PXP Reports Substantially Higher Quarterly Earnings of $493 Million or $4.50 Per Diluted Share
Thursday 11/06/2008 4:29 PM ET - Pr Newswire
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PXP 23.09 -2.33%

As of 12:51 PM ET 11/12/08Plains Exploration & Production Company (NYSE: PXP) ("PXP" or the "Company") today announced financial and operating results for the third quarter 2008 and filed full-year 2009 operating guidance with the SEC in a Form 8-K.

Financial Highlights:

-- Net income increased to $493.1 million in the third quarter 2008 from
$32.9 million in the third quarter 2007. Included in third quarter 2008
earnings is an after-tax gain on mark-to-market derivative contracts of
$282.4 million.

-- PXP set its 2009 capital budget at $1.15 billion and lowered 2008
estimated operational capital expenditures from $1.5 billion to $1.2
billion due to lower estimated acreage costs and reductions in
development costs attributed to the Permian and Piceance asset sale.

-- Strong liquidity is maintained with no significant debt maturities for
approximately four years; and pro forma for the Permian and Piceance
Basin properties sale, PXP's liquidity improves to approximately $1.3
billion. In addition, PXP is supported by its positive derivative
position which as of October 31, 2008 had a net value of approximately
$930 million.


Operational Highlights:

Production

-- Oil and gas sales volumes averaged 92.4 thousand barrels of oil
equivalent per day (BOEPD) in the third quarter 2008 compared to 57.1
thousand BOEPD in the third quarter 2007.

-- Hurricane downtime reduced third quarter 2008 volumes by approximately
170 thousand BOE. All production impacted by the hurricanes has been
restored.


Drilling Operations

-- Flatrock development continues delivering positive results with five
successful wells to date and three of these wells currently producing
approximately 37 million cubic feet equivalent per day (MMCFED) net to
PXP.

-- Flatrock No. 4 well production test, through perforations in the
primary Rob-L section, indicated a gross flow rate of approximately
109 MMCFD, 2,500 barrels per day of condensate and zero barrels of
water, approximately 124 MMCFED (27 MMCFED net to PXP). This is in
the same Rob-L sand which continues to produce at approximately 100
MMCFED at the Flatrock No. 2 well.
-- Flatrock No. 5 has encountered 90 net feet of pay as indicated by
wireline logs and is currently drilling below 15,000 feet to a
proposed total depth of 18,400 feet.
-- Flatrock No. 6 commenced drilling in late October 2008.

-- Additional multi-hundred BCFE Flatrock step-out prospects either
currently drilling or preparing to spud are outlined below:

-- Tom Sauk exploratory well, operated by McMoRan and located on
Louisiana State Lease 340, commenced drilling in August 2008 and is
drilling below 12,500 feet towards a proposed total depth of 19,000
feet to evaluate potential Operc and Gyro sands in the Middle and
Lower Miocene. PXP holds a 24.4% working interest.
-- Gladstone East exploration prospect, operated by McMoRan and located
on Louisiana State Lease 340, is expected to commence drilling in
November 2008 and carry over into 2009. This prospect, located in
the Flatrock area, has multiple targets in the Rob-L and Operc sands
in the Middle Miocene. PXP holds a 30% working interest.
-- Ammazzo exploration prospect, operated by McMoRan and located on
South Marsh Island Block 251, is expected to commence drilling in
November 2008 and carry over into 2009. The prospect, also located
in the Flatrock area, has multiple targets in the Rob-L, Operc and
Gyro sands in the Middle and Lower Miocene. PXP holds a 28% working
interest.

-- Plans are underway to complete and test the South Timbalier Block 168
ultra-deep exploratory well operated by McMoRan. The well will be
temporarily abandoned waiting completion. As previously reported, the
well was drilled to a total depth of 32,997 feet and logs indicated
four potential hydrocarbon bearing zones. PXP holds a 35% working
interest.

-- Friesian #2 well, operated by PXP and located on Green Canyon Block
643, is currently drilling below 24,000 feet to a proposed total depth
of 28,000 feet. Drilling results are expected before year end.

-- Drilling operations in the Haynesville Shale now include 14 rigs, up
from six in August, with an average of approximately 26 rigs expected
in 2009. For 2009, PXP allocated 40% of its 2009 capital budget, or
approximately $460 million, to Haynesville activity pursuant to
Chesapeake's, our operator's, 2009 operating plan. Drilling operations
for our Haynesville Shale Joint Venture began in July 2008 and
inaugural production commenced during the third quarter. Currently four
wells are producing 36 MMCFED gross, 5 MMCFED net to PXP. With over
7,000 potential well locations, this asset area is expected to be a
significant driver of future production and reserve growth. PXP holds a
20% interest in Chesapeake's over 550,000 net acre leasehold position.

