PXP Announces 2008 Second Quarter Earnings of $203 Million or $1.84 Per Diluted Share...

PXP Announces 2008 Second Quarter Earnings of $203 Million or $1.84 Per
Diluted Share Representing a 701% Gain Over Same Period in 2007

HOUSTON, Aug. 5 /PRNewswire-FirstCall/ -- Plains Exploration & Production
Company (NYSE: PXP) ("PXP" or the "Company") today announced financial and
operating results for the second quarter 2008.
Highlights:
-- Net income increased to $202.9 million in the second quarter 2008 from
$25.3 million in the second quarter 2007.
-- Operating cash flow was $450.3 million in the second quarter 2008
compared to $111.0 million in the second quarter 2007 (a non-GAAP
measure).
-- Second quarter 2008 oil and gas sales volumes averaged 87.5 thousand
barrels of oil equivalent per day (BOEPD) reflecting the previously
announced asset divestitures which closed in February 2008. Sales
volumes averaged 91.6 thousand BOEPD for the first six months of 2008.
PXP expects sales volumes to average between 92 and 96 thousand BOEPD
for the year-ended 2008 and is currently producing within that range.
Flatrock and other growth initiatives are expected to contribute to
sales volume growth throughout the year.
-- Positive drilling results at Flatrock which has four successful wells
to date and two producing wells with approximately 30 million cubic
feet equivalent per day (MMCFED) net to PXP:
- Flatrock No. 2 well commenced production on July 6, 2008. Gross
production currently approximates 102 MMCFED, 23 MMCFED net to PXP.
- Flatrock No. 3 well logged deeper pay in May 2008. In total, the well
encountered 256 feet of net pay. First production is expected in the
third quarter of 2008.
- Flatrock No. 4 development well logged 116 net feet of pay in June
2008 and is drilling below 16,800 feet to proposed total depth of
18,500 feet.
- Flatrock No. 5 well commenced on July 1, 2008 and is currently
drilling below 9,700 feet to proposed total depth of 18,400 feet.
- Flatrock No. 6 well is expected to commence drilling in the second
half of 2008.
-- South Timbalier Block 168 ultra-deep exploratory well has been drilled
to 32,550 feet and is being evaluated.
-- Fredericksburg exploratory prospect, operated by Shell and located on
Desoto Canyon Block 486, is currently drilling with results expected in
the third quarter.
-- Friesian #2 well, operated by PXP and located on Green Canyon Block
643, has a rig on location running anchors, with drilling results
expected in the fourth quarter.
-- Positive drilling results continue from the Texas Panhandle development
program. We began the year producing 6,500 BOEPD and are currently
producing approximately 7,600 BOEPD. These production gains are
primarily coming from the Courson Ranch and Marvin Lakes areas. We are
having better-than-expected results from vertical wells targeting the
Mississippian St. Louis formation and horizontal wells targeting the
Cleveland formation. Additionally, wells in the Marvin Lakes area
targeting the Granite Wash and Atoka Wash formations, where we have a
significant inventory of future drilling locations, are contributing to
these positive results.
-- Acquired a 20% interest in Chesapeake Energy's 550,000 acre leasehold
position in the Haynesville Shale, 110,000 acres net to PXP, for $1.65
billion. In addition, PXP has agreed to fund 50% of Chesapeake's 80%
share of drilling and completion costs for future Haynesville Shale JV
wells over a several year period until an additional $1.65 billion has
been paid. This applies to less than 10% of the estimated 6,800
potential future drilling locations. PXP expects average drilling and
completion costs of $1.25 per MCFE and total finding and development
costs of $1.83 per MCFE. Drilling operations are underway with 6 rigs
running and a total of 30 rigs expected by year-end 2009. Production
contribution is expected in the fourth quarter 2008.
-- Closed the Piceance Basin acquisition in June 2008, expanding an
existing PXP growth area by adding approximately 11,000 acres adjacent
to our existing position and increasing our overall Piceance drilling
inventory to over 3,600 potential well locations. Production from the
Piceance Basin properties has increased 155% to 27.5 MMCF per
day in the second quarter of 2008 compared to 10.8 MMCF per day in the
second quarter 2007. There are 6 rigs running and a total of 7 rigs
expected by year-end 2008.
-- Received Santa Barbara County Planning Commission approval of the
Tranquillon Ridge project in April, one of the necessary government
approvals. PXP is currently working to secure approval from the
California State Lands Commission.
-- In Vietnam we contracted a rig to drill our first well mid-year 2009.
-- Increased PXP's commodity price protection by acquiring incremental
derivatives on a significant portion of 2008, 2009 and 2010 production
volumes with over $100 crude oil floors and $10 by $20 natural gas
collars.

