Louisiana-based Stone Energy Corporation (SGY - Free Report) has inked a definitive agreement to divest its non-core Gulf of Mexico (GoM) conventional shelf properties to Talos Energy Offshore LLC. Stone Energy will raise cash proceeds of $200 million and assume future undiscounted abandonment liabilities projected at about $117 million.
For the first quarter of 2014, the divested properties accounted for production volumes of about 57 million cubic feet equivalent (MMcfe) per day (58% natural gas). The estimated proved reserves related to these properties represented about 9% of Stone Energy's year-end 2013 estimated proved reserves. Stone Energy will retain an option for a 50% working interest in the deep drilling rights on the properties.
The transaction, effective Apr 1, 2014, is subject to customary closing conditions and adjustments and will expectedly close by early Aug 2014. Stone Energy will provide an updated 2014 guidance, adjusted for the proposed divestiture after the completion of this transaction.
The GOM deep water, gulf coast deep gas and Appalachian projects remain the key growth drivers for Stone Energy. The sale of its non-core GoM shelf properties will facilitate the company to focus on the development of these properties. The company continues to own working interest in two core operated fields in conventional GoM shelf that produce about 6,000 barrels of oil equivalent per day (86% oil).
Stone Energy has sold assets worth about $300 million in non-core GoM shelf properties, including sale of its two onshore south Louisiana properties in late 2013 and the first quarter of 2014.
At present, Stone Energy is favorably positioned in the industry with widespread high-yielding inventory. Moreover, the company has an extensive capital project inventory. Although Stone Energy aims to apportion the capital across its portfolio, the focus will be on the GoM shelf as well as Marcellus region.
Stone Energy carries a Zacks Rank #3 (Hold). Investors interested in the same sector could consider stocks like Encana Corp (ECA - Free Report) , Magellan Midstream Partners LP (MMP - Free Report) and EQT Corp. (EQT - Free Report) , all of which sport a Zacks Rank #1.