================================================================================
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
================================================================================
ITEM 5. Other Events
On February 20, 2003, Plains Exploration & Production Company issued a press
release reporting 2002 earnings and year-end oil and gas reserve information.
The following was included in the press release:
Houston, Texas - February 20, 2003 - Plains Exploration & Production Company
(NYSE: PXP) ("PXP" or the "Company") today reported fourth quarter 2002 net
income of $4.7 million, or $0.20 per share compared to net income of $7.6
million, or $0.31 per share for the fourth quarter of 2001. Net income for the
period was affected by $5.1 million of special pre-tax charges related to the
Company's separation from Plains Resources Inc., including a non-cash $3.7
million charge related to stock appreciation rights issued on the spin-off date.
Net income excluding the special charges was $7.9 million, or $0.33 per share.
For the full year, the Company reported net income of $26.2 million, or $1.08
per share compared to net income of $53.2 million, or $2.20 per share for 2001.
The full-year pre-tax impact of the special charges related to the separation
from Plains Resources Inc. was approximately $6.8 million.
"2002 was a pivotal year for Plains Exploration & Production Company," said
James C. Flores, Chairman and Chief Executive Officer. "Some of the highlights
include:
. Completion of the Company's tax-free spin-off from Plains Resources
Inc.
. Reporting record proved reserve volumes resulting in a 247% reserve
replacement ratio at an all-in-cost of $2.80 per BOE.
. Doubling the Company's interest in the Point Arguello Unit on very
favorable terms.
. Initiating a 3-D seismic survey of the Company's Inglewood field, the
first application of 3-D seismic technology in an onshore Los Angeles
Basin field.
"In addition, on February 3, 2003 we announced an agreement to acquire 3TEC
Energy, a transaction that would significantly enlarge and diversify the
Company."
Oil and gas production volumes increased 8% to 2.5 million barrels of oil
equivalent in the fourth quarter of 2002, compared to 2.3 million barrels of oil
equivalent in the 2001 period. For the full year, oil and gas production volumes
increased 6% to 9.3 million barrels of oil equivalent compared to 8.8 million
barrels of oil equivalent in 2001.
Mr. John Raymond, President and Chief Operating Officer of PXP stated, "The
accomplishments of 2002 set the stage for the future of PXP. Most notably, the
separated platform will enhance both the efficiency of capital allocation as
well as access to capital, both of which are evidenced by the recently announced
3TEC transaction. As it relates specifically to 2002, the Company delivered a
very solid performance, highly consistent with what was outlined in guidance
provided by Plains through the course of the year."
Proved Reserve Volumes, Values for 2002
The Company's total proved oil and gas reserve volumes increased 6% to 253.0
million barrels of oil equivalent at December 31, 2002. Reserve additions were
23.0 million barrels equivalent, resulting in a 247% reserve replacement ratio
at an all-in-cost of $2.80 per BOE. At year-end 2002, the pre-tax net present
value of proved reserves (discounted at 10%) was $1.5 billion. This compares
with the Company's reported 239.3 million barrels of oil equivalent with a
pre-tax net present value (discounted at 10%) of $643.2 million at December 31,
2001. The Company's three-year average reserve replacement ratio was 262% with a
three-year average reserve addition cost of $3.78 per barrel.
The Company will host a conference call to discuss the results and other
forward-looking items at 10:00 a.m. Central on Thursday, February 20, 2003.
Investors wishing to participate may dial 1-800-711-5301 or int'l: 785-832-0201.
Reference Conference I.D#: Plains XP. The replay will be available for 2 weeks
at 1-800-934-3032 or int'l: 402-220-1143.
PXP is an independent oil and gas company primarily engaged in the upstream
activities of acquiring, exploiting, developing and producing oil and gas in its
core areas of operation: onshore California, primarily in the Los Angeles Basin,
and offshore California in the Point Arguello unit, and the Illinois Basin in
southern Illinois. PXP is headquartered in Houston, Texas.
