Plains Resources Inc. Board of Directors Receives Letter From Vulcan Energy Corporation

Plains Resources Inc. Board of Directors Receives Letter From
Vulcan Energy Corporation 


HOUSTON, July 19  /PRNewswire-FirstCall/ -- The following was released today by
Plains Resources Inc. (NYSE:PLX):

                        VULCAN ENERGY CORPORATION
                          505 FIFTH AVENUE SOUTH
                        SEATTLE, WASHINGTON 98104

   July 18, 2004

   Via Facsimile [phone]
   Plains Resources Inc.
   700 Milam Street, Suite 3100
   Houston, Texas 77002

   Attn: Board of Directors

   Gentlemen:

        In an effort to ensure that everyone has the most current and
   accurate information, we thought that it was important to reiterate that
   $17.25 per share is Vulcan Energy's best and final offer.  As you know,
   we believe the $17.25 per share price is a full and fair price for Plains
   Resources' shares and represents a significant premium over the value of
   Plains Resources' shares on a stand-alone basis, even after consummation
   of any feasible leveraged recapitalization.  We are confident that the
   vast majority of your stockholders will recognize this.  In addition, as
   we have discussed, Leucadia's suggested leveraged recapitalization is not
   a proposal to engage in a transaction with Leucadia and provides no basis
   to actually effectuate any such transaction.  Furthermore, in reviewing
   any correspondence you receive from Leucadia, you should remember that
   (i) they pursued their March 19th proposal despite the fact that they did
   not understand the tax issues associated with the structure of the
   proposal and (ii) they repeatedly refused to sign a confidentiality
   agreement, to the end that they have conducted no due diligence on Plains
   Resources.

        We believe that our position is strongly supported by the following.

   -- Institutional Shareholder Services Inc. (ISS) has consistently
      recommended that Plains Resources' stockholders should vote for the
      Vulcan Energy merger.  ISS is widely recognized as the nation's
      leading independent proxy advisory firm.  Its analyses and
      recommendations are relied upon by hundreds of major institutional
      investment firms, mutual funds and fiduciaries throughout the United
      States;
   -- Greg Armstrong, the Chief Executive Officer of Plains All American
      (PAA), has informed us that he never discussed with Leucadia their
      July 7th proposal, and that he has voted his personal share holdings
      in Plains Resources in favor of the $17.25 per share Vulcan Energy
      merger.  Mr. Armstrong has also indicated to us that he views the
      Vulcan Energy transaction as a positive from PAA's perspective;
   -- Over seven months have elapsed since our original proposal and no bona
      fide competing proposal has been made; and
   -- The $17.25 per share merger consideration represents an approximate
      30% premium over the average closing price of $13.23 per share of
      Plains Resources common stock over the 30-calendar day period ending
      on November 20, 2003, and an approximate 28% premium over the $13.44
      per share closing price of Plains Resources common stock on the same
      date, the last full trading day prior to the public announcement of
      our original proposal.

        We believe that Leucadia's analysis of a leveraged recapitalization
   is based on seriously flawed fundamental assumptions and that Leucadia's
   model is fraught with inaccuracies, including the following:

   -- Leucadia overstates the amount of cash available for Plains Resources
      to repurchase its shares by between $47 million and $54 million.
          * Plains Resources' net debt (before the suggested
            recapitalization) is approximately $15 million higher than
            assumed by Leucadia.
          * The sale of Calumet Florida is likely to realize $10 million to
            $15 million less than assumed by Leucadia.
          * The transaction suggested by Leucadia would require the payment
            of our $15 million termination fee (notwithstanding Leucadia's
            assertion to the contrary).
          * Leucadia fails to take into account between $5 million and
            $7 million in expenses incurred by Plains Resources in
            connection with the Vulcan Energy transaction.
          * Leucadia's analysis fails to account for 280G gross-up payments
            that would likely be payable under the existing employment
            agreements for Messrs. Flores and Raymond in connection with the
            suggested recapitalization.
   -- Leucadia's model relies on several overly optimistic assumptions
      regarding PAA, including assuming a 2005 distribution which is $0.28
      above the mid point of PAA guidance, as well as unrealistic
      assumptions with respect to the pricing, timing and integration of
      acquisitions.
   -- Leucadia also relies on several inaccurate assumptions regarding
      Plains Resources, including underestimating annual G&A by $0.5 million
      and overstating Plains Resources' NOLs by approximately $15 million.
   -- Leucadia's conclusions rely on the assumption that, post-
      recapitalization, Plains Resources' stock would trade at 15 times free
      cash flow.  We believe this assumption is unreasonable because:
                  -- Prior to the beginning of this sales process on
                     November 19, 2003, following the spin-off of PXP,
                     Plains Resources had generally traded at a multiple of
                     12.5 times free cash flow, and interest rates have
                     increased substantially in the intervening period; and
                  -- Kinder Morgan Inc. currently trades at a multiple of
                     approximately 13 times free cash flow, which is at the
                     top end of the comparable range, particularly given
                     that Kinder Morgan Energy Partners generally trades at
                     a lower yield than PAA.
   -- In addition, Leucadia's valuation applies its free cash flow multiple
      to NOL-shielded after-tax cash flows, effectively valuing the NOL at a
      multiple, which is inappropriate because it is a one-time item.

        We are committed to completing our $17.25 per share all-cash
   transaction with Plains Resources.

   Respectfully,

   /s/ David N. Capobianco

   David N. Capobianco
   Vice President


   cc: R. Joel Swanson, Baker Botts L.L.P


DATASOURCE: Plains Resources Inc.



CONTACT:  E. Lynn Hill of Plains Resources Inc., [phone]



Web site:  http://www.plainsresources.com/ 

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