Houston-based Plains Resources Inc. plans a spin-off of its upstream subsidiary, Plains Exploration & Production Co., possibly in the first quarter of 2003.
According to the company's filings with the US Securities and Exchange Commission in June, that will be done through a possible initial public offering of 19.9% of the subsidiary's common stock, followed by a distribution to Plains Resources stockholders of the remaining 80.1% of outstanding shares.
But before that, Plains Resources officials want a letter from the US Internal Revenue Service confirming that the proposed IPO would not affect an IRS ruling in May that the distribution of the subsidiary's stock would be tax-free to both the recipient stockholders and the company.
"If the IPO occurs, we expect the spin-off to occur within the following 12 months. If the IPO does not occur, we may still decide to proceed with the spin-off," company officials said in their filing. However, they added, "Any decision to pursue the spin-off is subject to obtaining a number of regulatory and contractual third-party consents and permits."
Operating details
Plains Resources is involved primarily in acquisition and exploitation of mature, underdeveloped oil properties, preferably an entire field in which a major integrated or large independent producer has controlling interest, simplifying the acquisition process. The company's holdings are located primarily in California, with core operations in the Los Angeles basin, Arroyo Grande, and Mount Poso field onshore, and Point Arguello field offshore. Its proven reserves are 94% oil, with a reserve life in excess of 25 years.
Plains Resources also retains 29% of Plains All American Pipeline LP, down from 54% in 2000, and 44% of the pipeline's general partner. In May 2001, the company sold 50% of the pipeline's subordinated units and an aggregate 52% interest in the general partner for $149.3 million to an investor group that included James C. Flores, former vice-chairman and director of Ocean Energy Inc., Houston.
Simultaneously with the execution of that definitive agreement, Flores was named chairman and CEO of Plains Resources, succeeding Greg Armstrong, who remained as chairman and CEO of Plains All American. John T. Raymond was named executive vice-president and chief operating officer at that time; Raymond was vice-president, corporate development, at Kinder Morgan Inc. and Kinder Morgan Energy Partners LP just prior to that move, but he had served previously as vice-president, corporate development, for Ocean Energy.
Flores took no salary for his new position, accepting instead a stock option that makes him the company's fourth largest shareholder.
Flores and other Plains Resources executives did not respond to OGJ's requests for interviews for this article. A secretary said the company is in a compulsory "quiet period" because of its SEC filing. However, in a letter to fellow shareholders endorsed by both Flores and Raymond in the company's 2001 annual report, they said, "We manage the company with the core belief that success never comes at the expense of integrity."
As major shareholders, they said, "a significant portion of our personal net worths are dependent upon the success" of both Plains Resources and Plains All American.
"We manage the company with the core belief that success never comes at the expense of integrity."