Occidental Petroleum Corp., Los Angeles, (NYSE: OXY) and XTO Energy Inc., Houston, (NYSE: XTO) have closed their acquisitions of working interests in Texas, New Mexico and Colorado from Plains Exploration & Production Co., Houston, (NYSE: PXP) in separate deals for a total of $1.71 billion.

The divestments include properties Plains had planned in 2007 to MLP. “The MLP has come and gone,” a source says.

Coker & Palmer Research analyst Michael Bodino reports the combined transactions have an implied reserve value of approximately $18.51 per barrel and, considering Plains paid an approximate $16 per barrel in the Laramie Energy and Pogo Producing Co. transactions in 2007, the sale is accretive to net asset value. He expects Plains to remain active in the M&A markets as long as the arbitrage exists between the equity and acquisition markets.

Oxy paid $1.53 billion to acquire 50% of Plains’ working interests in the Permian Basin in West Texas and New Mexico. Plains will retain a 50% working interest and Oxy will be operator. Total production is approximately 18,000 barrels of oil equivalent per day (9,000 barrels net). Proved reserves as of Dec. 31, 2006, were approximately 91 million barrels of oil equivalent (46 million barrels net).

Additionally, Oxy acquired 50% of Plains’ working interests in properties in the Piceance Basin in Colorado. Plains will retain a 50% working interest and will remain operator. Total production is approximately 9,000 barrels of oil equivalent per day (4,500 barrels net). Proved reserves are approximately 64 million barrels of oil equivalent (46 million barrels net).

XTO acquired properties in the San Juan Basin in New Mexico and in the Barnett shale in Texas. Production is approximately 3,000 barrels of oil equivalent per day. Proved reserves were approximately 17 million barrels of oil equivalent as of Dec. 31, 2006.

XTO paid $199 million in cash and its 50% working interest in the Big Mac 3-D prospect area on the Texas Gulf Coast. Pro forma, Plains will have a 100% working interest in Big Mac, covering approximately 50,000 net lease acres in the 275-square-mile 3-D survey.

The effective date for each is Jan. 1.

Plains amended its credit facility to reduce the borrowing base to $1.9 billion following the sales.

Plains chairman and chief executive Jim Flores says, “The oil and gas property divestments balance PXP’s asset portfolio and align operator strengths to specific assets maximizing efficiencies and returns.” The prices Oxy and XTO paid are significantly higher than currently valued in Plains’ stock price, he adds. Plains will use the proceeds to buy back up to $1 billion in stock and reduce debt.

“The 2008 capital plan supports PXP’s diversified growth strategy by funding drilling programs in each of our key asset areas and maintains capital discipline since we anticipate capital expenditures to be funded from internal cash flow,” he adds.

Occidental chairman and CEO Ray R. Irani says, “This acquisition is consistent with our strategy of focusing on our Permian Basin core area and continuing to build a meaningful position in the Piceance Basin…We look forward to 20% year-over-year growth from the combined Piceance assets. The Permian properties, including the large acreage position, have excellent growth prospects. We believe, over time, the proved reserves from both properties will more than double.”

Occidental currently produces 40 million cubic feet of gas per day in the Piceance Basin, and this will increase to 67 million cubic feet per day with this acquisition, he says.

Lehman Brothers Inc., J.P. Morgan Securities Inc. and Jefferies Randall & Dewey are financial advisors to Plains.

Plains focuses on California, the Rockies, the Permian Basin, the Texas Panhandle, South Texas and the Gulf Coast. Occidental operates in the U.S., Middle East/North Africa and Latin America. XTO operates primarily in the Barnett shale, San Juan Basin, Midcontinent, the Permian Basin, East Texas and northern Louisiana.

Standard & Poor’s Ratings Services reports Occidental’s credit rating (A-/Positive/A-2) is not affected by the purchase. S&P expects the company to selectively undertake acquisitions in its core areas of operations, such as the Permian, as part of its acquire-and-exploit business strategy.

Its rating on Plains (BB/Stable/—) is not affected, S&P adds. Proceeds will allow Plains to reduce its debt in the wake of its recently completed acquisition of Pogo. As a result, the per-barrel debt leverage is expected to improve over the near term.

Morgan Stanley Research analyst Lloyd Byrne reports that closing the arbitration between the acquisition market and Plains’ stock price is consistent with its recent upgrade of Plains to Overweight. “We continue to favor PXP relative, due to the oil leverage of the asset base—60% pro forma the transaction—and the opportunity for management to be proactive.”