Stone Energy Corporation announces third quarter 2013 results

Tuesday, November 5, 2013      
 
  • 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.

Stone Energy Corporation (NYSE: SGY) announced financial and operational results for the third quarter of 2013 and provided updated guidance.

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 theSan 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.

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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 $0.39per 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)

Fourth Quarter

Full Year

Production - MBoe per day

(MMcfe per day)

42.5 – 45.5

(255 – 273)

44.5 – 45.5

(267 – 273)

Lease operating expenses (in millions)

(excluding transportation/processing expenses)

-

$210 - $220

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

Volume

(MMBtus/d)

Swap

Price

Daily

Volume

(Bbls/d)

Swap

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

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.comfor 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.

STONE ENERGY CORPORATION

SUMMARY STATISTICS

(In thousands, except per share/unit amounts)

(Unaudited)

Three Months Ended

September 30,

Nine Months Ended

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 Ended

September 30,

Nine Months Ended

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 Ended

September 30,

Nine Months Ended

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


 

Article Tags

Stone Energy United States North America Finance Operations Update Production Update Deepwater Gulf Of Mexico Spud Watch


This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More


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