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Louisiana-based independent oil and gas explorer, Stone Energy Corporation (SGY - Analyst Report) provided encouraging drilling results and raised its production guidance cum capital expenditure budget.

Stone Energy provided an update on the deepwater Taggart prospect, including the exploratory well drilled at Mississippi Canyon 816. The project where the company owns 23% working interest, is operated by privately owned LLOG Exploration Offshore, L.L.C. The duo has completed drilling operations in the project. The well has been logged; and pressure readings, cores and fluid samples have been taken in the Pliocene and Upper Miocene section sands. The data indicates a discovery with approximately 90 feet of net oil and gas condensate pay in two sands.

The company also made a discovery 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 Energy is the operator here with a 100% working interest.

Finally, a rig for the deepwater San Marcos prospect at Mississippi Canyon 983 is on location and has begun drilling. Stone holds a 25% working interest in the prospect which is operated by Apache Corporation (APA - Analyst Report).

Eyeing such bullish prospects, Stone Energy raised the production guidance for both the third quarter and full year 2013. Third quarterly production guidance was raised from 42–45 Mboe per day (252–270 MMcfe per day) to 46–49 Mboe per day (276–294 MMcfe per day). The full year guidance has been increased from 41–44 Mboe per day (246–264 MMcfe per day) to 43.5–45.0 Mboe per day (261–270 MMcfe per day).

Additionally, Stone's board of directors has authorized an increase in the 2013 capital expenditure budget from $650 million to $710 million. Most of the increased capex is expected to be in the Gulf of Mexico (GoM) deepwater shelf, with a minor increase in the Appalachia area.

Stone Energy is an independent oil and natural gas exploration and production company headquartered in Lafayette, La. with additional offices in New Orleans, Houston and Morgantown, W. Va.  

Stone Energy is well placed in the industry with a widespread and high-yielding inventory. The company boasts an extensive capital project inventory and generates surplus cash flow with no bank debt. Although Stone Energy aims to apportion its capital across its portfolio, the focus will be on the GoM shelf as well as the Marcellus region.

Stone Energy currently carries a Zacks Rank #3 (Hold). However, there are other Zacks Ranked #1 (Strong Buy) stocks in the oil and gas industry such as Carrizo Oil & Gas Inc. (CRZO - Snapshot Report) and Whiting Petroleum Corp. (WLL - Snapshot Report) that appear attractive in the short term.

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