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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 8, 2002
PLAINS RESOURCES INC.
(Exact name of registrant as specified in charter)
Delaware 13-2898764
(State of Incorporation) (I.R.S. Employer Identification No.)
0-9808
(Commission File No.)
500 Dallas Street, Suite 700
Houston, Texas 77002
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: (713) 739-6700
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Item 9. Regulation FD Disclosure
In accordance with General Instruction B.2. of Form 8-K, the following
information shall not be deemed "filed" for purposes of Section 18 of the
Securities Act of 1934, as amended, nor shall it be deemed incorporated by
reference in any filing under the Securities Act of 1933, as amended, except as
shall be expressly set forth by specific reference in such a filing.
Forward-Looking Statements and Associated Risks
All statements, other than statements of historical fact, included in this
report are forward-looking statements, including, but not limited to, statements
identified by the words "anticipate," "believe," "estimate," "expect," "plan,"
"intend" and "forecast" and similar expressions and statements regarding our
business strategy, plans and objectives of our management for future operations.
These statements reflect our current views with respect to future events, based
on what we believe are reasonable assumptions. These statements, however, are
subject to certain risks, uncertainties and assumptions, including, but not
limited to:
o uncertainties inherent in the exploration for and development and
production of oil and gas and in estimating reserves;
o unexpected future capital expenditures (including the amount and nature
thereof);
o impact of crude oil and natural gas price fluctuations;
o the effects of competition;
o the success of our risk management activities;
o the availability (or lack thereof) of acquisition or combination
opportunities;
o the impact of current and future laws and governmental regulations;
o environmental liabilities that are not covered by an indemnity or
insurance; and
o general economic, market or business conditions.
If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, actual results may vary materially from
those in the forward-looking statements. Except as required by applicable
securities laws, we do not intend to update these forward-looking statements and
information.
Disclosure of Third and Fourth Quarter 2002 Estimates
The following table reflects current estimates of certain results for the
third and fourth quarter of 2002 for Plains Resources Inc. (the "Company").
These estimates are based on assumptions and estimates that management believes
are reasonable based on currently available information; however, management's
assumptions and the Company's future performance are both subject to a wide
range of business risks and uncertainties and there is no assurance that these
goals and estimates can or will be met. Any number of factors could cause actual
results to differ materially from those in the following table, including but
not limited to the factors discussed above. The estimates set forth below are
given as of the date hereof only based on information available as of the date
hereof. The Company undertakes no obligation to publicly update or revise any
forward-looking statements. Further information on risks and uncertainties is
available in the Company's filings with the Securities and Exchange Commission
("SEC"), and we encourage you to review such filings.
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Operating and Financial Guidance
Quarter Ended
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September 30, 2002 December 31, 2002
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Estimated Production Volumes
Barrels of oil equivalent-MBOE 2,575-2,725 2,625-2,775
MBOE PER DAY 28.0-29.6 28.5-30.2
% Oil 95% 95%
% Gas 5% 5%
Estimated Oil Price differentials - $/Bbl
Estimated Differentials to NYMEX Prices - pre hedge $4.75 - $5.25 $4.75 - $5.25
Estimated Hedging gain (loss) based on: ($ in thousands)
$17.00 NYMEX 13,600 13,800
$18.00 NYMEX 11,600 11,800
$19.00 NYMEX 9,600 9,800
$20.00 NYMEX 7,600 7,800
$25.00 NYMEX (1,500) (1,400)
$26.00 NYMEX (3,300) (3,300)
$30.00 NYMEX (10,500) (10,600)
Crude Oil Hedge Positions - barrels per day
Puts - Floor $20.00 2,000 2,000
Swaps - Average price $24.20 per barrel 19,664
Swaps - Average price $24.22 per barrel 20,000
Calls - Average price $35.17 per barrel 9,000 9,000
Operating Costs per BOE
Production expenses $9.20 - $9.45 $8.80 - $9.05
General and administrative $1.25 - $1.35 $1.20 - $1.30
DD&A - oil and gas $3.10 Note 7
Other Income (expense) ($ in thousands)
Equity in earnings of Plains All American Pipeline, L.P. ("PAA") $4,700 - $5,400 $5,500 - $6,400
DD&A - other $400 $400
Loss on debt extinguishment Note 9
Interest expense Note 10 Note 10
Book Tax Rate
Current 4% 4%
Deferred 37% 37%
Weighted Average Equivalent shares outstanding (in thousands)
Basic 23,900 23,900
Diluted 25,400 25,400
Capital Expenditures ($ in thousands) $18,000 - $19,000 $12,000 - $13,000
Distributions from Plains All American Pipeline, L.P. ($ in thousands) $7,400 $7,400
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Notes:
1. The estimates reflect the closing on August 1, 2002 of the acquisition
of an additional 26% working interest (21.93% net revenue interest) in
the offshore California Point Arguello unit and include our estimates
of results from the interest acquired effective as of the date of
closing.