-- Drilling operations in the South Texas and the Texas Panhandle areas
continue to yield positive results. Production combined from these
areas increased approximately 40% from January to September 2008. In
South Texas, drilling has focused on the Los Mogotes, Lopez Ranch and
Mills Bennett Fields and the area was producing 11,700 net BOEPD at the
end of the third quarter. In the Texas Panhandle, production was
approximately 8,100 net BOEPD at the end of the quarter with ongoing
drilling successes in the Courson Ranch, Wheeler and Marvin Lake
Fields. These asset areas provide multi-year drilling inventories
supporting further reserve and production growth.

-- Los Angeles County Board of Supervisors recently passed enhanced
environmental and safety standards supporting continued development of
the Inglewood Field in the Baldwin Hills area of Los Angeles,
California. This approval gives PXP the ability to drill up to 600 new
wells at the Inglewood Field.

-- The County of San Luis Obispo California recently approved a permit to
construct a water reclamation and treatment facility to improve
operating efficiencies for oil recovery activities in PXP's Arroyo
Grande Field. The new facility will accelerate field development and
production growth at the Arroyo Grande Field, which represents a
significant development for our onshore California production
operations. Construction is expected to begin by year-end 2008 followed
by drilling and steaming operations to enhance the present production
rate of 1,300 BOEPD with a 17% compound average growth rate over the
next 10 years.

-- T-Ridge received final approval from the County of Santa Barbara
California Board of Supervisors on October 7, 2008. This approval is an
important milestone for this significant project. PXP is working to
obtain approvals from the California State Lands Commission, the
California Coastal Commission, and the federal Minerals Management
Service, which would allow drilling to begin as early as the first
quarter 2009.


Divestiture

-- PXP agreed on September 24, 2008 to divest its oil and gas properties
located in the Permian and the Piceance Basins for $1.25 billion to
Occidental Petroleum Corporation. This transaction is expected to close
on December 1, 2008.


THREE MONTHS ENDED SEPTEMBER 30

PXP reported third quarter 2008 net income of $493.1 million, or $4.50 per diluted share, on revenues of $719.5 million, an increase from third quarter 2007 net income of $32.9 million, or $0.45 per diluted share, on revenues of $299.0 million. Higher revenues during the third quarter of 2008 were primarily due to a 62% increase in sales volumes and a $26.73 per barrel of oil equivalent (BOE) increase in realized prices. Included in third quarter 2008 earnings is an after-tax gain on mark-to-market derivative contracts of $282.4 million.

Sales volumes increased to 92.4 thousand BOEPD during the third quarter 2008 from 57.1 thousand BOEPD in the third quarter 2007 reflecting the acquisitions and divestments in 2007 and first half of 2008, as well as production from the Flatrock project. Third quarter 2008 sales volumes reflect the impacts of shut-in production associated with the recent Gulf of Mexico hurricanes. Hurricane downtime reduced third quarter volumes by approximately 170 thousand BOE. All production impacted by the hurricanes has been restored.

Total production costs per BOE were slightly higher during third quarter 2008 compared to the prior year period due primarily to increased per unit production and ad valorem taxes associated with the properties acquired in 2007. Total general and administrative costs per BOE were lower due primarily to higher sales volumes.

Operating cash flow, a non-GAAP measure, was $423.7 million in the third quarter 2008 compared to $146.0 million in the prior year period. The increase was due primarily 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.

NINE MONTHS ENDED SEPTEMBER 30

Net income for the first nine months of 2008 was $859.6 million, or $7.72 per diluted share, on revenues of $2.1 billion, a significant increase from net income of $78.7 million, or $1.07 per diluted share, on revenues of $779.2 million for the same period a year ago. Higher revenues during the first nine months of 2008 were primarily due to a 70% increase in sales volumes and a $29.32 per BOE increase in realized prices. Included in the nine months ended September 30, 2008 is a $243.9 million after-tax gain on mark-to-market derivative contracts.

Sales volumes for the first nine months of 2008 increased to 91.9 thousand BOEPD from 54.2 thousand BOEPD for the same period in 2007. Higher year-over- year sales volumes primarily reflect the 2007 acquisitions.

Total production costs per BOE were slightly higher for the first nine 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 taxes associated with the properties acquired in 2007. Total general and administrative costs per BOE were lower due to higher sales volumes.

