Plains Exploration & Production 8-K/A Acquisition or disposition of assets

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report: June 14, 2004

Date of Earliest Event Reported: May 14, 2004

PLAINS EXPLORATION

& PRODUCTION COMPANY

(Exact name of registrant as specified in charter)

Delaware	33-0430755
(State of Incorporation)	(I.R.S. Employer Identification No.)

001-31470

(Commission File No.)

700 Milam, Suite 3100

Houston, Texas 77002

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (832) 239-6000

Item 2. Acquisition or Disposition of Assets

On May 28, 2004, Plains Exploration & Production Company, or PXP, filed a current report on Form 8-K announcing the closing of its merger with Nuevo Energy Company, or Nuevo, pursuant to an Agreement and Plan of Merger, dated February 12, 2004, as amended on April 9, 2004. The purpose of this amended current report is to file the pro forma financial information required to be filed pursuant to Items 2 and 7 of Form 8-K.

Item 7. Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired.

The following information is hereby incorporated by reference in this report:

1. Nuevo’s consolidated financial statements as of March 31, 2003 and 2004 and for each of the three month periods then ended and related notes contained in Nuevo’s Quarterly Report on Form 10-Q for the period ended March 31, 2004 (File No. 001-10537).

(b) Pro Forma Financial Information.

2

PLAINS EXPLORATION & PRODUCTION COMPANY

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma combined financial information shows the pro forma effect of the merger of Plains Exploration & Production Company (“Plains”) and Nuevo Energy Company (“Nuevo”), the sale of Nuevo’s Congo operations, Plains’ acquisition of 3TEC Energy Corporation (“3TEC”), which was completed on June 4, 2003, and Plains’ issuance of $75 million of 8.75% senior subordinated notes on May 30, 2003. The unaudited pro forma combined balance sheet as of March 31, 2004 and the unaudited pro forma combined statements of income for the three months ended March 31, 2004 and 2003 and the year ended December 31, 2003 have been prepared based on the historical consolidated statements of income of Plains and Nuevo under the assumptions set forth in the accompanying footnotes.

On May 14, 2004, Plains acquired Nuevo in a stock for stock transaction. Plains issued 36.5 million shares of common stock to Nuevo shareholders and assumed $256 million of net debt and $115 million of Term Convertible Securities (“TECONs”). Under the terms of the transaction, Nuevo stockholders received 1.765 shares of Plains common stock for each share of Nuevo common stock. This transaction has been accounted for using the purchase method of accounting. The effect of this transaction is reflected in the Nuevo merger adjustments in the unaudited pro forma combined balance sheet and statements of income.

On April 8, 2004 Nuevo, together with its wholly owned subsidiary Nuevo International Inc., entered into a definitive agreement to sell Nuevo’s operations offshore The Republic of Congo via the sale of the stock of Nuevo’s subsidiaries that hold the Congo properties. The pro forma effects of that transaction on Nuevo’s historical consolidated statements of income are presented in Note 2 to the pro forma combined financial statements.

The pro forma effects of Plains’ acquisition of 3TEC, which was completed on June 4, 2003, and Plains’ issuance of $75 million of 8.75% senior subordinated notes on May 30, 2003 are presented in Note 5 to the pro forma combined financial statements.

The unaudited pro forma combined balance sheet presents the pro forma effects of the merger of Plains and Nuevo and the sale of Nuevo’s Congo operations as though such transactions occurred on March 31, 2004. The unaudited pro forma combined statement of income for the three months ended March 31, 2004 assumes such transactions occurred on January 1, 2004. The unaudited pro forma combined statements of income for the three months ended March 31, 2003 and the year ended December 31, 2003 assume such transactions, together with Plains acquisition of 3TEC and the issuance of the $75 million of 8.75% senior subordinated notes occurred on January 1, 2003. Plains believes the assumptions used provide a reasonable basis for presenting the significant effects directly attributable to such transactions.

In February 2004 Nuevo redeemed the $75 million balance outstanding of its 9 ¹/2% Senior Subordinated Notes due June 1, 2008 at 104.75%. The redemption was funded by proceeds from real estate sales and bank debt. We estimate the redemption will result in annual interest expense savings of approximately $6 million. The effect of the redemption is not reflected as a pro forma adjustment to the historical data. In addition, we have not reflected as an adjustment to the historical data annual cost savings of approximately $20 million that we expect to result from the merger with Nuevo.

