Recent Developments
Divestments
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 October 2011, we entered into a securities purchase agreement with 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 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. The preferred stock will
pay quarterly cash dividends of 6% per annum and an additional 2% per annum dividend. The 2%
dividend may be deferred and accumulated quarterly until paid. The shares of preferred stock also fully
participate, on an as-converted basis at four times, in cash dividends distributed to any class of
common stockholders of Plains Offshore. 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. PXP guarantees the Plains Offshore senior credit facility.
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