Plains Exploration & Production Co. (PXP) posted third-quarter earnings of 29 cents per share, above the Zacks Consensus Estimate of 24 cents, but below the year-ago profit of 60 cents.
Operating Results
Net revenues of $387.8 million grew 3.4% (positive surprise) from the Zacks Consensus Estimate of $375 million. Also, revenue grew 24% from $312.2 million a year-ago, driven primarily by higher commodity prices and higher sales volumes. Strong drilling results in the Granite Wash, Haynesville, California and South Texas Eagle Ford accounted for the volume growth during the quarter.
Oil Sales accounted for approximately 71% of the quarter’s revenues, while Gas Sales represented 28.5% of revenues.
Daily sales volumes of the company rose 9% year over year averaging 90.6 thousand barrels of oil equivalent (MBoe) for third quarter 2010 from 83.0 MBoe in the year-ago quarter.
Average realized oil and gas prices, before derivative transactions, were $64.65 per barrel and $4.54 per thousand cubic feet (MCF), respectively, up 12.9% and up 42.8% from a year ago. Average hydrocarbon price on “per barrel of oil equivalent (BOE) basis” was $46.43, up 13.6% year over year.
Plains’ total operating costs increased 22% to $290.7 million from $237.4 million in the third quarter 2009. Higher costs in the quarter was marked by higher per unit lease operating expenses (up 2.9%), steam gas costs (up 44%), higher production and ad valorem tax costs (up 4.8%), offset by lower electricity costs (down 15.4%).
Despite rise in operating costs, Plains’ operating income in the quarter increased 30% year over year to $97.1 million. On a unit of production basis, operating income increased 19% per barrel oil equivalent (BOE) compared to last year.
Financials
Plains’ balance sheet remained strong at quarter-end helped by its conservative financial strategy. The company ended the quarter with nearly $11.7 million of cash and cash equivalents. In the third quarter 2010, net cash provided by operating activities was $202.7 million and operating cash flow was $258.1 million.
On September 20, 2010, Plains announced that it plans to sell its Gulf of Mexico deepwater divestment. Plains expects to close the transaction by year-end 2010 or early 2011
Outlook
For the fourth-quarter 2010, Plains expects average daily sales volumes to be in line with third quarter volumes reflecting the impact of the Gulf of Mexico shelf asset sale, downtime on certain California and Texas assets and the previously announced repair work following a fire at the Madden Field in Wyoming.
Plains said it plans to issue full-year 2011 operating and financial guidance at the end of 2010. The 2011 guidance will reflect the impact of the previously announced Eagle Ford acquisition and Gulf of Mexico divestments.
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