Stone Energy Corporation Announces Third Quarter 2017 Results
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 Put Daily Swap
Volume Price Volume Price
(Bbls/d) ($ per Bbl) (Bbls/d) ($ 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 $51.57
Collar Contracts
----------------
Daily Put Call
Volume Price Price
(Bbls/d) ($ per Bbl) ($ per Bbl)
Mar 2017 - Dec
2017 1,000 $50.00 $56.45
Apr 2017 - Dec
2017 1,000 $50.00 $56.75
Jan 2018 - Dec
2018 1,000 $45.00 $55.35
Natural Gas Hedging Contracts
NYMEX
-----
Swap Contracts
--------------
Daily Swap
Volume Price
(MMBtu/d) ($ per MMBtu)
--------- ------------
Jul
2017
- Dec
2017 11,000 $3.00
Collar Contracts
----------------
Daily Put Call
Volume Price Price
(MMBtu/d) ($ per MMBtu) ($ 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 Three Months Combined Nine Nine Months
Ended Ended Months Ended Ended
September 30, September 30, September 30, September 30,
2017 2016 2017 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 Three Months
Ended Ended
September 30, September 30,
2017 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 Period from Period from Nine Months
Nine Months March 1, 2017 January 1,
2017 Ended
Ended through through September 30,
September 30, September 30, February 28, 2016
2017 2017 2017
(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 Three Months
Ended Ended
September 30, September 30,
2017 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 Period from Period from Nine Months
Months Ended March 1, 2017 January 1, Ended
September 30, through 2017 September 30,
2017 September 30, through 2016
2017 February 28,
2017
(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
