LAFAYETTE, La.,
Nov. 1, 2017 /PRNewswire/ -- Stone
Energy Corporation (NYSE: SGY) ("Stone" or the "Company") today
announced financial and operational results for the third quarter
of 2017. Some items of note include:
- Production volumes averaged 19.2 thousand barrels of oil
equivalent per day for the three months ended September 30, 2017, at the upper end of our third
quarter 2017 guidance
- Positive results from the Rampart Deep exploration well;
follow-up Derbio well to spud in the first half of 2018
- Mt. Providence
development well to spud in December
2017
- Liquidity, including restricted cash, totaled
$420 million at September 30, 2017
Interim Chief Executive Officer and President James M. Trimble stated, "We are pleased to be
progressing our deep water drilling program and are encouraged by
the Rampart Deep results. We are also excited about the
December 2017 spud of Mt.
Providence and the 2018 spud of
Derbio. In addition, we are working with partners to evaluate
several other near-term drilling prospects, both in our portfolio
and outside-generated ideas, and we continue to review a number of
asset acquisition opportunities. Our balance sheet, which
includes over $245 million in
unrestricted cash at quarter end, and an undrawn bank facility
allow us the flexibility to pursue a variety of tactical and
strategic options."
Financial Results
For the quarter ended September 30,
2017, Stone reported net income of $1.3million on oil and gas revenue of
$69.8 million, which included
$7.9 million of non-cash derivative
expense. Net cash provided by operating activities for the
third quarter of 2017 totaled $42.5
million, while discretionary cash flow for the same period
totaled $45.5 million. See the
"Non-GAAP Financial Measure" schedules and the accompanying
financial statements for reconciliations of discretionary cash
flow, a non-GAAP financial measure, to net cash provided by
operating activities.
Net daily production during the third quarter of 2017
averaged approximately 19.2 thousand barrels of oil equivalent
("MBoe") per day, compared to net daily production of
approximately 20.6 MBoe per day for the quarter ended June 30, 2017. Third quarter 2017 volumes
included the effects of one week of planned downtown at the Pompano
platform for the rig demobilization and reinstallation of living
quarters. The production mix for the third
quarter of 2017 was approximately 73% oil, 21% natural gas, and 6%
natural gas liquids ("NGLs"). We expect production rates to
range from 17.0 MBoe per day to 18.0 MBoe per day for the fourth
quarter of 2017, which includes five full days of
downtime from Hurricane Nate and a ten day planned shut-in of the
Pompano platform to replace a compressor engine in
November.
Prices realized during the third quarter of 2017 averaged
$48.13 per barrel of oil,
$2.46 per Mcf of natural gas, and
$21.69 per barrel of NGLs.
Average realized prices for the third quarter of 2016 were
$45.50 per barrel of oil,
$1.93 per Mcf of natural gas, and
$9.72 per barrel of NGLs.
In July 2017, we received a
federal royalty recovery totaling $14.1
million as part of a multi-year federal royalty refund
claim. Approximately $9.6
million of the refund was recognized as other operational
income and $4.5 million as a
reduction of lease operating expenses during the quarter ended
September 30, 2017. Included in
SG&A expenses during the quarter ended September 30, 2017 is a $3.9 million success-based consulting fee
incurred in connection with the federal royalty recovery, resulting
in an overall net gain of $10.2
million.
Lease operating expenses ("LOE") during the third quarter
of 2017 totaled approximately $11.8
million ($6.66 per Boe), and
included approximately $6.7 million
of planned major maintenance expense and the aforementioned
$4.5 million reduction of LOE related
to the federal royalty refund claim, compared to LOE of
$16.6 million ($8.88 per Boe) for the quarter ended June 30, 2017. Adjusting for third quarter
actuals, including the LOE reduction related to the federal royalty
recovery, we now expect our full year 2017 LOE to range from
$58 million to $60 million, which
includes planned major maintenance projects scheduled for the
fourth quarter of 2017.
Transportation, processing, and gathering ("TP&G")
expenses during the third quarter of 2017 totaled approximately
$1.1 million ($0.61 per Boe). We expect TP&G expenses
to approximate $1.0 million in the
fourth quarter of 2017.
Depreciation, depletion, and amortization ("DD&A")
expense on oil and gas properties for the third quarter of 2017
totaled approximately $26.7 million
($15.10per Boe). We expect
DD&A to range from $14 per Boe to
$16 per Boe for the fourth quarter of
2017.
Salaries, general, and administrative ("SG&A")
expenses for the third quarter of 2017 were $15.9 million ($8.98per Boe), compared to SG&A expenses of
$18.5 million ($9.88 per Boe) for the quarter ended June 30, 2017. This included the previously
mentioned charge of approximately $3.9
million of success-based consulting fees paid in connection
with the federal royalty recovery, as well as approximately
$4 million of advisory fees tied to
the Board-requested strategic review. We expect
SG&A cash costs, excluding fees associated with the strategic
review, to approximate $10 million to $11
million for the fourth quarter of 2017, of which we expect
to capitalize approximately 17% - 18%. We capitalized
$2.6 million of SG&A expenses in
the third quarter of 2017.
Incentive compensation expense for the third quarter of
2017 was approximately $4.6 million,
representing the accrual of three-fourths of the estimated annual
incentive following the Board's approval of the incentive and
retention programs in July
2017.
Accretion expense for the third quarter of 2017 was
approximately $8.1 million. We
expect accretion expense to also approximate $8 million in the fourth quarter of
2017.
Other operational expenses for the third quarter of 2017
totaled approximately $0.7 million
and included approximately $0.4
million of stacking charges for the platform rig at Pompano,
while awaiting demobilization.
