Stone Energy Corporation (SGY) announced the results of the previously announced cash tender offer to repurchase dearer senior notes due 2017 with a coupon rate of 8.625%. The company is also moving ahead to issue cheaper 7.500% senior notes worth $475 million due in 2022. This is a smart move by Stone Energy to lower its interest burden. It gives the company the scope to recycle the funds in its business for a longer period.
In response to the offer made on Nov 13, Stone Energy has to date received a redemption offer for approximately $236.4 million or approximately 63%, of its outstanding 8.625% senior notes due 2017. As redemption proceeds, the company would shell out a consideration of $1,057.38 for each $1,000 principal amount of notes, which include a consent payment of $30.00, plus accrued and unpaid interest.
The partial redemption of the 8.625% senior notes worth will improve the long-term debt-to-capitalization ratio which stood at 50.9% as of Sep 30.
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.
Stone Energy holds a Zacks Rank #3 (short-term Hold rating). However, there are better-ranked stocks in the oil and gas sector such as Abraxas Petroleum Corp. (AXAS), SM Energy Company (SM) and Matador Resources Company (MTDR). All these stocks hold a Zacks Rank #1 (Strong Buy).