Stone Energy's estimated year-end 2008 proved reserves were 519 Bcfe (billion cubic feet of natural gas equivalent), as compared with 403 Bcfe at year-end 2007. This included proved developed reserves of 398 Bcfe and proved undeveloped reserves of 121 Bcfe, and the split between natural gas and oil reserves was 58% and 42%, respectively. In addition, there were 186 Bcfe of estimated probable reserves and 285 Bcfe of estimated possible reserves at year-end 2008. All of Stone's 2008 year-end estimated proved, probable and possible reserves were independently engineered by Netherland Sewell & Associates (NSA).
The present value of the estimated future net cash flows from estimated proved reserves before income taxes, using a 10% discount rate (PV10), was approximately $0.8 billion using year-end prices of $41.00 per barrel of oil and $5.71 per mmbtu of gas. Stone expects to report a pre-tax non-cash ceiling test write-down of its oil and gas properties of approximately $1.3 billion and impairment of all of its goodwill in the fourth quarter 2008.
Using the average five year NYMEX strip pricing at December 31, 2008 of $66.03 per barrel and $7.01 per mmbtu, the internal estimated proved reserves would have been 581 Bcfe and the PV10 estimate would have been $1.8 billion. These estimates were not independently engineered.
The changes from 2007 year-end estimated proved reserves to 2008 year-end estimated proved reserves included acquisitions of approximately 252 Bcfe, divestments of 18 Bcfe, production of 64 Bcfe, 10 Bcfe of drilling additions/extensions, 2 Bcfe of upward revisions before price revisions, and 66 Bcfe of downward price revisions. Included in the acquisition total was approximately 250 Bcfe relating to Bois d'Arc reserves that were engineered by NSA using pricing of $117.47 per barrel and $8.85 per million cubic feet of natural gas at the date of acquisition.
Capital expenditures on oil and gas properties for 2008 were approximately $381 million, excluding the Bois d'Arc acquisition, capitalized SG&A and interest, and abandonment expenditures. Expenditures on normal plugging and abandonment projects were approximately $31 million.
For 2009, the Board of Directors has authorized a capital expenditure budget of $300 million. This figure excludes acquisitions and capitalized SG&A and interest. Approximately 75% of the capital expenditure budget is expected to be spent on exploitation projects, supporting facilities, and abandonment projects. The remaining budgeted capital expenditures include GOM exploration drilling (shelf and deep water), seismic and reprocessing projects, and acreage acquisition and drilling in Appalachia.
At year-end, Stone's production continued to be adversely affected by third party and company pipeline repairs and shut-ins. Stone exited the year at approximately 200 MMcfe per day of production. To date approximately 20-25 MMcfe per day has come back on line (225 MMcfe per day on February 1), driven primarily by the return of the Bluewater pipeline.
Stone estimates another 35-40 MMcfe per day remains shut-in including 20-25 MMcfe per day in oil and gas volumes at Mississippi Canyon 109 (Amberjack). The oil pipeline from the Amberjack platform was damaged in two sections and plans to re-direct and repair the pipeline are underway.
Stone expects the line to be operational by late summer 2009. In the interim, Stone will examine the economics of barging oil from the platform starting in the spring after the disruptive winter weather. Given the delay in Amberjack production, Stone's limited 2009 capital expenditure program, and expected natural decline in production, Stone is now projecting its 2009 net daily production to average between 210-240 MMcfe per day.
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