Additional Information & Forward Looking Statement
This press release includes "forward-looking statements" as defined by the
Securities and Exchange Commission ("SEC"). Such statements are those concerning
PXP's merger and strategic plans, expectations and objectives for future
operations. All statements included in this press release that address
activities, events or developments that PXP expects, believes or anticipates
will or may occur in the future are forward- looking statements. These include:
* completion of the proposed merge with 3TEC Energy Corporation
("3TEC"),
* effective integration of the two companies,
* reliability of reserve and production estimates,
* production expense estimates,
* cash flow and EBITDA estimates,
* future financial performance, and
* other matters that are discussed in PXP's filings with the SEC.
These statements are based on certain assumptions PXP made based on its
experience and perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate in the
circumstances. Such statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond PXP's control. Statements regarding
future production are subject to all of the risks and uncertainties normally
incident to the exploration for and development and production of oil and gas.
These risks include, but are
not limited to, inflation or lack of availability of goods and services,
environmental risks, drilling risks and regulatory changes. Investors are
cautioned that any such statements are not guarantees of future performance and
that actual results or developments may differ materially from those projected
in the forward-looking statements.
Investors and security holders are urged to read the proxy statement/prospectus
that will be included in the Registration Statement on Form S-4 filed with the
SEC in connection with the proposed merger. PXP and 3TEC will file the proxy
statement/prospectus with the SEC. Investors and security holders may obtain a
free copy of the proxy statement/prospectus (when available) and other documents
filed by PXP and 3TEC with the SEC at the SEC's web site at www.sec.gov. The
proxy statement/prospectus and such other documents (relating to PXP) may also
be obtained for free from PXP by directing such request to: Plains Exploration &
Production Company, 500 Dallas, Suite 700 Houston, TX 77002, Attention: Joanna
Pankey; telephone: (713) 739-6700; e-mail: jpankey@plainsxp.com. The proxy
statement/prospectus and such other documents (relating to 3TEC) may also be
obtained for free from 3TEC by directing such request to: 3TEC Energy
Corporation, 700 Milam, Suite 1100, Houston, Texas 77002.
PXP, its directors, executive officers and certain members of management and
employees may be considered "participants in the solicitation" of proxies from
PXP's stockholders in connection with the merger. Information regarding such
persons and a description of their interests in the merger will be contained in
the Registration Statement on Form S-4 when it is filed.
3TEC, its directors, executive officers and certain members of management and
employees may be considered "participants in the solicitation" in connection
with the merger. Information regarding such persons and a description of their
interests in the merger will be contained in the Registration Statement on Form
S-4 when it is filed.
Plains Exploration & Production Company
Consolidated Statements of Income
(Amounts in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
---------------- ------------------
2002 2001 2002 2001
------- ------- -------- --------
Revenues
Oil and liquids............................................ $48,475 $40,938 $178,038 $174,895
Gas........................................................ 3,169 1,901 10,299 28,771
Other operating revenues................................... 199 5 226 473
------- ------- -------- --------
51,843 42,844 188,563 204,139
------- ------- -------- --------
Costs and Expenses
Production expenses........................................ 21,625 15,800 78,451 63,795
General and administrative.................................
