We spent $502 million of capital in 2011 focused on continued development drilling and the
completion of seven production facilities. At December 31, 2011, we had seven rigs drilling horizontal
development wells on our acreage. For 2012, we allocated approximately $655 million of our capital
budget to Eagle Ford Shale activity and plan to focus on development drilling and the completion of 12
additional production facilities, including two existing facilities modified to bring on additional wells.
During 2012, we plan to have nine to 11 rigs drilling horizontal development wells on our acreage.
Haynesville Shale
As of December 31, 2011, we have rights to approximately 432,000 gross acres (84,000 net
acres) in the Haynesville Shale that we acquired from Chesapeake Energy Corporation, including
approximately 54,000 net acres of leasehold that we believe is also prospective for the Bossier Shale.
The Haynesville Shale is characterized by gas production from the Jurassic aged Haynesville shale
formation, and typical well depth is 10,500 feet. The area is currently being developed with
approximately 4,000 foot horizontal wells at a measured total depth of 16,000 feet. Based on the
potential of 80 acre well spacing, we anticipate that there could be over 11,000 unrisked potential
drilling locations. During 2011, 2010 and 2009, we spent $14 million, $16 million and $59 million,
respectively, to acquire approximately 1,100, 1,200 and 5,000 net additional acres, respectively, in the
Haynesville Shale. During 2011, we divested 3,000 net acres and released 20,200 net acres that were
deemed to be outside of our primary focus area.
Our net average daily sales volumes during the fourth quarter of 2011 were 199.8 MMcfe per day,
a 23% increase from the 161.9 MMcfe per day net average during the first quarter of 2011. The rate of
increase in sales volumes is expected to slow as the rig count continues to decline.
We spent $363 million of capital in 2011 focused on converting undeveloped leases to leases held
by production. For 2012, we allocated approximately $140 million of our capital budget to Haynesville
Shale activity and plan to continue to focus on the development of our undeveloped leasehold and
improved recovery efficiency through infill drilling.
Deepwater Gulf of Mexico
Our deepwater Gulf of Mexico portfolio is anchored by Lucius, a high-quality oil discovery, and a
comprehensive exploration portfolio with interests in 102 blocks containing 29 prospects or leads in
Pliocene, Miocene and lower Tertiary reservoirs.
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
Operations Inc., or Plains Offshore, a former wholly owned subsidiary. 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, 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 common stock, which will be held in escrow until the conversion and
cancellation of the preferred stock or the exercise of the warrants held by EIG. In November 2011,
Plains Offshore also entered into a senior credit facility providing for $300 million of commitments to
fund future capital costs beyond that already raised.
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