Net derivative expense for the third quarter of 2017
totaled approximately $6.7 million,
comprised of $1.2 million of income
from cash settlements and $7.9
million of non-cash expense resulting from changes in the
fair value of derivative instruments.
Interest expense for the third quarter of 2017 was
approximately $3.5 million, which
primarily included interest associated with the Company's
$225 million 7.50% Senior Second Lien
Notes due 2022. Capitalized interest was $1.2 million in the third quarter of 2017.
We expect interest expense to remain constant for the fourth
quarter of 2017.
Capital Expenditures Update
Capital expenditures for the third quarter of 2017 were
approximately $34 million, which
included $7 million related to
drilling the Rampart Deep well, before reimbursement of lease
costs, $5 million associated with
removal of the rig and reinstallation of the living quarters at the
Pompano platform, and $20 million of
plugging and abandonment expenditures. In addition,
approximately $2.6 million of
SG&A expense and $1.2 million of
interest expense were capitalized during the quarter ended
September 30, 2017. For the
nine months ended September 30, 2017,
capital expenditures totaled approximately $96 million, which included approximately
$57 million of plugging and
abandonment expenditures. Capitalized SG&A and interest
expenses for the nine months ended September
30, 2017 totaled approximately $7.4
million and $5.2 million,
respectively.
Our Board-approved capital expenditures budget for 2017 is
$181 million and includes
approximately $22 million for
exploration opportunities, $69
million for development activities, and $90 million for the plugging and abandonment of
idle wells and platforms, and excludes capitalized SG&A and
interest expenses. We currently expect to spend less than the
approved 2017 budget.
Liquidity Update
As of September 30, 2017,
Stone's liquidity approximated $420.8
million, which included approximately $137.4 million of undrawn capacity under the
Company's revolving credit facility plus approximately $245.7 million in cash on hand and approximately
$37.7 million in cash being held in a
restricted account to satisfy near-term plugging and abandonment
activities. As of November 1,
2017, Stone had cash on hand of approximately $242 million, and $38 million in cash held in the restricted
abandonment account.
As of September 30, 2017,
Stone's outstanding debt totaled approximately $236 million, consisting of $225 million of 7.50% Senior Second Lien Notes
due 2022 and approximately $11
million outstanding under a building loan. Further,
the Company had no outstanding borrowings and outstanding letters
of credit of approximately $12.6
million under its $150 million
available borrowing base. The borrowing base redetermination
from the bank group is expected in early November 2017.
As of September 30, 2017, we
had a current income tax receivable of $27.7
million, which we expect to collect within the next twelve
months.
We expect that cash flows from operating activities, cash
on hand, and availability under our revolving credit facility will
be adequate to meet the current 2017 operating and capital
expenditures needs of the Company.
Strategic Review
As previously announced, following the
successful completion of the Company's financial restructuring and
emergence from Chapter 11 reorganization, Stone's
Board of Directors (the "Board") retained Petrie Partners LLC
to assist the Board in its determination of the
Company's strategic direction, including assessing its various
strategic alternatives. The Board's assessment with Petrie
Partners is ongoing and there can be no assurance that this
assessment will result in any transaction.
Fresh Start Accounting and Hedge Accounting
Changes
Upon emergence from Chapter 11 reorganization, Stone
adopted fresh start accounting effective February 28, 2017. Under the principles of
fresh start accounting, a new reporting entity was created, and
Stone's assets and liabilities were recorded at their fair values
as of the fresh start reporting date. Also,
effective January 1, 2017, we have
elected to not designate our 2017, 2018, and 2019 commodity
derivative contracts as cash flow hedges for accounting
purposes. Accordingly, the net changes in the mark-to-market
valuations and the monthly settlements on these derivative
contracts will be recorded in earnings through derivative
income/expense. As a result, Stone's financial
statements dated on or after March 1,
2017 will not be comparable with financial statements issued
prior to that date. References to "Predecessor" refer to
Stone prior to the adoption of fresh start accounting while
references to "Successor" refer to Stone subsequent to the adoption
of fresh start accounting. Please review Stone's Quarterly
Reports on Form 10-Q for the periods ended March 31, 2017 and September 30, 2017, respectively, for further
details regarding fresh start accounting and the financial
information presented at the end of this press release.
Operational
Update
Mississippi Canyon 116 - Rampart Deep (Deep
Water). As previously announced, the
Rampart Deep well, operated by Deep Gulf Energy III, LLC,
encountered approximately 107 net vertical feet of liquids-rich
natural gas pay in three primary zones, as interpreted by Stone. In
addition to the reserve potential of Rampart Deep, this well also
provides critical information that reduces the exploration risk of
Stone's Derbio prospect. Completion of the Rampart Deep well
was deferred while the partners analyze the well data, and will be
further evaluated in conjunction with future Derbio drilling
results, which may impact sanctioning of the project. Working
interest partners in the Rampart Deep well are Stone with 40%, Deep
Gulf Energy III, LLC with 30% and entities managed by Ridgewood
Energy Corporation (including Riverstone Holdings, LLC and its
portfolio company ILX Holdings III, LLC) with 30%.
Mississippi Canyon 72 - Derbio (Deep
Water). The Derbio prospect
is located five miles from Stone's Pompano platform and targets the
Miocene interval. Results from the Rampart Deep well reduced
the exploration risk of the Derbio prospect. Current drilling
plans for Derbio target a first half of 2018 spud date. The
well is estimated to take three months to drill, and, if
successful, first production from the Rampart Deep/Derbio project
is expected by late 2019 and could be a multi-well tie back to the
Stone 100% owned Pompano platform.
Working interest partners in the Derbio prospect are Stone
with 40%, Deep Gulf Energy III, LLC with 30% and entities managed
by Ridgewood Energy Corporation (including Riverstone Holdings, LLC
and its portfolio company ILX Holdings III, LLC) with
30%.