Stock appreciation rights.............................. 3,653 -- 3,653 --
Spin-off costs......................................... 777 -- 777 --
Other.................................................. 3,394 3,136 10,756 10,210
Depletion, depreciation and amortization................... 9,097 7,106 30,359 24,105
------- ------- -------- --------
38,546 26,042 123,996 98,110
------- ------- -------- --------
Income from Operations........................................ 13,297 16,802 64,567 106,029
Other Income (Expense)
Expenses of terminated public equity offering.............. (695) -- (2,395) --
Interest expense........................................... (4,950) (4,469) (19,377) (17,411)
Interest and other income.................................. 60 4 174 463
------- ------- -------- --------
Income Before Income Taxes and Cumulative Effect of Accounting
Change...................................................... 7,712 12,337 42,969 89,081
Income Taxes
Current................................................ (693) (834) (6,353) (6,014)
Deferred............................................... (2,282) (3,931) (10,379) (28,374)
------- ------- -------- --------
Income Before Cumulative Effect of Accounting Change.......... 4,737 7,572 26,237 54,693
Cumulative effect of accounting change, net of tax......... -- -- -- (1,522)
------- ------- -------- --------
Net Income.................................................... $ 4,737 $ 7,572 $ 26,237 $ 53,171
======= ======= ======== ========
Earnings per Share Basic and Diluted
Income before cumulative effect of accounting change....... $ 0.20 $ 0.31 $ 1.08 $ 2.26
Cumulative effect of accounting change..................... -- -- -- (0.06)
------- ------- -------- --------
Net income................................................. $ 0.20 $ 0.31 $ 1.08 $ 2.20
======= ======= ======== ========
Weighted Average Shares Outstanding
Basic...................................................... 24,174 24,200 24,193 24,200
Diluted.................................................... 24,203 24,200 24,201 24,200
5
Plains Exploration & Production Company
Financial and Operating Data (unaudited)
Three Months Ended
December 31, Year Ended December 31,
------------------ ----------------------
2002 2001 2002 2001
-------- -------- --------- ---------
Sales Volumes
Oil and liquids (MBbls)................................. 2,350 2,162 8,783 8,219
Gas (MMcf).............................................. 822 856 3,362 3,355
MBOE.................................................... 2,487 2,305 9,343 8,778
Daily Average Sales Volumes
Oil and liquids (Bbls)
Onshore California.................................. 16,365 16,320 16,671 15,858
Offshore California................................. 6,659 4,409 4,851 3,920
Illinois............................................ 2,520 2,775 2,540 2,740
-------- -------- --------- ---------
25,544 23,504 24,062 22,518
======== ======== ========= =========
Gas (Mcf)
Onshore California.................................. 8,938 9,302 9,211 9,192
======== ======== ========= =========
BOE..................................................... 27,034 25,054 25,597 24,050
======== ======== ========= =========
Unit Economics (in dollars)
Average Oil & Liquids Sales Price ($/Bbl)
Average NYMEX....................................... $ 28.23 $ 20.53 $ 26.15 $ 26.01
Hedging revenue (expense)........................... (3.19) 3.03 (1.77) 0.03
Differential........................................ (4.41) (4.63) (4.11) (4.76)
-------- -------- --------- ---------
Net realized price.................................. $ 20.63 $ 18.93 $ 20.27 $ 21.28
======== ======== ========= =========
Average Gas Sales Price ($/Mcf)......................... $ 3.86 $ 2.22 $ 3.06 $ 8.58
Average Sales Price per BOE............................. $ 20.77 $ 18.59 $ 20.16 $ 23.20
Average Production Expenses per BOE..................... (8.70) (6.85) (8.40) (7.27)
-------- -------- --------- ---------
Gross Margin per BOE.................................... 12.07 11.74 11.76 15.93
G&A per BOE............................................. (1.68) (1.36) (1.23) (1.16)
-------- -------- --------- ---------
Gross Profit per BOE.................................... $ 10.39 $ 10.38 $ 10.53 $ 14.77
======== ======== ========= =========
Cash Flows
Net income................................................. $ 4,737 $ 7,572 $ 26,237 $ 53,171
Depletion, depreciation and amortization................... 9,097 7,106 30,359 24,105
Deferred income taxes...................................... 2,282 3,931 10,379 28,374
Changes in assets and liabilities from operating activities 4,272 (4,147) 11,394 7,585
Other...................................................... 85 275 457 3,573
-------- -------- --------- ---------
Cash Flows from Operating Activities.................... 20,473 14,737 78,826 116,808
-------- -------- --------- ---------
