Stone Energy Corporation (SGY)

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Stone Energy Corp (SGY)

Q2 2013 Earnings Conference Call

August 6, 2013 10:00 AM ET


David H. Welch – Chairman, President and Chief Executive Officer

Kenneth H. Beer – Executive Vice President, Chief Financial Officer


David W. Kistler – Simmons & Company International

Michael Glick – Johnson Rice & Co.

Tom Nowak – Advent Capital

Richard Tullis – Capital One Southcoast

Doug Dyer – Heartland Funds

Curtis Trimble – Global Hunter Securities



Good morning. My name is Debbie and I will be your conference operator today. At this time, I would like to welcome everyone to the Stone Energy Second Quarter 2013 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. Mr. Welch, you may now begin your call.

David H. Welch

Okay. Thank you, Debbie. This is Dave Welch, Chairman and CEO and with me this morning is Ken Beer, our Executive Vice President, Chief Financial Officer. Ken is going to discuss our quarterly financial results and then I’ll provide an update on our progress in implementing our strategic plan. We’ll then follow this with your questions. Ken?

Kenneth H. Beer

Thank you, Dave. Let me start with forward-looking statements. In this conference call, we may make forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.

These forward-looking statements are subject to all of the risks and uncertainties normally incident to the exploration for and the development, production and sales of oil and gas. We urge you to read our 2012 annual report on Form 10-K and the recent 10-Q that should be filed tomorrow for discussion of the risks that could cause our actual results to differ materially from those that 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 a reconciliation of the differences between these measures and the most directly comparable GAAP financial measures.

Let me go on rather than go through the second quarter results in great detail, we will assume that people have seen the press release and attached financials. Accordingly, I will focus on the selective financial items on the call. First our discretionary cash flow for the quarter was $170 million or $3.40 per share and the earnings for the quarter were $39 million or $0.78 per share with both of these results significantly higher than the analyst first call estimates either production for the quarter came in at over 45,000 Boe per days or over 270 million cubic feet equivalents per day are well above the upper end of our guidance which was 250 million cubic feet a day above.

Our Marcellus volumes were strong contributor as our production fall on the Williams pipeline repairs in early May have been above expectations and projections. Also early production in June from the third well at the La Cantera was also helpful and importantly an active well work program helped our base Gulf of Mexico volumes for the quarter as well.

The production split for the quarter was approximately 43% oil, 10% NGLs and 47% natural gas; NGL production has certainly showed an increase this quarter as both Appalachia and La Cantera through out NGL volumes. Our production guidance for the third quarter for 2013 is 42,000 barrels to 45,000 barrels equivalents a day or about 252 million cubic feet to 270 million cubic feet equivalents per day. We are currently at or slightly above the upper end of that range, but we do have some hurricane downtime baked into our numbers.

Our guidance for the year has also increased to 41,000 barrels to 44,000 barrels equivalents a day. 246 million cubic feet to 264 million cubic feet equivalents per day which also incorporates potential hurricane and some operational downtime.

Our quarterly oil prices realizations remained above a $100 per barrel and however there has been a narrowing of the Louisiana Sweet Premium above WTI which is now down to around $5 a barrel versus WTI still for us a very attractive price. Our realized NGL prices were down sharply versus the first quarter to under $30 per barrel as the Appalachian NGL prices continue to be soft and we also had some pricing adjustments versus the first quarter of the year due to timing lag on the reporting that we get from the NGL facilities, we would expect our prices to remain in the low-to-mid $30 per barrel range for the remainder of the year.

Overall gas prices weakened during the quarter especially in Appalachia, but our gas hedge position help to keep our realized price above the $4 per Mcf mark.

On the cost side, our LOE was around $50 million for the quarter reducing our unit LOE per Mcfe to around $0.02 or $12 per Boe. Although we might see this creep back up very slightly in the third or fourth quarter our operations guys are clearly doing a good job in keeping LOE cost down. The transportation processing and gathering expense of almost $9 million mirrored the big increase in NGL volumes especially in Appalachia given the increased production guidance for NGLs; we have also increased our guidance for this expense line.

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