Mississippi Canyon 28 - Mt. Providence (Deep
Water). The Mt. Providence prospect is located approximately
five miles from the Pompano platform and targets the Miocene
interval. We currently expect to spud the Mt. Providence development well in December
2017. The well is estimated to take two months to
drill. If successful, the well will be tied back to the
Pompano platform, with first production expected in the second
quarter of 2018. Stone holds a 100% working interest in this
prospect.
Hedge Position
The following table illustrates our derivative positions
for 2017, 2018, and 2019 as of November
1, 2017:
|
Oil Hedging Contracts
|
|
NYMEX
|
|
Put Contracts
|
|
Swap Contracts
|
|
Daily
Volume
(Bbls/d)
|
|
Put
Price
($ per Bbl)
|
|
Daily
Volume
(Bbls/d)
|
|
Swap
Price
($ per Bbl)
|
Feb 2017 – Dec
2017
|
2,000
|
|
$50.00
|
Mar 2017 – Dec
2017
|
1,000
|
|
$53.90
|
Jul 2017 – Dec
2017
|
1,000
|
|
$41.10
|
Oct 2017 – Dec
2017
|
1,000
|
|
$52.10
|
Jan 2018 – Dec
2018
|
1,000
|
|
$54.00
|
Jan 2018 – Dec
2018
|
1,000
|
|
$52.50
|
Jan 2018 – Dec
2018
|
1,000
|
|
$45.00
|
Jan 2018 – Dec
2018
|
1,000
|
|
$51.98
|
|
|
|
|
Jan 2018 – Dec
2018
|
1,000
|
|
$53.67
|
|
|
|
|
Jan 2019 – Dec
2019
|
1,000
|
|
$51.00
|
|
|
|
|
Jan 2019 – Dec
2019
|
1,000
|
|
$51.57
|
|
Collar Contracts
|
|
Daily
Volume
(Bbls/d)
|
Put
Price
($ per Bbl)
|
Call
Price
($ per Bbl)
|
Mar 2017 – Dec
2017
|
1,000
|
$50.00
|
$56.45
|
Apr 2017 – Dec
2017
Jan 2018 – Dec
2018
|
1,000
1,000
|
$50.00
$45.00
|
$56.75
$55.35
|
|
Natural Gas Hedging Contracts
|
|
NYMEX
|
|
|
Swap Contracts
|
|
|
|
Daily
Volume
(MMBtu/d)
|
|
Swap
Price
($ per MMBtu)
|
|
|
Jul 2017 – Dec
2017
|
11,000
|
|
$3.00
|
|
|
|
|
|
|
|
|
Collar Contracts
|
|
Daily
Volume
(MMBtu/d)
|
Put
Price
($ per MMBtu)
|
Call
Price
($ per MMBtu)
|
Jan 2018 – Dec
2018
|
6,000
|
$2.75
|
$3.24
|
|
|
|
|
Other Information
Stone has planned a conference call for 9:00 a.m. Central Time on November 2, 2017 to discuss the operational and
financial results for the third quarter of 2017. The call
will be available through a live webcast link located in the
Investor Center section of the Company's website at
www.StoneEnergy.com. The call will also be accessible by
dialing (844) 632-7353 and requesting the "Stone Energy Call"
approximately ten minutes before the scheduled start time. If
unable to participate in the original call, a webcast replay will
be available three hours after the call through a link in the
Investor Center section of the Company's website.
Non-GAAP Financial Measure
In this press release, we refer to a non-GAAP financial
measure we call "discretionary cash flow." Discretionary cash
flow equals cash flows from operating activities before changes in
operating assets and liabilities. Management believes
discretionary cash flow is a financial indicator of our company's
ability to internally fund capital expenditures and service
debt. Management also believes this non-GAAP financial
measure of cash flow is useful information to investors because it
is widely used by professional research analysts in the valuation,
comparison, rating, and investment recommendations of companies in
the oil and gas exploration and production industry. Discretionary
cash flow should not be considered an alternative to net cash
provided by (used in) operating activities or net income (loss), as
defined by GAAP. See the "Reconciliation of Non-GAAP
Financial Measure" schedules for reconciliations of discretionary
cash flow to net cash provided by (used in) operating
activities.
Forward-Looking Statements
Certain statements in this press release are
forward-looking and are based upon Stone's current belief as to the
outcome and timing of future events. All statements, other than
statements of historical facts, that address activities or results
that Stone plans, expects, believes, projects, estimates, or
anticipates will, should, or may occur in the future, including
future production of oil and gas, future capital expenditures and
drilling of wells, and future financial or operating results are
forward-looking statements. All forward-looking numbers
are approximate. Important factors that could cause
actual results to differ materially from those in the
forward-looking statements herein include, but are not limited to,
the timing, extent, and volatility of changes in commodity prices
for oil and gas; operating risks; liquidity risks, including risks
relating to our bank credit facility and the Company's
ability to access the capital markets; political and
regulatory developments and legislation, including developments and
legislation relating to our operations in the Gulf of Mexico basin; and other risk factors
and known trends and uncertainties as described in Stone's Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current
Reports on Form 8-K as filed with the Securities and Exchange
Commission. For a more detailed discussion of
risk factors, please see Part I, Item 1A, "Risk Factors" of the
Company's most recent Annual Report on Form 10-K and Part II, Item
1A of the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 2017.
Should one or more of these risks or uncertainties occur, or
should underlying assumptions prove incorrect, Stone's actual
results and plans could differ materially from those expressed in
the forward-looking statements. Stone assumes no obligation
and expressly disclaims any duty to update the information
contained herein, except as required by law.
