We believe that we have sufficient liquidity through our forecasted cash flow from operations and
borrowing capacity under our senior revolving credit facility, cash on hand and the Plains Offshore
senior credit facility to meet our short-term and long-term normal recurring operating needs, derivative
obligations, debt service obligations, contingencies, anticipated capital expenditures and preferred
stock dividends of Plains Offshore. We have no near-term debt maturities. Our senior revolving credit
facility matures on May 4, 2016 and the earliest maturity of our senior notes will occur on June 15,
2015.
Working Capital
At December 31, 2011, we had working capital of approximately $815.2 million, primarily due to
the current asset classification of our investment in the McMoRan common shares and cash on hand
from the Plains Offshore preferred stock transaction with EIG in November 2011. Our working capital
fluctuates for various reasons, including the fair value of our investment, commodity derivative
instruments and stock appreciation rights.
Financing Activities
Senior Revolving Credit Facility.
As of December 31, 2011, our borrowing base is $1.8 billion
and commitments are $1.4 billion. In May 2011, we entered into an amendment to our senior revolving
credit facility, adjusting our borrowing rates and extending the maturity date to May 4, 2016. In
connection with the EIG preferred stock private placement, we further amended our senior revolving
credit facility in November 2011. See
Plains Offshore Senior Credit Facility
. The amendment requires,
among other things, that we make a mandatory prepayment if the combined total borrowings under
both our senior revolving credit facility and the Plains Offshore senior credit facility exceed the
borrowing base, which remained at $1.8 billion. In connection with our divestments in December 2011,
we further amended our senior revolving credit facility. The amendment provided for no reduction to
our borrowing base. The borrowing base will be redetermined on an annual basis, with us and the
lenders each having the right to one annual interim unscheduled redetermination, and adjusted based
on our oil and gas properties, reserves, other indebtedness and other relevant factors. In February
2012, our borrowing base was increased from $1.8 billion to $2.3 billion until the next scheduled
redetermination date on or before May 1, 2013. The commitments remained unchanged at $1.4 billion.
Additionally, our senior revolving credit facility contains a $250 million limit on letters of credit and a
$50 million commitment for swingline loans. At December 31, 2011, we had $735.0 million in
outstanding borrowings and $1.2 million in letters of credit outstanding under our senior revolving credit
facility. The daily average outstanding balance for the quarter and year ended December 31, 2011 was
$439.1 million and $411.2 million, respectively.
Amounts borrowed under our senior revolving credit facility, as amended, bear an interest rate, at
our election, equal to either: (i) the Eurodollar rate, which is based on LIBOR, plus an additional
variable amount ranging from 1.50% to 2.50%; (ii) a variable amount ranging from 0.50% to 1.50% plus
the greater of (1) the prime rate, as determined by JPMorgan Chase Bank, (2) the federal funds rate,
plus
1
⁄
2
of 1%, and (3) the adjusted LIBOR plus 1%; or (iii) the overnight federal funds rate plus an
additional variable amount ranging from 1.50% to 2.50% for swingline loans. The additional variable
amount of interest payable is based on the utilization rate as a percentage of (a) the total amount of
funds borrowed under both our senior revolving credit facility and the Plains Offshore senior credit
facility and (b) the borrowing base under our senior revolving credit facility. Letter of credit fees under
our senior revolving credit facility are based on the utilization rate and range from 1.50% to 2.50%.
Commitment fees range from 0.375% to 0.50% of amounts available for borrowing. The effective
interest rate on our borrowings under our senior revolving credit facility was 2.08% at December 31,
2011.
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