Plains To Unload South Texas Conventional Assets

To buy WI in conventional gas assets in S TX, gaining 39 MMcfe/d, 120 Bcfe proved.

Plains Exploration & Production Co., Houston, (NYSE: PXP) plans to sell conventional gas assets in South Texas to an undisclosed third party for $185 million.

The deal consists of all of Plains' working interests in its South Texas conventional gas properties for $185 million. Total working interest sales volumes during the third quarter were approximately 39 million cubic feet of gas equivalent per day. Proved reserves as of year-end 2010 were 120 billion cubic feet equivalent.

The deal is expected to close in December. The effective date is Sept. 1. Barclays Capital Inc is financial advisor to Plains and Simmons & Co. International rendered a fairness opinion.

Plains executive vice president and chief financial officer Winston M. Talbert says, “The asset sales are part of a broader strategy to increase revenues through the previously announced marketing contracts, decrease deferred premium costs through the previously announced derivative enhancements, and lower total interest costs by lowering debt levels. Over the next 18 months, Plains has $2.1 billion of high coupon debt that is callable. With the current low-interest-rate environment, Plains sees a unique opportunity to reduce its interest costs 30% to 40% by year-end 2012 thereby increasing profitability, shareholder return and cash flow.”