Stone Energy Corporation Announces Second Quarter 2013 Results

        Stone Energy Corporation Announces Second Quarter 2013 Results

PR Newswire

LAFAYETTE, La., Aug. 5, 2013

LAFAYETTE, La., Aug. 5, 2013 /PRNewswire/ -- Stone Energy Corporation (NYSE:
SGY) today announced financial and operational results for the second quarter
of 2013 and provided updated guidance. Some of the highlights include:

  oProduction at 45.4 MBoe (272 MMcfe) per day exceeded the upper end of
    second quarter guidance, driven by strong Marcellus volumes, early
    production from the third La Cantera well and an active well work
    program. This represents a 12% increase when compared to the second
    quarter of 2012. The production mix was 53% liquids and 47% natural gas.
  oProduction from Appalachia averaged 75 MMcfe per day, including 51 MMcf
    per day of natural gas and 4,000 barrels per day of liquids.
  oThe third La Cantera well was placed on production during the second
    quarter of 2013, increasing the rate from this field to approximately 30
    MMcfe per day net production to Stone.

Chairman, President and Chief Executive Officer David Welch stated, "We
continue to see the benefit of our strategy to transition from our legacy
conventional shelf Gulf of Mexico assets to the higher potential Marcellus
shale and GOM deep water. During the second quarter, average production
increased to 272 MMcfe per day with the Marcellus shale contributing over 75
MMcfe per day and 16 - 18 additional wells expected to be brought on
production during the second half of 2013. In the deep water, we expect to
spud Stone's first deep water operated well and participate in 2 to 3
non-operated deep water tests in the second half of 2013 as well as having a
very exciting portfolio of deep water wells for 2014. With the success in
Appalachia and the significant increased activity level in the deep water, we
have engaged a financial advisor to market a portion of our conventional
shelf, state water and onshore properties. This action is consistent with our
long term strategy and will further increase our focus on the higher potential
growth areas of the company."

Financial Results

For the second quarter of 2013, Stone reported net income of $39.0 million, or
$0.78 per share, on oil and gas revenue of $243.5 million, compared to net
income of $30.5 million, or $0.62 per share, on oil and gas revenue of $220.2
million for the second quarter of 2012. Discretionary cash flow totaled
$169.6 million during the second quarter of 2013, as compared to $147.1
million during the second 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 second quarter of 2013 averaged 45.4 thousand
barrels of oil equivalent (MBoe) per day (272 million cubic feet of gas
equivalent (MMcfe) per day), compared with net daily production of 40.1 MBoe
(241 MMcfe) per day in the first quarter of 2013, and net daily production of
40.5 MBoe (243 MMcfe) per day in the second quarter of 2012. The production
mix for the second quarter of 2013 was 43% oil, 10% natural gas liquids (NGL)
and 47% natural gas.

Prices realized during the second quarter of 2013 averaged $104.41 per barrel
of oil, $27.52 per barrel of NGLs and $4.07 per Mcf of natural gas. Average
realized prices for the second quarter of 2012 were $107.74 per barrel of oil,
$39.00 per barrel of NGLs and $2.70 per Mcf of natural gas. Effective hedging
transactions increased the average realized price of natural gas by $0.17 per
Mcf and increased the average realized price of oil by $3.02 per barrel in the
second quarter of 2013.

Lease operating expenses during the second quarter of 2013 totaled $50.5
million ($12.23 per Boe or $2.04 per Mcfe), compared to $51.6 million ($14.01
per Boe or $2.33 per Mcfe), in the second quarter of 2012.

Depreciation, depletion and amortization (DD&A) on oil and gas properties for
the second quarter of 2013 totaled $86.3 million ($20.88 per Boe or $3.48 per
Mcfe), compared to $86.4 million ($23.46 per Boe or $3.91 per Mcfe) in the
second quarter of 2012.

Salaries, general and administrative (SG&A) expenses (excluding incentive
compensation expense) for the second quarter of 2013 were $15.2 million ($3.68
per Boe or $0.61 per Mcfe), compared to $13.1 million ($3.57 per Boe or $0.60
per Mcfe) in the second quarter of 2012.

Capital expenditures before capitalized SG&A and interest during the second
quarter of 2013 were approximately $190.4 million, which include $22.5 million
of plugging and abandonment expenditures. Additionally, $7.5 million of SG&A
expenses and $10.9 million of interest were capitalized during the quarter.
During the six months ended June 30, 2013, capital expenditures before
capitalized SG&A and interest were approximately $325.8 million, which include
$37.3 million of plugging and abandonment expenditures.