Operating cash flow for the first nine months of 2008, a non-GAAP measure, increased to $1.2 billion from $351.5 million reported in the prior year period. The increase was due primarily to higher sales volumes and stronger commodity prices.

Oil and gas capital expenditures, excluding acquisitions, were $806.4 million for the first nine months of 2008 compared to $573.0 million for the prior year period.

FULL-YEAR 2008 GUIDANCE UPDATE

Due to the pending asset sale, higher service costs and higher natural gas prices, we are revising estimates on certain items of our previously issued full-year 2008 guidance. Production is expected to average about 92 thousand BOEPD for 2008. Lease operating expenses per unit are higher than previously anticipated due primarily to increased well work and stimulation activity and higher service costs accompanied by higher water disposal costs associated with the Pogo and Piceance assets. Lease operating expenses per unit are now estimated to approximate $9.50 per BOE. Steam gas costs per unit are higher than previously anticipated due to significantly higher average natural gas prices and slightly higher volumes of natural gas used in steam generation. Steam gas costs per unit are now estimated to approximate $4.00 per BOE.

LIQUIDITY

On September 30, 2008, the company had approximately $665 million available under its revolving credit facility, which had commitments of $2.7 billion. The commitments are from a diverse syndicate of 23 lenders with no single lender's commitment representing more than 9% of the total.

Due to the pending $1.25 billion asset sale to Occidental, PXP's revolving credit facility commitments will be voluntarily reduced from $2.7 billion to $2.3 billion upon closing of the transaction. Pro forma for the asset sale, PXP's liquidity increases to approximately $1.3 billion and its borrowing base is established at $2.7 billion, well in excess of its commitments.

PXP's liquidity is further supported by no near-term debt maturities and a material positive derivative position. The senior revolving credit facility matures November 6, 2012 and the next maturity of senior unsecured notes occurs on June 15, 2015. In addition, PXP's positive derivative position as of October 31, 2008 had a net value of approximately $930 million.

DERIVATIVE POSITION

PXP's derivatives position remains unchanged. On average 80% of our 2009 and 2010 estimated oil production is protected with floors above $100 and approximately 80% of our estimated natural gas production through year-end 2009 is protected with either physical purchases used in our operations or $10 by $20 collars. On September 30, 2008 PXP's mark-to-market position had a net value of approximately $338 million. On October 31, 2008 the mark-to-market position had a net value of approximately $930 million. A table summarizing PXP's open commodity derivative positions as of October 1, 2008 is included at the end of this release.

2009 CAPITAL BUDGET

PXP's Board of Directors approved a $1.15 billion 2009 capital budget. Approximately 50% of the capital investment is allocated to production and development activities, 40% to the Haynesville and 10% for exploration projects. PXP intends to fund its 2009 capital budget from internally generated funds and has flexibility to adjust spending as market conditions warrant.

The capital plan supports PXP's growth initiatives by funding drilling programs in each of its key asset areas. Development activities primarily focus on the large, high-free cash flow California oil business and on the Haynesville, California, Texas Panhandle, South Texas and Gulf of Mexico growth areas. Exploration spending funds a number of high-potential projects in the Gulf of Mexico, onshore Gulf Coast and Vietnam asset areas.

Gulf of Mexico exploration projects include the Blackbeard East prospect located in South Timbalier Block 144 and the previously mentioned Ammazzo and Gladstone East prospects.

THIRD QUARTER CONFERENCE CALL

PXP plans to host its quarterly conference call tomorrow, November 7, 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 November 14, 2008 and can be accessed by dialing 1-800-642- 1687 or 1-706-645-9291. Conference call and replay ID: 69777216. A short slide presentation will be available in the Investor Information section of PXP's website, http://www.pxp.com.

PXP is an independent oil and gas company primarily engaged in the activities of acquiring, developing, exploring and producing oil and gas in California, Texas, Louisiana and the Gulf of Mexico. 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:

