STONE ENERGY CORPORATION 
By LAFAYETTE, La., Nov. 4, 2013 /PRNewswire/ -- Stone Energy Corporation (NYSE: SGY) today announced financial and operational results for the third quarter of 2013 and provided updated guidance. Some of the highlights include:
-- Generated net income of $36.1 million and cash flow of $166.1 million.
-- Production for the third quarter of 2013 averaged 49.4 thousand barrels
of oil equivalent (MBoe) per day, which was near record volumes, and
represents an 18% increase from 41.8 MBoe per day in the third quarter
of 2012.
-- The San Marcos deep water well spud in September and is currently
drilling with a target depth of 29,000 feet.
-- The drilling rig for the Stone operated Amethyst deep water prospect is
mobilizing to location.
-- The deep gas Tomcat prospect was spud in October and is currently
drilling at approximately 3,500 feet with a target depth of 16,125 feet.
Chairman, President and Chief Executive Officer David Welch stated, "We have entered an exciting phase of our ongoing strategy to grow the company. We registered one of the highest levels of quarterly production in Stone's history with volumes just under 50,000 Boe per day and have increased full year production guidance again. Over the next several quarters, we are exposing the company to numerous significant projects in the Gulf of Mexico deep water. We are currently participating in the San Marcos deep water prospect and we are moving a rig to drill the Stone operated deep water Amethyst prospect, with both scheduled to be at total depth in the first quarter of 2014. We expect to spud both our Stone operated Cardona development well and the ExxonMobil operated Mica Deep prospect in early 2014. In addition, the Tomcat deep gas exploration prospect is drilling and is projected to be at total depth in early 2014. In Appalachia, we experienced steady increases in our Marcellus shale production, with third quarter volumes of over 80 MMcfe per day. Additionally, we are continuing with our process to divest a portion of our conventional shelf, state water and onshore Louisiana properties to further strengthen our balance sheet."
Financial Results
For the third quarter of 2013, Stone reported net income of $36.1 million, or $0.72 per share, on oil, gas, and natural gas liquids (NGLs) revenue of $255.8 million, compared to net income of $23.7 million, or $0.48 per share, on oil, gas, and NGLs revenue of $226.7 million in the third quarter of 2012. Discretionary cash flow totaled $166.1 million during the third quarter of 2013, as compared to $142.9 million during the third quarter of 2012. Please see "Non-GAAP Financial Measures" 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 during the third quarter of 2013 averaged 49.4 thousand barrels of oil equivalent (MBoe) per day (296 million cubic feet of gas equivalent (MMcfe) per day), compared with net daily production of 45.4 MBoe (272 MMcfe) per day in the second quarter of 2013, and net daily production of 41.8 MBoe (251 MMcfe) per day in the third quarter of 2012. The production mix for the third quarter of 2013 was 40% oil, 9% NGLs and 51% natural gas. Production for the fourth quarter of 2013 is expected to decrease slightly to approximately 42.5-45.5 MBoe (255-273 MMcfe) per day due to Williams pipeline downtime in Appalachia during the month of October, the sale of selected onshore Louisiana properties on October 1, 2013, downtime associated with Tropical Storm Karen, and unplanned downtime at Ship Shoal Block 113. However, due to positive third quarter production results, the full year production guidance has been increased to 44.5-45.5 MBoe (267-273 MMcfe) per day.
Prices realized during the third quarter of 2013 averaged $103.16 per barrel of oil, $38.77 per barrel of NGLs and $3.80 per Mcf of natural gas. Average realized prices for the third quarter of 2012 were $104.15 per barrel of oil, $34.93 per barrel of NGLs and $3.20 per Mcf of natural gas. Effective hedging transactions increased the average realized price of natural gas by $0.39 per Mcf and decreased the average realized price of oil by $4.14 per barrel in the third quarter of 2013.
Lease operating expenses (LOE) during the third quarter of 2013 totaled $54 million ($11.88 per Boe or $1.98 per Mcfe), compared to $61.0 million ($15.86 per Boe or $2.64 per Mcfe), in the third quarter of 2012.
Transportation, processing and gathering expenses during the third quarter of 2013 totaled $13.1 million ($2.88 per Boe or $0.48 per Mcfe) compared to $6.8 million ($1.76 per Boe or $0.29 per Mcfe) in the third quarter of 2012. The increase is attributable to higher gas and NGL volumes, short term blending fees in Appalachia and higher Gulf of Mexico pipeline fees.