As of June 30, 2013 and August 5, 2013, we had no outstanding borrowings under
our bank credit facility. In addition, Stone had letters of credit totaling
$21.5 million, resulting in $378.5 million available for borrowing based on a
borrowing base of $400 million.

Operational Update

Mississippi Canyon 26 - Amethyst (Deep Water). The deep water Amethyst
exploration well is currently scheduled to spud in the fourth quarter of
2013. Stone is the operator of the well and currently holds a 100% working
interest, although expects to reduce its working interest in the prospect.
The well is estimated to take three months to drill.

Pompano Area – Cardona and Cardona South Prospects (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 to four months to drill.

Mississippi Canyon 816 – Taggart (Deep Water). The deep water Taggart
exploration well is currently planned to spud in the third quarter of 2013.
Stone currently holds a 23% working interest in the prospect, which is
operated by LLOG. The well is estimated to take two months to drill.

Mississippi Canyon 983 - San Marcos (Deep Water). The deep water San Marcos
exploration well is currently scheduled to spud late in the third quarter of
2013. Stone currently holds a 25% working interest in the prospect, which is
operated by Apache Deepwater LLC. The well is estimated to take four months
to drill.

Mississippi Canyon 555 – Guadalupe (Deep Water). The deep water Guadalupe
exploration well is currently scheduled to spud in late 2013 or early 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.

Walker Ridge 719 – Phinisi (Deep Water). The deep water Phinisi exploration
well is projected to spud either in the fourth quarter of 2013 or the first
half of 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.

La Cantera (Deep Gas). The third well in the La Cantera field, the Broussard
#1 ST #1, was completed and placed on production in June 2013. The well is
currently producing approximately 30 MMcfe per day. Combined with the first
two wells, current gross production from this field is over 120 MMcfe per day
(over 30 MMcfe per day net). Stone holds a 34.6% non-operated working
interest in the field.

Appalachian Basin - Marcellus Shale (Drill Program Update). Stone drilled six
Marcellus shale wells during the second quarter of 2013 bringing the total to
16 horizontal Marcellus shale wells drilled in the first half of 2013. Stone
expects to drill 28 to 30 Marcellus shale wells during 2013. In addition,
Stone completed seven Marcellus shale wells during the second quarter of 2013
bringing the total to 15 for the first half of 2013. Stone plans to complete
26 to 30 wells Marcellus shale wells in 2013.

Appalachian Basin - Marcellus Shale (Production Update). During the second
quarter of 2013, Stone averaged 75 MMcfe per day (51 MMcf per day of gas and
4,000 barrels per day of liquids) from Stone's Marcellus shale position. The
Williams pipeline, which impacted first quarter volumes, was repaired and
pressure restrictions were eliminated, which allowed Stone to restore shut-in
production in the Mary field. In addition, 14 wells (11 new and 3 shut-in) in
the Heather field were brought online during the second quarter of 2013. Stone
expects to bring an additional 16-18 wells in the Mary field online during the
second half of 2013.

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 9 stages. The
well is expected to be tested and brought online late in 2013.

Conventional Shelf (Drill Program). The Hyena prospect in the Clovelly field
in South Louisiana was drilled and completed in the second quarter. Current
production from the Hyena well is approximately 300 barrels of oil per day.
The ENSCO 81 jack-up rig is drilling on the second well of a four well
drilling program that was initiated in May 2013. The Hammerlock prospect
located on South Timbalier 100 was found non-productive and abandoned. The
second well, the Ship Shoal 113 field Taildancer oil prospect, is currently
drilling and is expected to be brought on line in the fourth quarter of 2013.
The final two wells of the program are expected to be drilled in the Ship
Shoal 113 field during the second half of 2013. In addition, Stone completed
hydraulic rig operations on the Main Pass Block 288 A-26 sidetrack #1 well,
which is currently producing approximately 400 barrels of oil per day.

Conventional Shelf (Potential Sale). Stone has engaged a financial advisor to
market certain of its properties in the Conventional Shelf, state waters, and
onshore Louisiana. The potential sale of these 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 third 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."



