Stone Energy Corporation

Stone Energy Corporation (SGY - Analyst Report) is cheap, trading with a forward P/E of just 7.23. The company has surprised on estimates 3 out of the last 4 quarters by an average of 144.51%.

Company Description

Stone Energy is an independent oil and natural gas exploration company with operations in the Gulf of Mexico, onshore Louisiana and the Appalachia region. The company uses acquisitions and exploration to increase its production volumes.

Stone Energy Surprised on the Third Quarter

On Nov 3, Stone Energy reported third quarter results and beat the Zacks Consensus Estimate handily by 63.64%. Earnings per share were $1.08 compared to the Zacks Consensus of 66 cents.

This was still well under the year ago quarter where the company reported $1.04 per share coming on the back of record oil prices in July 2008.

Prices for the third quarter averaged $77.39 per barrel of oil and $5.90 per thousand cubic feet (Mcf) of natural gas versus year ago prices of $106.81 per barrel and $10.72 per Mcf of natural gas.

Net daily production volumes jumped to 239 million cubic feet of gas equivalent (MMcfe) from 129 MMcfe in the third quarter of 2008 but that quarter saw shut-ins related to Hurricanes Gustav and Ike. Production volumes also increased sequentially from the second quarter of 2009.

For the fourth quarter of 2009, Stone expects more of the same with production levels averaging between 225 and 235 MMcfe.

The company has been adjusting to the new reality in prices and demand throughout 2009. It expects to see increased drilling in its Marcellus shale play in Appalachia and in the GOM deepwater in 2010.

Zacks Consensus Estimates Jump

In the last 3 months, as the outlook for the energy explorers improved, analysts have been raising 2009 and 2010 estimates.

The 2009 Zacks Consensus Estimate is up 179% in the previous 90 days to $2.43 from 87 cents, including 10 cents in the last 30 days.

Similarly, analysts see continuing growth in 2010 with the Zacks Consensus up 13 cents to $2.63 per share in the last month.

Value Fundamentals

Stone Energy is a Zacks #1 Rank (strong buy) stock. It is trading with a price-to-book ratio of 1.94. The company has an outstanding track record on return on equity, with an average of 15.47% over the last 5 years.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

Read the full analyst report on SGY