Nov. 3, 2009 (PR Newswire) --
LAFAYETTE, La., Nov. 3 /PRNewswire-FirstCall/ -- Stone Energy Corporation (NYSE: SGY) today announced net income of $51.1 million, or $1.06 per share, on operating revenue of $202.7 million for the third quarter of 2009 compared to net income of $34.1 million, or $1.04 per share, on operating revenue of $172.4 million for the third quarter of 2008. For the nine months ended September 30, 2009, Stone reported a net loss of $147.6 million, or $3.45 per share, on operating revenue of $515.1 million compared to net income of $179.2 million, or $5.97 per share, on operating revenue of $634.9 million during the comparable 2008 period. All per share amounts are on a diluted basis.
Discretionary cash flow was $157.0 million during the three months ended September 30, 2009 compared to $163.8 million generated during the third quarter of 2008. For the first nine months of 2009, discretionary cash flow totaled $339.1 million compared to $494.6 million for the comparable 2008 period. Please see "Non-GAAP Financial Measure" and the accompanying financial statements for a reconciliation of discretionary cash flow, a non-GAAP financial measure, to net cash flow provided by operating activities.
Net daily production volumes during the third quarter of 2009 averaged 239 million cubic feet of gas equivalent (MMcfe) compared to average net daily production for the second quarter of 2009 of 209 MMcfe and average net daily production for the third quarter of 2008 of 129 MMcfe. The third quarter of 2009 included approximately 8 MMcfe per day associated with a non-recurring production adjustment relating to previous royalty relief volumes. The third quarter of 2008 was negatively impacted by shut-ins from Hurricanes Gustav and Ike. For the nine months ended September 30, 2009, average net daily production volumes were approximately 214 MMcfe, or 26% higher than average net daily production volumes of approximately 170 MMcfe for the nine months ended September 30, 2008. For the fourth quarter of 2009, Stone expects net daily production to average between 225 - 235 MMcfe.
CEO David Welch stated, "We are pleased with continued progress in executing our strategic plan in the third quarter as well as year to date. Our finance team has been able to improve our liquidity and significantly strengthen our balance sheet by reducing debt $200 million, raising stockholders' equity by $75 million and building our cash position. Our operations team delivered production near the top end of our guidance this quarter, while reducing costs as they debottlenecked platforms, optimized wells and restored substantially all of our hurricane deferred production, including the rerouting of the Amberjack oil pipeline. Our exploration team followed our Pyrenees discovery with a successful delineation well in the third quarter. We also made a traditional shelf discovery at our Cardinal prospect at Vermilion 96 which should provide production impact in 2010. Our four-well Amberjack drilling program is scheduled to commence in December as the platform rig modifications are now complete and the rig will be moving to location this week. We expect to gain further traction in exploration in 2010 with increased drilling in our Marcellus shale play in Appalachia and in the GOM deepwater."
Prices realized during the third quarter of 2009 averaged $77.39 per barrel (Bbl) of oil and $5.90 per thousand cubic feet (Mcf) of natural gas compared with third quarter 2008 average realized prices of $106.81 per Bbl of oil and $10.72 per Mcf of natural gas. Average realized prices during the first nine months of 2009 were $68.48 per Bbl of oil and $6.42 per Mcf of natural gas compared to $104.20 per Bbl of oil and $10.29 per Mcf of natural gas realized during the first nine months of 2008. All unit pricing amounts include the effects of cash settlements of effective hedging contracts. Hedging transactions during the third quarter of 2009 increased the average price we received for natural gas by $2.37 per Mcf, compared to a decrease in average realized prices of $0.07 per Mcf during the third quarter of 2008. Realized oil prices in the third quarter of 2009 increased by $10.92 per Bbl, compared to a decrease in realized oil prices of $16.89 per Bbl in the comparable quarter of 2008 as a result of hedging transactions. Overall, hedging transactions added approximately $46.4 million to third quarter 2009 revenues, including $36.5 million recognized from the unwinding of hedges in March 2009.
Lease operating expenses (LOE) incurred during the third quarter of 2009 totaled $28.1 million compared to $41.1 million in the second quarter of 2009 and $40.1 million for the comparable quarter in 2008. In the third quarter of 2009, there was approximately $12 million in downward adjustments of previously accrued major maintenance and base LOE costs as a result of actual costs being less than the previously accrued estimated amounts. During the third quarter of 2008, lease operating expenses included $6.8 million of repairs in excess of estimated insurance recoveries related to damage from Hurricanes Gustav and Ike. For the nine months ended September 30, 2009 and 2008, lease operating expenses were $127.4 million and $105.3 million, respectively.
Depreciation, depletion and amortization (DD&A) on oil and gas properties for the third quarter of 2009 totaled $67.2 million compared to $51.0 million for the third quarter of 2008. DD&A expense on oil and gas properties for the nine months ended September 30, 2009 totaled $181.9 million compared to $183.9 million during the same year-to-date period of 2008.
Salaries, general and administrative (SG&A) expenses (exclusive of incentive compensation) for the third quarter of 2009 were $9.5 million compared to $10.5 million in the third quarter of 2008. For the nine months ended September 30, 2009 and 2008, SG&A (exclusive of incentive compensation) totaled $31.1 million and $32.0 million, respectively.
As previously announced on October 13, 2009, the borrowing base re-determination process was completed and the borrowing base was reaffirmed at $425 million. As of September 30, 2009, Stone had $250 million in borrowings outstanding on its credit facility and another $69 million in outstanding letters of credit, leaving $106 million available under the facility. Stone's cash position as of September 30, 2009 was $98 million. As of October 30, 2009, borrowings outstanding were further reduced to $225 million, leaving over $131 million in availability, while the cash position was approximately $91 million.
Capital expenditures before capitalized SG&A and interest during the third quarter of 2009 totaled $70.5 million, including $2.0 million of lease acquisition costs. The capital expenditure amount includes $33.1 million of proactive hurricane risk mitigation expenditures, primarily platform decommissioning and the plugging and abandonment of idle wells. Additionally, $4.8 million of SG&A expenses and $6.6 million of interest were capitalized during the quarter. For the nine months ended September 30, 2009, capital expenditures before capitalized SG&A and interest totaled $231.7 million, including $4.3 million of lease acquisition costs. The year-to-date capital expenditure amount includes $61.4 million of plugging and abandonment expenditures and $16.9 million in tubular inventory purchases made in the first quarter. Additionally, $13.5 million of SG&A expenses and $19.4 million of interest were capitalized during this year-to-date period.
Operational Update
Stone provided an Operational Update in its October 13, 2009 press release which included updates on its Pyrenees prospect (Garden Banks Block 293), Amberjack (Mississippi Canyon 109), Cardinal/Blue Jay (Vermilion Block 96) and Appalachia. Since then, the Cardinal well has been drilled and is a discovery with the completion to follow, while the Blue Jay well is currently drilling. The platform rig for the Amberjack drilling program is schedule to move to the platform this week and initial operations are expected in early December. In Appalachia, the vertical Stang #1 and the Loomis #1wells were successfully drilled in Susquehanna County, Pennsylvania and are awaiting completion. In West Virginia, six vertical wells are now awaiting completions which are scheduled for the fourth quarter.
Stone has substantially completed its hurricane risk mitigation program which called for proactively plugging and abandoning idle wells and addressing the structural integrity of its platforms. Stone has spent approximately $55 million on this initiative this year which we believe substantially reduces Stone's financial exposure to future hurricanes.
Updated 2009 Guidance
Estimates for Stone's future production volumes are based on assumptions of capital expenditure 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.
