Note 3 — Divestments
Panhandle and South Texas Properties
In December 2011, we completed the divestment of our Texas Panhandle properties to Linn
Energy, LLC. After the exercise of third party preferential rights and preliminary closing adjustments,
we received approximately $554.8 million in cash. At December 31, 2011, we continue to have
interests in approximately 50,000 gross leasehold acres. We expect to receive additional proceeds
from future closings, as may be further modified for additional post-closing adjustments. The cash
proceeds received, net of approximately $6.2 million in transaction costs, were primarily used to reduce
indebtedness. Our aggregate working interest in the Texas Panhandle properties generated total sales
volumes of approximately 84 MMcfe per day during the third quarter of 2011 and had 263 Bcfe of
estimated proved reserves as of December 31, 2010. The transaction was effective November 1, 2011.
In December 2011, we completed the divestment of all our working interests in our South Texas
conventional natural gas properties to a third party. After preliminary closing adjustments, we received
$181.0 million in cash. The cash proceeds received were primarily used to reduce indebtedness. The
transaction was effective September 1, 2011.
The proceeds from the 2011 sales of oil and gas properties were recorded as reductions to
capitalized costs pursuant to full cost accounting rules.
Gulf of Mexico
In December 2010, we completed the divestment of our Gulf of Mexico shallow water shelf
properties to McMoRan Exploration Co. At closing and after preliminary closing adjustments, we
received approximately $86.1 million in cash, which included $11.1 million in working capital
adjustments, and 51.0 million shares of McMoRan common stock in exchange for all our interests in
our Gulf of Mexico leasehold located in less than 500 feet of water. The transaction was completed
pursuant to an Agreement and Plan of Merger dated as of September 19, 2010, and effective as of
August 1, 2010, between us and certain of our subsidiaries and McMoRan and certain of its
subsidiaries. The McMoRan shares were valued at approximately $665.9 million based on McMoRan’s
closing stock price of $17.18 on December 30, 2010 discounted to reflect certain limitations on the
marketability of the McMoRan shares under the registration rights agreement and stockholder
agreement entered into by us and McMoRan at the closing of the transaction. The cash proceeds
received, net of approximately $8.8 million in transaction costs, were primarily used to repay
outstanding borrowings under our credit facilities. The proceeds were recorded as reductions to
capitalized costs pursuant to full cost accounting rules.
Note 4 — Noncontrolling Interest in the Form of Preferred Stock of Subsidiary
In October 2011, we entered into a securities purchase agreement with EIG Global Energy
Partners, or EIG, pursuant to which we received $430.2 million of net cash proceeds in November
2011, upon closing of the transaction, in exchange for a 20% equity interest in Plains Offshore. Plains
Offshore holds all of our oil and natural gas properties and assets located in the United States Gulf of
Mexico in water depths of 500 feet or more. The proceeds raised are expected to be used to fund
Plains Offshore’s share of capital investment in the Lucius oil field and the Phobos prospect
exploratory drilling planned for 2012 and other activities. Under the agreement and upon closing of the
transaction, Plains Offshore issued to EIG managed funds and accounts, or the EIG Funds (i) 450,000
shares of Plains Offshore 8% convertible perpetual preferred stock and (ii) non-detachable warrants to
purchase in aggregate 9,121,000 shares of Plains Offshore’s common stock with an exercise price of
$20 per share. In addition, Plains Offshore issued 87 million shares of Plains Offshore Class A
F-15