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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 8, 2002
PLAINS RESOURCES INC.
(Exact name of registrant as specified in charter)
Delaware 13-2898764
(State of Incorporation) (I.R.S. Employer Identification No.)
0-9808
(Commission File No.)
500 Dallas Street, Suite 700
Houston, Texas 77002
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: (713) 739-6700
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Item 9. Regulation FD Disclosure
In accordance with General Instruction B.2. of Form 8-K, the following
information shall not be deemed "filed" for purposes of Section 18 of the
Securities Act of 1934, as amended, nor shall it be deemed incorporated by
reference in any filing under the Securities Act of 1933, as amended, except as
shall be expressly set forth by specific reference in such a filing.
Forward-Looking Statements and Associated Risks
All statements, other than statements of historical fact, included in this
report are forward-looking statements, including, but not limited to, statements
identified by the words "anticipate," "believe," "estimate," "expect," "plan,"
"intend" and "forecast" and similar expressions and statements regarding our
business strategy, plans and objectives of our management for future operations.
These statements reflect our current views with respect to future events, based
on what we believe are reasonable assumptions. These statements, however, are
subject to certain risks, uncertainties and assumptions, including, but not
limited to:
. uncertainties inherent in the exploration for and development and
production of oil and gas and in estimating reserves;
. unexpected future capital expenditures (including the amount and
nature thereof);
. impact of crude oil and natural gas price fluctuations;
. the effects of competition;
. the success of our risk management activities;
. the availability (or lack thereof) of acquisition or combination
opportunities;
. the impact of current and future laws and governmental regulations;
. environmental liabilities that are not covered by an indemnity or
insurance; and
. general economic, market or business conditions.
If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, actual results may vary materially from
those in the forward-looking statements. Except as required by applicable
securities laws, we do not intend to update these forward-looking statements and
information.
Disclosure of Second Quarter 2002 Estimates
The following table reflects current estimates of certain results for the second
quarter of 2002 for Plains Resources Inc. (the "Company"). These estimates are
based on assumptions and estimates that management believes are reasonable based
on currently available information; however, management's assumptions and the
Company's future performance are both subject to a wide range of business risks
and uncertainties and there is no assurance that these goals and estimates can
or will be met. Any number of factors could cause actual results to differ
materially from those in the following table, including but not limited to the
factors discussed above. The estimates set forth below are given as of the date
hereof only based on information available as of the date hereof. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements. Further information on risks and uncertainties is available in the
Company's filings with the Securities and Exchange Commission ("SEC"), and we
encourage you to review such filings.
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Operating and Financial Guidance
Quarter Ended
June 30, 2002
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Estimated Production Volumes
Barrels of oil equivalent- MBOE 2,460-2,500
MBOE PER DAY 27.0-27.5
% Oil 94%
% Gas 6%
Estimated Oil Price differentials - $/Bbl
Estimated Differentials to NYMEX Prices - pre hedge $5.00-$5.50
Estimated Hedging gain (loss) based on: ($ in thousands)
$17.00 NYMEX $12,900
$18.00 NYMEX $11,000
$19.00 NYMEX $9,100
$20.00 NYMEX $7,200
$25.00 NYMEX ($1,500)
$26.00 NYMEX ($3,200)
$30.00 NYMEX ($10,100)
Crude Oil Hedge Positions - barrels per day
Puts - Floor $20.00 2,000
Swaps - Average price $24.14 per barrel 19,000
Calls - Average price $35.17 per barrel 9,000
Operating Costs per BOE
Production expenses $7.90-$8.10
General and administrative $1.30-$1.40
DD&A - oil and gas $3.10
Other Income (expense) ($ in thousands)
Equity in earnings of Plains All American Pipeline, L.P. ("PAA") $4,500-$5,000
DD&A - other $500
Interest expense Note 7
Book Tax Rate
Current 4%
Deferred 37%
Weighted Average Equivalent shares outstanding (in thousands)
Basic 23,700
Diluted 25,300
Capital Expenditures ($ in thousands) $23,000-$27,000
Distributions from Plains All American Pipeline, L.P. ($ in thousands) $7,200
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Notes:
1. Estimated Production Volumes. Production estimates are based on historical
operating performance and trends and the Company's 2002 capital budget and
assume that market demand and prices for oil and gas will continue at
levels that allow for profitable production of these products.
SEC Staff Accounting Bulletin 101 ("SAB 101") requires that revenue from
crude oil production be recognized as the volumes are sold versus when
produced. The location of our Florida properties and the timing of the
barges that transport the crude oil to market cause reported sales volumes
to differ from production volumes. Actual timing of sales volumes is
difficult to predict. Reported sales volumes will differ from the
production estimates provided. The Florida crude oil is typically sold in
shipments of approximately 100,000 barrels and typically occurs every 40-50
days.
