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Stone Energy Corporation (Stone) is an independent oil and natural gas company engaged in the acquisition, exploration, exploitation and development of oil and gas resources in the US. The company?s Exploration and Production (E&P) operations are primarily located in the Gulf of Mexico (GoM), where it has made strategic investments in the deepwater and conventional shelf areas. The company acquired deepwater assets in the Pompano field and several deepwater blocks during 2011?2012. This acquisition was completed in two tranches, of which one was completed in Q4 2011 and the other was completed in Q2 2012. This acquisition increased its reserves and production, along with other exploration prospects. These assets included producing oil and gas properties and several other exploratory prospects. Moreover, these assets contained oil-rich resources. Thus, the acquisition of these assets was in line with the company?s strategy to focus on the development of oil-rich assets, compared to natural gas-rich assets. Stone derived the majority of its production from the GoM conventional shelf in 2011. Apart from the GoM assets, the company is also active in the Appalachian Basin, where it has established a significant acreage in the Marcellus Shale and few other prospects. The company?s production from this basin comes from the Mary and Heather fields, both of which contain resources for liquids-rich gas.
- Key Highlights: This section provides detailed analysis on the company?s overall oil and gas value chain, new projects, growth opportunities, new ventures, assets performance, hedging strategies, Capex funding, geographical results of oil and gas operations.
- Goals and Strategies: This section provides the upcoming goals and strategies of the company. The section mainly goals and strategies followed by the company in order to meet its upcoming goals.
- SWOT: The report?s SWOT section provides the internal strength, weakness, opportunities and threats of company to reflect its strategic positions in the market.
- Production and Development Overview: This section highlights the company?s crude oil and natural gas production forecast from its legacy and upcoming assets by region and commodity mix for next five years. The report also covers the detailed information and analysis on the company?s producing and development assets.
- Exploration: This section includes detailed explanation and analysis on the company?s exploration assets resulted due to new discoveries, new drilling and other activities.
- M&A trends: This section mainly provides information and analysis on the company?s recent assets transactions, joint ventures, acquisition, and divestment activities during the last one year. This section highlights the company?s status as a buyer or seller during the analyzed period.
- Financial Forecast and Valuation: This section highlights the detailed financial statement forecast for next five years. With the financial statement forecast, this section also provides intrinsic value of the company by using Valuation method.
- Financial and Operational Metrics: This section covers the company?s historical performance on several financial and operational parameters such as Production and Reserves, Reserves Replacement, Costs Incurred, Acreage, Wells, F&D Costs, Oil and Gas Revenue and Expenses etc.
Reasons to buy
The report will enhance the decision-making capability in a more rapid and time sensitive manner. It will allow you to -
- Provide detailed analysis to those who are interested in knowing the companies? existing and future business strategies.
- Provide in-depth analysis on the companies E&P profiles along with the exploration and M&A updates.
- Provide valuable insights to those who are tracking oil and gas markets and wants to know the intrinsic value of the companies.
- Use the analysis for strategy and planning, M&A identifications, and competitor analysis. Strategically Aligning Operational Focus to Boost Cash Flows
Stone?s major operating activities are located in the conventional shelf, deep gas and deepwater areas in the GoM and the Marcellus Shale in the Appalachian Basin. Until 2011, the majority of its production was driven by the GoM shelf area, which contributed 89.3% towards its total production in the year; however, going forward, it plans to diversify production sources through increased focus on other areas such as deepwater and deep gas areas of the GoM, and the Marcellus Shale. In line with this, Stone acquired the deepwater assets in the Pompano field and other areas during 2011?2012 in a series of transactions. Apart from diversifying its geographic footprints to other areas, the company also shifted the capital investment to areas other than GoM shelf in 2012 as compared to 2011. The company invested 44% of its 2011 capex towards the GoM; however, it has allocated only 36% of its 2012 capex towards this area. This shift in the capital allocation is due to the company?s strategic prioritization of operational areas. Going forward, it plans to maintain steady production and cash flows from its legacy assets in the GoM shelf, and utilizing the cash flows in accelerating the development of its future growth assets in the deepwater areas of the GoM and the Marcellus Shale. This operational realignment will help the company to offset the decline from the legacy assets and add new production centers, thereby reducing dependence on GoM and ensuring long-term growth simultaneously.
In line with this strategy, Stone acquired deepwater assets in a series of transactions during 2011?2012. In Q4 2011, the company acquired BP?s 75% interest in the deepwater Pompano field in the Mississippi Canyon, a 51% interest in Mississippi Canyon?s block 29, a 50% interest in the Mica field, which is tied back to the Pompano platform, and interests in 23 deepwater exploration leases located near the Pompano field. This acquisition entitled Stone to 3,300 Thousand Barrels of Oil Equivalent per Day (mboe/d) of production capacity and 17mmboe of proved reserves. These proved reserves consisted of 83% crude oil and 17% natural gas. These assets were acquired near the end of the year, and thus their contribution was very low in 2011; however, this is expected to increase in the future. Moreover, the company also completed another transaction in Q2 2012, when it acquired the remaining 25% interest from Anadarko Petroleum Corporation. This acquisition entitled Stone to its remaining 25% interest in the deepwater Pompano field in the Mississippi Canyon, a 22% working interest in Mississippi Canyon?s block 29, and a 10% working interest in portions of block MC 72. Consequently, Stone expanded its reserve base by 5.9mmboe and production by more than 1,000boe/d. These assets mainly consisted of oil resources and as a result will support the company?s oil production in a scenario of high imparity between oil and gas prices, thereby strategically boosting its profitability in the near future and ensuring stronger cash flows.
Currently, Stone holds a substantial drilling inventory of deepwater prospects such as the Parmer, Phinisi, Amethyst, Amberjack, Cordona, Mica Deep, Sherwood, TwentyOne, Fiji, Marauder, Taggert, Floyd and Lamprey prospects. These prospects are currently in the initial exploration and appraisal phase of development. The development of these prospects will drive Stone?s long-term growth.
Moreover, the company is also accelerating its development activities in the Marcellus Shale, where its development activities are mainly focused on liquid-rich targets such as the Mary and Heather fields. Apart from these fields, it has several other targets in the initial evaluation phase; these targets include the Christine, Katie/Andie and Buddy prospects. The development of these prospects is expected to further boost its production and reserves in the long-term.
Thus, Stone has strategically built up its drilling inventory in core areas, which provides it with the opportunity to accelerate exploration and development activities. Moreover, the company plans to allocate moderate capex to its legacy assets in the GoM conventional shelf. This will allow it to generate a steady stream of cash flow from its GoM shelf assets and invest in the high-growth assets in the deepwater areas and other assets. Thus, the company?s strategic development plan, coupled with its strong drilling inventory and steady cash flows, will allow it to maintain capital discipline. Stone?s operational alignment will allow it to maintain sufficient liquidity as well as drive its growth, which is expected to improve its valuation statistics and shareholders? value.