LAFAYETTE, La., Nov. 3 /PRNewswire-FirstCall/ -- Stone Energy
Corporation (NYSE:SGY) today announced net income of $51.1 million,
or $1.06 per share, on operating revenue of $202.7 million for the
third quarter of 2009 compared to net income of $34.1 million, or
$1.04 per share, on operating revenue of $172.4 million for the
third quarter of 2008. For the nine months ended September 30,
2009, Stone reported a net loss of $147.6 million, or $3.45 per
share, on operating revenue of $515.1 million compared to net
income of $179.2 million, or $5.97 per share, on operating revenue
of $634.9 million during the comparable 2008 period. All per share
amounts are on a diluted basis. Discretionary cash flow was $157.0
million during the three months ended September 30, 2009 compared
to $163.8 million generated during the third quarter of 2008. For
the first nine months of 2009, discretionary cash flow totaled
$339.1 million compared to $494.6 million for the comparable 2008
period. Please see "Non-GAAP Financial Measure" and the
accompanying financial statements for a reconciliation of
discretionary cash flow, a non-GAAP financial measure, to net cash
flow provided by operating activities. Net daily production volumes
during the third quarter of 2009 averaged 239 million cubic feet of
gas equivalent (MMcfe) compared to average net daily production for
the second quarter of 2009 of 209 MMcfe and average net daily
production for the third quarter of 2008 of 129 MMcfe. The third
quarter of 2009 included approximately 8 MMcfe per day associated
with a non-recurring production adjustment relating to previous
royalty relief volumes. The third quarter of 2008 was negatively
impacted by shut-ins from Hurricanes Gustav and Ike. For the nine
months ended September 30, 2009, average net daily production
volumes were approximately 214 MMcfe, or 26% higher than average
net daily production volumes of approximately 170 MMcfe for the
nine months ended September 30, 2008. For the fourth quarter of
2009, Stone expects net daily production to average between 225 -
235 MMcfe. CEO David Welch stated, "We are pleased with continued
progress in executing our strategic plan in the third quarter as
well as year to date. Our finance team has been able to improve our
liquidity and significantly strengthen our balance sheet by
reducing debt $200 million, raising stockholders' equity by $75
million and building our cash position. Our operations team
delivered production near the top end of our guidance this quarter,
while reducing costs as they debottlenecked platforms, optimized
wells and restored substantially all of our hurricane deferred
production, including the rerouting of the Amberjack oil pipeline.
Our exploration team followed our Pyrenees discovery with a
successful delineation well in the third quarter. We also made a
traditional shelf discovery at our Cardinal prospect at Vermilion
96 which should provide production impact in 2010. Our four-well
Amberjack drilling program is scheduled to commence in December as
the platform rig modifications are now complete and the rig will be
moving to location this week. We expect to gain further traction in
exploration in 2010 with increased drilling in our Marcellus shale
play in Appalachia and in the GOM deepwater." Prices realized
during the third quarter of 2009 averaged $77.39 per barrel (Bbl)
of oil and $5.90 per thousand cubic feet (Mcf) of natural gas
compared with third quarter 2008 average realized prices of $106.81
per Bbl of oil and $10.72 per Mcf of natural gas. Average realized
prices during the first nine months of 2009 were $68.48 per Bbl of
oil and $6.42 per Mcf of natural gas compared to $104.20 per Bbl of
oil and $10.29 per Mcf of natural gas realized during the first
nine months of 2008. All unit pricing amounts include the effects
of cash settlements of effective hedging contracts. Hedging
transactions during the third quarter of 2009 increased the average
price we received for natural gas by $2.37 per Mcf, compared to a
decrease in average realized prices of $0.07 per Mcf during the
third quarter of 2008. Realized oil prices in the third quarter of
2009 increased by $10.92 per Bbl, compared to a decrease in
realized oil prices of $16.89 per Bbl in the comparable quarter of
2008 as a result of hedging transactions. Overall, hedging
transactions added approximately $46.4 million to third quarter
2009 revenues, including $36.5 million recognized from the
unwinding of hedges in March 2009. Lease operating expenses (LOE)
incurred during the third quarter of 2009 totaled $28.1 million
compared to $41.1 million in the second quarter of 2009 and $40.1
million for the comparable quarter in 2008. In the third quarter of
2009, there was approximately $12 million in downward adjustments