2. Estimated Production Volumes. Production estimates are based on
historical operating performance and trends and the Company's 2002
capital budget and assume that market demand and prices for oil and gas
will continue at levels that allow for profitable production of these
products. For the year ended December 31, 2002, production volumes are
estimated at 10,100-10,400 MBOE compared to prior guidance of
10,000-10,200 MBOE. The increase is attributable to the Point Arguello
acquisition.
SEC Staff Accounting Bulletin 101 ("SAB 101") requires that revenue
from crude oil production be recognized as the volumes are sold versus
when produced. The location of our Florida properties and the timing of
the barges that transport the crude oil to market cause reported sales
volumes to differ from production volumes. Actual timing of sales
volumes is difficult to predict. Reported sales volumes will differ
from the production estimates provided. The Florida crude oil is
typically sold in shipments of approximately 130,000-140,000 barrels
(100,000 barrels net to the Company's interest) and typically occurs
every 40-50 days.
3. Estimated Oil Price Differentials. The Company's realized wellhead
crude oil price is lower than the NYMEX index level as a result of area
and quality differentials. The Company has locked in a fixed price
differential to NYMEX on approximately 60-65% of its production for the
second half of 2002. Estimated average differentials by area for the
second half of 2002 are: Onshore California - $4.00 per barrel,
Offshore California - $6.85 per barrel, Florida - $8.25 per barrel, and
Illinois - $0.90 per barrel. The estimates are based on current market
conditions and include the effects of the fixed price differential
arrangements.
4. Crude Oil Hedge Positions. The estimated hedging gain (loss) is
calculated based on the NYMEX prices presented and the Company's
current crude oil hedge positions. The hedging gain (loss) presented
does not include approximately $400,000 of option premiums that will be
amortized as a charge to oil revenues in each of the third and fourth
quarters of 2002.
5. Production expenses. The Company estimates that production expenses
(including production and ad valorem taxes) will average $9.20-$9.45
per BOE and $8.80-$9.05 per BOE for the third and fourth quarter of
2002, respectively. The estimates reflect increases from prior
guidance due to increased costs for electricity and insurance premiums
as well as the acquisition of the additional interest in the Point
Arguello unit which has a higher production cost per BOE than the
Company's average unit production expense. As disclosed in prior SEC
Form 8-K filings, the Company obtains electricity for certain of its
operations in California through a direct access contract with an
electricity service provider. In July 2002, the California Public
Utility Commission ("CPUC") assessed what is commonly known as "exit
fees" for certain rate payers who elected to enter the direct access
electricity market. The Company currently estimates that its
electricity costs for the second half of 2002 will increase by $1.1
million due to this CPUC ruling. The Company is currently evaluating
alternatives to mitigate the increased costs, including the
feasibility of self or co-generation projects.
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6. General and administrative. Unit G&A costs are expected to average
$1.25-$1.35 per BOE and $1.20-$1.30 per BOE for the third and fourth
quarter of 2002, respectively. Unit G&A costs for 2002 are estimated to
be $1.25-$1.35 per BOE. These amounts are consistent with prior
guidance. For purposes of calculating upstream unit G&A, we exclude
noncash compensation expense related to stock options and nonrecurring
items from the calculation. For the third and fourth quarter of 2002
noncash compensation expense is estimated at $200,000 per quarter.
7. DD&A - oil and gas. The Company's DD&A rate for the first nine months
of 2002 is $3.10 per BOE. The fourth quarter DD&A rate will be adjusted
based on year-end 2002 proved reserve volumes. For estimate purposes we
are utilizing the $3.10 rate for the fourth quarter.
8. Equity in earnings of Plains All American Pipeline, L.P. ("PAA"). The
Company's equity in earnings from PAA is based on guidance provided by
PAA in its Form 8-K filed with the SEC on July 24, 2002, and the
Company's aggregate ownership interest, as adjusted for general
partner incentive distributions. As of the date hereof, the Company
has an aggregate ownership interest of approximately 29%, consisting
of (i) a 44% ownership stake in the general partner interest and
incentive distribution rights, (ii) 45%, or approximately 4.5 million,
of the subordinated units and (iii) 24%, or approximately 7.9 million
of the common units (including the Class B common units). PAA's Form
8-K provides guidance of $15.6 million to $17.9 million and $18.0
million to $21.3 million for its third and fourth quarter 2002 net
income, respectively.