Depreciation, depletion and amortization (DD&A) on oil and gas properties for the third quarter of 2013 totaled $91.9 million ($20.23 per Boe or $3.37 per Mcfe), compared to $88.4 million ($22.99 per Boe or $3.83 per Mcfe), in the third quarter of 2012.
Salaries, general and administrative (SG&A) expenses (excluding incentive compensation expense) for the third quarter of 2013 were $14.2 million ($3.12 per Boe or $0.52 per Mcfe), compared to $13.7 million ($3.56 per Boe or $0.59 per Mcfe), in the third quarter of 2012.
Capital expenditures before capitalized SG&A and interest during the third quarter of 2013 were approximately $161.6 million, which includes $23.8 million of plugging and abandonment expenditures. Additionally, $8.6 million of SG&A expenses and $11.9 million of interest were capitalized during the quarter. Capital expenditures before capitalized SG&A and interest for the first nine months of 2013 were approximately $487.6 million, which includes $61.2 million of plugging and abandonment expenditures. Additionally, $22.6 million of SG&A expenses and $32.8 million of interest were capitalized during the first nine months of 2013.
As of September 30 and November 4, 2013, there were no outstanding borrowings under Stone's bank credit facility and letters of credit totaling $21.5 million had been issued pursuant to the facility, leaving $378.5 million of availability under the bank credit facility.
Operational Update
Mississippi Canyon 983 - San Marcos (Deep Water). The San Marcos prospect at Mississippi Canyon 983 was spud in September. The well is currently expected to reach a depth of 29,000 feet late in the fourth quarter of 2013 or early in 2014. Stone holds a 25% working interest in the prospect which is operated by Apache Deepwater LLC.
Mississippi Canyon 26 - Amethyst (Deep Water). The Diamond Ocean Victory drilling rig is being mobilized to the deep water Amethyst exploration prospect. If successful, this well will likely be tied back to the 100% Stone-owned Pompano platform. Stone is the operator of the well and currently holds a 100% working interest. Target depth is 20,000 feet and the well is estimated to take three months to drill.
Pompano Area - Cardona and Cardona South (Deep Water). Drilling on Stone's Cardona prospect, located in Mississippi Canyon 29, is expected to commence during the first quarter of 2014 followed by the drilling of the Cardona South well. Stone plans to tie back both wells to the 100% owned Pompano platform with production projected for early 2015. Stone holds a 65% working interest in the Cardona wells and will be the operator. Each well is estimated to take three months to drill.
Mississippi Canyon 211 - Mica Deep (Deep Water). The Mica Deep exploration well is expected to spud in the first quarter of 2014. Stone holds a 50% working interest in the project which is operated by ExxonMobil. The well is expected to take 3 months to drill.
Walker Ridge 719 - Phinisi (Deep Water). The Phinisi exploration well is projected to spud in 2014. Stone currently holds a 20% working interest in the prospect, which is operated by Eni. The well is estimated to take four months to drill.
Walker Ridge 89 - Goodfellow (Deep Water). The Goodfellow exploration well is projected to spud in 2014. Stone currently holds approximately a 12.8% working interest in the prospect, which is operated by Eni. The well is estimated to take five months to drill.
Mississippi Canyon 555 - Guadalupe (Deep Water). The Guadalupe exploration well is currently scheduled to spud in 2014. Stone currently holds a 40% working interest in the prospect, which is operated by Apache Deepwater LLC. The well is estimated to take four months to drill.
Tomcat (Deep Gas). The ENSCO 81 jack-up rig was mobilized to the deep gas Tomcat prospect in October 2013. The well is currently drilling ahead at 3,500 feet and is expected to reach the anticipated depth of 16,125 feet in early 2014. Stone holds a 100% working interest in the prospect.
Appalachian Basin - Marcellus Shale (Drill Program Update). Stone drilled seven Marcellus shale wells during the third quarter of 2013, bringing the total to 23 horizontal Marcellus shale wells drilled in 2013. By year end, Stone expects to have drilled 28 to 30 wells and to have completed 27 to 30 wells in the Marcellus shale.
Appalachian Basin - Marcellus Shale (Production Update). During the third quarter of 2013, Stone averaged 82 MMcfe per day (58 MMcf per day of gas and 4,000 barrels per day of liquids) from Stone's Marcellus shale position. During the third quarter of 2013, seven new wells in the Mary field were brought online. Stone expects to bring an additional 11 wells in the Mary field online during the fourth quarter of 2013. During the month of October 2013, production was restricted due to downtime at the Williams pipeline; however production is currently above previous levels.
