Plains Exploration & Production Company (PXP) posted fourth-quarter earnings of $1.37 per share, substantially higher than the Zacks Consensus Estimate of 61 cents and the year-ago loss of 19 cents.
For the full year 2009, the company reported operating earnings of $5.40, beating the Zacks Consensus Estimate of $4.39 and last year’s earnings of $4.89. The better-than-expected results were driven by its strong production with lower operational and administrative costs, and effective hedging.
Plains reported a positive earnings surprise of nearly 55% in the quarter, in line with its history of outperforming estimates. Historically, the company has delivered a 145.6% positive surprise in the September quarter and a 323.5% positive surprise in the June quarter. The four-quarter average surprise from December 2008 through September 2009 was 180.6%. The current Zacks Consensus Estimate for 2010 EPS is $1.71.
Operating Results
Net revenue in the quarter was up 12% from a year ago to $367.7 million, driven primarily by an increase in realized oil prices. Total revenue for the year declined 51% to $1.2 billion, fueled by a decrease in realized oil and gas prices.
Average realized oil and gas prices in the quarter were $64.28 per barrel and $4.12 per thousand cubic feet (MCF), respectively, up 33% and down 17% from a year ago. In 2009, realized oil and gas prices averaged $51.43 per barrel (down 41%) and $3.72 per MCF (down 54%).
Daily sales volumes for the fourth quarter were 86.4 thousand barrels of oil equivalent (MBOE), which was flat versus last year, driven by higher production from the Haynesville Shale and Flatrock properties. Sales volumes in 2009 averaged 82.7 MBOE, down 9% year over year. Excluding the impact of 2008 disinvestments, full-year sales volumes increased 8% over 2008, exceeding targets.
Plains continued to manage its costs effectively in the quarter, with production costs declining 32% to $12.89 per BOE. Cost improvement in the quarter was marked by lower per unit lease operating expense (down 38%), steam gas costs (down 22%), electricity costs (down 38%) and production and ad valorem tax costs (down 49%), offset by higher gathering & transportation costs (up 90%). For the year, total production costs per BOE were $14.03, well below published targets.
Year-end Proved Reserves
During 2009, proved reserves increased 23% to 359.5 million barrels of oil equivalent (MMBOE), reserve replacement was 320% and finding and development costs, excluding acquisition costs, were $12.61 per BOE. Of the year-end estimated proved reserves, 60% were oil and 64% proved developed.
The company has an estimated proved reserve life of 11 years and a proved developed reserve life of 7 years.
Balance Sheet
Plains’ balance sheet remained strong at quarter-end, helped by its conservative financial strategy. The company ended the year with no near-term debt maturities (until 2015), nearly $1.9 million of cash and $990 million available under its senior revolving credit facility. At year-end, net cash provided by operating activities was $499.0 million and operating cash flow was $1.6 billion.
Outlook
Plains remains focused on cost control, operational execution and reserve and production growth from its balanced portfolio of assets. The company highlighted its corporate goals to double production and reserves by 2014, remain balanced between oil and gas, and continue reducing total production costs per BOE. The company has entered 2010 positioned to continue efficiently growing production and reserves per share with contribution from multiple asset areas over the next several years.
Plains Exploration provided its full-year 2010 daily sales volumes guidance of 88 to 92 MBOE. Driven by the expected growth of the three Gulf of Mexico projects, the company has the potential to grow production 15% annually through 2014, up from 10% targeted previously. Furthermore, Plains is targeting an average annual reserve growth target of 20% over the next several years.
For 2010, Plains expects capital expenditures to total $1.2 billion, reflecting additional spending on its Gulf of Mexico discoveries, Davy Jones and Lucius, and Phobos and Blackbeard East exploration prospects.
Depreciation, depletion and amortization expense is expected to be $16.00 to $18.00 per BOE for 2010.
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