PXP Announces Big 2Q08 Beat; Reaffirms Guidance. Pre Call Note


2Q Numbers:

  • Production: 87,500 BOEpd, current production is between 92 and 96,000 boepd which is the guidance for year end as well.
  • Revenue of $733 mm vs $667 mm expected
  • EPS of $1.84 vs $1.61 expected
  • CFPS of $4.08 vs $3.93 expected
  • Costs: Up
    • Straight LOE was $10.70/BOE ($1.78 / Mcfe) , up about 4% YoY which isn't bad in this environment however it is up 25% from the 1Q08 levels. This is a function of asset additions and "charges for stock appreciation rights" which I don't like to see not broken out from operating numbers during the quarter. That last may cause a little head scratching.
    • I call it straight LOE as they break out steam flood operations in California in a separate category. Those are rising as well, up 38% sequentially and again, in need of a little explanation.

Other Notable Items:

  • Flatrock Update: No new information here from MMR's mid July update
  • Another couple of Gomex wells are either being evaluated or are still drilling.
  • Guidance: Reaffirming prior operating and financial guidance. The word "reaffirm" has not set well with investors over the course of 2Q earnings to date as despite the fall in stock prices, "what have you done for me lately" has set in in the extreme.  Prior guidance here was 92 to 96,000 BOEpd for 2008.

In A Nutshell: Strong quarter from an operation standpoint. This is not a story or management I know well but lots of people asked about it after the CHK JV in the Haynesville and I've been wanting to get closer to the story since then. The stock trades at 31xs 2009 CF which is low to its peers and they continue to impress both in the decline rate treadmill of the Gulf of Mexico Shelf and in their onshore domestic efforts. Will listen to a replay of the call when time permits and think about this one a bit more.

Conference Call: 9 Est.

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