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Stone Energy Trims 3Q Production

Zacks Equity Research

Stone Energy Corporation (SGY) has cut its production forecast for the upcoming quarter due to last week's Hurricane Isaac.

While providing an update on the impact of Hurricane Isaac, Lafayette, Louisiana-based energy company stressed that its facilities across the Gulf of Mexico (GoM) appear to be little affected with no major issues or problems. However, shutting-in and de-manning of the platforms in the GoM region in response to Hurricane Isaac compelled the company to lower its production estimates by approximately 2,000 – 4,000 barrels of oil equivalent per day (BOE/d).

Stone Energy now expects its third quarter production to be between 38,000 and 40,000 BOE/d versus its previous expectation of 41,000 and 43,000 BOE/d. Accordingly, the company now expects its full year production to be on the lower end of the guided range of 41,000 – 43,000 BOE/d, or 245-260 million cubic feet per day.

Before Hurricane Isaac, Stone Energy used to produce approximately 35,000 BOE/d and 8,500 BOE/d from the GoM and Appalachia region, respectively. Current daily production was at about 18,000 BOE in the GoM as of September 3. The company is dependent on third party facilities to bring the remaining production on line. The Amberjack and Pompano fields are expected to re-start its production within a few days awaiting onshore processing facilities.

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. Growing exploration exposure to the mature, low reserve life and capital intensive GoM shelf is expected to aggravate Stone Energy’s risk profile.

As the company is primarily engaged in the GoM region, it remains prone to region-specific environmental threats, like Hurricane Isaac, that can potentially affect the company’s earnings.

Recently, Stone Energy has entered into a purchase agreement with independent energy giant Anadarko Petroleum Corporation (APC) for a working interest in a U.S. Gulf field. The purchase by Stone Energy comprises Anadarko's 25% working interest in the five block deepwater Pompano field in Mississippi Canyon, 22% in Mississippi Canyon Block 29, and another 10% in portions of Mississippi Canyon Block 72. This new acquisition will aid the company to grow and maintain steady cash.

The company retains a Zacks #3 Rank, equivalent to a short-term Hold rating.

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