Plains Exploration & Production Co. (PXP) posted fourth quarter 2011 pro forma earnings of 20 cents per share, significantly lower than the Zacks Consensus Estimate of 42 cents. However, it was roughly flat year over year.
PXP’s fourth quarter 2011 GAAP earnings were 69 cents per share versus a loss of 14 cents in the year-ago quarter. The variance between GAAP and pro forma was due to unrealized loss on mark-to-market derivative contracts, realized loss on mark-to-market derivative contracts, unrealized loss on investment measured at fair value and costs related to debt extinguishment.
In fiscal 2011, the company’s pro forma earnings were $1.56 per share versus $1.06 in the year-ago period. The figure also missed the Zacks Consensus Estimate of $1.81.
Plains Exploration & Production Co. reported 2011 GAAP earnings of $1.44 per share compared with 73 cents per share in fiscal 2010.
Operating Results
Fourth quarter net revenues of $517.5 million increased 26.8% from $408.1 million in the year-ago quarter. Oil revenues increased approximately $104.3 million reflecting higher average realized prices, consistent performance of the Eagle Ford Shale and California crude postings and higher crude oil sales volumes. Gas revenues increased nearly $3.0 million, reflecting higher sales volumes. The quarterly revenue surpassed the Zacks Consensus Estimate of $492.0 million.
In 2011, the company reported total revenue of $1,964.5 million, up 27.2% year over year from $1,544.6 million in 2010. This was driven by higher revenues generated by Oil, Gas and Other segments. The fiscal 2011 revenue beat the Zacks Consensus Estimate of $1,931.0 million.
In the reported quarter, Oil Sales accounted for approximately 80.9% of the company’s revenues, Gas Sales represented 18.7% of revenues, while other operating revenues made up for the remaining 0.4%.
Daily sales volumes at PXP grew 13% year over year to 105,396 barrels of oil equivalent (“BOE”) per day in the fourth quarter of 2011. Average daily liquids sales volume increased 12% year over year to 52,262 barrels per day compared with the fourth quarter of 2010.
Average realized hydrocarbon price, before derivative transactions, on per barrel of oil equivalent (BOE) basis was $53.13 in the fourth quarter 2011, up 11.5% year over year. An 18.9% year-over-year growth in oil realized prices helped the company to offset the 9.8% decline in natural gas prices to $3.30 per thousand cubic feet (Mcf).
On the cost side, Plains Exploration & Production’s operating costs increased 31.6%, marked by significantly higher per unit lease operating expenses (up 34.4%), higher production and ad valorem tax costs (up 98.8%) and higher gathering and transportation costs (up 33.1%), offset by lower impairment of oil and gas properties accretion (down 3.7%).
Despite significant rise in costs, strong revenue growth boosted PXP’s operating income for the quarter to $102.1 million with an increase of 10.3%.
Financials
Plains Exploration & Production’s balance sheet remained strong at quarter end helped by its conservative financial strategy. As of December 31, 2011, the company had nearly $419.1 million of cash and cash equivalents and $3,761.0 million in long-term debt.
In the fourth quarter, the company generated cash from operating activities of $188.1 million, a 20.1% dip from last year, with operating cash flows increasing 12.3% to $284.7 million.
Guidance
For the fiscal 2012, PXP maintains its sales volumes guidance in the range of 92-96 thousand BOE per day, based on minimization of drilling activity by operators in the Haynesville Shale. At the same time, the company plans to re-allocate its capital from the Haynesville Shale to the Eagle Ford Shale.
In fiscal 2012, the company expects that the cost of production per BOE will be in the range of $15.45 – $17.90.
Plains Exploration & Production has also reaffirmed cost of production per BOE, reflecting higher forecasted oil and liquids volumes and lower forecasted natural gas prices.
At the Peer
Noble Energy Inc. (NBL), a PXP peer, announced adjusted earnings of $1.18 per share for the fourth quarter of 2011 versus $1.04 per share in the year-ago quarter. The quarterly earnings surpassed the Zacks Consensus Estimate of $1.12.
Noble Energy’s fourth quarter revenue was $985.0 million versus $783 million in the prior-year quarter. The reported revenue beat the Zacks Consensus Estimate by $35.0 million.
Plains Exploration & Production retains a short-term Zacks #3 Rank on the stock, which translates into a Hold rating. 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.
Our View
Plains Exploration and Production expects that crude oil realized price will be 92% of Brent, reflecting the impact of higher estimated crude oil volumes and stronger pricing.
Plains Exploration and Production is well positioned with its fiscal 2012 contracts in California and the Eagle Ford Shale. The company has also received the approval for the development of the Lucius project at Keathley Canyon in the deepwater Gulf of Mexico and expects production to begin from 2014.
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