3

The unaudited pro forma combined 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 combined financial statements should be read in conjunction with the Quarterly Report on Form 10-Q of Plains for the three months ended March 31, 2004 (as amended), the Annual Report on Form 10-K of Plains for the year ended December 31, 2003 (as amended), the Consolidated Financial Statements of 3TEC included in Plains’ Registration Statement on Form S-4 (No. 333-108407) filed August 29, 2003, the Quarterly Report on Form 10-Q of Nuevo for the three months ended March 31, 2004 and the Annual Report on Form 10-K of Nuevo for the year ended December 31, 2003.

4

PLAINS EXPLORATION & PRODUCTION COMPANY

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AT MARCH 31, 2004

(in thousands of dollars)

	Plains Historical			Nuevo Merger Adjustments (a)		Plains Pro forma
ASSETS				(Note 3)
Current Assets
Cash and cash equivalents	$	1,985		$	56,826	$	58,811
Accounts receivable		53,641			42,032		95,673
Assets held for sale		—			39,747		39,747
Inventories		4,359			1,963		6,322
Deferred income taxes		29,949			24,391		54,340
Other current assets		2,108			2,153		4,261
		92,042			167,112		259,154
Property and Equipment, at cost
Oil and natural gas properties—full cost method
Subject to amortization		1,088,287			1,222,205		2,310,492
Not subject to amortization		57,980			137,556		195,536
Other property and equipment		4,960			—		4,960
		1,151,227			1,359,761		2,510,988
Allowance for depreciation, depletion and amortization		(201,179	)		—		(201,179	)
		950,048			1,359,761		2,309,809
Goodwill		145,046			62,030		207,076
Other Assets		19,497			5,422		24,919
	$	1,206,633		$	1,594,325	$	2,800,958
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and other current liabilities	$	75,393		$	135,610	$	211,003
Commodity hedging contracts		75,609			61,594		137,203
Royalties payable		16,879			9,392		26,271
Interest payable		6,296			6,343		12,639
		174,177			212,939		387,116
Long-Term Debt
Bank revolving credit facility		191,000			104,900		295,900
8.75% senior subordinated notes		276,862			—		276,862
Senior notes		—			—		—
9 3/8% senior subordinated notes		—			162,945		162,945
TECONS		—			103,815		103,815
		467,862			371,660		839,522
Asset Retirement Obligation		30,447			133,452		163,899
Other Long-Term Liabilities		58,162			14,868		73,030
Deferred Income Taxes		138,887			281,998		420,885
Stockholders’ Equity
Stockholders’ equity		406,617			579,408		986,025
Accumulated other comprehensive income (loss)		(69,519	)		—		(69,519	)
		337,098			579,408		916,506
	$	1,206,633		$	1,594,325	$	2,800,958

5

PLAINS EXPLORATION & PRODUCTION COMPANY

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(in thousands of dollars, except per share data)

	Plains Historical			Nuevo Pro forma			Nuevo Merger Adjustments			Combined Company Pro forma Adjusted
				(Note 2)
Revenues
Oil and gas revenues	$	92,725		$	92,987		$	(2,594	)(b)	$	183,118
Other operating revenues		236			(944	)		2,594	(b)		1,886
		92,961			92,043			—			185,004
Costs and Expenses
Production expenses		30,849			41,370			—			72,219
Exploration costs		—			366			(366	)(c)		—
General and administrative		9,531			7,768			—			17,299
Stock appreciation rights		10,561			—			—			10,561
Depreciation, depletion, amortization and accretion		16,567			17,187			13,618	(e)		47,372
Other		—			910			—			910
		67,508			67,601			13,252			148,361
Income from Operations		25,453			24,442			(13,252	)		36,643
Other Income (Expense)
Interest expense		(6,930	)		(5,923	)		2,158	(f)		(10,695	)
Gain (loss) on derivatives		(1,565	)		(7,014	)		—			(8,579	)
Loss on early extinguishment of debt		—			(3,004	)		—			(3,004	)
Interest and other income (expense)		262			431			—			693
Income From Continuing Operations Before Income Taxes		17,220			8,932			(11,094	)		15,058
Income tax benefit (expense)		(6,822	)		(3,329	)		4,188	(g)		(5,963	)
Income From Continuing Operations	$	10,398		$	5,603		$	(6,906	)	$	9,095
Earnings Per Share
Basic	$	0.26		$	0.28					$	0.12
Diluted	$	0.26		$	0.27					$	0.12
Average Shares Outstanding
Basic		40,247			20,246			16,240			76,733
Diluted		40,488			20,662			15,909			77,059

6

PLAINS EXPLORATION & PRODUCTION COMPANY

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2003

(in thousands of dollars, except per share data)

