Stone Acquires Gulf of Mexico Properties from Concoco
Stone Energy Corporation provided an update of its press release of October 10, 2001 regarding agreements to acquire from Conoco, eight producing properties on federal leases in the Gulf of Mexico and certain gathering facilities and pipelines through both stock and asset purchases for cash. All of the preferential rights to purchase that were applicable to any of the properties have expired and Stone will pay Conoco a total purchase price of $299.7 million. A small amount of the purchase price ($4.1 million) is associated with two crude oil pipelines which are subject to preferential rights to purchase elections that are due to expire on or before December 17, 2001. We believe the estimated net proved reserves associated with this acquisition are approximately 214.4 billion cubic feet (Bcf) of gas equivalent (25.7 million barrels of oil and 60.2 Bcf of gas). Using Stone estimates, this acquisition would increase our proved reserves at December 31, 2000 by approximately 35% and lower our natural gas as a percent of total reserves from 66% to 56%. The properties to be acquired are estimated to have a reserve life of approximately nine years based on an anticipated initial daily production rate of 65 MMcfe net to Stone. In addition to the value of estimated proved reserves and related existing infrastructure associated with these substantial properties, Stone has identified value in a combination of undrilled exploratory potential for future reserve and production growth, existing infrastructure from which many of these prospects can be drilled and future revenues and cost savings associated with the pipelines and gathering facilities.
This acquisition was privately negotiated and is consistent with our strategy of targeting properties with characteristics fitting our core business strategy. Included in these characteristics are a Gulf of Mexico location, a mature production history with established infrastructure, multiple productive reservoirs and operatorship of a majority of proved reserves, combined with significant identified opportunities for future reserve and production growth. In addition to providing significant immediate growth in reserves and production, the properties will complement and enhance our existing Gulf of Mexico prospect inventory. We have advanced $30 million of the purchase price to Conoco as a performance deposit and expect to close the transaction on or before December 31, 2001. Stone Energy has acquired an interest in the following properties: Ewing Bank 305, Mississippi Canyon 109, South Marsh Island 9, Ship Shoal 176, Main Pass 311, Main Pass 144, Main Pass 290, and South Marsh Island 107.
Stone plans to finance this transaction through a combination of borrowings under its credit facility and other long-term debt instruments. We are currently negotiating a $400 million credit facility.
We have budgeted approximately $220 million for capital expenditures during 2002, which we plan to finance with cash flow from operations. This budget includes approximately $36 million to exploit and develop the Conoco properties. In addition to funding our drilling budget, we plan to use excess cash flow in 2002 to repay a portion of the bank debt that we expect to incur to finance a portion of this transaction.