We retained our Outperform recommendation on
Stone Energy Corporation
) on Jan 8, 2014. The company's strategy of offloading its
non-core upstream properties will prove beneficial over time,
simultaneously creating a portfolio with stronger growth from a
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Stone Energy, a Zacks Rank #2 (Buy) stock, has a favorable
position in the industry with widespread high yielding inventory.
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 Gulf of Mexico (GoM) shelf as well as
the Marcellus region.
Recently, the company inked a joint venture deal with
) for the exploration of four deepwater prospects in the GoM.
This minimizes the burden of capital intensive prospects on Stone
Energy and provides it with an experienced partner boasting
technical expertise in the GoM.
Stone Energy's Gulf operations are back on track and its U.S.
land activities (additional Marcellus results, deep onshore
exploration results and Alberta Bakken results) are also
significant tailwinds. Importantly, year-end reserves are
expected to grow with success in the Pompano field, Appalachia
and the Marcellus Shale programs.
A number of opportunities in new well production (like Parmer
well in the Wideberth prospect) and continued activity in the La
Cantera prospect, including drilling commencement at the
Taildancer prospect in Ship Shoal 113, the Taggart prospect in
Mississippi Canyon 816 and San Marcos prospect at Mississippi
Canyon 983 could significantly improve revenues.
Further, permits for the Phinisi and Floyd prospects along with
the interests purchased in Pompano and Mica fields in the GoM
) are expected to place the company in favorable light.
In view of the several bullish prospects, Stone Energy raised the
production guidance for the fourth quarter and full-year 2013.
The company estimates 42.5-45.5 Mboe (255-273 MMcfe per day)
yield per day for the fourth quarter. The full-year guidance has
been increased from 43.5-45.0 Mboe (261-270 MMcfe per day) to
44.5-45.5 Mboe per day (267-273 MMcfe per day).
Other Stocks to Consider
Another stock worth considering in the oil & gas sector is
Athlon Energy Inc.
) with a Zacks Rank #1 (Strong Buy).