	Plains Pro forma			Nuevo Pro forma			Nuevo Merger Adjustments			Combined Company Pro forma Adjusted
	(Note 5)			(Note 2)
Revenues
Oil and gas revenues	$	99,862		$	86,683		$	—		$	186,545
Other operating revenues		207			138			—			345
		100,069			86,821			—			186,890
Costs and Expenses
Production expenses		29,009			36,430			—			65,439
Exploration costs		—			1,072			(1,072	)(c)		—
General and administrative		6,748			6,717			—			13,465
Stock appreciation rights		(1,363	)		—			—			(1,363	)
Depreciation, depletion, amortization and accretion		15,535			15,673			16,949	(e)		48,157
Other		—			795			—			795
		49,929			60,687			15,877			126,493
Income from Operations		50,140			26,134			(15,877	)		60,397
Other Income (Expense)
Interest expense		(6,966	)		(10,975	)		2,726	(f)		(15,215	)
Gain (loss) on derivatives		(14,410	)		(943	)		—			(15,353	)
Interest and other income (expense)		86			79			—			165
Income From Continuing Operations Before Income Taxes		28,850			14,295			(13,151	)		29,994
Income tax benefit (expense)		(11,540	)		(7,472	)		7,134	(g)		(11,878	)
Income From Continuing Operations	$	17,310		$	6,823		$	(6,017	)	$	18,116
Earnings Per Share
Basic	$	0.43		$	0.36					$	0.24
Diluted	$	0.43		$	0.35					$	0.24
Average Shares Outstanding
Basic		40,085			19,199			17,287			76,571
Diluted		40,295			19,305			17,266			76,866

7

PLAINS EXPLORATION & PRODUCTION COMPANY

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

FOR THE YEAR ENDED ENDED DECEMBER 31, 2003

(in thousands of dollars, except per share data)

	Plains Pro forma			Nuevo Pro forma			Nuevo Merger Adjustments			Combined Company Pro forma Adjusted
	(Note 5)			(Note 2)
Revenues
Oil and gas revenues	$	376,797		$	327,203		$	—		$	704,000
Other operating revenues		888			1,362			—			2,250
		377,685			328,565			—			706,250
Costs and Expenses
Production expenses		118,205			149,296			—			267,501
Exploration costs		—			2,115			(2,115	)(c)		—
General and administrative		29,424			28,457			—			57,881
Stock appreciation rights		18,010			—			—			18,010
Gain on disposition of properties		—			(5,824	)		4,551	(d)		(1,273	)
Depreciation, depletion, amortization and accretion		64,999			64,963			65,445	(e)		195,407
Other		—			1,256			—			1,256
		230,638			240,263			67,881			538,782
Income from Operations		147,047			88,302			(67,881	)		167,468
Other Income (Expense)
Interest expense		(27,075	)		(36,405	)		8,810	(f)		(54,670	)
Gain (loss) on derivatives		(37,084	)		(5,842	)		—			(42,926	)
Loss on early extinguishment of debt		—			(12,578	)		—			(12,578	)
Interest and other income (expense)		(100	)		317			—			217
Income From Continuing Operations Before Income Taxes		82,788			33,794			(59,071	)		57,511
Income tax benefit (expense)		(34,342	)		(19,666	)		29,567	(g)		(24,441	)
Income From Continuing Operations	$	48,446		$	14,128		$	(29,504	)	$	33,070
Earnings Per Share
Basic	$	1.21		$	0.73					$	0.43
Diluted	$	1.20		$	0.72					$	0.43
Average Shares Outstanding
Basic		40,190			19,355			17,131			76,676
Diluted		40,256			19,627			17,026			76,909

8

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

NOTE 1—BASIS OF PRESENTATION AND ACCOUNTING FOR THE TRANSACTIONS

The accompanying unaudited pro forma combined financial statements present the pro forma effect of the merger of Plains Exploration & Production Company (“Plains”) and Nuevo Energy Company (“Nuevo”), the sale of Nuevo’s Congo operations, Plains’ acquisition of 3TEC Energy Corporation (“3TEC”), which was completed on June 4, 2003, and Plains’ issuance of $75 million of 8.75% senior subordinated notes on May 30, 2003. The unaudited pro forma combined financial statements have been prepared based on the historical consolidated statements of income of Plains and Nuevo under the assumptions set forth in the accompanying footnotes.

The accompanying unaudited pro forma combined balance sheet presents the pro forma effects of the merger of Plains and Nuevo and the sale of Nuevo’s Congo operations as though such transactions occurred on March 31, 2004. The unaudited pro forma combined statement of income for the three months ended March 31, 2004 assumes such transactions occurred on January 1, 2004. The unaudited pro forma combined statements of income for the three months ended March 31, 2003 and the year ended December 31, 2003 assume such transactions, together with Plains acquisition of 3TEC and the issuance of the $75 million of 8.75% senior subordinated notes occurred on January 1, 2003.

