PXP Unveils 3Q12 Production Outlook

Zacks

Plains Exploration & Production Company (PXP) provided its preliminary third-quarter 2012 production projections. The company expects preliminary daily sales volumes in the third quarter of 2012 to average approximately 105 thousand barrel of oil equivalent per day (“MBoe/d”). This will represent roughly 60% of its total quarterly sales volumes.

Plains Exploration & Production expects its third-quarter 2012 production numbers to be benefited owing to few of its Gulf of Mexico (“GoM”) properties acquisitions from BP plc (BP). These assets have already exhibited their production-potentials with generation of 59,500 barrels of oil equivalent net per day at the end of July 2012.

In addition, the company expects its forthcoming production-increase to come up from Eagle Ford shale.

2Q12 Production Recap

Daily sales volumes of Plains Exploration & Production inched up 0.6% year over year to 98,336 barrels of oil equivalent per day (“Boe/d”) in the second quarter of 2012. Average daily oil and liquids sales volume increased 23.2% year over year to 59,780 barrels per day in the reported quarter.

Our Take

During second-quarter 2012 earnings call, Plains Exploration & Production forecasted sales volume in the range of 95 - 97 MBoe/d for 2012. Last month, the company entered into two significant agreements, totaling $6.11 billion, with BP plc and Royal Dutch Shell plc (RDS.A) to acquire some of their oilfields in the GoM. These assets have strong production profile along with solid proven reserves and we believe that these acquisitions will help the company meet its annual projected volume.

We appreciate Plains Exploration & Production’s strong balance sheet and liquidity position, liquid-rich profile, higher realized oil prices, strong asset rebalancing strategy, and development of onshore assets in California along with the Eagle Ford Shale, which offer ample upside potential over the long term.  

However, we are skeptical about uncertainty related to drilling results and regulatory restrictions, and volatile commodity prices. Plains Exploration & Production Company currently retains a short-term Zacks #3 Rank (Hold Rating).

Houston, Texas-based Plains Exploration & Production engages in the acquisition, development, exploration, and production of oil and gas properties, primarily in the United States.

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