2. Estimated Oil Price Differentials. The Company's realized wellhead crude
oil price is lower than the NYMEX index level as a result of area and
quality differentials. The Company has locked in a fixed price differential
to NYMEX on approximately 60% of its production for the second quarter of
2002. Estimated average differentials by area for the second quarter of
2002 are: Onshore California - $4.50 per barrel, Offshore California -
$7.00 per barrel, Florida - $9.00 per barrel, and Illinois - $1.70 per
barrel. The estimates are based on current market conditions and include
the effects of the fixed price differential arrangements.
3. Crude Oil Hedge Positions. The Company has hedged approximately 82% of its
estimated second quarter 2002 crude oil production. The estimated hedging
gain (loss) is calculated based on the NYMEX prices presented and the
Company's current crude oil hedge positions. The hedging gain (loss)
presented does not include approximately $365,000 of option premiums that
will be amortized as a charge to oil revenues in the second quarter of
2002.
4. Production expenses. The Company estimates that production expenses
(including production and ad valorem taxes) will average $7.90-$8.10 per
BOE during the second quarter of 2002, an increase of approximately
$0.65-$0.85 per BOE over the 2001 annual average and approximately
$0.10-$0.30 over the first quarter 2002 level. The increase from the 2001
level is primarily related to electric costs. The Company's insurance
program is up for renewal on June 1, 2002. The insurance market in general
and the energy insurance market in particular is one of the most difficult
markets in several years. Any impact of increased insurance costs to the
second quarter should be minimal and within our guidance range. The full
impact of any increase will be reflected in the third and fourth quarter
and could range from $0.03-$0.07 per BOE. The exact amount of the increase
won't be determined until later in May 2002. The Company obtains
electricity for certain of its operations in California through a direct
access contract with an electric service provider. The Company's production
expenses will increase from the estimates provided if the California Public
Utility Commission ("CPUC") assesses exit fees related to the direct access
contract.
5. General and administrative. Unit G&A costs are expected to average
$1.30-$1.40 per BOE in the second quarter of 2002, approximately $0.05-
$0.15 per BOE higher than the 2001 average for the year. The increase is
primarily attributable to increased personnel expenses. For purposes of
calculating upstream unit G&A, we exclude noncash compensation expense
related to stock options and
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nonrecurring items from the calculation. For the second quarter of 2002
these items are estimated at approximately $600,000.
6. Other Income (expense). The Company's equity in earnings from Plains All-
American Pipeline L.P. ("PAA") is based on guidance provided by PAA in its
Form 8-K filed on May 7, 2002, and the Company's aggregate ownership
interest, as adjusted for general partner incentive distributions. As of
the date hereof the Company has an aggregate ownership interest of
approximately 29%, consisting of (i) a 44% ownership stake in the general
partner interest and incentive distribution rights, (ii) 45%, or
approximately 4.5 million, of the subordinated units and (iii) 24%, or
approximately 7.9 million of the common units (including the Class B common
units). PAA's 8-K provides guidance of $14.8 million to $16.5 million for
its second quarter net income.
7. Interest expense. The Company's interest expense will consist of interest
on:
a. $267.5 million of 10.25% senior subordinated notes ($275 million
outstanding, net of $7.5 million held by the Company).
b. Amounts outstanding on the Company's $225 million revolving credit
facility ("Credit Facility"). The Company had $31 million outstanding
on the Credit Facility on March 31, 2002. The Credit Facility bears
interest, at our option, of either LIBOR plus 1-3/8% or prime. The
Company incurs a non-use fee of 3/8ths of 1% per annum on the Credit
Facility. The Company has a three-year interest rate swap agreement
which fixes the interest rate on $7.5 million of borrowings at 5.29%
including the LIBOR margin.
c. The Company estimates it will capitalize approximately $800,000 of
interest during the second quarter of 2002.
8. Book Tax Rate. The Company's book tax rate is based on a Federal rate of
35% and an estimated combined foreign and state rate of 6%. The foreign tax
is attributable to the Canadian operations of PAA. The Company's deferred
and current tax rates are based on current estimates of taxable income and
utilization of net operating loss carryforwards.
9. Weighted average equivalent shares outstanding. Estimated basic shares
outstanding are based on shares outstanding on March 31, 2002, net of
treasury shares. Estimated diluted shares are based on basic shares
outstanding, plus shares issuable upon conversion of preferred stock and
outstanding options and warrants utilizing the treasury stock method for
the options and warrants.
10. Distributions from Plains All American Pipeline, L.P. The estimated cash
distribution is based on PAA's $0.525 per unit quarterly distribution
($2.10 on an annual basis) that was declared in April 2002. The amount
presented reflects estimated cash to be received from PAA and has not been
adjusted for cash taxes.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PLAINS RESOURCES INC.
Date: May 8, 2002 /s/ Cynthia A. Feeback
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Cynthia A. Feeback
Senior Vice President- Accounting
and Treasurer
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