THREE MONTHS ENDED JUNE 30
PXP reported second quarter 2008 net income of $202.9 million, or
$1.84 per diluted share, on revenues of $732.7 million, an increase from
second quarter 2007 net income of $25.3 million, or $0.35 per diluted share,
on revenues of $255.5 million. Higher revenues during the second quarter of
2008 were primarily due to a 64% increase in sales volumes and a $39.08 per
barrel of oil equivalent (BOE) increase in realized prices.
Sales volumes increased to 87.5 thousand BOEPD during the second quarter
2008 from 53.5 thousand BOEPD in the second quarter 2007 reflecting the Pogo
acquisition and increased production from the Piceance Basin.
Total production costs per BOE were higher during second quarter 2008
compared to the prior year period. Higher commodity prices and the impact from
Pogo and Piceance Basin properties increased per unit production and ad
valorem tax costs. Additionally, an increase in our stock price during the
period resulted in higher per unit lease operating costs due to charges for
stock appreciation rights.
Operating cash flow, a non-GAAP measure, increased to $450.3 million in
the second quarter 2008 from $111.0 million for the same period a year ago due
to higher sales volumes and stronger commodity prices. An explanation and
reconciliation of non-GAAP financial measures is included at the end of this
release.
SIX MONTHS ENDED JUNE 30
Net income for the first six months of 2008 was $366.4 million, or
$3.27 per diluted share, on revenues of $1.4 billion, a significant increase
from net income of $45.9 million, or $0.63 per diluted share, on revenues of
$480.2 million for the same period a year ago. Higher revenues during the
first six months of 2008 were primarily due to a 74% increase in sales volumes
and a $30.82 per BOE increase in realized prices.
Sales volumes for the first six months of 2008 increased to 91.6 thousand
BOEPD from 52.7 thousand BOEPD for the same period in 2007. Higher
year-over-year sales volumes are primarily due to the 2007 acquisitions.
Total production costs per BOE were nearly flat for the first six months
of 2008 compared to the same period in 2007. Lower per unit lease operating,
steam gas and electricity costs due to increased sales volumes were offset by
higher per unit gathering and transportation and production and ad valorem tax
costs associated with the addition of the Pogo and Piceance Basin properties.
Operating cash flow, a non-GAAP measure, increased to $800.4 million for
the first six months of 2008 from $205.6 million in the prior year period due
to higher sales volumes and stronger commodity prices.
Oil and gas capital expenditures, excluding acquisitions, were $449.6
million for the first six months of 2008 compared to $309.8 million for the
prior year period.
OUTLOOK
PXP reaffirms full-year 2008 operating and financial guidance. As
previously announced, oil and gas expenditures for 2008 are expected to be
approximately $1.5 billion, excluding acquisitions.
SECOND QUARTER CONFERENCE CALL
PXP plans to host its quarterly conference call tomorrow, August 6, 2008,
at 8:00 a.m. Central time. Investors wishing to participate in the conference
call may dial 1-800-567-9836 or 1-973-935-8460. The replay will be available
through August 20, 2008 and can be accessed by dialing 1-800-642-1687 or
1-706-645-9291. Conference call and replay ID: 54420420.
PXP is an independent oil and gas company primarily engaged in the
activities of acquiring, developing, exploring and producing oil and gas in
its core areas of operation: California, Rockies, Haynesville Shale/North
Louisiana and East Texas, Gulf Coast, Gulf of Mexico, Texas Panhandle, South
Texas and the Permian Basin of the United States. PXP is headquartered in
Houston, Texas.
ADDITIONAL INFORMATION & FORWARD LOOKING STATEMENTS
This press release contains forward-looking information regarding PXP that
is intended to be covered by the safe harbor "forward-looking statements"
provided by the Private Securities Litigation Reform Act of 1995. All
statements included in this press release that address activities, events or
developments that PXP expects, believes or anticipates will or may occur in
the future are forward-looking statements. These include statements regarding:
* reserve and production estimates,
* oil and gas prices,
* the impact of derivative positions,
* production expense estimates,
* cash flow estimates,
* future financial performance,
* planned capital expenditures, and
* other matters that are discussed in PXP's filings with the SEC.