The merger with Nuevo has been accounted for using the purchase method of accounting for business combinations. Under the purchase method of accounting, Nuevo’s assets and liabilities acquired or assumed are revalued and recorded at their estimated fair values.

Plains follows the full cost method of accounting for oil and gas properties while Nuevo follows the successful efforts method of accounting. Certain costs that are capitalized under the full cost method are expensed under the successful efforts method. These costs consist primarily of costs associated with unsuccessful exploration drilling, geological and geophysical costs and general and administrative costs associated with acquisition, exploration, exploitation and development activities. Under full cost accounting proceeds from the sale of oil and gas properties are reflected as reductions to capitalized costs unless such sales involve a significant change in the relationship between costs and the estimated value of proved reserves, in which case a gain or loss is recognized. Pro forma entries include the reclassification of certain of these items to conform Nuevo’s accounting to the full cost method.

NOTE 2—SALE OF NUEVO CONGO OPERATIONS

On April 8, 2004 Nuevo, together with its wholly owned subsidiary Nuevo International Inc., entered into a definitive agreement to sell Nuevo’s operations offshore The Republic of Congo via the sale of the stock of Nuevo’s subsidiaries that hold the Congo properties. Nuevo’s historical statement of income for the three months ended March 31, 2004 and the year ended December 31, 2003 have been adjusted to reflect the sale of such operations effective January 1 of the period presented. The assets acquired and liabilities assumed in the Merger Adjustments have been adjusted to exclude amounts related to Nuevo’s Congo operations and cash and cash equivalents includes $52.6 million related to the sale. The effects to Nuevo’s historical balance sheet for other working capital items, which have equal impacts to the assets acquired and liabilities assumed, consist of decreases to current assets of $10.6 million, primarily related to accounts receivable, and to current liabilities of $7.2 million, primarily related to accounts payable and other current liabilities. The other effects to Nuevo’s historical balance sheet relate to decreases to non-current assets, primarily oil and gas properties, of approximately $42.2 million and non-current liabilities, primarily the asset retirement obligation of $2.7 million. The Nuevo Merger Adjustments (Note 3(a)) reflect the assets acquired and liabilities assumed at fair value.

If the combined company used the $52.6 million in estimated net proceeds from the sale to retire outstanding bank debt, pro forma long-term debt at March 31, 2004 would be reduced to $814 million. Interest expense for the three months ended March 31, 2004 and 2003 and year ended December 31, 2003 would be reduced by $0.4 million, $0.4 million and $1.5 million, respectively, and income from continuing operations for such periods would be increased by $0.2 million, $0.2 million and $0.9 million, respectively.

9

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS—(Continued)

The following tables reflect the effect of the sale of Nuevo’s Congo operations on Nuevo’s Consolidated Statements of Income for the three months ended March 31, 2004 and 2003 and the year ended December 31, 2003 (amounts in thousands, except per share data):

NUEVO ENERGY COMPANY

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(in thousands of dollars, except per share data)

	Nuevo Historical			Adjustments for Sale of Nuevo’s Congo Operations			Nuevo Pro forma
Revenues
Oil and gas revenues	$	103,792		$	(10,805	)	$	92,987
Other operating revenues		(944	)		—			(944	)
		102,848			(10,805	)		92,043
Costs and Expenses
Production expenses		44,793			(3,423	)		41,370
Exploration costs		366			—			366
General and administrative		7,768			—			7,768
Depreciation, depletion, amortization and accretion		18,678			(1,491	)		17,187
Other		910			—			910
		72,515			(4,914	)		67,601
Income from Operations		30,333			(5,891	)		24,442
Other Income (Expense)
Interest expense		(5,923	)		—			(5,923	)
Gain (loss) on derivatives		(7,014	)		—			(7,014	)
Loss on early extinguishment of debt		(3,004	)		—			(3,004	)
Interest and other income (expense)		437			(6	)		431
Income From Continuing Operations Before Income Taxes		14,829			(5,897	)		8,932
Income tax benefit (expense)		(7,651	)		4,322			(3,329	)
Income From Continuing Operations	$	7,178		$	(1,575	)	$	5,603
Earnings Per Share
Basic	$	0.35					$	0.28
Diluted	$	0.35					$	0.27
Average Shares Outstanding
Basic		20,246						20,246
Diluted		20,662						20,662

10

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS—(Continued)

NUEVO ENERGY COMPANY

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2003

(in thousands of dollars, except per share data)