Estimates for Stone's future production volumes are based
on assumptions of capital expenditures levels and the assumption
that market demand and prices for oil and gas will continue at
levels that allow for economic production of these products. The
production, transportation, and marketing of oil and gas are
subject to disruption due to transportation and processing
availability, mechanical failure, human error, hurricanes, and
numerous other factors. Stone's estimates are based on
certain other assumptions, such as well performance and uptime
estimates, which may vary significantly from those assumed. Delays
experienced in well permitting could affect the timing of drilling
and production. Lease operating expenses, which include major
maintenance costs, vary in response to changes in prices of
services and materials used in the operation of our properties, and
the amount of maintenance activity required. Estimates of
DD&A rates can vary according to reserve additions, capital
expenditures, future development costs, and other factors.
Therefore, we can give no assurance that our future production
volumes, lease operating expenses, or DD&A rates, if provided,
will be as estimated.
Stone Energy is an independent oil and natural gas
exploration and production company headquartered in Lafayette,
Louisiana with an additional office in New Orleans.
Stone is engaged in the acquisition, exploration,
development, and production of properties in the Gulf of Mexico basin. For additional
information, contact Kenneth H. Beer, Chief Financial Officer,
at 337-521-2210 phone, 337-521-9880 fax or via e-mail at
CFO@StoneEnergy.com.
STONE ENERGY CORPORATION
|
SUMMARY STATISTICS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
|
Predecessor
|
|
|
Three Months
Ended
September 30,
2017
|
|
Three Months
Ended
September 30,
2016
|
|
Combined Nine
Months Ended
September 30,
2017
|
|
Nine Months
Ended
September 30,
2016
|
|
|
|
|
(1)(2)
|
|
PRODUCTION QUANTITIES
|
|
|
|
|
|
|
|
|
Oil
(MBbls)
|
|
1,285
|
|
|
1,563
|
|
|
3,902
|
|
|
4,746
|
|
Natural gas
(MMcf)
|
|
2,220
|
|
|
8,096
|
|
|
10,630
|
|
|
20,042
|
|
Natural gas liquids
(MBbls)
|
|
114
|
|
|
686
|
|
|
701
|
|
|
1,294
|
|
Oil, natural gas and
NGLs (MBoe)
|
|
1,769
|
|
|
3,598
|
|
|
6,375
|
|
|
9,380
|
|
AVERAGE DAILY PRODUCTION
|
|
|
|
|
|
|
|
|
Oil
(MBbls)
|
|
14.0
|
|
|
17.0
|
|
|
14.3
|
|
|
17.3
|
|
Natural gas
(MMcf)
|
|
24.1
|
|
|
88.0
|
|
|
38.9
|
|
|
73.1
|
|
Natural gas liquids
(MBbls)
|
|
1.2
|
|
|
7.5
|
|
|
2.6
|
|
|
4.7
|
|
Oil, natural gas and
NGLs (MBoe)
|
|
19.2
|
|
|
39.1
|
|
|
23.4
|
|
|
34.2
|
|
REVENUE DATA (in thousands)
(3)
|
|
|
|
|
|
|
|
|
Oil
revenue
|
|
$61,841
|
|
|
$71,116
|
|
|
$189,393
|
|
|
$204,102
|
|
Natural gas
revenue
|
|
5,451
|
|
|
15,601
|
|
|
27,677
|
|
|
43,327
|
|
Natural gas liquids
revenue
|
|
2,473
|
|
|
6,666
|
|
|
14,970
|
|
|
15,119
|
|
Total oil, natural
gas and NGLs revenue
|
|
$69,765
|
|
|
$93,383
|
|
|
$232,040
|
|
|
$262,548
|
|
AVERAGE REALIZED PRICES
(3)
|
|
|
|
|
|
|
|
|
Oil (per
Bbl)
|
|
$48.13
|
|
|
$45.50
|
|
|
$48.54
|
|
|
$43.01
|
|
Natural gas (per
Mcf)
|
|
2.46
|
|
|
1.93
|
|
|
2.60
|
|
|
2.16
|
|
Natural gas liquids
(per Bbl)
|
|
21.69
|
|
|
9.72
|
|
|
21.36
|
|
|
11.68
|
|
Oil, natural gas and
NGLs (per Boe)
|
|
39.44
|
|
|
25.95
|
|
|
36.40
|
|
|
27.99
|
|
AVERAGE COSTS PER BOE
|
|
|
|
|
|
|
|
|
Lease operating
expenses
|
|
$6.66
|
|
|
$4.72
|
|
|
$6.58
|
|
|
$5.90
|
|
Transp, processing
and gathering expenses
|
|
0.61
|
|
|
2.96
|
|
|
1.57
|
|
|
1.99
|
|
Salaries, general and
administrative expenses
|
|
8.98
|
|
|
4.29
|
|
|
7.43
|
|
|
5.14
|
|
DD&A expense on
oil and gas properties
|
|
15.10
|
|
|
16.08
|
|
|
17.45
|
|
|
17.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Results include
operational and financial results from the Appalachia basin through
the close of the sale of Appalachia properties on February 27,
2017.
|
|
|
(2)
|
For illustrative
purposes, the Company has combined the Successor and Predecessor
results to derive combined results for the nine month period ended
September 30, 2017. The combination was generated by addition of
comparable financial statement line items. However, because of
various adjustments to the consolidated financial statements in
connection with the application of fresh start accounting,
including asset valuation adjustments and liability adjustments,
the results of operations for the Successor will not be comparable
to those of the Predecessor. The financial information in the
Consolidated Statement of Operations and Reconciliations of
Non-GAAP Financial Measures on the following pages provides the
Successor's and the Predecessor's GAAP results for the applicable
periods. The Company believes that subject to consideration of the
impact of fresh start accounting, combining the results of the
Predecessor and Successor provides meaningful information about
production, revenues, commodity prices and costs that assists a
reader in understanding the Company's financial results for the
applicable period.
|
|
|
(3)
|
Through December 31,
2016, we designated our commodity derivatives as cash flow hedges
for accounting purposes upon entering into the contracts.