These statements are based on our current expectations and projections
about future events and involve known and unknown risks, uncertainties, and
other factors that may cause our actual results and performance to be
materially different from any future results or performance expressed or
implied by these forward-looking statements. Please refer to our filings with
the SEC, including our Form 10-K for the year ended December 31, 2007, for a
discussion of these risks.
All forward-looking statements in this report are made as of the date
hereof, and you should not place undue reliance on these statements without
also considering the risks and uncertainties associated with these statements
and our business that are discussed in this report and our other filings with
the SEC. Moreover, although we believe the expectations reflected in the
forward-looking statements are based upon reasonable assumptions, we can give
no assurance that we will attain these expectations or that any deviations
will not be material. Except for any obligation to disclose material
information under the Federal securities laws, we do not intend to update
these forward-looking statements and information.

Plains Exploration & Production Company
Consolidated Statements of Income (Unaudited)
(amounts in thousands, except per share data)

Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Revenues
Oil sales $545,767 $231,583 $1,002,351 $437,101
Gas sales 182,334 23,210 346,403 40,745
Other operating revenues 4,602 754 7,026 2,394
732,703 255,547 1,355,780 480,240
Costs and Expenses
Production costs
Lease operating expenses 85,248 50,112 159,756 94,775
Steam gas costs 40,599 27,924 72,757 54,281
Electricity 10,661 9,500 22,298 18,267
Production and ad valorem
taxes 24,181 5,042 50,409 10,301
Gathering and transportation
expenses 2,462 1,220 10,951 1,406
General and administrative 45,203 29,913 85,131 52,410
Depreciation, depletion and
amortization 130,749 58,523 271,602 111,201
Accretion 3,223 2,273 6,610 4,535
342,326 184,507 679,514 347,176
Income from Operations 390,377 71,040 676,266 133,064
Other Income (Expense)
Gain on sale of assets - - 34,658 -
Interest expense (23,511) (11,698) (54,120) (17,058)
Debt extinguishment costs - - (10,263) -
Loss on mark-to-market
derivative contracts (51,427) (15,837) (60,908) (36,427)
Interest and other income 1,686 747 1,661 1,324
Income Before Income Taxes 317,125 44,252 587,294 80,903
Income tax expense
Current (61,716) - (102,253) -
Deferred (52,491) (18,934) (118,622) (35,015)
Net Income $202,918 $25,318 $366,419 $45,888
Earnings per share
Basic $1.88 $0.35 $3.33 $0.63
Diluted $1.84 $0.35 $3.27 $0.63
Weighted Average Shares
Outstanding
Basic 107,707 72,171 109,939 72,316
Diluted 110,138 73,275 112,147 73,382

Plains Exploration & Production Company
Operating Data (Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Daily Average Volumes
Oil and liquids sales (Bbls) 55,153 46,865 56,399 47,106
Gas (Mcf)
Production 200,358 46,285 217,573 40,148
Used as fuel 6,015 6,415 6,236 6,423
Sales 194,343 39,870 211,337 33,725
BOE
Production 88,546 54,579 92,662 53,798
Sales 87,543 53,510 91,622 52,727
Unit Economics (in dollars)
Average NYMEX Prices
Oil $123.80 $65.02 $111.12 $61.67
Gas 10.90 7.55 9.50 7.17
Average Realized Sales Price Before
Derivative Transactions
Oil (per Bbl) $108.74 $54.31 $97.65 $51.27
Gas (per Mcf) 10.31 6.40 9.01 6.68
Per BOE 91.40 52.32 80.89 50.07
Cash Margin per BOE (1)
Oil and gas revenues $91.40 $52.32 $80.89 $50.07
Costs and expenses
Lease operating expenses (10.70) (10.29) (9.58) (9.93)
Steam gas costs (5.10) (5.73) (4.36) (5.69)
Electricity (1.34) (1.95) (1.34) (1.91)
Production and ad valorem taxes (3.04) (1.04) (3.02) (1.08)
Gathering and transportation (0.31) (0.25) (0.66) (0.15)
Gross margin before DD&A (GAAP) 70.91 33.06 61.93 31.31
Cash derivative settlements (2.86) (5.20) (2.35) (5.23)
Cash margin (Non-GAAP) $68.05 $27.86 $59.58 $26.08