9. Loss on debt extinguishment. On July 3, 2002 Plains Exploration &
Production Company, L.P. ("PXP"), a wholly owned subsidiary of the
Company, completed a private placement under Rule 144A of the
Securities Act of 1933 of 8 3/4% Senior Subordinated Notes due 2012 in
the aggregate principal amount of $200 million. PXP also entered into a
new senior secured revolving credit facility to provide up to $300
million of available credit with an initial borrowing base of $225
million. Syndication for this facility was completed on July 19, 2002.
The $267.5 million of outstanding 10 1/4% Senior Subordinated Notes of
the Company as well as its revolving credit facility were retired in
connection with these PXP debt refinancing transactions. The Company
will recognize a pre-tax loss of approximately $10.3 million in
connection with the refinancing transactions consisting of: (1) $9.1
million for the 3.4167% call premium on the 10 1/4% Senior
Subordinated Notes, (2) $3.1 million of unamortized debt issue costs
less (3) a $1.9 million credit for the unamortized premium on the
10 1/4% Senior Subordinated Notes. In accordance with Statement of
Financial Accounting Standards 145, the loss is not considered an
extraordinary item.
10. Interest expense. The Company's interest expense will consist of
interest on:
a. PXP's $200 million of 8 3/4% Senior Subordinated Notes described
above. The notes were issued at 98.376% of par, and interest
expense for the third and fourth quarter of 2002 will each
include $51,000 for the amortization of the original issue
discount.
b. Third quarter 2002 interest expense will include $2.4 million of
interest expense on the 10 1/4% Senior Subordinated Notes which
were called for redemption on July 3, 2002 and were redeemed on
August 2, 2002.
c. Amounts outstanding under PXP's $225 million revolving credit
facility ("Credit Facility"). PXP had approximately $114 million
in borrowings outstanding under the Credit Facility on July 31,
2002. The Credit Facility provides for grid pricing at LIBOR
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or Prime at PXP's option plus a margin based on the percentage of the
borrowing base then being utilized as follows:
less than 25% more than more than
25% to 50% 50% 75%
LIBOR Loans 1.375% 1.500% 1.625% 1.750%
Prime Loans 0.125% 0.250% 0.375% 0.500%
Commitment Fee 0.375% 0.375% 0.500% 0.500%
d. The Company has a three-year interest rate swap agreement which fixes
the interest rate on $7.5 million of borrowings at 3.9% not including
the rate margin.
e. The Company estimates it will capitalize approximately $600,000 of
interest during each of the third quarter and the fourth quarter of
2002.
f. The Company estimates that it's third quarter interest expense will be
$7.3 million to $7.5 million, assuming an average NYMEX crude oil
price of $25.00 per barrel and the guidance estimates included in this
document.
11. Book Tax Rate. The Company's book tax rate is based on a Federal rate of
35% and an estimated combined foreign and state rate of 6%. The foreign tax
is attributable to the Canadian operations of PAA. The Company's deferred
and current tax rates are based on current estimates of taxable income and
utilization of net operating loss carryforwards.
12. Weighted average equivalent shares outstanding. Estimated basic shares
outstanding are based on shares outstanding on June 30, 2002, net of
treasury shares. Estimated diluted shares are based on basic shares
outstanding, plus shares issuable upon conversion of preferred stock and
outstanding options and warrants utilizing the treasury stock method for
the options and warrants assuming a $25.00 average price for the Company's
common stock.
13. Distributions from Plains All American Pipeline, L.P. The estimated cash
distributions are based on PAA's $0.5375 per unit quarterly distribution
($2.15 on an annual basis) that was declared in July 2002. The amount
presented reflects estimated cash to be received from PAA and has not been
adjusted for cash taxes.
14. PXP has filed an initial registration statement with the SEC for an initial
public offering ("IPO") of slightly less than 20% of PXP's outstanding
common stock (after giving effect to the IPO). If the IPO is completed, the
Company expects that:
a. a portion of the proceeds will be used to repay amounts outstanding
under the Credit Facility, which would in turn reduce reported
interest expense, and
b. the Company will report a minority interest expense for the shares
sold to the public. The minority interest expense will be based on the
percentage of PXP's outstanding shares that are held by the public and
PXP's reported net income.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PLAINS RESOURCES INC.
Date: August 8, 2002 /s/ Cynthia A. Feeback
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Cynthia A. Feeback
Senior Vice President--Accounting
and Treasurer
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