Accordingly, they were recorded as either an asset or liability
measured at fair value and subsequent changes in the derivative's
fair value were recognized in stockholders' equity through other
comprehensive income (loss), net of related taxes, to the extent
the hedge was considered effective. Monthly settlements of
effective hedges were reflected in revenue from oil and natural gas
production. With respect to our 2017, 2018 and 2019 commodity
derivative contracts, we have elected to not designate these
contracts as cash flow hedges for accounting purposes.
Accordingly, the net changes in the mark-to-market valuations and
the monthly settlements on these derivative contracts will be
recorded in earnings through derivative income/expense. As a
result of these mark-to-market adjustments, we will likely
experience volatility in earnings from time to time due to
commodity price volatility. Further, this change in
accounting method effects the comparability of 2017 revenues,
average realized prices and derivative income/expense to 2016
revenues, average realized prices and derivative income/expense,
respectively.
|
STONE ENERGY CORPORATION
|
CONSOLIDATED STATEMENT OF
OPERATIONS
|
(In thousands, except
per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Three Months
Ended
September 30,
2017
|
|
|
Three Months
Ended
September 30,
2016
|
Operating revenue:
|
|
|
|
|
Oil
production
|
$61,841
|
|
|
|
$71,116
|
|
Natural gas
production
|
5,451
|
|
|
|
15,601
|
|
Natural gas liquids
production
|
2,473
|
|
|
|
6,666
|
|
Other operational
income
|
9,760
|
|
|
|
1,044
|
|
Total operating revenue
|
79,525
|
|
|
|
94,427
|
|
Operating expenses: (1)
|
|
|
|
|
Lease operating
expenses
|
11,778
|
|
|
|
16,976
|
|
Transportation,
processing and gathering expenses
|
1,076
|
|
|
|
10,633
|
|
Production
taxes
|
188
|
|
|
|
835
|
|
Depreciation,
depletion and amortization
|
27,553
|
|
|
|
58,918
|
|
Write-down of oil and
gas properties
|
—
|
|
|
|
36,484
|
|
Accretion
expense
|
8,095
|
|
|
|
10,082
|
|
Salaries, general and
administrative expenses
|
15,887
|
|
|
|
15,425
|
|
Incentive
compensation expense
|
4,646
|
|
|
|
2,160
|
|
Restructuring
fees
|
129
|
|
|
|
5,784
|
|
Other operational
expenses
|
703
|
|
|
|
9,059
|
|
Derivative expense,
net
|
6,685
|
|
|
|
199
|
|
Total operating expenses
|
76,740
|
|
|
|
166,555
|
|
|
|
|
|
|
Gain (loss) on
Appalachia Properties divestiture
|
(132)
|
|
|
|
—
|
|
|
|
|
|
|
Income (loss) from operations
|
2,653
|
|
|
|
(72,128)
|
|
Other (income) expenses:
|
|
|
|
|
Interest
expense
|
3,529
|
|
|
|
16,924
|
|
Interest
income
|
(366)
|
|
|
|
(58)
|
|
Other
income
|
(276)
|
|
|
|
(272)
|
|
Other
expense
|
47
|
|
|
|
16
|
|
Total other expense
|
2,934
|
|
|
|
16,610
|
|
Loss before income taxes
|
(281)
|
|
|
|
(88,738)
|
|
Provision (benefit) for income
taxes:
|
|
|
|
|
Current
|
(1,578)
|
|
|
|
(991)
|
|
Deferred
|
—
|
|
|
|
1,888
|
|
Total income taxes
|
(1,578)
|
|
|
|
897
|
|
Net income (loss)
|
$1,297
|
|
|
|
($89,635)
|
|
Net income (loss) per share
|
$0.06
|
|
|
|
($16.01)
|
|
Average shares outstanding -
diluted
|
19,997
|
|
|
|
5,600
|
|
|
|
(1)
|
Through December 31,
2016, we designated our commodity derivatives as cash flow hedges
for accounting purposes upon entering into the contracts.
Accordingly, they were recorded as either an asset or liability
measured at fair value and subsequent changes in the derivative's
fair value were recognized in stockholders' equity through other
comprehensive income (loss), net of related taxes, to the extent
the hedge was considered effective. Monthly settlements of
effective hedges were reflected in revenue from oil and natural gas
production. With respect to our 2017, 2018 and 2019 commodity
derivative contracts, we have elected to not designate these
contracts as cash flow hedges for accounting purposes.
Accordingly, the net changes in the mark-to-market valuations and
the monthly settlements on these derivative contracts will be
recorded in earnings through derivative income/expense. As a
result of these mark-to-market adjustments, we will likely
experience volatility in earnings from time to time due to
commodity price volatility. Further, this change in
accounting method effects the comparability of 2017 revenues,
average realized prices and derivative income/expense to 2016
revenues, average realized prices and derivative income/expense,
respectively.