* completion of proposed transaction,
* reserve and production estimates,
* oil and gas prices,
* the impact of derivative positions,
* production expense estimates,
* cash flow estimates,
* future financial performance,
* capital and credit market conditions,
* 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 Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Revenues
Oil sales $528,787 $276,096 $1,531,138 $713,197
Gas sales 181,971 22,696 528,374 63,441
Other operating revenues 8,779 177 15,805 2,571
719,537 298,969 2,075,317 779,209
Costs and Expenses
Production costs
Lease operating expenses 76,943 52,696 236,699 147,471
Steam gas costs 37,418 22,349 110,175 76,630
Electricity 14,367 11,197 36,665 29,464
Production and ad valorem
taxes 27,348 5,118 77,757 15,419
Gathering and transportation
expenses 4,405 3,026 15,356 4,432
General and administrative 29,374 22,007 114,505 74,417
Depreciation, depletion and
amortization 139,956 69,731 411,558 180,932
Accretion 3,258 2,297 9,868 6,832
333,069 188,421 1,012,583 535,597
Income from Operations 386,468 110,548 1,062,734 243,612
Other Income (Expense)
Gain on sale of assets - - 34,658 -
Interest expense (32,994) (18,165) (87,114) (35,223)
Debt extinguishment costs (3,138) - (13,401) -
Gain (loss) on mark-to-market
derivative contracts 451,083 (39,155) 390,175 (75,582)
Other income (expense) (13,842) (372) (12,181) 952
Income Before Income Taxes 787,577 52,856 1,374,871 133,759
Income tax (expense) benefit
Current (210,023) 2,183 (312,276) 2,183
Deferred (84,409) (22,179) (203,031) (57,194)
Net Income $493,145 $32,860 $859,564 $78,748
Earnings per share
Basic $4.58 $0.45 $7.87 $1.09
Diluted $4.50 $0.45 $7.72 $1.07
Weighted Average Shares
Outstanding
Basic 107,725 72,859 109,195 72,499
Diluted 109,617 73,811 111,297 73,526



Plains Exploration & Production Company
Operating Data (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Daily Average Volumes
Oil and liquids sales (Bbls) 55,803 47,482 56,199 47,233
Gas (Mcf)
Production 225,232 63,768 220,145 48,108
Used as fuel 5,691 6,096 6,053 6,313
Sales 219,541 57,672 214,092 41,795
BOE
Production 93,342 58,110 92,890 55,251
Sales 92,393 57,094 91,881 54,199
Unit Economics (in dollars)
Average NYMEX Prices
Oil $118.22 $75.15 $113.52 $66.19
Gas 10.28 6.18 9.76 6.84
Average Realized Sales Price
Before Derivative Transactions
Oil (per Bbl) $103.00 $63.19 $99.43 $55.31
Gas (per Mcf) 9.01 4.28 9.00 5.56
Per BOE 83.62 56.89 81.81 52.49
Cash Margin per BOE (1)
Oil and gas revenues $83.62 $56.89 $81.81 $52.49
Costs and expenses
Lease operating expenses $(9.06) $(10.04) $(9.40) $(9.96)
Steam gas costs (4.40) (4.26) (4.38) (5.18)
Electricity (1.69) (2.13) (1.46) (1.99)
Production and ad valorem
taxes (3.22) (0.97) (3.09) (1.04)
Gathering and transportation (0.52) (0.58) (0.61) (0.30)
Gross margin before DD&A (GAAP) 64.73 38.91 62.87 34.02
Cash derivative settlements (1.81) (4.88) (2.17) (5.10)
Cash margin (Non-GAAP) $62.92 $34.03 $60.70 $28.92

(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)

September 30, December 31,
2008 2007
ASSETS (Unaudited)
Current Assets
Cash and cash equivalents $2,427 $25,446
Restricted cash - 59,092
Accounts receivable 362,015 304,972
Commodity derivative contracts 79,236 2,186
Inventories 29,643 18,394
Deferred income taxes 19,474 229,893
Other current assets 12,240 34,937
505,035 674,920
Property and Equipment, at cost
Oil and natural gas properties -
full cost method
Subject to amortization 7,328,579 7,340,238
Not subject to amortization 3,147,345 1,951,783
Other property and equipment 117,946 85,928
10,593,870 9,377,949
Less allowance for depreciation,
depletion and amortization (1,404,010) (1,000,722)
9,189,860 8,377,227
Goodwill 535,280 536,822
Commodity Derivative Contracts 293,439 -
Other Assets 112,240 104,382
$10,635,854 $9,693,351

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $381,603 $319,583
Commodity derivative contracts 30,262 79,938
Royalties and revenues payable 145,411 132,919
Stock appreciation rights 5,116 63,106
Interest payable 32,696 25,330
Income taxes payable 194,965 3,492
Accrued merger expenses 964 77,980
Other current liabilities 133,524 115,698
924,541 818,046
Long-Term Debt
Senior revolving credit facility 2,034,131 2,205,000
Senior notes 1,500,000 1,100,000
3,534,131 3,305,000
Other Long-Term Liabilities
Asset retirement obligation 183,197 184,080
Other 125,374 88,547
308,571 272,627
Deferred Income Taxes 1,931,823 1,959,431
Stockholders' Equity
Common stock 1,128 1,128
Additional paid-in capital 2,729,070 2,711,617
Retained earnings 1,483,557 623,993
Accumulated other comprehensive
income 1,496 1,566
Treasury stock (278,463) (57)
3,936,788 3,338,247
$10,635,854 $9,693,351