	Nuevo Historical			Adjustments for Sale of Nuevo’s Congo Operations			Nuevo Pro forma
Revenues
Oil and gas revenues	$	98,112		$	(11,429	)	$	86,683
Other operating revenues		138			—			138
		98,250			(11,429	)		86,821
Costs and Expenses
Production expenses		39,330			(2,900	)		36,430
Exploration costs		1,072			—			1,072
General and administrative		6,717			—			6,717
Depreciation, depletion, amortization and accretion		17,389			(1,716	)		15,673
Other		795			—			795
		65,303			(4,616	)		60,687
Income from Operations		32,947			(6,813	)		26,134
Other Income (Expense)
Interest expense		(10,975	)		—			(10,975	)
Gain (loss) on derivatives		(943	)		—			(943	)
Interest and other income (expense)		79			—			79
Income From Continuing Operations Before Income Taxes		21,108			(6,813	)		14,295
Income tax benefit (expense)		(8,445	)		973			(7,472	)
Income From Continuing Operations	$	12,663		$	(5,840	)	$	6,823
Earnings Per Share
Basic	$	0.66					$	0.36
Diluted	$	0.65					$	0.35
Average Shares Outstanding
Basic		19,199						19,199
Diluted		19,305						19,305

11

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS—(Continued)

NUEVO ENERGY COMPANY

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED ENDED DECEMBER 31, 2003

(in thousands of dollars, except per share data)

	Nuevo Historical			Adjustments for Sale of Nuevo’s Congo Operations			Nuevo Pro forma
Revenues
Oil and gas revenues	$	369,975		$	(42,772	)	$	327,203
Other operating revenues		1,362			—			1,362
		371,337			(42,772	)		328,565
Costs and Expenses
Production expenses		159,832			(10,536	)		149,296
Exploration costs		2,115			—			2,115
General and administrative		28,457			—			28,457
Gain on disposition of properties		(5,824	)		—			(5,824	)
Depreciation, depletion, amortization and accretion		70,810			(5,847	)		64,963
Other		1,256			—			1,256
		256,646			(16,383	)		240,263
Income from Operations		114,691			(26,389	)		88,302
Other Income (Expense)
Interest expense		(36,406	)		1			(36,405	)
Gain (loss) on derivatives		(5,842	)		—			(5,842	)
Loss on early extinguishment of debt		(12,578	)		—			(12,578	)
Interest and other income (expense)		342			(25	)		317
Income From Continuing Operations Before Income Taxes		60,207			(26,413	)		33,794
Income tax benefit (expense)		(23,118	)		3,452			(19,666	)
Income From Continuing Operations	$	37,089		$	(22,961	)	$	14,128
Earnings Per Share
Basic	$	1.92					$	0.73
Diluted	$	1.89					$	0.72
Average Shares Outstanding
Basic		19,355						19,355
Diluted		19,627						19,627

12

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS—(Continued)

NOTE 3—PRO FORMA ADJUSTMENTS RELATED TO THE MERGER

The unaudited pro forma combined balance sheet includes the following adjustments:

(a) This entry reflects the estimated preliminary pro forma allocation of the purchase price as of March 31, 2004 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):

Shares of Plains common stock issued		36,486
Average Plains stock price	$	15.76
Fair value of Plains common stock issued	$	575,019
Fair value of Nuevo employee stock options assumed by Plains		4,389
Tender for Nuevo employee stock options		17,385
Estimated merger expenses		34,215
Total estimated purchase price before liabilities assumed		631,008
Fair value of liabilities :
Senior Subordinated Notes		162,945
Bank Credit Facility		53,300
TECONS		103,815
Current liabilities		212,939
Other noncurrent liabilities		14,868
Deferred income tax liabilities		281,998
Asset retirement obligation		133,452
Total estimated purchase price plus liabilities assumed	$	1,594,325
Fair value of assets acquired:
Current assets (including deferred income taxes of $24,391)		167,112
Oil and gas properties
Subject to amortization		1,222,205
Not subject to amortization		137,556
Other noncurrent assets		5,422
Goodwill		62,030
Total estimated fair value of assets acquired	$	1,594,325

The purchase price includes the value of Plains common stock issued to Nuevo stockholders in the merger. 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 days before the merger was announced. Under the terms of the merger agreement, Nuevo common stockholders received 1.765 shares of Plains common stock for each share of Nuevo common stock.

The total purchase price also includes $34 million of estimated merger costs. These costs include investment banking expenses, severance and related costs, legal and accounting fees, printing expenses and other merger-related costs. These costs have been added to long-term debt in the unaudited pro forma combined balance sheet.

