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Stone Energy Corp. Reports Operating Results (10-Q)

August 05, 2010 | About:
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10qk

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Stone Energy Corp. (SGY) filed Quarterly Report for the period ended 2010-06-30.

Stone Energy Corp. has a market cap of $673.7 million; its shares were traded at around $13.9 with a P/E ratio of 4.3 and P/S ratio of 0.9. Stone Energy Corp. had an annual average earning growth of 9% over the past 10 years.SGY is in the portfolios of Westport Asset Management, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, George Soros of Soros Fund Management LLC, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Net cash flow used in financing activities totaled $61.0 million for the six months ended June 30, 2010, which primarily represents repayments of borrowings under our bank credit facility of $125.0 million, the redemption of our 81/4% Senior Subordinated Notes due 2011 of $200.5 million, net of proceeds from the public offering of our 85/8% Senior Notes due 2017 of approximately $275 million less $9.7 million of deferred financing costs. Net cash flow used in financing activities totaled $40.5 million for the six months ended June 30, 2009, which primarily represents repayments of borrowings under our bank credit facility of approximately $100 million net of proceeds from the sale of common stock of approximately $60.5 million.

Capital Expenditures. During the three months ended June 30, 2010, additions to oil and gas property costs of $70.8 million included $24.8 million of lease and property acquisition costs, $4.1 million of capitalized salaries, general and administrative expenses (inclusive of incentive compensation) and $7.2 million of capitalized interest. During the six months ended June 30, 2010, additions to oil and gas property costs of $134.6 million included $50.8 million of lease and property acquisition costs, $9.0 million of capitalized salaries, general and administrative expenses (inclusive of incentive compensation) and $13.6 million of capitalized interest. These investments were financed by cash flow from operations.

Bank Credit Facility. On August 28, 2008, we entered into an amended and restated revolving credit facility totaling $700 million, maturing on July 1, 2011, with a syndicated bank group. In May 2010, our borrowing base was reaffirmed at $395 million. At June 30, 2010, we had $50 million in borrowings under our bank credit facility, letters of credit totaling $63.1 million had been issued pursuant to our bank credit facility, and the weighted average interest rate under our bank credit facility was approximately 2.6%. As of August 4, 2010, we had $50 million of outstanding borrowings under our bank credit facility and letters of credit totaling $63.1 million had been issued pursuant to our bank credit facility, leaving $281.9 million of availability under our bank credit facility. Our bank credit facility is guaranteed by all of our material direct and indirect subsidiaries, including Stone Offshore.

Prices. Prices realized during the second quarter of 2010 averaged $72.14 per Bbl of oil and $5.46 per Mcf of natural gas, or 7% lower, on an Mcfe basis, than second quarter 2009 average realized prices of $69.93 per Bbl of oil and $6.41 per Mcf of natural gas. During the six months ended June 30, 2010, average realized prices were $71.43 per Bbl of oil and $5.71 per Mcf of natural gas, compared to $63.01 per Bbl of oil and $6.73 per Mcf of natural gas for the comparable 2009 period. All unit pricing amounts include the cash settlement of effective hedging contracts.

We enter into various hedging contracts in order to reduce our exposure to the possibility of declining oil and gas prices. Our effective hedging transactions increased our average realized natural gas price by $0.95 per Mcf and decreased our average realized oil price by $4.02 per Bbl in the second quarter of 2010. During the second quarter of 2009, our effective hedging transactions increased our average realized natural gas price by $2.62 per Mcf and increased our average realized oil price by $12.57 per Bbl. Effective hedging transactions for the six months ended June 30, 2010 increased our average realized natural gas price by $0.75 per Mcf and decreased our average realized oil price by $4.95 per Bbl. During the six months ended June 30, 2009, effective hedging transactions increased our average realized natural gas price by $2.48 per Mcf and increased our average realized oil price by $13.28 per Bbl.

Derivative Income/Expense. During the year-to-date periods ended June 30, 2010 and 2009, certain of our derivative contracts were determined to be partially ineffective because of differences in the relationship between the fixed price in the derivative contract and actual prices realized. Net derivative income for the quarter ended June 30, 2010, totaled $2.2 million, consisting of $1.2 million of cash settlements on the ineffective portion of derivative contracts, plus $1.0 million of changes in the fair market value of the ineffective portion of derivative contracts. Net derivative expense for the quarter ended June 30, 2009, totaled $0.7 million, consisting of $1.5 million of cash settlements on the ineffective derivative contracts, less $2.2 million of changes in the fair market value of the ineffective portion of derivative contracts. Net derivative income for the six months ended June 30, 2010 totaled $3.4 million, consisting of $1.6 million of cash settlements on the ineffective portion of the derivative contracts, plus $1.8 million of changes in the fair market value of the ineffective portion of derivative contracts. Net derivative income for the six months ended June 30, 2009 totaled $3.2 million, consisting of $7.6 million of cash settlements on the ineffective portion of the derivative contracts, less $4.4 million of changes in the fair market value of the ineffective portion of derivative contracts.

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