Stone Energy Corporation (SGY)

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Stone Energy Corp (SGY)

Q1 2013 Earnings Call

May 07, 2013 11:00 AM ET


David Welch - Chairman and CEO

Ken Beer - EVP and CFO


Michael Glick - Johnson Rice

Dave Kistler - Simmons & Company

Samuel Colbert - University of California

Mario Barraza - Tuohy Brothers

Hubert van der Heijden - Tudor Pickering Holt

Dave Kistler - Simmons & Company



Good morning. My name is Mellissa and I will be your conference operator today. At this time I would like to welcome everyone to the Stone Energy First Quarter 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.

Thank you. Mr. Welch, you may begin your conference.

David Welch

Okay, thank you very Mellissa and welcome everyone to our first quarter 2013 earnings conference call. Joining us this morning is Ken Beer, our Executive Vice President and Chief Financial Officer. Ken will discuss our quarterly financial results and then return the floor to me where I will discuss our progress in implementing our strategic plan. After that we will be happy to answer your questions. So, with that, Ken.

Ken Beer

Thanks Dave, let me start with the forward-looking statement. In this conference call we will 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 Form 10-K and our soon to be filed first quarter 10-Q 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 to be 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 reconciliation between the differences between these financial measures and the most directly comparable GAAP financial measures.

And with that, you’ve read and through the first quarter press release in great detail. We will assume everyone has seen the release and the attached financials accordingly our focus on selected financial items on this call. Our discretionary cash flow for the quarter was $159 million or over $3.15 per share and earnings for the quarter were $40.8 million or $0.82 per share; with both of these results being well above the analysts’ first call estimates.

Production for the quarter came in at 40,000 barrel equivalents per day or 241 million cubic feet a day, just above the upper end of our guidance with a split of approximately 46% oil, 6% NGLs and 48% natural gas. Production of natural gas, NGL and condensate was affected by the previously announced third party pipeline issues in West Virginia which restricted volumes in the first quarter and into the second quarters as well.

However, the Williams pipeline has been fully repaired although there is still some restriction due to high pipeline pressure from liquid build up.

Our production guidance for the second quarter 2013 is 38,000 to 40,000 barrel a day equivalents per day or 230 million cubic feet to 240 million cubic feet equivalence per day which is flat with the first quarter guidance. The Williams pipeline restrictions throughout April and into May and one week compressor change out at Pompano field which added down for the week and have been factored into the guidance.

Our guidance for the year remains it 40,000 to 43,000 Boe per day or 240 million cubic feet to 255 million cubic feet equivalence per day with the production mix becoming more gas weighted as we progressed through the year.

Our quarterly oil price utilization remains above $100 per barrel as the Louisiana Sweet premium remain above that WTI; however, there has been a narrowing of this differential which is narrowed down to around $10 per barrel.

Our NGL prices were up versus the fourth quarter to just over $42 per barrels as there was a greater proportion of the higher price Gulf of Mexico NGLs due to the restricted Marcellus volumes just wanted to highlight them.

On the cost side, our LOE was about $53 million for the quarter in line with our expectations. The transportation processing gathering expense of $5.4 million was a little light due to the reduced Appalachian volumes; we would expect this expense that year to trend upward as the Appalachian volumes increase.

Our DD&A rate for the quarter averaged about $3.44 per mcfe and then accretion expense should remained just under $8.5 million per quarter going forward throughout the year. Our G&A expense also included a positive adjustment of $1.5 million this quarter due to on insurance reimbursement as noted in our last conference call we do expect G&A to trend upward as we’ve seen increases in the personnel and salaries, particularly as we step up our deep-water efforts.

Reported interest expense of $9.6 million incorporates the full quarter of 300 million 7.5% notes issued in mid fourth quarter of 2012 and still contains about $4 million in non-cash interest primarily tied to the convertible notes accretion. Regarding taxes, we’re still projecting roughly at 36% tax rate although for the first quarter; we show a $3.7 million current tax benefit which is in expected tax refund from the carry back of the current year’s expected tax loss.

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