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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 (Date of earliest event reported): February 20, 2003
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.)
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
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Item 9. Regulation FD Disclosure
In accordance with General Instruction B.2. of Form 8-K, the following
information shall not be deemed "filed" for purposes of Section 18 of the
Securities Act of 1934, as amended, nor shall it be deemed incorporated by
reference in any filing under the Securities Act of 1933, as amended, except as
shall be expressly set forth by specific reference in such a filing.
Forward-Looking Statements and Associated Risks
All statements, other than statements of historical fact, included in this
report are forward-looking statements, including, but not limited to, statements
identified by the words "anticipate," "believe," "estimate," "expect," "plan,"
"intend" and "forecast" and similar expressions and statements regarding our
business strategy, plans and objectives of our management for future operations.
These statements reflect our current views with respect to future events, based
on what we believe are reasonable assumptions. These statements, however, are
subject to certain risks, uncertainties and assumptions, including, but not
limited to:
. uncertainties inherent in the exploration for and development and
production of oil and gas and in estimating reserves;
. unexpected future capital expenditures (including the amount and
nature thereof);
. impact of crude oil and natural gas price fluctuations;
. the effects of competition;
. the success of our risk management activities;
. the availability (or lack thereof) of acquisition or combination
opportunities;
. the impact of current and future laws and governmental regulations;
. environmental liabilities that are not covered by an indemnity or
insurance; and
. general economic, market or business conditions.
If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, actual results may vary materially from
those in the forward-looking statements. Except as required by applicable
securities laws, we do not intend to update these forward-looking statements and
information.
Disclosure of 2003 Estimates
The following table reflects current estimates of certain results for 2003
for Plains Exploration & Production Company (the "Company"). These estimates are
based on assumptions and estimates that management believes are reasonable based
on currently available information; however, management's assumptions and the
Company's future performance are both subject to a wide range of business risks
and uncertainties and there is no assurance that these goals and estimates can
or will be met. Any number of factors could cause actual results to differ
materially from those in the following table, including but not limited to the
factors discussed above. The estimates set forth below are given as of the date
hereof only based on information available as of the date hereof. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements. Further information on risks and uncertainties is available in the
Company's filings with the Securities and Exchange Commission ("SEC"), and we
encourage you to review such filings.
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Operating and Financial Guidance
Quarter Ended Year Ended
March 31, 2003 December 31, 2003
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Estimated Sales Volumes
Barrels of oil equivalent-MBOE 2,300-2,400 9,400-9,600
MBOE PER DAY 25.6-26.7 25.7-26.3
% Oil 95% 95%
% Gas 5% 5%
Estimated Oil Price differential to NYMEX (pre-hedge) - $/Bbl $4.25 - $4.50 $4.25 - $4.50
Crude Oil Hedge Positions - barrels per day
Swaps - Average price $23.81 per barrel 19,250 19,250
Operating Costs per BOE
Production expenses $9.00 - $9.15 $9.00 - $9.15
General and administrative $1.50 - $1.60 $1.50 - $1.60
DD&A - oil and gas $3.53 $3.53
Other Income (expense) ($ in thousands)
DD&A - other 450 1,800
Book Tax Rate
Current 4% 4%
Deferred 37% 37%
Weighted Average Equivalent shares outstanding (in thousands)
Basic 24,014 24,040
Diluted 24,224 24,224
Capital Expenditures ($ in thousands) $18,000 - $20,000 $70,000 - $80,000
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Notes:
1. Estimates provided do not include the recently announced acquisition
of 3TEC Energy Corporation, which is expected to close in the second
quarter of 2003.
2. Estimated production volumes. Production estimates are based on
historical operating performance and trends and the Company's 2003
capital budget and assume that market demand and prices for oil and
gas will continue at levels that allow for profitable production of
these products.
3. Estimated oil price differentials. The Company's realized wellhead
crude oil price is lower than the NYMEX index level as a result of
area and quality differentials. The Company has locked in a fixed
price differential to NYMEX on approximately 70% of its oil production
for 2003.
4. General and administrative. The G&A amounts provided exclude any
expense related to stock appreciation rights which are subject to
variable accounting. As a result, the Company's results of operations
will be affected by fluctuations in the price of its common stock. At
the end of each quarter the Company will compare the per share closing
price of its common stock to the exercise price of each outstanding or
unexercised stock appreciation right that is vested or for accounting
purposes is deemed vested at the end of the period. For example, if a
SAR is scheduled to vest on December 31, for accounting purposes
one-fourth of the shares are deemed to vest at the end of each quarter
even though no vesting occurs until December 31. To the extent the
closing price at the end of each period exceeds the exercise price,
the Company will recognize the excess as compensation expense to the
extent not previously recognized. If the quarter-end closing price
decreases compared to prior periods, the Company will reduce
compensation expense to the extent previously recognized. As of
February 19, 2003 the Company has approximately 4.0 million SAR's
outstanding with an average exercise price of $8.70, of which 2.6
million of the SAR's were deemed vested. The Company will incur cash
expenditures as SAR's are exercised, but its common share count will
not increase.
5. DD&A - oil and gas. Based on the book value of the Company's proved
oil and gas properties at December 31, 2002 and the reserve volumes
and future development costs included in the proved reserve reports at
that date, the 2003 DD&A rate for its oil and gas properties will be
approximately $3.53 per BOE. This number will be revised when the
Company completes the calculations to implement FAS 143 effective
January 1, 2003. Under FAS 143 the Company will record a liability
equal to its discounted estimated abandonment costs and a
corresponding increase to oil and gas properties. The Company expects
that expense recognized after adoption of FAS 143 will not exceed the
$3.53 per BOE DD&A rate although a portion of the expense will be
recognized as accretion expense rather than DD&A expense.
6. Interest expense. The Company's interest expense will consist of
interest on:
a. $200 million of 8.75% Senior Subordinated Notes. The notes were
issued at 98.376% of par, and interest expense for the first
quarter and 2003 will include $53,000 and $200,000, respectively,
for the amortization of the original issue discount.
b. Amounts outstanding under the Company's $300 million revolving
credit facility ("Credit Facility"). The Credit Facility provides
for grid pricing at LIBOR or Prime at the
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Company's option plus a margin based on the percentage of the
borrowing base then being utilized as follows:
(Less (Greater (Greater
Than) 25% Than) Than)
25% to 50% 50% 75%
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LIBOR Loans 1.375% 1.500% 1.625% 1.750%
Prime Loans 0.125% 0.250% 0.375% 0.500%
Commitment Fee 0.375% 0.375% 0.500% 0.500%
c. The Company has a three-year interest rate swap agreement under
which it receives LIBOR and pays 3.9% on a notional amount of
$7.5 million.
d. The Company estimates it will capitalize approximately $500,000
and $2,000,000 of interest during the first quarter and 2003,
respectively.
7. Book Tax Rate. The Company's book tax rate is based on a Federal rate of
35% and an estimated state rate of 6%. The Company's deferred and current
tax rates are based on current estimates of taxable income.
8. Weighted average equivalent shares outstanding. Estimated basic shares
outstanding are based on shares outstanding on December 31, 2002. Estimated
diluted shares are based on basic shares outstanding, plus restricted
shares. Because stock appreciation rights are payable in cash rather than
stock, they are not a common stock equivalent and are not included in the
earnings per share calculation. The Company does not have any outstanding
stock options or warrants.
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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: February 20, 2003 /s/ Cynthia A. Feeback
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Cynthia A. Feeback
Senior Vice President-
Accounting and Treasurer
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