|
STONE ENERGY CORPORATION
|
CONSOLIDATED STATEMENT OF
OPERATIONS
|
(In thousands, except
per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Predecessor
|
|
Combined
Nine Months
Ended
September 30,
2017
|
|
Period from
March 1, 2017
through
September 30,
2017
|
|
|
Period from
January 1, 2017
through
February 28,
2017
|
|
Nine Months
Ended
September 30,
2016
|
|
(1)(2)
|
|
|
|
(1)
|
|
Operating revenue: (3)
|
|
|
|
|
|
|
|
|
Oil
production
|
$189,393
|
|
|
$143,556
|
|
|
|
$45,837
|
|
|
$204,102
|
|
Natural gas
production
|
27,677
|
|
|
14,201
|
|
|
|
13,476
|
|
|
43,327
|
|
Natural gas liquids
production
|
14,970
|
|
|
6,264
|
|
|
|
8,706
|
|
|
15,119
|
|
Other operational
income
|
10,839
|
|
|
9,936
|
|
|
|
903
|
|
|
1,737
|
|
Derivative income,
net
|
—
|
|
|
1,414
|
|
|
|
—
|
|
|
—
|
|
Total operating revenue
|
242,879
|
|
|
175,371
|
|
|
|
68,922
|
|
|
264,285
|
|
Operating expenses: (3)
|
|
|
|
|
|
|
|
|
Lease operating
expenses
|
41,974
|
|
|
33,154
|
|
|
|
8,820
|
|
|
55,349
|
|
Transportation,
processing and gathering expenses
|
9,978
|
|
|
3,045
|
|
|
|
6,933
|
|
|
18,657
|
|
Production
taxes
|
1,128
|
|
|
446
|
|
|
|
682
|
|
|
1,894
|
|
Depreciation,
depletion and amortization
|
113,982
|
|
|
76,553
|
|
|
|
37,429
|
|
|
166,707
|
|
Write-down of oil and
gas properties
|
256,435
|
|
|
256,435
|
|
|
|
—
|
|
|
284,337
|
|
Accretion
expense
|
25,145
|
|
|
19,698
|
|
|
|
5,447
|
|
|
30,147
|
|
Salaries, general and
administrative expenses
|
47,347
|
|
|
37,718
|
|
|
|
9,629
|
|
|
48,193
|
|
Incentive
compensation expense
|
6,654
|
|
|
4,646
|
|
|
|
2,008
|
|
|
11,809
|
|
Restructuring
fees
|
739
|
|
|
739
|
|
|
|
—
|
|
|
16,173
|
|
Other operational
expenses
|
3,822
|
|
|
3,292
|
|
|
|
530
|
|
|
49,266
|
|
Derivative expense,
net
|
364
|
|
|
—
|
|
|
|
1,778
|
|
|
687
|
|
Total operating expenses
|
507,568
|
|
|
435,726
|
|
|
|
73,256
|
|
|
683,219
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on
Appalachia Properties divestiture
|
213,348
|
|
|
(105)
|
|
|
|
213,453
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
(51,341)
|
|
|
(260,460)
|
|
|
|
209,119
|
|
|
(418,934)
|
|
Other (income) expenses:
|
|
|
|
|
|
|
|
|
Interest
expense
|
8,320
|
|
|
8,320
|
|
|
|
—
|
|
|
49,764
|
|
Interest
income
|
(620)
|
|
|
(575)
|
|
|
|
(45)
|
|
|
(474)
|
|
Other
income
|
(1,034)
|
|
|
(719)
|
|
|
|
(315)
|
|
|
(840)
|
|
Other
expense
|
14,197
|
|
|
861
|
|
|
|
13,336
|
|
|
27
|
|
Reorganization items,
net
|
(437,744)
|
|
|
—
|
|
|
|
(437,744)
|
|
|
—
|
|
Total other (income) expense
|
(416,881)
|
|
|
7,887
|
|
|
|
(424,768)
|
|
|
48,477
|
|
Income (loss) before income
taxes
|
365,540
|
|
|
(268,347)
|
|
|
|
633,887
|
|
|
(467,411)
|
|
Provision (benefit) for income
taxes:
|
|
|
|
|
|
|
|
|
Current
|
—
|
|
|
(3,570)
|
|
|
|
3,570
|
|
|
(4,178)
|
|
Deferred
|
—
|
|
|
—
|
|
|
|
—
|
|
|
10,947
|
|
Total income taxes
|
—
|
|
|
(3,570)
|
|
|
|
3,570
|
|
|
6,769
|
|
Net income (loss)
|
$365,540
|
|
|
($264,777)
|
|
|
|
$630,317
|
|
|
($474,180)
|
|
Net income (loss) per share
|
|
|
($13.24)
|
|
|
|
$110.99
|
|
|
($84.90)
|
|
Average shares outstanding -
diluted
|
|
|
19,997
|
|
|
|
5,634
|
|
|
5,585
|
|
|
|
(1)
|
Results include
operational and financial results from the Appalachia basin through
the close of the sale of Appalachia properties on February 27,
2017.
|
|
|
(2)
|
For illustrative
purposes, the Company has combined the Successor and Predecessor
results to derive combined results for the nine month period ended
September 30, 2017. The combination was generated by addition of
comparable financial statement line items. However, because of
various adjustments to the consolidated financial statements in
connection with the application of fresh start accounting,
including asset valuation adjustments and liability adjustments,
the results of operations for the Successor will not be comparable
to those of the Predecessor. The Company believes that subject to
consideration of the impact of fresh start accounting, combining
the results of the Predecessor and Successor provides meaningful
information that assists a reader in understanding the Company's
financial results for the applicable period.
|
|
|
(3)
|
Through December 31,
2016, we designated our commodity derivatives as cash flow hedges
for accounting purposes upon entering into the contracts.
Accordingly, they were recorded as either an asset or liability
measured at fair value and subsequent changes in the derivative's
fair value were recognized in stockholders' equity through other
comprehensive income (loss), net of related taxes, to the extent
the hedge was considered effective. Monthly settlements of
effective hedges were reflected in revenue from oil and natural gas
production. With respect to our 2017, 2018 and 2019 commodity
derivative contracts, we have elected to not designate these
contracts as cash flow hedges for accounting purposes.
