Stone Energy Q3 Earnings Miss on Low Realization & Output - Analyst Blog

Stone Energy Corp. (SGY) posted third-quarter 2014 earnings of a penny per share, which lagged the Zacks Consensus Estimate of 10 cents. The reported figure also fell sharply from 72 cents per share earned in the year-earlier quarter. The decline was due to both lower price realization and production.
 

Total operating revenue fell to $183.2 million in the quarter from approximately $256.7 million in the year-ago quarter. The reported figure however came above the Zacks Consensus Estimate of $179.0 million.

Operational Highlights

During the quarter, production averaged 237.3 million cubic feet of gas equivalent per day (MMcfe/d), down from the prior-year quarter level of 296.4 MMcfe/d. Overall realization on a per Mcfe basis was $8.01 versus $9.38 per Mcfe in third-quarter 2013. Natural gas price of $2.77 per Mcf was down from $3.80 per Mcf in the year-ago quarter, while natural gas liquids price came in at $42.45 per barrel (up from $38.77). Oil price, however, decreased to $93.15 per barrel from $103.16 in the year-ago quarter.

On the cost front, unit lease operating expenses increased to $2.00 per Mcfe from $1.98 per Mcfe in the year-ago quarter. Depreciation, depletion and amortization was $3.63 per Mcfe (versus $3.37 per Mcfe), while salaries, general and administrative expenses came in at 75 cents per Mcfe (versus 52 cents per Mcfe).

Liquidity

At quarter end, Stone Energy had approximately $180.3 million in cash and $1,809.9 million in long-term debt, with a debt-to-capitalization ratio was 49.9% versus 50.9% in the preceding quarter. Discretionary cash flow fell 44.5% year over year to $92.2 million.

Guidance

For the fourth quarter of 2014, the company expects net daily production of 240−264 MMcfe. For full-year 2014, it anticipates total volume in the range of 252−258 MMcfe per day. Stone Energy's capital outlay projection for full-year 2014 is $895 million.

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 Gulf of Mexico (GoM).

Currently, the company is well positioned in the industry, with a widespread high-yielding inventory. Notably, it boasts an extensive capital project inventory. Moreover, Stone Energy is generating surplus cash flow. Although the company aims to apportion the capital across its portfolio, its focus will be on the GoM shelf and 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.

At present, Stone Energy has a Zacks Rank #3 (Hold). Investors interested in the oil and gas sector could consider stocks like Magellan Midstream Partners LP (MMP), Cobalt International Energy Inc. (CIE) and Murphy USA Inc. (MUSA). All of these carry a Zacks Rank #1 (Strong Buy).