Through our ownership in Lucius, located in the deepwater U.S. Gulf of Mexico, we joined the
Lucius and Hadrian working interest partners and executed a unit participation and unit operating
agreement effective June 1, 2011. As part of the agreements, we have agreed to share in our portion
of certain long lead equipment orders and detailed engineering work.
Plains Offshore and its partners have entered into various agreements with third parties for long-
term oil and gas gathering and transportation services at the Lucius oil field. Beginning in 2014, Plains
Offshore will pay guaranteed fixed minimum monthly fees plus additional variable gathering fees based
upon actual throughput. The commitments of Plains Offshore under the oil gathering agreements are
guaranteed by PXP.
In December 2011, the operator and our working interest partners sanctioned development of
Lucius. Lucius will be developed with a truss spar floating production facility with the capacity to
produce in excess of 80 MBbl per day and 450 MMcfe per day. The development drilling program is
expected to begin in 2012 with achievement of first production anticipated in 2014.
During the third quarter of 2011, we determined not to develop the Friesian prospect and the lease
terminated by its terms. The accumulated costs of approximately $460 million associated with the
project were transferred to the full cost pool.
Rocky Mountains
Wind River Basin
We own an approximate 14% working interest in the Madden Deep Unit and Lost Cabin Gas Plant
located in central Wyoming. The Madden Deep Unit is a federal unit operated by a third party and
consists of approximately 64,000 gross acres in the Wind River Basin. The Madden Deep Unit is
characterized by gas production from multiple stratigraphic horizons of the Lower Fort Union, Lance,
Mesaverde and Cody sands and the Madison Dolomite. Production from the Madden Deep Unit is
typically found at depths ranging from 5,500 to 25,000 feet. Some of the gas produced from the
Madden Deep Unit requires processing at the Lost Cabin Gas Plant to remove high concentrations of
carbon dioxide and hydrogen sulfide. Our net average daily sales volumes during the fourth quarter of
2011 were 27.2 MMcfe from the Wind River Basin.
During 2011, we spent $5 million on capital projects in the Madden Deep Unit. After completion of
repair work following a fire in 2010 that affected a portion of the Lost Cabin Gas Plant, production was
back to full capacity during the first quarter of 2011. In 2012, we are focused on maintaining production
and high-grading the remaining development drilling inventory.
Big Horn Basin
We hold leases covering 126,000 gross acres (111,000 net acres) in the Big Horn Basin located in
Wyoming. We drilled two wells in 2011 that tested high-quality oil in small quantities. During 2012, we
plan to monitor industry activity in this play.
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