The preliminary allocation of purchase price includes approximately $62 million of goodwill. The goodwill is related to deferred income tax liabilities to be recorded due to the non-taxable nature of the merger.

In the process of allocating the purchase price, Plains reviewed Nuevo’s exploration and development opportunities targeting probable and possible reserves. Based on Plains assessment of the Nuevo opportunities,

13

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS—(Continued)

approximately 50 MMBOE of probable and possible reserves with estimated future net revenues of approximately $764 million (undiscounted) were assigned to the properties acquired in the merger. Probable and possible reserves have a higher risk profile than proved undeveloped reserves and thus the range of ultimate results can vary widely. Based on this assessment, approximately $138 million of the estimated purchase price has been allocated to properties not subject to amortization.

The majority of the probable reserves are located in California, equally split between offshore and onshore projects and the majority of the possible reserves are located in offshore California. Because most of the probable and possible reserves are closely associated with producing properties, any transfers to proved reserves are anticipated to occur over the next several years as development decisions are made.

The purchase price is preliminary and is subject to change due to several factors including:

• Changes in the fair values of Nuevo’s assets and liabilities as of the effective time of the merger;

• Actual merger costs incurred; and

• Tax basis of Nuevo assets at the effective time of the merger.

The unaudited pro forma statements of income include the following adjustments:

(b) Reclassification of certain Nuevo revenue/expense items to conform to the Plains presentation.

(c) Reflects the reversal of Nuevo historical exploration costs that are expensed under the successful efforts methods of accounting and are capitalized under the full cost method of accounting.

(d) Reflects the reversal of the gain on disposition of oil and gas properties and assets held for sale. Under full cost accounting, proceeds from the sale of oil and gas properties are accounted for as reductions to capitalized costs unless such sales involve a significant change in the relationship between costs and the estimated value of proved reserves, in which case a gain or loss is recognized. The remaining gain on disposition of property relates to sales of non-oil and gas properties.

(e) Adjusts depreciation, depletion, amortization and accretion expense based on the fair value allocated to oil and gas properties. Pro forma depreciation, depletion, amortization and accretion for the combined company is calculated using the unit of production method based on the oil and gas property costs, reserve volumes and future development and abandonment costs of the combined companies. The pro forma depreciation, depletion and amortization rate for oil and gas properties subject to amortization is $5.95 per barrel of oil equivalent. Accretion expense has been adjusted to reflect Plains’ credit adjusted risk free interest rate and other assumptions.

(f) Adjusts historical interest expense for the effect of debt assumed and incurred in connection with the merger and interest capitalized on oil and gas properties not subject to amortization of $2.2 million and $2.8 million for the three months ended March 31, 2004 and 2003, respectively, and $8.9 million for the year ended December 31, 2003.

(g) Reflects the adjustment of income tax expense based on a post-merger effective rate of approximately 40% (43% for the year ended December 31, 2003 including return to provision adjustments included in Plains’ historical income tax expense for the period).

14

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS—(Continued)

NOTE 4—EARNINGS PER SHARE

Earnings per share for the three months ended March 31, 2004 and 2003 and the year ended December 31, 2003 has been calculated based on the pro forma weighted average number of shares outstanding as follows (in thousands):

		Three Months Ended March 31,			Year Ended December 31, 2003
		2004		2003
Weighted average shares outstanding		40,247	��	24,015	33,321
Pro forma increase assuming 3TEC merger occurred January 1, 2003				16,070	6,869
Nuevo outstanding shares	20,672
Exchange ratio	1.765	36,486		36,486	36,486
Pro forma basic shares outstanding		76,733		76,571	76,676
Plains restricted shares		241		210	148
Nuevo options		85		85	85
Pro forma diluted shares outstanding		77,059		76,866	76,909

Diluted shares do not include the following because the inclusion would be anti-dilutive:

Nuevo employee stock options with an exercise price greater than the average market price of the common stock 124

NOTE 5—PLAINS PRO FORMA RESULTS OF OPERATIONS

Plains’ pro forma results of operations included in the accompanying unaudited pro forma statements of income for the three months ended March 31, 2003 and the year ended December 31, 2003 include the effect of the following:

• Plains acquisition of 3TEC Energy Corporation which was completed on June 4, 2003; and

• Plains issuance of $75 million of 8.75% senior subordinated notes on May 30, 2003.

On June 4, 2003 Plains acquired 3TEC for approximately $312.9 million in cash and common stock plus $90.0 million to retire outstanding debt and $14.7 million to retire outstanding 3TEC preferred stock. Under the terms of the agreement 3TEC stockholders received $8.50 in cash and 0.85 shares of our common stock for each share of 3TEC common stock. This transaction has been accounted for using the purchase method of accounting. The effect of this transaction is reflected in the 3TEC Merger Adjustments in the unaudited pro forma consolidated statements of income.

