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 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
CFO@StoneEnergy.com.
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
========== ==========
SOURCE Stone Energy Corporation
Kenneth H. Beer, Chief Financial Officer of Stone Energy Corporation,
+1-337-521-2210, fax, +1-337-521-9880, CFO@StoneEnergy.com