(1) Cash margin (a non-GAAP measure) is calculated by adjusting gross
margin before DD&A (a GAAP measure) to deduct cash derivative
settlements. Management believes this presentation may be helpful to
investors as it represents the cash generated by our oil and gas
production that is available for, among other things, capital
expenditures and debt service. PXP management uses this information to
analyze operating trends and for comparative purposes within the
industry. This measure is not intended to replace the GAAP statistic
but to provide additional information that may be helpful in
evaluating the Company's operational trends and performance.

Plains Exploration & Production Company
Consolidated Balance Sheets
(in thousands of dollars)
June 30, December 31,
2008 2007
ASSETS (Unaudited)
Current Assets
Cash and cash equivalents $2,494 $25,446
Restricted cash - 59,092
Accounts receivable 406,745 304,972
Inventories 24,291 18,394
Deferred income taxes 175,793 229,893
Other current assets 12,946 37,123
622,269 674,920
Property and Equipment, at cost
Oil and natural gas properties -
full cost method
Subject to amortization 7,087,870 7,340,238
Not subject to amortization 1,384,611 1,951,783
Other property and equipment 110,955 85,928
8,583,436 9,377,949
Less allowance for depreciation,
depletion and amortization (1,267,019) (1,000,722)
7,316,417 8,377,227
Goodwill 535,296 536,822
Other Assets 103,433 104,382
$8,577,415 $9,693,351

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $284,148 $319,583
Commodity derivative contracts 101,825 79,938
Royalties and revenues payable 169,196 132,919
Stock appreciation rights 23,977 63,106
Interest payable 19,228 25,330
Accrued merger expenses 2,764 77,980
Other current liabilities 79,483 119,190
680,621 818,046
Long-Term Debt
Senior revolving credit facility 611,000 2,205,000
Senior notes 1,500,000 1,100,000
2,111,000 3,305,000
Other Long-Term Liabilities
Asset retirement obligation 179,665 184,080
Commodity derivative contracts 31,428 33,821
Other 143,460 54,726
354,553 272,627
Deferred Income Taxes 2,006,433 1,959,431
Stockholders' Equity
Common stock 1,128 1,128
Additional paid-in capital 2,710,212 2,711,617
Retained earnings 990,412 623,993
Accumulated other comprehensive income 1,519 1,566
Treasury stock (278,463) (57)
3,424,808 3,338,247
$8,577,415 $9,693,351

Plains Exploration & Production Company
Consolidated Statements of Cash Flows (Unaudited)
(in thousands of dollars)

Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $202,918 $25,318 $366,419 $45,888
Items not affecting cash
flows from operating
activities
Gain on sale of assets - - (34,658) -
Depreciation, depletion,
amortization and
accretion 133,972 60,796 278,212 115,736
Deferred income taxes 52,491 18,934 118,622 35,015
Debt extinguishment
costs - - 10,263 -
Loss on commodity
derivative contracts 51,427 15,837 60,908 36,427
Noncash compensation 28,378 15,717 40,451 21,621
Other noncash items 1,936 (24) 2,886 (31)
Change in assets and
liabilities from
operating activities (146,514) (15,282) (233,741) (113,406)
Net cash provided by
operating activities 324,608 121,296 609,362 141,250
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to oil and gas
properties (186,423) (113,281) (441,123) (258,182)
Acquisition of oil and
gas properties (311,136) (973,875) (331,293) (973,875)
Acquisition of Pogo
Producing Company (62,625) - (74,844) -
Derivative settlements (12,946) (25,615) (29,593) (49,143)
Proceeds from property
sales, net of costs and
expenses 7,901 - 1,717,781 -
Decrease in restricted cash
and cash held in escrow 339,974 - 59,092 -
Additions to other
property and equipment (4,754) (19,774) (27,443) (24,164)
Other, net 505 (3,431) (1,229) (3,431)
Net cash provided by (used
in) investing activities (229,504) (1,135,976) 871,348 (1,308,795)
CASH FLOWS FROM FINANCING
ACTIVITIES
Revolving credit
facilities
Borrowings 1,083,315 1,119,475 4,237,756 1,456,250
Repayments (1,532,315) (744,475) (5,831,756) (1,316,750)
Proceeds from issuance
of long-term debt 400,000 600,000 400,000 1,100,000
Costs incurred in
connection with
financing arrangements (5,927) (9,972) (6,064) (17,917)
Derivative settlements (7,898) - (13,088) -
Purchase of treasury
stock (32,385) (15,193) (304,192) (47,485)
Other (5,709) 1,462 13,682 3,341
Net cash (used in)
provided by financing
activities (100,919) 951,297 (1,503,662) 1,177,439
Net (decrease) increase
in cash and cash
equivalents (5,815) (63,383) (22,952) 9,894
Cash and cash equivalents,
beginning of period 8,309 74,176 25,446 899
Cash and cash equivalents,
end of period $2,494 $10,793 $2,494 $10,793

