquired in the merger. Probable and possible reserves have a much higher risk profile than proved undeveloped reserves and thus the range of ultimate results can vary widely. Based on this assessment, $65.3 million of the estimated purchase price has been allocated to properties not subject to amortization.

The majority of the probable and possible reserves are located in untested fault blocks in a productive basin that has 3D seismic interpretive data showing hydrocarbon potential. Hydrocarbon indicators do not eliminate prospect risk as non-commercial breached traps and residual hydrocarbon saturations also have positive indicators.

Reserves for these prospects will only become proved if commercial wells are drilled into these unproved fault blocks.

The number of Plains shares to be issued is based on 16.7 million shares of 3TEC common stock outstanding plus the conversion on a cashless basis of outstanding options to purchase 3TEC common stock and outstanding warrants to purchase 3TEC common stock of $3.00 per share. The average Plains common stock price is based on the average closing prices of Plains common stock during the five business day period commencing two business days before the merger was announced.

10

Under the terms of the merger agreement, 3TEC common stockholders will receive $8.50 in cash and 0.85 shares of Plains common stock for each share of 3TEC common stock or equivalent. This exchange ratio is subject to an upward or downward adjustment should the market price of Plains common stock fall below $7.65 per share or rise above $12.35 per share, respectively. The following table reflects the effect of changes in the Plains stock price (amounts in millions, except per share):

Plains Stock Price	Shares Issued	Value of Shares Issued		Increase (Decrease) in Stockholders’ Equity		Adjusted Earnings Per Share
						Year Ended December 31, 2002
$  9.47	15.9	$	150.9	—		$	0.87
$  7.65	15.9		121.8	(29.1	)		0.87
$  6.65	18.3		121.8	(29.1	)		0.82
$  6.25	19.5		121.8	(29.1	)		0.80
$12.35	15.9		196.7	45.9			0.87
$13.35	14.7		196.7	45.9			0.89

The increase or decrease in stockholders’ equity is offset by a corresponding change in goodwill.

If the market price of Plains common stock falls below $6.25 per share, Plains can terminate the merger or adjust the exchange ratio so that the stock consideration remains the same as indicated above but the cash consideration component, which will be funded with borrowings from a new credit facility, would increase by approximately $19.5 million for every $1.00 decrease in the market price below $6.25 per share. Accordingly, long-term debt would increase by $19.5 million and stockholders’ equity would decrease by $19.5 million and related interest expense would increase by approximately $0.8 million (net income of $0.5 million or an additional decrease in earnings per share of $.01 per share) for the year ended December 31, 2002.

Effective as of January 1, 2003, 3TEC adopted SFAS 143 which requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. The adoption of SFAS 143 resulted in the recognition of a liability for asset retirement obligations of approximately $4.8 million. In connection with the merger and under the purchase method of accounting, Plains assumed the asset retirement obligation and will record the fair value of the obligation as of the date of the acquisition. The effect of recording the obligation will result in an increase to oil and natural gas properties subject to amortization and other long-term liabilities.

The significant factors which contribute to the recognition of goodwill, include but are not limited to, providing a presence in East Texas and the Gulf Coast regions that can be used to pursue other opportunities in these core operating areas, improve financial flexibility with more efficient access to lower cost capital and higher returns from synergies in having a broader and more diversified reserve base and the ability to acquire an established business with an assembled workforce. In addition, additional goodwill has been recorded due to the application of purchase accounting rules which require that deferred taxes be recorded at undiscounted amounts.

The cash to 3TEC stockholders is based on $8.50 per share to be paid with respect to 16.7 million shares of 3TEC common stock outstanding plus the converted options to purchase 3TEC common stock and warrants to purchase 3TEC common stock for $3.00 per share. 3TEC preferred stockholders will receive $24.00 per share for each of the 0.6 million preferred shares outstanding.

The cash to pay the 3TEC stockholders and retire the 3TEC debt will be funded by Plains’ new credit facility.

The purchase price allocation is subject to changes in the fair value of 3TEC’s working capital and other assets and liabilities on the effective date and the actual merger costs incurred.

11

PLAINS EXPLORATION & PRODUCTION COMPANY

PRO FORMA RESERVE DATA

	Plains			3TEC			Plains Pro forma
Estimated Quantities of Oil & Gas Reserves at December 31, 2002
Proved Reserves
Oil (MBbl)		240,161			6,208			246,369
Gas (MMcf)		77,154			259,026			336,180
Proved Developed Reserves
Oil (MBbl)		127,415			5,546			132,961
Gas (MMcf)		53,317			205,301			258,618
Standardized Measure of Discounted Future Net Cash Flows at December 31, 2002 (in thousands)
Future cash inflows	$	6,819,645		$	1,285,657		$	8,105,302
Future development costs		(431,841	)		(53,127	)		(484,968	)
Future production expense		(2,528,065	)		(284,860	)		(2,812,925	)
Future income tax expense		(1,446,528	)		(277,372	)		(1,723,900	)
Future net cash flows		2,413,211			670,298			3,083,509
Discounted at 10% per year		(1,529,704	)		(320,858	)		(1,850,562	)
Standardized measure of discounted future net cash flows	$	883,507		$	349,440		$	1,232,947

(c) Not applicable.

12

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Plains Exploration & Production Company

/s/ Stephen A. Thorington

Stephen A. Thorington

Executive Vice President and Chief Financial Officer

Dated: May15, 2003

13