Stone Energy Earnings Miss on Realization & Production Fall - Analyst Blog

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Stone Energy Corp. ( SGY ) posted second-quarter 2014 earnings of 8 cents per share, which lagged the Zacks Consensus Estimate of 36 cents. The reported figure also decreased from 78 cents per share earned in the year-earlier quarter. The decline was due to both lower price realization and production.

Total operating revenue fell 15.8% year over year to $207 million in the quarter from approximately $245.9 million. The reported figure was also short of the Zacks Consensus Estimate of $220 million.

Operational Highlights

During the quarter, production averaged 264.3 million cubic feet of gas equivalent per day (MMcfe/d), down 3% from the prior-year quarter level of 272.4 MMcfe/d. Of the total production, natural gas accounted for nearly 51%, oil constituted 37% and the remaining 12% was natural gas liquids (NGL).

Overall realization on a per Mcfe basis was $8.52 in the reported quarter versus $9.82 per Mcfe in second-quarter 2013. Natural gas price of $3.77 per Mcf was down from $4.07 per Mcf in the year-ago quarter, while natural gas liquids price came in at $34.12 per barrel (up 24% on an annualized basis). Oil price, however, decreased 7.9% from the year-ago quarter to $96.15 per barrel.

On the cost front, unit lease operating expenses decreased to $2.06 per Mcfe (versus $2.04 per Mcfe in the year-ago quarter). Depreciation, depletion and amortization was $3.82 per Mcfe (versus $3.48 per Mcfe), while salaries, general and administrative (SG&A) expenses came in at 69 cents per Mcfe (versus 61 cents per Mcfe).

Liquidity

At the quarter-end, Stone Energy had approximately $333.9 million in cash and $1,033.9 million in long-term debt, with a debt-to-capitalization ratio of 50.9% versus 51.1% in the preceding quarter. Discretionary cash flow fell 30.7% year over year to $117.5 million.

Guidance

For the third quarter of 2014, the company expects net daily production of 222−234 MMcfe. For full-year 2014, it anticipates total volume in the range of 246−264 MMcfe per day. Stone Energy expects its capital outlay projection for full-year 2014 to be $825 million.

Outlook

Lafayette, LA-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 Gulf of Mexico (GoM).

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

At present, Stone Energy has a Zacks Rank #3 (Hold). Investors interested in the oil and gas sector could consider stocks like Weatherford International plc ( WFT ), Sasol Ltd. ( SSL ) and Cameron International Corp. ( CAM ). All of these carry a Zacks Rank #1 (Strong Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: NGL , WFT , CAM , SGY , SSL

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