Stone Energy Corporation (SGY)

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Stone Energy Corporation (SGY)

Q4 2012 Earnings Conference Call

February 26, 2013; 10:00 a.m. ET


David Welch - Chairman & Chief Executive Officer

Ken Beer - Executive Vice President & Chief Financial Officer


Dave Kistler - Simmons & Company

Michael Glick - Johnson Rice

Chad Mabry - KLR Group

Curtis Trimble - Global Hunter Securities

Nick Pope - Dahlman Rose

Shawn Steven (ph) - Oppenheimer

Mario Barraza - Tuohy Brothers

Hubert van der Heijden - Tudor Pickering Holt



Good morning. My name is Stephanie and I will be your conference operator today. At this time I would like to welcome everyone to the fourth quarter and year-end 2012 earnings conference call.

All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions). Thank you.

I’d now like to turn the call over to David Welch, you may begin your conference.

David Welch

Okay, thank you very much Stephanie and welcome everyone once again to our 2012 year-end earnings conference call. Joining us this morning is Ken Beer, Executive Vice President and Chief Financial Officer. Ken will discuss our financial results and then turn it back to me to discuss our progress implementing our strategic plan. After that we will be happy to answer your questions. So Ken.

Ken Beer

Thanks Dave, let me start with the forward-looking statement. In this conference call we may make forward-looking statements within the meaning of the Securities Act of 1933 and Securities Exchange Act of 1934. These forward-looking statements are subject to all the risks and uncertainties normally incident to the exploration for and development and production and sales of oil and natural gas.

We urge you to read our 2012 Annual Report on 10-K that will be filed later this week for a discussion of the risks that could cause our actual results to differ materially from those and any forward-looking statements we may make today.

In addition, in this call we may refer to financial measures that may be deemed non-GAAP financial measures as defined under the exchange act. Please refer to the press release we issued yesterday, which is posted on our website for a reconciliation of the differences between these financial measures and the most directly comparable GAAP financial measures.

With that out of the way, I’ll move forward. Again, I won’t go through the year 2012 year-end financials in great detail, but assume you’ve read the press release and the attached financials and we’ll try to focus on some selected items on the call.

Our discretionary cash flow for the quarter was $154 million or over $3 per share and for the year it was just under $620 million or a bad debt of $12.60 or so per share. The earnings for the quarter were $44 million or $0.89 per share and for the year earnings were $149 million or just over $3 per share; all of these results were well above the announced first call estimates. It’s just a good solid year with a good end of the year quarter.

Production for the quarter came in at 45,000 barrel equivalents per day or 270 million cubic feet equivalents at the upper end of our guidance and about 42,000 barrels per day or 252 million cubic feet equivalence for the year, with a split of approximately 46% oil, 8% NGOs and 46% natural gas.

Our production guidance for the first quarter 2013 is around 38,000 to 40,000 barrel equivalents per day or 230 mcf to 240 mcf per day. This is clearly lower than the fourth quarter 2012 production, primarily due to the Mary Field in Appalachia being down from virtually all of January and February.

As noted in the press release, after having heavy rainfall in late December that came in our Williams pipeline, which we produce into, experienced a couple of land slips on the hill side, which caused some pipeline damage for the Williams line. At first the repairs were thought to be relatively minor, but upon further investigation the decision was made by Williams to more fully repair the sections of the line.

Today the line has been repaired and although Williams has experienced some minor restart hiccups, we expect to be at full production in the Mary Field by early March. However this downtime affected approximately 60 million cubic feet day equivalence in volumes for January and February, clearly impacting our first quarter 2013 production, which will also impact our full year production guidance with a slight downward adjustment from a range of 41,000 to 44,000 barrels per day, down to the 40,000 to 43,000 barrels per day or 240 million, 255 million cubic equivalence per day for 2013.

We expect a little over 50% of the 2013 volumes to be natural gas with the remainder oil and NGO. Oil price utilization remained above $100 per barrel for the quarter and for the year as the Louisiana Sweet premium above WTI was over $20 for the quarter and $16 for the year. This positive differential continues into the first quarter of 2013, with LOS currently trading around $20 per barrel above WTI. Our NGO prices were just under $35 per barrel, as the NGO’s continue to be priced well below their historical ratio, the historical norm to the WTI.

Our realized natural gas price for the quarter was $3.40 or actually $3.80 after hedging. Not great, but certainly a lot better than the sub $3 and even sub $2 pricings we experienced back in 2012, early in that year.

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