Stone Energy Corporation Announces 2011 Reserve Growth, 2012 Capital Expenditure Budget, 2012 Guidance and Operational Update

Stone Energy Corporation SGY today announced 2011 year-end estimated reserves, 2012 capital expenditure budget, and 2012 guidance ranges. Stone also provided an operational update. Highlights included: Estimated proved reserves as of December 31, 2011 increased to 100 million Boe or 602 Bcfe, representing an annual increase of 27% and a production replacement of 264%; The acquisition of BP's working interest in the deep water Pompano field was completed in December 2011, contributing estimated proved reserves of 17 million Boe as of December 31, 2011, at an adjusted purchase price of $167 million; The 2012 capital expenditure budget was set at $625 million; and Production guidance for 2012 is in a range of 240-275 MMcfe per day, representing an annual increase of 12%-29% compared to estimated production for 2011 of approximately 214 MMcfe per day. Stone's estimated proved reserves as of December 31, 2011 were 100 MMboe (million barrel of oil equivalent) or 602 Bcfe (billion cubic feet of natural gas equivalent), representing an increase of 27% compared to estimated proved reserves of 79 MMboe (474 Bcfe) as of December 31, 2010. The net increase in estimated proved reserves was the result of increases from drilling additions (net of minor revisions) of 109 Bcfe and acquisitions of 111 Bcfe, offset by 78 Bcfe of production and 14 Bcfe of divestments. Drilling results replaced 140% of 2011 production while acquisition and divestment activity replaced an additional 124% of 2011 production, for a total production replacement of 264%. In addition to the estimated proved reserves there were estimated probable reserves of 319 Bcfe and estimated possible reserves of 476 Bcfe at year-end 2011. All of Stone's 2011 year-end estimated proved, probable and possible reserves were independently engineered by Netherland Sewell & Associates. The present value of the estimated future net cash flows from estimated proved reserves before income taxes at December 31, 2011 was $2.1 billion, which is a 75% increase over the 2010 value of $1.2 billion. The present value calculations used 12 month average prices of $100.97 per barrel and $4.74 per Mcf for 2011 as compared to $77.68 per barrel and $4.46 per Mcf in 2010. Present values were calculated using a 10% discount rate (PV-10). Stone's reserve base reflects its commitment to grow the company outside of the conventional shelf of the Gulf of Mexico (GOM), and into the more prolific reserve basins of the GOM deep water and Gulf Coast deep gas as well as onshore oil and gas shale opportunities. The Deep Water and Deep Gas areas, which include reserves associated with the Pompano acquisition, accounted for over 20% of the total estimated proved 2011 reserves compared to less than 2% in 2010. The Marcellus shale accounted for nearly 30% of the total estimated proved 2011 reserves compared to just over 15% in 2010. The GOM conventional shelf, which accounted for over 80% of 2010 estimated proved reserves, accounted for slightly over 50% of 2011 total estimated proved reserves. The estimated proved reserve growth was balanced across commodities, adding 18.7 million barrels (112 Bcfe) of estimated proved oil reserves and 94 Bcf (15.7 million boe) of estimated proved gas reserves. The year-end 2011 estimated proved reserves of 100 million Boe (602 Bcfe) include estimated proved developed (PD) reserves of 60 million boe or 360 Bcfe (52% oil, 48% gas) and estimated proved undeveloped (PUDs) reserves of 40 million boe or 242 Bcfe (37% oil and 63% gas). Capital Expenditure Budget Stone's Board of Directors has authorized a 2012 capital expenditure budget of $625 million, which excludes acquisitions and capitalized SG&A and interest. The budget is spread across Stone's major areas of investment with approximately 34% allocated to the GOM conventional shelf, 24% allocated to Deep Water/Deep Gas projects, 30% allocated to the Marcellus shale and 12% allocated to Onshore Oil projects and new venture opportunities. The allocation of capital across the various areas is subject to change based on several factors including permitting times, rig availability, non-operator decisions, farm-in opportunities and commodity pricing. The GOM conventional shelf capital budget provides for development drilling, recompletions, facilities and abandonment. Stone plans to drill 3-5 wells in the oil rich Ship Shoal 113 field and 4-6 oil wells across the remainder of the GOM and onshore south Louisiana, representing approximately $90-$100 million in potential expenditures. In addition, Stone has budgeted approximately $55-$60 million for recompletions and facilities improvement to the existing infrastructure. Capital allocation for P&A operations is approximately $55-$60 million. The Deep Gas capital budget is focused on exploration drilling, development drilling and 3D data acquisition. Stone plans to spend development capital on a second well at its LaPosada/La Cantera discovery which is expected to spud in the second quarter of 2012. Exploration opportunities include the drilling of 1-3 exploration wells, which includes the planned deepening of the Lighthouse Bayou prospect below 25,500 feet. Due to the timing of equipment procurement and permitting, the Lighthouse Bayou deepening operation is currently projected to commence during the second half of 2012, subject to final technical review. The Deep Water capital budget is focused on lease acquisition, exploration drilling and capital well-work. Stone expects to participate in 2-4 exploration wells including the Apache operated Parmer prospect in Green Canyon 823 and the ENI operated Phinisi prospect in Walker Ridge 719. The Parmer prospect is expected to spud in the second quarter of 2012 and Phinisi is currently scheduled to spud in the third quarter of 2012. Stone has also allocated capital to perform several workover/recompletion operations in the recently acquired Pompano deep water field. The Marcellus Shale capital budget provides for development drilling, infrastructure investments and acquisition of additional lease-hold interests. The budget includes funds for the drilling of 22-27 wells and the fracturing of 20-26 wells, predominately in the liquids rich Mary and Heather areas. Funds are also allocated for infrastructure to mitigate facility constraints and for new facilities associated with the wells expected to begin producing in 2012. The remainder of the capital budget is focused on Onshore Oil projects and new venture opportunities. This includes funds for work in Stone's Hatch Point/Cane Creek field in the Paradox basin of its Rocky Mountain region, continued non-operated development drilling in the Eagle Ford Shale formation and other new venture opportunities. As of December 31, 2011, Stone had $45 million of outstanding borrowings under its bank credit facility and had issued letters of credit totaling $61 million, leaving $294 million of availability under the facility. In addition, Stone had $38 million in cash available as of December 31, 2011. Stone expects to fund its 2012 capital expenditure budget substantially from cash flow as well as its credit facility. Stone expects net daily production for 2012 to be in the range of 240–275 MMcfe per day. The production is estimated to be approximately 50% natural gas and 50% crude oil/natural gas liquids (NGLs) on a btu equivalent basis. For the first quarter of 2012, Stone expects net daily production to average between 220-240 MMcfe per day. There are inherent uncertainties associated with several projects that could have a significant impact on the full year rate. This includes production from two deep water fields, Pyrenees and Wideberth, as well as production from the LaPosada/La Cantera deep gas discovery. In addition, there are uncertainties with respect to the timeline associated with the mitigation of the Caiman facility production constraints in the Mary field in the Marcellus Shale. These events are further discussed in the operational updates below. Finally, there may be unplanned third party pipeline interruptions, which would impact volumes. Lease Operating Expenses. Stone expects lease operating costs, excluding production taxes and transportation/processing costs, to range between $200-215 million for 2012 based upon current operating conditions and budgeted maintenance activities. The estimate includes approximately $30 million of LOE costs associated with the Pompano acquisition.