Appalachian Basin - Upper Devonian Shale. Stone drilled an Upper Devonian horizontal test well in the Mary field during the second quarter of 2013. The well was drilled with a 2,450 foot lateral and completed with nine stages. The well will be tested during the fourth quarter of 2013, with results expected in the first quarter of 2014.
Conventional Shelf (Drill Program). A discovery was made on the Taildancer prospect at Ship Shoal 113, with the well encountering 130 feet of net oil and gas pay. Production from this discovery is projected to be online in the fourth quarter of 2013. Stone is the operator with a 100% working interest.
Conventional Shelf (Potential Sale). Stone has engaged a financial advisor to market certain properties in the Conventional Shelf, state waters, and onshore Louisiana. Stone's Weeks Island field, which had third quarter production of approximately 1,200 Boe per day, was sold on October 1, 2013 for approximately $46 million. The potential sale of the remaining properties is subject to market conditions and there is no assurance that it will be completed, in whole or in part, or by any particular time.
2013 Guidance
Guidance for the fourth quarter and full year 2013 is shown in the table below (updated guidance numbers are italicized and bolded). The guidance is subject to all the cautionary statements and limitations described below and under the caption "Forward Looking Statements."
Fourth Quarter Full Year
-------------- ---------
Production - MBoe per day 42.5 - 45.5 44.5 - 45.5
(MMcfe per day) (255 - 273) (267 - 273)
Lease operating expenses (in millions) - $210 - $220
(excluding transportation/processing expenses)
Transportation, processing and gathering (in
millions) $37 - $42
Salaries, General & Administrative expenses (in
millions) - $55 - $60
(excluding incentive compensation)
Depreciation, Depletion & Amortization (per MBoe) - $20.40 - $21.00
(per Mcfe) $3.40 - $3.50
Corporate Tax Rate (%) - 35% - 37%
Capital Expenditure Budget (in millions) - $710
(excluding acquisitions)
Hedge Position
The following table illustrates our derivative positions for 2013, 2014 and 2015 as of November 4, 2013:
Fixed-Price Swaps
NYMEX (except where noted)
-------------------------
Natural Gas Oil
----------- ---
Daily Swap Daily Swap
Volume Price Volume Price
(MMBtus/d) (Bbls/d)
---------- --------
2013 10,000 $4.000 2,000** $92.35
2013 10,000* 4.050 1,000 92.80
2013 20,000** 4.450 2,000*** 94.05
2013 10,000 5.270 1,000 94.45
2013 10,000 5.320 1,000 94.60
2013 1,000 97.15
2013 1,000 101.53
2013 1,000 103.00
2013 1,000 103.15
2013 1,000 104.25
2013 1,000 104.47
2013 1,000 104.50
2013 1,000** 107.30
2014 10,000 4.000 1,000 90.06
2014 10,000 4.040 1,000 92.25
2014 10,000 4.105 1,000 93.55
2014 10,000 4.190 1,000 94.00
2014 10,000 4.250 1,000 98.00
2014 10,000 4.350 1,000 98.30
2014 2,000*** 98.85
2014 1,000 99.65
2014 1,000** 103.30
2015 10,000 4.005 1,000 90.00
2015 10,000 4.220
2015 10,000 4.255
* April -December
** July - December
*** January - June
** Brent oil contract
Other Information
Stone Energy has planned a conference call for 9:00 a.m. Central Time on November 5, 2013 to discuss the operational and financial results for the third quarter of 2013. Anyone wishing to participate should visit our website at 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 replay will be available immediately following the completion of the call on Stone Energy's website. The replay will be available for one month.
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 in 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 Statements
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, future financial or operating results and the amount, and timing of any potential divestitures 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, political and regulatory developments and legislation, including developments and legislation relating to our operations in the Gulf of Mexico and Appalachia, market conditions relating to acquisitions and divestitures 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 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.
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. Delays experienced in well permitting could affect the timing of drilling and production. 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 rates will be as estimated.
Stone Energy is an independent oil and natural gas exploration and production company headquartered in Lafayette, Louisiana with additional offices in New Orleans, Houston and Morgantown, West Virginia. Our business strategy is to leverage cash flow generated from existing assets to maintain relatively stable GOM shelf oil production, profitably grow gas reserves and production in price-advantaged basins such as Appalachia and the Gulf Coast Basin, and profitably grow oil reserves and production in material impact areas such as the deep water GOM and onshore oil. For additional information, contact Kenneth H. Beer, Chief Financial Officer, at 337-521-2210 phone, 337-521-2072 fax or via e-mail at CFO@StoneEnergy.com.
