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Stone Energy Earnings Lag Ests, Up YoY

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Stone Energy Corp. reported third-quarter 2013 earnings of 72 cents per share lagging the Zacks Consensus Estimate of 78 cents but increasing 44% from the year-earlier profit of 50 cents. The improvement was mainly attributable to higher natural gas realizations and increased production.
Total operating revenue of $256.7 million increased 12.9% year over year from $227.4 million and comfortably surpassed the Zacks Consensus Estimate of $245.0 million.

Operational Highlights

During the quarter, production averaged 296 million cubic feet of gas equivalent per day (MMcfe/d), up 17.9% from the year-earlier level of 251 MMcfe/d. Of the total production, natural gas accounted for nearly 51% while 40% was oil and the remaining 9% was natural gas liquids (NGL).

Overall realization on a per Mcfe basis amounted to $9.38 versus $9.82 per Mcfe in third quarter 2012. Natural gas prices at $3.80 per Mcf were up from $3.20 per Mcf in the year-ago quarter, while oil price was $103.16 per barrel (down approximately 1% on an annualized basis). Natural gas liquids prices increased 11.0% from the year-ago quarter to $38.77 per barrel.

On the cost front, unit lease operating expenses decreased to $1.98 per Mcfe (versus $2.64 per Mcfe in the year-ago quarter). Depreciation, depletion and amortization was $3.37 per Mcfe (versus $3.83 per Mcfe a year ago), while salaries, general and administrative (SG&A) expenses totaled 52 cents per Mcfe (versus 59 cents per Mcfe).


At quarter end, the company had approximately $243.1 million in cash and $923.7 million in long-term debt, with a debt-to-capitalization ratio of 50.9% versus 49.2% in the preceding quarter. Discretionary cash flow increased 16.2% year over year to $166.1 million.


For the upcoming quarter, the company expects net daily production of 255−273 MMcfe. For full-year 2013, the company anticipates total volume in the range of 267−273 MMcfe per day, up 24.8−27.6% from the 2012 level of 214 MMcfe/d.


Lafayette, Louisiana-based Stone Energy is an independent oil and gas exploration and production company engaged in the acquisition and subsequent exploration, development, operation and production of oil and gas properties, located primarily in the GoM.

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

Stone Energy holds a Zacks Rank #2 (short-term Buy rating). However, there are other stocks in the oil and gas sector – SM Energy Company (SM - Free Report) , Ocean Rig UDW Inc. and TransAtlantic Petroleum Ltd. –  which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.

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