How Was Stone Energy’s Operational Performance in 3Q16? PART 2 OF 11
By Nicholas Chapman | Dec 1, 2016 3:15 pm EST

Stone Energy’s operational strategies

Stone Energy (SGY) primarily operates in two low-cost basins in the US: the Gulf of Mexico and the Appalachia Basin. In this part, we’ll study Stone Energy’s operational strategies and how these strategies are impacting its operations.

Stone Energy’s Gulf of Mexico operations

Stone Energy’s Gulf of Mexico operations include its facilities at Pompano platform (deep water) and Mississippi Canyon (deep water).

In June 2016, Stone Energy temporarily stacked the Pompano platform rig in place to preserve liquidity. Stone Energy expects to resume Pompano platform drilling operations in early 2017. The company plans to drill three additional development wells from the Pompano platform. Each additional development well is expected to provide production volumes ranging from 0.5–1.5 Mboe (thousand barrels of oil equivalent) per day per well after hook up. Stone Energy holds a 100% working interest in these wells.

Stone Energy’s Appalachia operations

Stone Energy’s Appalachia operations include its facilities at Mary field, Heather field, and Buddy field. In 3Q16, Stone Energy negotiated the termination of the contract for the Appalachia drilling rig. Due to capital constraints, SGY plans to limit Appalachian activities in 2016 to maintaining production and core leasehold interests and to other maintenance operations.

Stone Energy’s divestiture

On October 20, 2016, Stone Energy entered a purchase and sale agreement with TH Exploration III, an affiliate of Tug Hill, for the sale of the Appalachia assets for $360 million in cash subject to customary purchase price adjustments. These assets produced ~10.3 Bcfe (billion cubic feet equivalent) in 3Q16. The sale has an effective date of June 1, 2016, and is expected to close by February 25, 2017.

Other upstream players

In order to deal with lower energy prices and raise cash, other upstream players from the S&P 500 (SPY) including Murphy Oil (MUR), CONSOL Energy (CNX), Devon Energy (DVN), Chesapeake Energy (CHK), and Anadarko Petroleum (APC) have also recently completed divestitures.