of previously accrued major maintenance and base LOE costs as a
result of actual costs being less than the previously accrued
estimated amounts. During the third quarter of 2008, lease
operating expenses included $6.8 million of repairs in excess of
estimated insurance recoveries related to damage from Hurricanes
Gustav and Ike. For the nine months ended September 30, 2009 and
2008, lease operating expenses were $127.4 million and $105.3
million, respectively. Depreciation, depletion and amortization
(DD&A) on oil and gas properties for the third quarter of 2009
totaled $67.2 million compared to $51.0 million for the third
quarter of 2008. DD&A expense on oil and gas properties for the
nine months ended September 30, 2009 totaled $181.9 million
compared to $183.9 million during the same year-to-date period of
2008. Salaries, general and administrative (SG&A) expenses
(exclusive of incentive compensation) for the third quarter of 2009
were $9.5 million compared to $10.5 million in the third quarter of
2008. For the nine months ended September 30, 2009 and 2008,
SG&A (exclusive of incentive compensation) totaled $31.1
million and $32.0 million, respectively. As previously announced on
October 13, 2009, the borrowing base re-determination process was
completed and the borrowing base was reaffirmed at $425 million. As
of September 30, 2009, Stone had $250 million in borrowings
outstanding on its credit facility and another $69 million in
outstanding letters of credit, leaving $106 million available under
the facility. Stone's cash position as of September 30, 2009 was
$98 million. As of October 30, 2009, borrowings outstanding were
further reduced to $225 million, leaving over $131 million in
availability, while the cash position was approximately $91
million. Capital expenditures before capitalized SG&A and
interest during the third quarter of 2009 totaled $70.5 million,
including $2.0 million of lease acquisition costs. The capital
expenditure amount includes $33.1 million of proactive hurricane
risk mitigation expenditures, primarily platform decommissioning
and the plugging and abandonment of idle wells. Additionally, $4.8
million of SG&A expenses and $6.6 million of interest were
capitalized during the quarter. For the nine months ended September
30, 2009, capital expenditures before capitalized SG&A and
interest totaled $231.7 million, including $4.3 million of lease
acquisition costs. The year-to-date capital expenditure amount
includes $61.4 million of plugging and abandonment expenditures and
$16.9 million in tubular inventory purchases made in the first
quarter. Additionally, $13.5 million of SG&A expenses and $19.4
million of interest were capitalized during this year-to-date
period. Operational Update Stone provided an Operational Update in
its October 13, 2009 press release which included updates on its
Pyrenees prospect (Garden Banks Block 293), Amberjack (Mississippi
Canyon 109), Cardinal/Blue Jay (Vermilion Block 96) and Appalachia.
Since then, the Cardinal well has been drilled and is a discovery
with the completion to follow, while the Blue Jay well is currently
drilling. The platform rig for the Amberjack drilling program is
schedule to move to the platform this week and initial operations
are expected in early December. In Appalachia, the vertical Stang
#1 and the Loomis #1wells were successfully drilled in Susquehanna
County, Pennsylvania and are awaiting completion. In West Virginia,
six vertical wells are now awaiting completions which are scheduled
for the fourth quarter. Stone has substantially completed its
hurricane risk mitigation program which called for proactively
plugging and abandoning idle wells and addressing the structural
integrity of its platforms. Stone has spent approximately $55
million on this initiative this year which we believe substantially
reduces Stone's financial exposure to future hurricanes. Updated
2009 Guidance Estimates for Stone's future production volumes are
based on assumptions of capital expenditure levels and the
assumption that market demand and prices for oil and gas will
continue at levels that allow for economic production of these
products. The production, transportation and marketing of oil and
gas are subject to disruption due to transportation and processing
availability, mechanical failure, human error, hurricanes, and
numerous other factors. Stone's estimates are based on certain
other assumptions, such as well performance, which may vary
significantly from those assumed. Lease operating expenses, which
include major maintenance costs, vary in response to changes in
prices of services and materials used in the operation of our
properties and the amount of maintenance activity required.
