Stone Updates Appalachian Activity

Stone Energy on Monday announced that 11 wells in its Mary field in Wetzel County, West Virginia have all flow tested into the Caiman pipeline at rates ranging from 3 to 5 million cubic feet (MMcf) of gas per day. The wells also had an initial condensate production rate ranging from 70 barrels to in excess of 100 barrels of condensate per MMcf of gas produced, which Stone expects will significantly enhance the economics of the field. In addition, the initial natural gas liquids (NGL) volumes from the wet gas stream were estimated to be over 40 barrels per MMcf of gas produced, which Stone believes will further enhance the value of the gas stream. Due to the higher than expected volume of condensate and NGLs, the pipeline facilities will require additional equipment to allow all 11 wells to flow continuously into the pipeline. Accordingly, production from the field has been intermittent over the past several weeks as pipeline solutions are reviewed.

There are another 13 wells in the Mary field that have been drilled, but not completed, which are expected to be fractured and produced during 2012. Outside of the Mary field, Marcellus production from Stone's other Appalachian fields remains at approximately 15 MMcf per day.

Stone added approximately 10,000 net acres to its West Virginia leasehold position during the second half of 2011, including the acquisition of over 6,700 net acres from a single entity. The remainder has been bolt-on acreage to enhance the current land position in the area. This brings the total Appalachian leasehold position for Stone up to approximately 90,000 net acres, with over 26,000 net acres in the condensate-rich Mary field.

Due to efficiencies gained during the year, Stone now expects to drill 27 horizontal wells in 2011 using one horizontal rig and one smaller vertical rig. Stone has recently extended its bundled service arrangement with Schlumberger for the Appalachian and Gulf of Mexico regions, which will satisfy the expected fracturing requirements for 2012. Separately, Stone entered into a Joint Operating Agreement with Magnum Hunter Resources encompassing 1,925 acres in the Heather field in Wetzel County to provide for more efficient development of the area. Stone will serve as operator in this 50%/50% arrangement, with volumes from this development expected to flow into the Eureka Hunter pipeline.