Stone Energy Beats Earnings, Down Y/Y

Zacks

Stone Energy Corp. (SGY) reported first-quarter 2013 earnings of 82 cents per share beating the Zacks Consensus Estimate of 69 cents. The quarterly earnings were, however, down 20.4% from the year-earlier profit of $1.03 per share.

Total operating revenue decreased 4.6% year over year to $233.7 million in the quarter from approximately $245.0 million. However, quarterly revenue was above the Zacks Consensus Estimate of $220.0 million.

Operational Highlights

During the quarter, production averaged 240.6 million cubic feet of gas equivalent per day (MMcfe/d), down 2.1% from the year-earlier level of 245.8 MMcfe/d. Of the total production, natural gas accounted for nearly 48% while 46% was oil and the remaining 6% natural gas liquids (NGL).

Overall realization on a per Mcfe basis amounted to $10.76 in the reported quarter versus $10.91 per Mcfe in first quarter 2012. Natural gas prices at $3.55 per Mcf were up from $2.89 per Mcf in the year-ago quarter, while oil price stood at $112.13 per barrel (up 3.5% on an annualized basis). Natural gas liquids prices, however, decreased 36.8% from the year-ago quarter to $42.49 per barrel.

On the cost front, unit lease operating expenses increased to $2.45 per Mcfe (versus $1.99 per Mcfe in the year-ago quarter). Depreciation, depletion and amortization was $3.44 per Mcfe (versus $3.75 per Mcfe), while salaries, general and administrative (SG&A) expenses came in at 64 cents per Mcfe (versus 61 cents per Mcfe).

Liquidity

At quarter end, the company had approximately $261.4 million in cash and $917.3 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 9.1% year over year to $159.1 million.

Guidance

For the upcoming quarter, the company expects net daily production of 230−240 MMcfe. For full-year 2013, the company anticipates total volume in the range of 250−255 MMcfe per day, up 17−19% from the 2012 level of 214 MMcfe/d.

The company expects its capital outlay projection for full-year 2013 at $650 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.

Outlook

Lafayette, La. 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.

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.

Stone Energy holds a Zacks Rank #2 (short-term Buy rating). However, there are other stocks in the oil and gas sector – InterOil Corporation (IOC), CNOOC Ltd. (CEO), and EPL Oil & Gas, Inc. (EPL) –  which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.

 

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