Estimates of DD&A rates can vary according to reserve
additions, capital expenditures, future development costs, and
other factors. Therefore, we can give no assurance that our future
production volumes, lease operating expenses or DD&A rate will
be as estimated. The following guidance is subject to all of the
cautionary statements and limitations described in this press
release below, under the heading "Forward-Looking Statements." The
following guidance supersedes the previous guidance provided in the
July 30, 2009 press release. Capital Expenditure Budget. The
current Board authorized 2009 capital expenditure budget is $300
million, which excludes acquisitions, and capitalized interest and
SG&A. Although management had earlier targeted a lesser amount
of approximately $250 million to focus on liquidity, planned
expenditures increased as liquidity improved, which should bring
the final figure closer to the original $300 million budgeted
amount. Production. For the fourth quarter of 2009, Stone expects
net daily production to average between 225-235 MMcfe. Stone now
expects its full year 2009 average daily production to be in the
range of 210-220 MMcfe per day compared to its previous annual
guidance of 205-225 MMcfe per day. Lease Operating Expenses. Stone
now expects lease operating costs, excluding production taxes, to
range between $160-$175 million (versus $190-$210 million
previously) for 2009 based upon current operating conditions and
budgeted maintenance activities. Depreciation, Depletion &
Amortization. Stone now expects its DD&A rate to range between
$3.00-$3.20 per Mcfe (versus $2.80-$3.00 per Mcfe previously) for
2009. The decrease from 2008 is due to the 2008 year-end and first
quarter 2009 ceiling test write-downs, which reduced the carrying
value of the full cost pool for our oil and gas properties.
Salaries, General & Administrative Expenses. Stone now expects
its SG&A expenses (excluding incentive compensation expense) to
range between $40-$45 million (versus $43-$48 million previously)
during 2009. Corporate Tax Rate. For 2009, Stone expects its
corporate tax rate to be approximately 35%. Hedge Position The
following tables illustrate Stone's derivative positions for
calendar years 2009, 2010, and 2011 as of November 1, 2009. This
table excludes the oil and gas hedges unwound in the first quarter
resulting in proceeds of $113 million. Zero-Premium Collars
-------------------------------- Natural Gas
-------------------------------- Daily Volume Floor Ceiling
(MMBtus/d) Price Price ---------- ----- ------- 2009 20,000 $8.00
$14.30 Fixed-Price Swaps ---------------------------------------
Natural Gas Oil ----------------- ----------------- Daily Daily
Volume Swap Volume Swap (MMBtus/d) Price (Bbls/d) Price ----------
----- -------- ----- 2009 20,000* $4.24 3,000** $50.00 2009
20,000** 5.00 2,000** 50.45 2009 20,000** 5.13 4,000** 71.25
----------------------------------------------- 2010 20,000 6.97
2,000 63.00 2010 20,000 6.50 1,000 64.05 2010 10,000 6.50 1,000
60.20 2010 1,000 75.00 2010 1,000 75.25 2010 4,000 *** 73.65
----------------------------------------------- 2011 10,000 6.83
1,000 70.05 2011 1,000 78.20 * July - September ** October -
December *** January - March Other Information Stone Energy has
planned a conference call for 10:00 a.m. Central Time on Wednesday,
November 4, 2009 to discuss the operational and financial results
for the third quarter of 2009. Anyone wishing to participate should
visit our website at http://www.stoneenergy.com/ for a live web
cast or dial 1-877-228-3598 and request the "Stone Energy Call." If
you are unable to participate in the original conference call, a
digital recording, accessed by dialing (800) 642-1687 (ID
#37532692), will be available at approximately 12:00 p.m. Central
Time for one week. A web replay will also be available
approximately one hour following the completion of the call on
Stone Energy's website. Non-GAAP Financial Measures In this press
release, we refer to a non-GAAP financial measure we call
"discretionary cash flow." Management believes discretionary cash
flow is a financial indicator of our company's ability to
internally fund capital expenditures and service debt. Management
also believes this non-GAAP financial measure of cash flow is
useful information to investors because it is widely used by
professional research analysts in the valuation, comparison, rating
and investment recommendations of companies within the oil and gas
exploration and production industry. Discretionary cash flow should
