Plains Exploration & Production Company (PXP) has updated its natural gas derivative positions for 2011 and 2012 and also provided details on its Gulf of Mexico (GOM) divestments.
Hedge Positions
Plains Exploration & Production announced that its has hedged nearly 200,000 MMBtu per day of 2011 natural gas production under three-way collars having a floor price of $4.00 with a limit of $3.00 and a weighted average ceiling price of $4.92. The company has also hedged 160,000 MMBtu per day of 2012 production through put-option spread contracts with a floor price of $4.30 and a limit of $3.00 per MMBtu.
Plains Exploration & Production already has 2010 hedges in place for 85,000 MMBtu per day of natural gas production under three-way collars with a floor price of $6.12 and a limit of $4.64 and a ceiling price of $8.00. Additionally, Plains Exploration & Production has hedges in place for its crude oil production in 2010, 2011 and 2012.
Gulf of Mexico Divestment Proceedings
Plains Exploration & Production continues with its efforts to optimize the value of its deepwater portfolio through the sale of its Gulf of Mexico properties. With a view to accommodating existing and several additional participants for the proposed sale, Plains Exploration & Production has extended the review process for its deepwater divestments into the first quarter 2011.
Plains Exploration & Production believes this will provide additional time allowing for a complete assessment by all interested parties of PXP’s properties and is an important step in securing the optimum value for PXP shareholders.
On the other hand, Plains Exploration & Production’s September deal with McMoRan Exploration Company (MMR) to dispose its shallow water Gulf of Mexico assets still remains pending for approval from McMoRan shareholders and other customary closing conditions and adjustments. McMoRan shareholders are expected to vote on the proposed deal at the special meeting to be held on December 30, 2010.
Outlook
Plains Exploration & Production’s decision to trim down operations in the Gulf of Mexico area stemmed from the need to cut capital expenditures and also by the uncertain regulatory environment in the region. The company intends to invest the proceeds from the Gulf of Mexico asset sale in its onshore operations in the years to come, as the gas price fundamentals would change for the better. The company has onshore projects in the Granite Wash, California and the Haynesville shale.
Furthermore, hedges provide significant protection to Plains Exploration & Production’s bottom-line, which may be affected by the ever-volatile commodity prices.
The major competitors of the company are Anadarko Petroleum Corporation (APC) and Pioneer Natural Resources Co. (PXD). During the third quarter, Plains Exploration & Production’s reported earnings outdid the consensus, while the earnings of its peers were below projections.
Plains Exploration & Production currently has a short-term Zacks #3 Rank (Hold), which translates into a long-term Neutral recommendation for the stock.
Based in Houston, Texas, Plains Exploration & Production engages in the acquisition, development, exploration, and production of oil and gas properties primarily in the United States.
ANADARKO PETROL (APC): Free Stock Analysis Report
MCMORAN EXPLOR (MMR): Free Stock Analysis Report
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PLAINS EXPL&PRD (PXP): Free Stock Analysis Report
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