Plains Exploration (NYSE: PXP ) made a big purchase this week -- $6.1 billion for three offshore GOM fields. The company is laying its cards on the table, moving back offshore after doubling its size through this highly-leveraged purchase. The market reaction was negative immediately after the announcement was made, as Plains paid top dollar for the assets.
Of course, if Plains is able to make this transition smoothly, and the price of oil continues to strengthen, they'll be able to amass a horde of cash, as this deal is expected to drive $4 billion to $5 billion in cash flow by 2016. It's an expensive venture, and there's always risk when a company leverages itself to such a degree.
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