Stone Energy's EPS Lags, Rev Beats - Analyst Blog

Stone Energy Corp. ( SGY ) has reported third-quarter 2012 earnings of 48 cents per share, which missed the Zacks Consensus Estimate of 52 cents due to lower price realization and higher operating expenses. The quarterly earnings were also down 54.7% from the year-earlier profit of $1.06 per share.

Total operating revenue increased 6% year over year to $227.4 million in the quarter from $214.6 million and beat the Zacks Consensus Estimate of $219.0 million.

Operational Highlights

During the quarter, production averaged 251 million cubic feet of gas equivalent per day (MMcfe/d), up 17.8% from the year-earlier level of 213 MMcfe/d. Of the total production, natural gas accounted for nearly 46% while 45% was oil and the remaining 9% natural gas liquids (NGL).

Overall realization on a per Mcfe basis amounted to $9.82 in the reported quarter versus $10.70 per Mcfe in third quarter 2011. Natural gas prices were down at $3.20 per Mcf from $4.48 per Mcf in the year-ago quarter, while oil price stood at $104.15 per barrel (up 0.6% on an annualized basis). Natural gas liquids prices also decreased 42.6% from the year-ago quarter to $34.93 per barrel.

On the cost front, unit lease operating expenses increased to $2.64 per Mcfe (versus $2.38 per Mcfe in the year-ago quarter). Depreciation, depletion and amortization was $3.83 per Mcfe (versus $3.26 per Mcfe), while salaries, general and administrative (SG&A) expenses came in at 59 cents per Mcfe (versus 37 cents per Mcfe).


At quarter end, the company had approximately $176.2 million in cash and $811.0 million in long-term debt, with a debt-to-capitalization ratio of 49.5% versus 49.3% in the preceding quarter. Discretionary cash flow was down 10.8% year over year to $142.8 million.


For the upcoming quarter, the company expects net daily production of 255−270 MMcfe. For full-year 2012, the company anticipates total volume in the range of 250-255 MMcfe per day, up 17-19% from the 2011 level of 214 MMcfe/d.

The company has maintained its capital outlay projection for the year at $625 million. Earlier, the amount was distributed across Stone's foremost areas with approximately 34% for the Gulf of Mexico (GoM) conventional shelf, 24% for Deep Water/Deep Gas projects, 30% for the Marcellus Shale and 12% for Onshore Oil projects and new ventures.


Lafayette, Louisiana-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 GoM.

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

During the quarter, Stone Energy inked a joint venture deal with ConocoPhillips ( COP ) for exploration of four deepwater prospects in GoM. The company also commissioned the deep gas La Cantera #2 delineation well and completed 21 wells in Mary and Heather fields in the Marcellus shale.

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.

Hence, we maintain our long-term Neutral recommendation for the company, which carries a Zacks #3 Rank, equivalent to a short-term Hold rating.

CONOCOPHILLIPS (COP): Free Stock Analysis Report

STONE ENERGY CP (SGY): Free Stock Analysis Report

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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 Nasdaq, Inc.

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

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