not be considered an alternative to net cash provided by operating
activities or net income, as defined by GAAP. Please see the
"Reconciliation of Non-GAAP Financial Measure" for a reconciliation
of discretionary cash flow to cash flow provided by operating
activities. Forward Looking Statement Certain statements in this
press release are forward-looking and are based upon Stone's
current belief as to the outcome and timing of future events. All
statements, other than statements of historical facts, that address
activities that Stone plans, expects, believes, projects, estimates
or anticipates will, should or may occur in the future, including
future production of oil and gas, future capital expenditures and
drilling of wells and future financial or operating results are
forward-looking statements. Important factors that could cause
actual results to differ materially from those in the
forward-looking statements herein include the timing and extent of
changes in commodity prices for oil and gas, operating risks,
liquidity risks, and other risk factors and known trends and
uncertainties as described in Stone's Annual Report on Form 10-K
and Quarterly Reports on Form 10-Q as filed with the Securities and
Exchange Commission ("SEC"). Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove
incorrect, Stone's actual results and plans could differ materially
from those expressed in the forward-looking statements. Stone
Energy is an independent oil and natural gas company headquartered
in Lafayette, Louisiana, and is engaged in the acquisition,
exploration, exploitation, development and operation of oil and gas
properties located primarily in the Gulf of Mexico. Stone is also
active in the Appalachia region. For additional information,
contact Kenneth H. Beer, Chief Financial Officer, at
337-521-2210-phone, 337-521-9880 fax or via e-mail at . STONE
ENERGY CORPORATION SUMMARY STATISTICS (In thousands, except per
share/unit amounts) (Unaudited) Three Months Ended Nine Months
Ended September 30, September 30, -------------------
-------------------- 2009 2008 2009 2008 -------- -------- --------
-------- FINANCIAL RESULTS Net income (loss) $51,053 $34,121
($147,644) $179,174 Net income (loss) per share $1.06 $1.04 ($3.45)
$5.97 PRODUCTION QUANTITIES Oil (MBbls) 1,741 943 4,579 3,647 Gas
(MMcf) 11,517 6,213 30,899 24,631 Oil and gas (MMcfe) 21,963 11,871
58,373 46,513 AVERAGE DAILY PRODUCTION Oil (MBbls) 19 10 17 13 Gas
(MMcf) 125 68 113 90 Oil and gas (MMcfe) 239 129 214 170 REVENUE
DATA (1) Oil revenue $134,737 $100,726 $313,563 $380,002 Gas
revenue 67,982 66,584 198,472 253,503 -------- -------- --------
-------- Total oil and gas revenue $202,719 $167,310 $512,035
$633,505 AVERAGE PRICES (1) Oil (per Bbl) $77.39 $106.81 $68.48
$104.20 Gas (per Mcf) 5.90 10.72 6.42 10.29 Per Mcfe 9.23 14.09
8.77 13.62 COST DATA Lease operating expenses $28,136 $40,149
$127,412 $105,302 Salaries, general and administrative expenses
9,490 10,481 31,073 32,015 DD&A expense on oil and gas
properties 67,201 51,046 181,931 183,925 AVERAGE COSTS (per Mcfe)
Lease operating expenses $1.28 $3.38 $2.18 $2.26 Salaries, general
and administrative expenses 0.43 0.88 0.53 0.69 DD&A expense on
oil and gas properties 3.06 4.30 3.12 3.95 AVERAGE SHARES
OUTSTANDING - Diluted 47,679 32,670 42,762 29,740 (1) Includes the
cash settlement of effective hedging contracts. STONE ENERGY
CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (In thousands)
(Unaudited) Three Months Ended Nine Months Ended September 30,
September 30, ------------------ ---------------------- 2009 2008
2009 2008 -------- -------- ---------- -------- Operating revenue:
Oil production $134,737 $100,726 $313,563 $380,002 Gas production
67,982 66,584 198,472 253,503 Derivative income, net - 5,045 3,106
1,433 -------- -------- ---------- -------- Total operating revenue
202,719 172,355 515,141 634,938 -------- -------- ----------
-------- Operating expenses: Lease operating expenses 28,136 40,149
127,412 105,302 Other operational expense - - 2,400 - Production
taxes 2,126 1,325 5,966 6,228 Depreciation, depletion and
amortization 68,652 51,962 186,322 186,180 Write-down of oil and
gas properties - 8,759 340,083 18,859 Accretion expense 8,131 4,146
24,884 12,367 Salaries, general and administrative expenses 9,490
10,481 31,073 32,015 Incentive compensation expense 1,932 283 3,349
2,183 Impairment of inventory 1,275 - 8,454 - Derivative expenses,
net 91 - - - -------- -------- ---------- -------- Total operating
