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Stone Energy Beats Overall

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Stone Energy Corp. reported fourth-quarter 2012 earnings of 89 cents per share, which comfortably surpassed the Zacks Consensus Estimate of 55 cents. However, the quarterly earnings were down 4.3% from the year-earlier profit of 93 cents per share on lower price realization.

Total operating revenue increased 14% year over year to $254.9 million from $223.6 million and beat the Zacks Consensus Estimate of $240.0 million.

For full-year 2012, the company earned $3.03 per share compared with the year-earlier profit of $3.97 and beat the Zacks Consensus Estimate of $2.71 per share. Total revenue was $951.5 million, representing more than 9% increase from the year-ago level of $869.9 million.

Operational Highlights

During the quarter, production averaged 270 million cubic feet of gas equivalent per day (MMcfe/d), up 26.2% from the year-earlier level of 214 MMcfe/d. Of the total production, natural gas accounted for 46% while 44% was oil and the remaining 10% natural gas liquids (NGL - Free Report) .

Overall realization on a per Mcfe basis amounted to $10.21 in the reported quarter versus $11.34 per Mcfe in fourth quarter 2011. Natural gas prices decreased to $3.79 per Mcf from $4.11 per Mcf in the year-ago quarter, while oil price was $106.48 per barrel (down 3.5% on an annualized basis). Natural gas liquids prices also decreased 41.2% from the year-ago quarter to $35.96 per barrel.

On the cost front, unit lease operating expenses increased to $2.33 per Mcfe from $2.31 per Mcfe in the year-ago quarter. Depreciation, depletion and amortization was $3.32 per Mcfe (versus $3.80 per Mcfe), while salaries, general and administrative (SG&A) expenses came in at 57 cents per Mcfe (versus 54 cents per Mcfe).


At quarter end, the company had approximately $279.5 million in cash and $914.0 million in long-term debt, with a debt-to-capitalization ratio of 51.2% versus 49.5% in the preceding quarter. Discretionary cash flow decreased 6% year over year to $153.9 million.


For the upcoming quarter, the company expects net daily production of 230−240 MMcfe per day. For full-year 2012, the company anticipates total volume in the range of 240–255 MMcfe per day.

The company has projected its capital outlay for the year at $650 million and expects the tax rate at 35–37%. In 2013, Stone estimates lease operating expenses at $205–$225 million, transportation, processing and gathering expenses at $26–$32 million, and salaries, general & administrative expenses at $55–$60 million.


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.

However, as is the case with other independent exploration and production companies, results for Stone Energy are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces.

Stone Energy carries a Zacks Rank #3, equivalent to a short-term Hold rating. However, there are other stocks in the oil and gas sector – NGL Energy Partners LP (NGL - Free Report) , Laclede Group Inc and Calumet Specialty Products Partners LP (CLMT - Free Report) – which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.

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