Acquisition. exploration & development costs............... (10,908) (26,407) (64,497) (125,753)
Other...................................................... 394 (20) 339 (127)
-------- -------- --------- ---------
Cash Flows from Investing Activities (10,514) (26,427) (64,158) (125,880)
-------- -------- --------- ---------
Change in revolving credit facility........................ (54,900) -- 35,800 --
Proceeds from debt issuance................................ -- -- 196,752 --
Contribution from Plains Resources......................... 47,200 -- 52,200 --
Distribution to Plains Resources........................... -- -- (311,964) --
Receipts from (payments to) Plains Resources............... (1,173) 11,700 20,363 9,060
Other...................................................... (824) -- (6,804) (511)
-------- -------- --------- ---------
Cash Flows from Financing Activities.................... (9,697) 11,700 (13,653) 8,549
-------- -------- --------- ---------
Net Increase (Decrease) in Cash......................... $ 262 $ 10 $ 1,015 $ (523)
======== ======== ========= =========
6
Plains Exploration & Production Company
Consolidated Balance Sheets
(Thousands of Dollars)
December 31,
--------------------
2002 2001
--------- ---------
ASSETS
Current Assets
Cash and cash equivalents................................. $ 1,028 $ 13
Accounts receivable--Plains All American Pipeline, L.P.... 22,943 12,331
Other accounts receivable and current assets.............. 6,976 4,051
Commodity hedging contracts............................... 2,594 21,787
Inventories............................................... 5,198 4,629
--------- ---------
38,739 42,811
--------- ---------
Properties and Equipment
Oil and natural gas properties--full cost method.......... 659,499 594,405
Other property and equipment.............................. 2,207 1,516
--------- ---------
661,706 595,921
Less-accumulated depletion, depreciation and amortization. (168,494) (140,804)
--------- ---------
493,212 455,117
--------- ---------
Other Assets................................................. 18,929 18,827
--------- ---------
$ 550,880 $ 516,755
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and other current liabilities............ $ 61,092 $ 41,368
Commodity hedging contracts............................... 24,572 --
Current maturities of long-term debt...................... 511 511
--------- ---------
86,175 41,879
--------- ---------
Payable to Plains Resources Inc.............................. -- 235,161
--------- ---------
Long-Term Debt............................................... 233,166 1,022
--------- ---------
Other Long-Term Liabilities.................................. 6,303 1,413
--------- ---------
Deferred Income Taxes........................................ 51,416 57,193
--------- ---------
Stockholders' Equity
Common stock.............................................. 244 --
Additional paid-in capital................................ 174,279 --
Retained earnings......................................... 12,155 --
Combined owner's equity................................... -- 164,203
Accumulated other comprehensive income.................... (12,858) 15,884
--------- ---------
173,820 180,087
--------- ---------
$ 550,880 $ 516,755
========= =========
7
PLAINS EXPLORATION & PRODUCTION COMPANY
Selected Reserve Data
2002 2001 2000
-------- -------- --------
Future Net Revenue from Proved Reserves (millions). $3,859.7 $1,642.7 $2,852.4
Pre-tax Present Value of Proved Reserves (millions)
Proved Developed................................... $ 916.3 $ 454.1 $ 982.8
Proved Undeveloped................................. 598.7 189.1 321.4
-------- -------- --------
Total Proved....................................... $1,515.0 $ 643.2 $1,304.2
======== ======== ========
NYMEX WTI Spot Price-$/Bbl......................... $ 31.20 $ 19.84 $ 26.80
Proved Reserves
Oil & Liquids-MMBbls............................... 240.2 223.3 204.4
Natural Gas-Bcf.................................... 77.2 96.2 93.5
Barrel of Oil Equivalent-MMBOE..................... 253.0 239.3 220.0
Proved Reserve Profile
Proved Developed Value............................. 60% 71% 75%
Proved Developed Volumes........................... 54% 54% 52%
Reserve additions (MBOE)........................... 23,033 28,140 17,770
Reserve life (years)............................... 27.1 27.3 27.0
Costs incurred (thousands)......................... $ 64,497 $125,753 $ 70,505
Reserve Replacement Ratio.......................... 247% 321% 218%
Three-year Average................................. 262% 564% 466%
Reserve Addition Costs-$/BOE....................... $ 2.80 $ 4.47 $ 3.97
Three-year Average................................. $ 3.78 $ 1.84 $ 2.15
8
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 21, 2003 /s/ Cynthia A. Feeback
-----------------------------
Cynthia A. Feeback
Senior Vice President-Accounting and Treasurer