expenses 119,833 117,105 729,943 363,134 -------- --------
---------- -------- Income (loss) from operations 82,886 55,250
(214,802) 271,804 -------- -------- ---------- -------- Other
(income) expenses: Interest expense 5,170 3,036 15,124 10,528
Interest income (155) (2,255) (437) (10,601) Other income, net
(937) (1,421) (2,762) (3,775) -------- -------- ---------- --------
Total other (income) expenses 4,078 (640) 11,925 (3,848) --------
-------- ---------- -------- Income (loss)before taxes 78,808
55,890 (226,727) 275,652 -------- -------- ---------- --------
Provision (benefit) for income taxes: Current 1,615 (45,583) 1,638
1,395 Deferred 26,140 67,352 (80,748) 95,083 -------- --------
---------- -------- Total income taxes 27,755 21,769 (79,110)
96,478 -------- -------- ---------- -------- Non-controlling
interest - - (27) - Net income (loss) $51,053 $34,121 ($147,644)
$179,174 ======== ======== ========== ======== STONE ENERGY
CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURE (In
thousands) (Unaudited) Three Months Ended Nine Months Ended
September 30, September 30, ------------------ --------------------
2009 2008 2009 2008 ------- -------- -------- -------- Net income
(loss) as reported $51,053 $34,121 ($147,617) $179,174 Reconciling
items: Depreciation, depletion and amortization 68,652 51,962
186,322 186,180 Write-down of oil and gas properties - 8,759
340,083 18,859 Non-cash write-down of tubular inventory 1,275 -
8,454 - Deferred income tax provision (benefit) 26,140 67,352
(80,748) 95,083 Accretion expense 8,131 4,146 24,884 12,367 Stock
compensation expense 1,233 1,964 4,392 6,286 Other 531 (4,524)
3,355 (3,392) ------- -------- -------- -------- Discretionary cash
flow 157,015 163,780 339,125 494,557 Settlement of asset retirement
obligations (33,145) (8,551) (61,394) (42,202) Unwinding of
derivative contracts (36,567) - 35,095 - Changes in current income
taxes 1,615 (45,583) 32,050 (92,714) Investment in put contracts -
- - (1,914) Other working capital changes 10,457 138,163 28,042
129,471 Net cash provided by operating ------- -------- --------
-------- activities $99,375 $247,809 $372,918 $487,198 =======
======== ======== ======== STONE ENERGY CORPORATION CONSOLIDATED
BALANCE SHEET (In thousands) (Unaudited) September 30, December 31,
2009 2008 ---------- ---------- Assets ------ Current assets: Cash
and cash equivalents $97,749 $68,137 Accounts receivable 104,495
151,641 Inventory 10,299 35,675 Other current assets 1,038 1,413
Deferred tax asset 3,683 - Current income tax receivable 6,637
31,183 Fair value of hedging contracts 17,155 136,072 ----------
---------- Total current assets 241,056 424,121 Oil and gas
properties - United States: Proved, net 873,296 1,130,583
Unevaluated 420,733 493,738 Building and land, net 5,736 5,615
Fixed assets, net 4,306 5,326 Other assets, net 48,928 46,620 Fair
value of hedging contracts 704 - ---------- ---------- Total assets
$1,594,759 $2,106,003 ========== ========== Liabilities and
Stockholders' Equity ------------------------------------ Current
liabilities: Accounts payable to vendors $98,826 $144,016 Deferred
taxes - 32,416 Undistributed oil and gas proceeds 12,919 37,882
Other current liabilities 29,461 15,759 Asset retirement
obligations 40,175 70,709 Fair value of hedging contracts 21,028 -
---------- ---------- Total current liabilities 202,409 300,782
Bank debt 250,000 425,000 81/4% Senior Subordinated Notes due 2011
200,000 200,000 63/4% Senior Subordinated Notes due 2014 200,000
200,000 Deferred taxes 113,849 193,924 Other long-term liabilities
11,358 11,751 Asset retirement obligations 174,231 186,146 Fair
value of hedging contracts 7,686 1,221 ---------- ---------- Total
liabilities 1,159,533 1,518,824 ---------- ---------- Common stock
475 394 Additional paid-in capital 1,322,184 1,257,633 Accumulated
deficit (902,631) (754,987) Treasury stock (860) (860) Accumulated
other comprehensive income 16,058 84,912 ---------- ----------
Total Stone Energy Corporation stockholders' equity 435,226 587,092
---------- ---------- Non-controlling interest - 87 ----------
---------- Total stockholders' equity 435,226 587,179 ----------
---------- Total liabilities and stockholders' equity $1,594,759
$2,106,003 ========== ========== DATASOURCE: Stone Energy
Corporation CONTACT: Kenneth H. Beer, Chief Financial Officer of
Stone Energy Corporation, +1-337-521-2210, fax, +1-337-521-9880,
Web Site: http://www.stoneenergy.com/
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