Plains Exploration & Production Co. (PXP) posted second-quarter earnings of 26 cents per share, in line with the Zacks Consensus Estimate, but below the year-ago profit of 60 cents.
Operating Results
Net revenues of $364.6 million dipped 2.5% (negative surprise) from the Zacks Consensus Estimate of $374 million. However, it grew 31% from $278.7 million a year-ago, driven primarily by higher commodity prices and higher sales volumes. Strong drilling results in the Granite Wash, Haynesville, California and Gulf of Mexico accounted for the volume growth during the quarter.
Despite the impacts of the fire and damage of a portion of the gas processing facility at the Madden Field in Fremont County, which reduced production by 850 BOE per day, daily sales volumes for the quarter increased 5% to 85.0 thousand barrels of oil equivalent (MBOE). Oil represented approximately 53% of the quarter’s daily volumes.
Average realized oil and gas prices, before derivative transactions, were $66.87 per barrel and $4.05 per thousand cubic feet (MCF), respectively, up 35% and up 20% from a year ago. Average hydrocarbon price on “per barrel of oil equivalent (BOE) basis” was $47.05, up 24% year over year.
Plains continued to manage its costs effectively in the quarter, with production costs declining 10% to $13.03 per BOE from $14.43 per BOE in the second quarter 2009. Cost improvement in the quarter was marked by lower per unit lease operating expenses (down 14%), electricity costs (down 15%) and lower production and ad valorem tax costs (down 66%), offset by higher gathering & transportation costs (up 42%).
Financials
Plains’ balance sheet remained strong at quarter-end helped by its conservative financial strategy. The company ended the quarter with nearly $12.6 million of cash and cash equivalents. At quarter-end, net cash provided by operating activities was $252.7 million and operating cash flow was $212.3 million.
During the quarter, Plains amended and restated its senior revolving credit agreement extending the maturity of the revolver to Aug 3, 2015 from Nov 6, 2012. The company also increased its borrowing base by 23% to $1.6 billion from $1.3 billion. On Jun 30, 2010, the senior revolving credit facility had no amounts outstanding.
Outlook
On the call, Plains retained its fiscal 2010 operating and financial guidance, but with lower volumes due to the facilities fire at Madden Field. The company now expects full-year 2010 average daily sales volumes to be at the lower end of the stated guidance of 88 thousand to 92 thousand BOE per day.
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