The unaudited pro forma combined statements of income for the three months ended March 31, 2003 and the year ended December 31, 2003 assume the 3TEC merger transactions and the $75 million notes offering occurred on January 1, 2003. Plains believes the assumptions used provide a reasonable basis for presenting the significant effects directly attributable to such transactions.

15

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS—(Continued)

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			Offering Adjustments			Plains Pro forma Offering			3TEC Historical			Merger Adjustments			Plains Pro forma Adjusted
Revenues
Oil and gas revenues	$	51,531		$	—		$	51,531		$	48,372		$	(41	)(4)	$	99,862
Gain (loss) on sale of properties					—			—			59			(59	)(9)		—
Gain (loss) derivatives					—			—			(14,410	)		14,410	(11)		—
Other operating revenues		207			—			207			53			(53	)(11)		207
		51,738			—			51,738			34,074			14,257			100,069
Costs and Expenses
Production expenses		21,013			—			21,013			7,996			—			29,009
Geological and geophysical		—			—			—			3,608			(3,608	)(9)		—
Dry hole and impairments		—			—			—			2,161			(2,161	)(9)		—
General and administrative		3,076						3,076			2,575			(266	)(9)		5,385
														(10,372	)(5)
														6,711	(6)
Depreciation, depletion,														(96	)(7)
amortization and accretion		8,305			19	(1)		8,324			10,718			250	(12)		15,535
		32,394			19			32,413			27,058			(9,542	)		49,929
Income from Operations		19,344			(19	)		19,325			7,016			23,799			50,140
Other Income (Expense)
														831	(7)
Interest expense		(4,856	)		(1,445	)(2)		(6,301	)		(831	)		(665	)(8)		(6,966	)
Gain (loss) on derivatives		—			—			—						(14,410	)(11)		(14,410	)
Merger costs		—			—			—			(894	)		894	(10)		—
Interest and other income (expense)		33			—			33						53	(11)		86
Income From Continuing Operations Before Income Taxes		14,521			(1,464	)		13,057			5,291			10,502			28,850
Income tax benefit (expense)		(5,918	)		556	(3)		(5,362	)		(2,064	)		(4,114	)(13)		(11,540	)
Income From Continuing Operations	$	8,603		$	(908	)	$	7,695		$	3,227		$	6,388		$	17,310
Earnings per share
Basic	$	0.36					$	0.32								$	0.43
Diluted	$	0.35					$	0.32								$	0.43
Average shares outstanding
Basic		24,015						24,015						16,070	(14)		40,085
Diluted		24,225						24,225						16,070	(14)		40,295

(footnotes on following page)

16

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS—(Continued)

Offering Adjustments

  (1) Reflects amortization of debt issue costs for the period, on a straight line basis that approximates the interest method, over the life of the New Notes.

  (2) Reflects interest expense at a rate of 7.71% (net of premium on issuance) for the period on the 8.75% Notes issued in the New Notes offering, assuming that the New Notes were issued on January 1, 2003. A ¹/8 of 1% change in the interest rate would result in a $24 thousand change in interest expense.

  (3) Reflects the income tax effect of the Offering Adjustments based on Plains’ historical effective income tax rate.

Merger Adjustments

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

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

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

  (7) 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.

  (8) Reflects interest expense for the period on $216.7 million of debt incurred in connection with the acquisition net of $0.9 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 $62.8 million of purchase price allocated to oil and gas properties not subject to amortization and Plains’ effective average interest rate (6.0% 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.

  (9) 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.

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

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

(12) 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.

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

(14) Reflects common shares issued in the 3TEC merger.

17

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS—(Continued)

PLAINS EXPLORATION & PRODUCTION COMPANY

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2003

(in thousands of dollars, except per share data)