Accordingly, the net changes in the mark-to-market valuations and
the monthly settlements on these derivative contracts will be
recorded in earnings through derivative income/expense. As a
result of these mark-to-market adjustments, we will likely
experience volatility in earnings from time to time due to
commodity price volatility. Further, this change in
accounting method effects the comparability of 2017 revenues,
average realized prices and derivative income/expense to 2016
revenues, average realized prices and derivative income/expense,
respectively.
|
STONE ENERGY CORPORATION
|
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE
|
DISCRETIONARY CASH FLOW to NET CASH PROVIDED BY
OPERATING ACTIVITIES
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Three Months
Ended
September 30,
2017
|
|
|
Three Months
Ended
September 30,
2016
|
|
|
|
|
|
Net income (loss) as reported
|
$1,297
|
|
|
|
($89,635)
|
|
Reconciling items:
|
|
|
|
|
Depreciation,
depletion and amortization
|
27,553
|
|
|
|
58,918
|
|
Write-down of oil and
gas properties
|
—
|
|
|
|
36,484
|
|
Deferred income tax
provision
|
—
|
|
|
|
1,888
|
|
Accretion
expense
|
8,095
|
|
|
|
10,082
|
|
Loss on sale of oil
and gas properties
|
132
|
|
|
|
—
|
|
Non-cash stock
compensation expense
|
502
|
|
|
|
1,725
|
|
Non-cash interest
expense
|
3
|
|
|
|
4,875
|
|
Non-cash derivative
expense (1)
|
7,879
|
|
|
|
236
|
|
Other non-cash
expense
|
56
|
|
|
|
—
|
|
Discretionary cash flow
|
45,517
|
|
|
|
24,573
|
|
Change in income
taxes payable
|
(1,578)
|
|
|
|
24,771
|
|
Settlement of asset
retirement obligations
|
(20,293)
|
|
|
|
(4,400)
|
|
Other working capital
changes
|
18,844
|
|
|
|
(9,921)
|
|
Net cash provided by operating
activities
|
$42,490
|
|
|
|
$35,023
|
|
|
|
(1)
|
Through December 31,
2016, we designated our commodity derivatives as cash flow hedges
for accounting purposes upon entering into the contracts.
Accordingly, they were recorded as either an asset or liability
measured at fair value and subsequent changes in the derivative's
fair value were recognized in stockholders' equity through other
comprehensive income (loss), net of related taxes, to the extent
the hedge was considered effective. Monthly settlements of
effective hedges were reflected in revenue from oil and natural gas
production. With respect to our 2017, 2018 and 2019 commodity
derivative contracts, we have elected to not designate these
contracts as cash flow hedges for accounting purposes.
Accordingly, the net changes in the mark-to-market valuations and
the monthly settlements on these derivative contracts will be
recorded in earnings through derivative income/expense. As a
result of these mark-to-market adjustments, we will likely
experience volatility in earnings from time to time due to
commodity price volatility. Further, this change in
accounting method effects the comparability of 2017 revenues,
average realized prices and derivative income/expense to 2016
revenues, average realized prices and derivative income/expense,
respectively.
|
STONE ENERGY CORPORATION
|
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE
|
DISCRETIONARY CASH FLOW to NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Predecessor
|
|
Combined Nine
Months Ended
September 30,
2017
|
|
Period from
March 1, 2017
through
September 30,
2017
|
|
|
Period from
January 1,
2017
through
February 28,
2017
|
|
Nine Months
Ended
September 30,
2016
|
|
(1)(2)
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) as reported
|
$365,540
|
|
|
($264,777)
|
|
|
|
$630,317
|
|
|
($474,180)
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
113,982
|
|
|
76,553
|
|
|
|
37,429
|
|
|
166,707
|
|
Write-down of oil and
gas properties
|
256,435
|
|
|
256,435
|
|
|
|
—
|
|
|
284,337
|
|
Deferred income tax
provision
|
—
|
|
|
—
|
|
|
|
—
|
|
|
10,947
|
|
Accretion
expense
|
25,145
|
|
|
19,698
|
|
|
|
5,447
|
|
|
30,147
|
|
(Gain) loss on sale of
oil and gas properties
|
(213,348)
|
|
|
105
|
|
|
|
(213,453)
|
|
|
—
|
|
Non-cash stock
compensation expense
|
3,538
|
|
|
893
|
|
|
|
2,645
|
|
|
6,407
|
|
Non-cash interest
expense
|
3
|
|
|
3
|
|
|
|
—
|
|
|
14,278
|
|
Non-cash derivative
expense (3)
|
2,988
|
|
|
1,210
|
|
|
|
1,778
|
|
|
1,261
|
|
Non-cash
reorganization items
|
(458,677)
|
|
|
—
|
|
|
|
(458,677)
|
|
|
—
|
|
Other non-cash
expense
|
1,049
|
|
|
877
|
|
|
|
172
|
|
|
6,081
|
|
Discretionary cash flow
|
96,655
|
|
|
90,997
|
|
|
|
5,658
|
|
|
45,985
|
|
Change in income
taxes payable
|
(1,586)
|
|
|
(5,156)
|
|
|
|
3,570
|
|
|
21,584
|
|
Settlement of asset
retirement obligations
|
(56,770)
|
|
|
(53,129)
|
|
|
|
(3,641)
|
|
|
(15,106)
|
|
Investment in
derivative contracts
|
(6,152)
|
|
|
(2,416)
|
|
|
|
(3,736)
|
|
|
—
|
|
Other working capital
changes
|
32,366
|
|
|
40,101
|
|
|
|
(7,735)
|
|
|
(19,570)
|
|
Net cash provided by (used in) operating
activities
|
$64,513
|
|
|
$70,397
|
|
|
|
($5,884)
|
|
|
$32,893
|
|
|
|
(1)
|
Results include
operational and financial results from the Appalachia basin through
the close of the sale of Appalachia properties on February 27,
2017.