STONE ENERGY CORPORATION
SUMMARY STATISTICS
(In thousands, except per
share/unit amounts)
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2013 2012 2013 2012
---- ---- ---- ----
FINANCIAL RESULTS
Net income $36,102 $23,659 $115,882 $105,180
Net income per share $0.72 $0.48 $2.32 $2.13
PRODUCTION QUANTITIES
Oil (MBbls) 1,809 1,736 5,243 5,289
Natural Gas (MMcf) 13,866 10,615 35,969 31,031
Natural gas liquids
(MBbls) 425 341 1,048 794
Oil, gas and NGLs
(MBoe) 4,545 3,846 12,286 11,255
Oil, gas and NGLs
(MMcfe) 27,270 23,077 73,715 67,529
AVERAGE DAILY
PRODUCTION
Oil (MBbls) 20 19 19 19
Gas (MMcf) 151 115 132 113
Natural gas liquids
(MBbls) 5 4 4 3
Oil, gas and NGLs
(MBoe) 49 42 45 41
Oil, gas and NGLs
(MMcfe) 296 251 270 246
REVENUE DATA
Oil revenue $186,608 $180,806 $558,031 $564,745
Natural Gas revenue 52,728 34,003 137,382 91,006
Natural gas liquids
revenue 16,476 11,910 36,854 35,228
Total oil, natural gas
and NGL revenue $255,812 $226,719 $732,267 $690,979
AVERAGE PRICES
Prior to the cash
settlement of
effective hedging
transactions:
Oil (per Bbl) $107.30 $101.81 $105.98 $106.57
Natural Gas (per Mcf) 3.41 2.65 3.50 2.38
Natural gas liquids
(per Bbl) 38.77 34.93 35.17 44.37
Oil, gas and NGLs (per
Boe) 56.75 56.35 58.48 59.76
Oil, gas and NGLs (per
Mcfe) 9.46 9.39 9.75 9.96
Including the cash
settlement of
effective hedging
transactions:
Oil (per Bbl) $103.16 $104.15 $106.43 $106.78
Natural Gas (per Mcf) 3.80 3.20 3.82 2.93
Natural gas liquids
(per Bbl) 38.77 34.93 35.17 44.37
Oil, gas and NGLs (per
Boe) 56.28 58.95 59.60 61.39
Oil, gas and NGLs (per
Mcfe) 9.38 9.82 9.93 10.23
COST DATA
Lease operating
expenses $53,986 $60,995 $157,547 $157,030
Salaries, general and
administrative
expenses 14,201 13,673 43,351 40,521
DD&A expense on oil
and gas properties 91,932 88,417 252,759 258,598
AVERAGE COSTS
Lease operating
expenses (per Boe) $11.88 $15.86 $12.82 $13.95
Lease operating
expenses (per Mcfe) 1.98 2.64 2.14 2.33
Salaries, general and
administrative
expenses (per Boe) 3.12 3.56 3.53 3.60
Salaries, general and
administrative
expenses (per Mcfe) 0.52 0.59 0.59 0.60
DD&A expense on oil
and gas properties
(per Boe) 20.23 22.99 20.57 22.98
DD&A expense on oil
and gas properties
(per Mcfe) 3.37 3.83 3.43 3.83
AVERAGE SHARES
OUTSTANDING - Diluted 48,776 48,384 48,720 48,343
STONE ENERGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2013 2012 2013 2012
---- ---- ---- ----
Operating revenue:
Oil production $186,608 $180,806 $558,031 $564,745
Gas production 52,728 34,003 137,382 91,006
Natural gas liquids
production 16,476 11,910 36,854 35,228
Other operational income 873 678 2,659 2,520
Derivative income, net - - - 3,119
--- --- --- -----
Total operating revenue 256,685 227,397 734,926 696,618
------- ------- ------- -------
Operating expenses:
Lease operating expenses 53,986 60,995 157,547 157,030
Transportation, processing
and gathering expenses 13,081 6,762 27,374 15,911
Other operational expenses 237 82 382 195
Production taxes 5,224 1,842 11,404 7,578
Depreciation, depletion
and amortization 92,853 89,274 255,497 260,982
Accretion expense 8,431 8,405 25,012 24,926
Salaries, general and
administrative expenses 14,201 13,673 43,351 40,521
Incentive compensation
expense 4,566 67 8,047 3,907
Derivative expense, net 1,684 1,812 1,537 -
Total operating expenses 194,263 182,912 530,151 511,050
------- ------- ------- -------
Income from operations 62,422 44,485 204,775 185,568
------ ------ ------- -------
Other (income) expenses:
Interest expense 7,922 7,692 26,452 21,107
Interest income (1,311) (117) (1,543) (227)