                                                                        Third    Full
                                                                        Quarter  Year
Production - MBoe per day                                 42 – 45  41 –
                                                                                 44
 (MMcfe per day)                                   (252 –   (246 –
                                                                        270)     264)
Lease operating expenses (in millions)                                          $205 -
                                                                        -        $225
(excluding transportation/processing expenses)
Transportation, processing and gathering (in millions)                           $28 -
                                                                                 $34
Salaries, General & Administrative expenses (in millions)               -        $55 -
                                                                                 $60
(excluding incentive compensation)


                                                                                 $20.00
Depreciation, Depletion & Amortization (per MBoe)                       -        -
                                                                                 $21.50
(per          $3.35
Mcfe)                                                                            -
                                                                                 $3.60
Corporate Tax Rate (%)                                                  -        35% -
                                                                                 37%
Capital Expenditure Budget (in millions)                                -        $650
(excluding acquisitions)



Hedge Position

The following table illustrates our derivative positions for 2013, 2014 and
2015 as of August 5, 2013:

     Fixed-Price Swaps
     NYMEX (except where noted)
     Natural Gas           Oil
     Daily                Daily         

     Volume        Swap    Volume        Swap

     (MMBtus/d)    Price   (Bbls/d)      Price
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                       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
Tuesday, August 6, 2013 to discuss the operational and financial results for
the second 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 Ended  Six Months Ended

                                      June 30,            June 30,
                                      2013      2012      2013      2012
FINANCIAL RESULTS
 Net income                          $39,022   $30,547   $79,780   $81,521
 Net income per share                $0.78     $0.62     $1.60     $1.65
PRODUCTION QUANTITIES
 Oil (MBbls)                         1,767     1,691     3,434     3,553
 Gas (MMcf)                          11,745    10,422    22,103    20,416
 Natural gas liquids (MBbls)         407       253       623       453
Oil, gas and NGLs (MBoe)            4,132     3,681     7,741     7,409
 Oil, gas and NGLs (MMcfe)           24,789    22,086    46,445    44,452
AVERAGE DAILY PRODUCTION
 Oil (MBbls)                         19.4      18.6      19.0      19.5
 Gas (MMcf)                          129.1     114.5     122.1     112.2
 Natural gas liquids (MBbls)         4.5       2.8       3.4       2.5
 Oil, gas and NGLs (MBoe)            45.4      40.5      42.8      40.7
 Oil, gas and NGLs (MMcfe)           272.4     242.7     256.6     244.2
REVENUE DATA
 Oil revenue                         $184,498  $182,181  $371,423  $383,939
 Gas revenue                         47,832    28,146    84,654    57,003
 Natural gas liquids revenue         11,200    9,866     20,378    23,318
 Total oil, gas and NGL revenue      $243,530  $220,193  $476,455  $464,260
AVERAGE PRICES
Prior to the cash settlement of
effective hedging transactions:
 Oil (per Bbl)                       $101.39   $106.05   $105.28   $108.90
Gas (per Mcf)                       3.90      2.07      3.56      2.24
 Natural gas liquids (per Bbl)       27.52     39.00     32.71     51.47
 Oil, gas and NGLs (per Boe)         57.16     57.27     59.50     61.53
 Oil, gas and NGLs (per Mcfe)        9.53      9.54      9.92      10.26
Including the cash settlement of
effective hedging transactions:
 Oil (per Bbl)                       $104.41   $107.74   $108.16   $108.06
 Gas (per Mcf)                       4.07      2.70      3.83      2.79
 Natural gas liquids (per Bbl)       27.52     39.00     32.71     51.47
 Oil, gas and NGLs (per Boe)         58.94     59.82     61.55     62.66
 Oil, gas and NGLs (per Mcfe)        9.82      9.97      10.26     10.44
COST DATA
 Lease operating expenses            $50,517   $51,555   $103,561  $96,035
 Salaries, general and               15,198    13,143    29,150    26,848
administrative expenses
 DD&A expense on oil and gas         86,295    86,357    160,827   170,181
properties
AVERAGE COSTS
Lease operating expenses (per Boe)  $12.23    $14.01    $13.38    $12.96
 Lease operating expenses (per Mcfe) 2.04      2.33      2.23      2.16
Salaries, general and               3.68      3.57      3.77      3.62
administrative expenses (per Boe)
 Salaries, general and               0.61      0.60      0.63      0.60
administrative expenses (per Mcfe)
 DD&A expense on oil and gas         20.88     23.46     20.78     22.97
properties (per Boe)
 DD&A expense on oil and gas         3.48      3.91      3.46      3.83
properties (per Mcfe)
AVERAGE SHARES OUTSTANDING – Diluted  48,725    48,344    48,691    48,322

STONE ENERGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
                                        Three Months Ended  Six Months Ended