|
|
|
(2)
|
For illustrative
purposes, the Company has combined the Successor and Predecessor
results to derive combined results for the nine month period ended
September 30, 2017. The combination was generated by addition of
comparable financial statement line items. However, because of
various adjustments to the consolidated financial statements in
connection with the application of fresh start accounting,
including asset valuation adjustments and liability adjustments,
the results of operations for the Successor will not be comparable
to those of the Predecessor. The Company believes that subject to
consideration of the impact of fresh start accounting, combining
the results of the Predecessor and Successor provides meaningful
information that assists a reader in understanding the Company's
financial results for the applicable period.
|
|
|
(3)
|
Through December 31,
2016, we designated our commodity derivatives as cash flow hedges
for accounting purposes upon entering into the contracts.
Accordingly, they were recorded as either an asset or liability
measured at fair value and subsequent changes in the derivative's
fair value were recognized in stockholders' equity through other
comprehensive income (loss), net of related taxes, to the extent
the hedge was considered effective. Monthly settlements of
effective hedges were reflected in revenue from oil and natural gas
production. With respect to our 2017, 2018 and 2019 commodity
derivative contracts, we have elected to not designate these
contracts as cash flow hedges for accounting purposes.
Accordingly, the net changes in the mark-to-market valuations and
the monthly settlements on these derivative contracts will be
recorded in earnings through derivative income/expense. As a
result of these mark-to-market adjustments, we will likely
experience volatility in earnings from time to time due to
commodity price volatility. Further, this change in
accounting method effects the comparability of 2017 revenues,
average realized prices and derivative income/expense to 2016
revenues, average realized prices and derivative income/expense,
respectively.
|
STONE ENERGY CORPORATION
|
CONSOLIDATED BALANCE SHEET
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
September 30,
|
|
|
December 31,
|
|
|
2017
|
|
|
2016
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$245,714
|
|
|
|
$190,581
|
|
Restricted
cash
|
|
37,684
|
|
|
|
—
|
|
Accounts
receivable
|
|
35,670
|
|
|
|
48,464
|
|
Fair value of
derivative contracts
|
|
2,565
|
|
|
|
—
|
|
Current income tax
receivable
|
|
27,672
|
|
|
|
26,086
|
|
Other current
assets
|
|
9,295
|
|
|
|
10,151
|
|
Total current assets
|
|
358,600
|
|
|
|
275,282
|
|
Oil and gas
properties, full cost method of accounting:
|
|
|
|
|
|
Proved
|
|
714,515
|
|
|
|
9,616,236
|
|
Less: accumulated
depreciation, depletion and amortization
|
|
(330,921)
|
|
|
|
(9,178,442)
|
|
Net proved oil and
gas properties
|
|
383,594
|
|
|
|
437,794
|
|
Unevaluated
|
|
102,283
|
|
|
|
373,720
|
|
Other property and
equipment, net
|
|
18,433
|
|
|
|
26,213
|
|
Fair value of
derivative contracts
|
|
1,040
|
|
|
|
—
|
|
Other assets,
net
|
|
18,252
|
|
|
|
26,474
|
|
Total assets
|
|
$882,202
|
|
|
|
$1,139,483
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable to
vendors
|
|
$33,120
|
|
|
|
$19,981
|
|
Undistributed oil and
gas proceeds
|
|
5,439
|
|
|
|
15,073
|
|
Accrued
interest
|
|
10,244
|
|
|
|
809
|
|
Fair value of
derivative contracts
|
|
368
|
|
|
|
—
|
|
Asset retirement
obligations
|
|
84,654
|
|
|
|
88,000
|
|
Current portion of
long-term debt
|
|
421
|
|
|
|
408
|
|
Other current
liabilities
|
|
28,503
|
|
|
|
18,602
|
|
Total current
liabilities
|
|
162,749
|
|
|
|
142,873
|
|
Bank credit
facility
|
|
—
|
|
|
|
341,500
|
|
7.5% Senior Second
Lien Notes due 2022
|
|
225,000
|
|
|
|
—
|
|
4.2% Building
Loan
|
|
10,567
|
|
|
|
10,876
|
|
Asset retirement
obligations
|
|
182,956
|
|
|
|
154,019
|
|
Fair value of
derivative contracts
|
|
74
|
|
|
|
—
|
|
Other long-term
liabilities
|
|
10,110
|
|
|
|
17,315
|
|
Total liabilities not subject to
compromise
|
|
591,456
|
|
|
|
666,583
|
|
Liabilities subject
to compromise
|
|
—
|
|
|
|
1,110,182
|
|
Total liabilities
|
|
591,456
|
|
|
|
1,776,765
|
|
Predecessor common
stock
|
|
—
|
|
|
|
56
|
|
Predecessor treasury
stock
|
|
—
|
|
|
|
(860)
|
|
Predecessor
additional paid-in capital
|
|
—
|
|
|
|
1,659,731
|
|
Successor common
stock
|
|
200
|
|
|
|
—
|
|
Successor additional
paid-in capital
|
|
555,323
|
|
|
|
—
|
|
Accumulated
deficit
|
|
(264,777)
|
|
|
|
(2,296,209)
|
|
Total stockholders'
equity
|
|
290,746
|
|
|
|
(637,282)
|
|
Total liabilities and stockholders'
equity
|
|
$882,202
|
|
|
|
$1,139,483
|
|
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SOURCE Stone Energy Corporation