Other income, net (782) (443) (2,190) (1,229)
Loss on early
extinguishment of debt - - - -
Other expense, net - - - -
Total other expenses 5,829 7,132 22,719 19,651
----- ----- ------ ------
Net income before taxes 56,593 37,353 182,056 165,917
------ ------ ------- -------
Provision (benefit) for
income taxes:
Current (88) 595 (10,827) 1,164
Deferred 20,579 13,099 77,001 59,573
------ ------ ------ ------
Total income taxes 20,491 13,694 66,174 60,737
Net income $36,102 $23,659 $115,882 $105,180
------- ------- -------- --------
STONE ENERGY CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(In thousands)
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2013 2012 2013 2012
---- ---- ---- ----
Net
income
as
reported $36,102 $23,659 $115,882 $105,180
Reconciling
items:
Depreciation,
depletion
and
amortization 92,853 89,274 255,497 260,982
Deferred
income
tax
provision 20,579 13,099 77,001 59,573
Accretion
expense 8,431 8,405 25,012 24,926
Stock
compensation
expense 2,717 2,529 7,583 6,800
Non-
cash
interest
expense 4,203 3,790 12,384 9,068
Other 1,263 2,103 1,470 (1,450)
----- ----- ----- ------
Discretionary
cash
flow 166,148 142,859 494,829 465,079
Change
in
current
income
taxes 15,695 681 (704) (3,240)
Settlement
of
asset
retirement
obligations (23,843) (25,293) (61,178) (47,211)
Other
working
capital
changes 5,537 6,246 6,563 (40,715)
Net
cash
provided
by
operating
activities $163,537 $124,493 $439,510 $373,913
======== ======== ======== ========
STONE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
September 30, December 31,
2013 2012
---- ----
Assets
------
Current assets:
Cash and cash
equivalents $243,075 $279,526
Accounts
receivable 189,565 167,288
Fair value of
hedging
contracts 14,423 39,655
Current income
tax receivable 10,893 10,027
Deferred taxes 26,350 15,514
Inventory 3,843 4,207
Other current
assets 1,439 3,626
Total current
assets 489,588 519,843
Oil and gas
properties,
full cost
method of
accounting:
Proved 7,589,153 7,244,466
Less:
accumulated
depreciation,
depletion and
amortization (5,762,937) (5,510,166)
--------- --------
Net proved oil
and gas
properties 1,826,216 1,734,300
Unevaluated 576,395 447,795
Other property
and equipment,
net 23,965 22,115
Fair value of
hedging
contracts 5,114 9,199
Other assets,
net 49,148 43,179
Total assets $2,970,426 $2,776,431
========== ========
Liabilities and
Stockholders'
Equity
---------------
Current
liabilities:
Accounts
payable to
vendors $104,486 $94,361
Undistributed
oil and gas
proceeds 42,913 23,414
Accrued
interest 14,272 18,546
Fair value of
hedging
contracts 8,261 149
Asset
retirement
obligations 60,938 66,260
Other current
liabilities 21,680 16,765
Total current
liabilities 252,550 219,495
8 5/8% Senior
Notes due 2017 375,000 375,000
7 1/2% Senior
Notes due 2022 300,000 300,000
1 3/4% Senior
Convertible
Notes due
2017* 248,745 239,126
Deferred taxes 387,033 310,830
Asset
retirement
obligations 407,712 422,042
Fair value of
hedging
contracts 360 1,530
Other long-
term
liabilities 26,463 36,275
Total
liabilities 1,997,863 1,904,298
--------- ---------
Common stock 488 484
Treasury stock (860) (860)
Additional
paid-in
capital 1,393,439 1,386,475
Accumulated
deficit (426,917) (542,799)
Accumulated
other
comprehensive
income 6,413 28,833
----- ------
Total
stockholders'
equity 972,563 872,133
------- -------
Total
liabilities
and
stockholders'
equity $2,970,426 $2,776,431
========== ========
*Face value of $300 million
(Logo: http://photos.prnewswire.com/prnh/20130429/MM04099LOGO)
SOURCE Stone Energy Corporation