	Plains Historical			Offering Adjustments			Plains Pro Forma Offering			3TEC Historical(4)			Merger Adjustments			Plains Pro Forma Adjusted
Revenues
Oil, gas and plant revenues	$	303,202		$	—		$	303,202		$	73,664		$	(69	)(5)	$	376,797
Gain (loss) on sale of properties		—			—			—			72			(72	)(10)		—
Gain (loss) on derivatives		—			—			—			(37,931	)		37,931	(12)		—
Other operating revenues		888			—			888			59			(59	)(12)		888
		304,090			—			304,090			35,864			37,731			377,685
Costs and Expenses
Production expenses		104,819			—			104,819			13,386			—			118,205
Geological and geophysical		—			—			—			5,023			(5,023	)(10)		—
Dry hole and impairments		—			—			—			2,198			(2,198	)(10)		—
General and administrative		25,148			—			25,148			4,539			(263	)(10)		29,424
Stock appreciation rights		18,010			—			18,010			—			—			18,010
														(17,954	)(6)
Depreciation, depletion,														11,707	(7)
amortization and accretion		52,484			32	(1)		52,516			18,313			417	(13)		64,999
		200,461			32			200,493			43,459			(13,314	)		230,638
Income from Operations		103,629			(32	)		103,597			(7,595	)		51,045			147,047
Other Income (Expense)
														1,336	(8)
Interest expense		(23,778	)		(2,408	)(2)		(26,186	)		(1,336	)		(889	)(9)		(27,075	)
Gain (loss) on derivatives		847			—			847			—			(37,931	)(12)		(37,084	)
Merger costs		—			—			—			(11,108	)		11,108	(11)		—
														14	(10)
Interest and other income (expense)		(159	)		—			(159	)		(14	)		59	(12)		(100	)
Income From Continuing Operations Before Income Taxes		80,539			(2,440	)		78,099			(20,053	)		24,742			82,788
Income tax benefit (expense)		(33,452	)		965	(3)		(32,487	)		7,820			(9,675	)(14)		(34,342	)
Income From Continuing Operations	$	47,087		$	(1,475	)	$	45,612		$	(12,233	)	$	15,067		$	48,446
Earnings Per Share
Basic	$	1.41														$	1.21
Diluted	$	1.41														$	1.20
Average Shares Outstanding
Basic		33,321												6,869	(15)		40,190
Diluted		33,469												6,787	(15)		40,256

Offering Adjustments

  (1) 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.

  (2) Reflects interest expense at a rate of 7.71% (net of premium on issuance) for the period on the new notes, assuming that the new notes were issued on January 1, 2003. A1/8 of 1% change in the interest rate would result in a $39,000 change in interest expense.

  (3) Reflects the income tax effect of the Offering Adjustments based on Plains’ historical effective income tax rate.

18

PLAINS EXPLORATION & PRODUCTION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS—(Continued)

Merger Adjustments

  (4) 3TEC’s historical results of operations for the five months ended May 31, 2003.

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

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

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

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

  (9) Reflects interest expense for the period on $189.2 million of debt incurred in connection with the acquisition net of $1.6 million of capitalized interest. Interest expense is based on an estimated borrowing rate under Plains’ senior revolving credit facility (3.1%). Capitalized interest is based on the $61.1 million of purchase price allocated to oil and gas properties not subject to amortization and Plains’ effective average interest rate (6.0% based on pro forma debt). A1/8% change in the interest rate would result in a $0.1 million change in interest expense.

(10) 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.

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

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

(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 adjustment of income tax expense based on a post-merger effective rate for current year earnings of approximately 41%.

(15) Reflects common shares issued in the 3TEC merger.

19

SUMMARY PRO FORMA OIL AND GAS RESERVE DATA OF THE COMBINED COMPANY

The following table sets forth summary pro forma information with respect to Plains’ and Nuevo’s combined estimated net proved oil and gas reserves as of December 31, 2003.

	Plains			Nuevo(1)			Pro forma
Estimated Quantities of Oil and Gas Reserves at     December 31, 2003
Proved Reserves
Oil (MBbl)		227,728			165,973			393,701
Gas (MMcf)		319,177			167,171			486,348
MMBOE		280,924			193,835			474,759
Proved Developed Reserves
Oil (MBbl)		124,822			150,319			275,141
Gas (MMcf)		235,070			125,721			360,791
MMBOE		164,000			171,273			335,273
Standardized Measure of Discounted Future Net Cash Flows at December 31, 2003 (in thousands)
Future cash inflows	$	8,190,872		$	5,111,413		$	13,302,285
Future development costs		(529,920	)		(415,090	)		(945,010	)
Future production expense		(3,041,607	)		(2,274,484	)		(5,316,091	)
Future income tax expense		(1,579,078	)		(733,237	)		(2,312,315	)
Future net cash flows		3,040,267			1,688,602			4,728,869
Discounted at 10% per year		(1,783,464	)		(634,307	)		(2,417,771	)
Standardized measure of discounted future net cash flows	$	1,256,803		$	1,054,295		$	2,311,098

(1) Adjusted to reflect the sale of Congo operations. See Note 2.

20

SIGNATURES

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

	PLAINS EXPLORATION & PRODUCTION COMPANY
Date: June 14, 2004	/S/    CYNTHIA A. FEEBACK
	Cynthia A. Feeback
	Senior Vice President—Accounting

21