Plains Exploration & Production continues to evaluate alternatives to separate its deepwater and onshore businesses, which include separately capitalizing its deepwater business through a joint venture or outside capital and then either spinning-off or divesting these assets.
James C. Flores, Chairman, President and CEO of PXP commented, "The planned separation of our Gulf of Mexico and onshore businesses is aimed at optimizing the value of PXP's assets, both onshore and offshore. However, to-date, the deepwater separation process reflects a discounted value due to the current regulatory uncertainties, permit delays, and reduced activity for Gulf of Mexico exploration and development, rather than the underlying long-term value of this oil-weighted asset, especially in this strong energy commodity market.
"We believe it prudent to allow time for the regulatory uncertainties to abate and to complete the Lucius well test operations before proceeding. Our Lucius operator, Anadarko, recently received approval to conduct well test operations beginning late March 2011. The flow test is a key milestone to possible project sanctioning in 2011, which results in significant discovered resources becoming proved reserves. Prior to separation, potential additional drilling could occur on the current leasehold on 50,000 acres covering 10 OCS blocks to further de-risk the Lucius-Phobos complex."
Plains E&P anticipates capital exposure for these properties in 2011 of approximately $50-$60 million net to PXP with the easing of Gulf of Mexico activity curtailments.
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