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

Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $493,145 $32,860 $859,564 $78,748
Items not affecting cash
flows from operating
activities
Gain on sale of assets - - (34,658) -
Depreciation,
depletion,
amortization and
accretion 143,214 72,028 421,426 187,764
Deferred income taxes 84,409 22,179 203,031 57,194
Debt extinguishment
costs 3,138 - 13,401 -
(Gain) loss on
commodity derivative
contracts (451,083) 39,155 (390,175) 75,582
Noncash compensation (1,520) 5,120 38,931 26,741
Other noncash items 1,344 251 4,230 220
Change in assets and
liabilities from
operating activities 264,930 (27,082) 31,189 (140,488)
Net cash provided by
operating activities 537,577 144,511 1,146,939 285,761
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to oil and gas
properties (247,082) (218,132) (688,205) (476,314)
Acquisition of oil and
gas properties (1,681,676) (1,532) (2,012,969) (975,407)
Acquisition of Pogo
Producing Company (1,801) - (76,645) -
Derivative settlements (6,619) (25,616) (36,212) (74,759)
Proceeds from property
sales, net of costs and
expenses 18,278 - 1,736,059 -
Decrease in restricted
cash - - 59,092 -
Additions to other
property and equipment (7,005) (4,424) (34,448) (28,588)
Other, net (442) (7,438) (1,671) (10,869)
Net cash used in
investing activities (1,926,347) (257,142) (1,054,999) (1,565,937)
CASH FLOWS FROM FINANCING
ACTIVITIES
Revolving credit
facilities
Borrowings 7,263,596 533,315 11,501,352 1,989,565
Repayments (5,840,465) (428,315) (11,672,221) (1,745,065)
Proceeds from issuance of
long-term debt - - 400,000 1,100,000
Costs incurred in
connection with
financing arrangements (19,384) (265) (25,448) (18,182)
Derivative settlements (11,009) - (24,097) -
Purchase of treasury
stock - - (304,192) (47,485)
Other (4,035) 1,700 9,647 5,041
Net cash provided by
(used in) financing
activities 1,388,703 106,435 (114,959) 1,283,874
Net (decrease) increase
in cash and cash
equivalents (67) (6,196) (23,019) 3,698
Cash and cash
equivalents, beginning
of period 2,494 10,793 25,446 899
Cash and cash
equivalents, end of
period $2,427 $4,597 $2,427 $4,597



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

Instrument Daily
Period Type Volumes Average Price (1) Index

Sales of Crude Oil Production

2008
Oct - Dec Put options 42,000 Bbls $55.00 Strike price WTI
Oct - Dec Collar 2,500 Bbls $60.00 Floor - $80.13 WTI
Ceiling

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
Oct - Dec Collar 15,000 MMBtu $8.00 Floor - $12.11 Henry Hub
Ceiling
Oct - Dec Collar 150,000 MMBtu $10.00 Floor - $20.00 Henry Hub
Ceiling
2009

Jan - Dec Collar 150,000 MMBtu $10.00 Floor - $20.00 Henry Hub
Ceiling

(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 nine months ended September 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 the effect of current income taxes attributable to the taxable gain on the anticipated sale of our remaining interest in the Permian and Piceance Basin properties which is expected to close in December 2008 and 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 September 30,
2008 2007
(millions of dollars)
Net cash provided by operating
activities (GAAP) $537.6 $144.5
Changes in operating assets and
liabilities (264.9) 27.1
Current income taxes on the tax gain
on sale of oil and gas properties 168.6 -
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 (17.6) (25.6)
Operating cash flow (Non-GAAP) $423.7 $146.0

Nine Months Ended September 30,
2008 2007
(millions of dollars)
Net cash provided by operating
activities (GAAP) $1,146.9 $285.8
Changes in operating assets and
liabilities (31.2) 140.5
Current income taxes on the tax gain
on sale of oil and gas properties 168.6 -
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 (60.3) (74.8)
Operating cash flow (Non-GAAP) $1,224.0 $351.5

SOURCE Plains Exploration & Production Company

http://www.pxp.com