Plains Exploration & Production Company
Summary of Open Derivative Positions
at July 1, 2008

Instrument Daily
Period Type Volumes Average Price (1) Index
Sales of Crude Oil Production
2008
July - Dec Put options 42,000 Bbls $55.00 Strike price WTI
July - Dec Collar 2,500 Bbls $60.00 Floor -
$80.13 Ceiling WTI
2009
Jan - Dec Put options 32,500 Bbls $55.00 Strike price WTI
Jan - Dec Put options 40,000 Bbls $106.16 Strike price WTI
2010
Jan - Dec Put options 40,000 Bbls $111.49 Strike price WTI

Sales of Natural Gas Production
2008
July - Dec Collar 15,000 MMBtu $8.00 Floor -
$12.11 Ceiling Henry Hub
July - Dec Collar 150,000 MMBtu $10.00 Floor -
$20.00 Ceiling Henry Hub
2009
Jan - Dec Collar 150,000 MMBtu $10.00 Floor -
$20.00 Ceiling Henry Hub

(1) The average strike prices do not reflect the cost to purchase the put
options or collars.

Plains Exploration & Production Company
Reconciliation of GAAP to Non-GAAP Measure

The following table reconciles Net Cash Provided by Operating Activities
(GAAP) to Operating Cash Flow (Non-GAAP) for the three and six months
ended June 30, 2008 and 2007. Management believes this presentation may be
useful to investors because it is illustrative of the impact of the
Company's derivative contracts. PXP management uses this information for
comparative purposes within the industry and as a means of measuring the
Company's ability to fund capital expenditures and service debt. This
measure is not intended to replace the GAAP statistic but to provide
additional information that may be helpful in evaluating the Company's
operational trends and performance.

Operating cash flow is calculated by adjusting the GAAP measure of cash
provided by operating activities to exclude changes in operating assets
and liabilities and include derivative cash flows that are classified as
financing or investing activities in the statement of cash flows. Pursuant
to GAAP certain cash payments with respect to our derivative instruments
are required to be reflected as financing or investing activities.

Three Months Ended June 30,
2008 2007
(millions of dollars)
Net cash provided by operating
activities (GAAP) $324.6 $121.3
Changes in operating assets and
liabilities 146.5 15.3
Cash payments for commodity
derivative contracts that settled
during the period that are reflected
as investing or financing cash flows
in the statement of cash flows (20.8) (25.6)
Operating cash flow (Non-GAAP) $450.3 $111.0

Six Months Ended June 30,
2008 2007
(millions of dollars)
Net cash provided by operating
activities (GAAP) $609.4 $141.3
Changes in operating assets and
liabilities 233.7 113.4
Cash payments for commodity
derivative contracts that settled
during the period that are reflected
as investing or financing cash flows
in the statement of cash flows (42.7) (49.1)
Operating cash flow (Non-GAAP) $800.4 $205.6

SOURCE Plains Exploration & Production Company

Investors, Hance Myers, Vice President Investor Relations +1-713-579-6291 or
1-800-934-6083, or Media, Scott Winters, Vice President Corporate
Communications, +1-713-579-6190 or 1-800-934-6083, both of Plains Exploration
& Production Company