Stone Energy Reports First Quarter Earnings



Stone Energy Corporation (NYSE: SGY) announced first quarter 2004 net income of $35.8 million, or $1.33 per share, on oil and gas revenue of $133.6 million compared to net income of $55.9 million, or $2.11 per share, on oil and gas revenue of $157.5 million in the first quarter of 2003. All per share amounts are on a diluted basis.

Stone also announced that effective April 30, 2004 it has entered into a four-year $500 million senior unsecured credit agreement with a syndicated bank group. The credit agreement has an initial borrowing base of $425 million and replaces the previous $350 million credit agreement. The borrowing base under the credit facility is re-determined periodically based on the bank group's evaluation of our proved oil and gas reserves.

Prices realized during the first quarter of 2004 averaged $34.48 per barrel of oil and $5.49 per thousand cubic feet (Mcf) of natural gas as compared to first quarter 2003 average realized prices of $33.53 per barrel of oil and $6.66 per Mcf of natural gas. All unit pricing amounts include the cash settlement of hedging contracts. Oil production during the first quarter of 2004 totaled approximately 1,544,000 barrels compared to first quarter 2003 oil production of approximately 1,419,000 barrels and fourth quarter 2003 oil production of approximately 1,541,000 barrels. Natural gas production during the first quarter of 2004 totaled approximately 14.6 billion cubic feet (Bcf), compared to first quarter 2003 natural gas production of approximately 16.5 Bcf and fourth quarter 2003 natural gas production of 15.3 Bcf. Daily production during the first quarter of 2004 averaged 262.7 MMcfe.

Discretionary cash flow totaled $104.2 million during the first quarter of 2004, compared to $129.7 million during the first quarter of 2003. Net cash flow provided by operating activities, as defined by generally accepted accounting principles (GAAP), totaled $99.2 million during the first quarter of 2004, compared to $109.3 million in the first quarter of 2003. (Please see the accompanying financial statements for a reconciliation of discretionary cash flow, a non-GAAP financial measure, to net cash flow provided by operating activities.)

Normal lease operating expenses incurred during the first quarter of 2004 totaled $16.8 million compared to $15.0 million incurred in the first quarter of 2003. The increase in normal lease operating expenses for the first quarter of 2004 is primarily attributable to a 7% increase in the number of active wells and increases in overall industry service costs over the comparable period of 2003.

Depreciation, depletion and amortization (DD&A) on oil and gas properties for the first quarter of 2004 totaled $46.0 million compared to $41.0 million for the first quarter of 2003. The increase in DD&A for the first quarter of 2004 is the result of increases in the full-cycle unit cost of finding and developing proved reserves.

Major maintenance expenses, which represent repair and maintenance cost that vary from period to period, totaled $3.1 million during the first quarter of 2004 compared to $2.7 million in the first quarter of 2003.

Salaries, general and administrative (G&A) expenses for the first quarter of 2004 were $3.7 million compared to $3.3 million in the first quarter of 2003. The increase in G&A expenses for the first quarter of 2004 is due primarily to a 5% increase in employment of technical personnel over the first quarter of 2003.

During the first quarter of 2004, we recognized non-cash expenses of $0.9 million relative to commodity derivatives, which represents the cost of oil and natural gas put contracts that settled during the period. During the first quarter of 2003, we recognized $2.2 million of non-cash expenses related to derivatives, of which $1.2 million related to the cost of put contracts that settled during the period.

During the first quarter of 2004, we borrowed $9 million under our bank credit facility. We have a borrowing base under the new bank credit facility of $425 million, of which $232.9 million of borrowings are currently available. As a result of debt repayments and redemption of our $100 million Senior Subordinated Notes during 2003, interest expense decreased to $3.9 million in the first quarter of 2004 compared to $5.5 million in the first quarter of 2003. In connection with the new credit agreement, we expect a non-cash charge of $0.9 million to other expense during the second quarter of 2004 to amortize the remaining deferred financing costs associated with the previous $350 million credit facility.

Stone Energy's 2004 capital expenditures budget, excluding acquisitions and capitalized G&A and interest, is currently $280 million. Capital expenditures during the first quarter of 2004 totaled $90.2 million, including $2.0 million of acquisition costs, $4.3 million of capitalized general and administrative expenses and $1.6 million of capitalized interest.
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