                                        June 30,            June 30,
                                        2013      2012      2013      2012
 Operating revenue:
 Oil production                 $184,498  $182,181  $371,423  $383,939
 Gas production                 47,832    28,146    84,654    57,003
 Natural gas liquids           11,200    9,866     20,378    23,318
production
 Other operational income       979       952       1,786     1,842
 Derivative income, net         1,368     5,416     147       4,931
 Total operating    245,877   226,561   478,388   471,033
revenue
 Operating expenses:
 Lease operating expenses       50,517    51,555    103,561   96,035
 Transportation, processing     8,896     5,492     14,293    9,149
and gathering
 Other operational expense      73        71        145       113
 Production taxes               4,091     2,358     6,180     5,736
 Depreciation, depletion and    87,209    87,133    162,644   171,708
amortization
 Accretion expense              8,318     8,255     16,581    16,521
 Salaries, general and          15,198    13,143    29,150    26,848
administrative expenses
 Incentive compensation         2,050     2,398     3,481     3,840
expense
Total operating     176,352   170,405   336,035   329,950
expenses
Income from operations           69,525    56,156    142,353   141,083
Other (income) expenses:
 Interest expense               8,895     7,684     18,530    13,415
 Interest income                (115)     (79)      (232)     (110)
 Other income, net              (682)     (366)     (1,408)   (786)
Total other         8,098     7,239     16,890    12,519
expenses
 Income before taxes             61,427    48,917    125,463   128,564
 Provision (benefit) for income
taxes:
 Current                        (6,993)   (665)     (10,739)  569
 Deferred                       29,398    19,035    56,422    46,474
 Total income       22,405    18,370    45,683    47,043
taxes
Net income                        $39,022   $30,547   $79,780   $81,521





STONE ENERGY CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(In thousands)
(Unaudited)
                                        Three Months Ended  Six Months Ended

                                        June 30,            June 30,
                                        2013      2012      2013      2012
Net income as reported                  $39,022   $30,547   $79,780   $81,521
Reconciling items:
Depreciation, depletion and             87,209    87,133    162,644   171,708
amortization
Deferred income tax provision           29,398    19,035    56,422    46,474
Accretion expense                       8,318     8,255     16,581    16,521
Stock compensation expense              2,570     2,521     4,866     4,271
Non-cash interest expense               4,140     3,705     8,181     5,278
Other                                   (1,074)   (4,048)   207       (3,553)
Discretionary cash flow                 169,583   147,148   328,681   322,220
Changes in income taxes payable         (6,997)   (1,274)   (16,399)  (3,921)
Settlement of asset retirement          (22,455)  (18,938)  (37,335)  (21,918)
obligations
Other working capital changes           (10,924)  3,552     1,026     (46,961)
Net cash provided by operating          $129,207  $130,488  $275,973  $249,420
activities





STONE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
                                                     June 30,     December 31,
                                                     2013         2012
Assets
Current assets:
 Cash and cash equivalents                   $226,372     $279,526
 Accounts receivable                         166,150      167,288
 Fair value of hedging contracts             30,053       39,655
 Current income tax receivable               26,530       10,027
 Deferred taxes                              15,653       15,514
 Inventory                                   4,006        4,207
 Other current assets                        3,872        3,626
Total current assets                   472,636      519,843
Oil and gas properties, full cost method of
accounting:
 Proved                                      7,478,481    7,244,466
 Less: accumulated depreciation, depletion   (5,671,005)  (5,510,166)
and amortization
 Net proved oil and gas properties           1,807,476    1,734,300
 Unevaluated                                 534,979      447,795
Other property and equipment, net                    22,517       22,115
Fair value of hedging contracts                      13,221       9,199
Other assets, net                                    55,066       43,179
 Total assets                                $2,905,895   $2,776,431
Liabilities and Stockholders' Equity
Current liabilities:
 Accounts payable to vendors                 $93,965      $94,361
 Undistributed oil and gas proceeds          27,280       23,414
 Accrued interest                            18,059       18,546
 Fair value of hedging contracts             1,880        149
 Asset retirement obligations                63,646       66,260
 Other current liabilities                   9,705        16,765
 Total current  liabilities            214,535      219,495
8⅝% Senior Notes due 2017                            375,000      375,000
7½% Senior Notes due 2022                            300,000      300,000
1¾% Senior Convertible Notes due 2017*               245,485      239,126
Deferred taxes                                       366,077      310,830
Asset retirement obligations                         420,417      422,042
Fair value of hedging contracts                      436          1,530
Other long-term liabilities                          32,909       36,275
Total liabilities                            1,954,859    1,904,298
Common stock                                         487          484
Treasury stock                                       (860)        (860)
Additional paid-in capital                           1,389,898    1,386,475
Accumulated deficit                                  (463,019)    (542,799)
Accumulated other comprehensive income               24,530       28,833
 Total stockholders' equity                  951,036      872,133
 Total liabilities and stockholders' equity  $2,905,895   $2,776,431



*Face value of $300 million

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SOURCE Stone Energy Corporation

Website: http://www.stoneenergy.com