<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO. 1 TO FORM 8-K
ON FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 15, 1997
------------------
STONE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-12074 72-1235413
(State or other jurisdiction (Commission File (I.R.S. employer
of incorporation or organization) Number) identification no.)
625 E. KALISTE SALOOM ROAD
LAFAYETTE, LOUISIANA 70508
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (318) 237-0410
===============================================================================
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On August 1, 1997, Stone Energy Corporation (the "Company") closed
the purchase of certain interests in Vermilion Block 255 Field (the "Property")
from three entities for $36.6 million. The sellers were Aviara Energy
Corporation, Forest Oil Corporation and TOTAL Minatome Corporation. The field
consists of interests in four Vermilion blocks (255, 256, 267 and 268), and the
working interests acquired range from 66.7% to 83.3%. The effective date of the
acquisition was April 1, 1997, and net cash flow from the property from April
through July 1997, estimated at $2.4 million, will be recorded as a reduction of
the investment in the property.
Eight platforms and 48 wells exist on the field, with 10 wells
currently producing at the aggregate daily rates of approximately 1,500 barrels
of oil and 18 million cubic feet of gas. Stone Energy is now the field operator,
and the remaining interests in the property are owned by CNG Producing Company.
In addition to the purchase price, Stone Energy provided a bond in the amount of
$8.8 million to secure abandonment obligations.
The Company funded the purchase of the Property with an advance under
its line of credit with a bank group led by NationsBank of Texas, N.A.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
See "Index to Financial Statements - Financial
Statements of the Acquired Property" on page F-1.
(b) Pro Forma Financial Information
See "Index to Financial Statements - Pro Forma
Financial Information" on page F-2.
(c) Exhibits
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of KPMG Peat Marwick LLP.
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
STONE ENERGY CORPORATION
Date: October 15, 1997 By: /s/ Michael L. Finch
-------------------------
Michael L. Finch
Executive Vice President and
Chief Financial Officer
3
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS OF THE ACQUIRED PROPERTY:
Aviara Energy Corporation's Interest -
Independent Auditors' Report......................................... F-3
Statement of Revenues and Direct Operating
Expenses of Vermilion Block 255 for the year
ended December 31, 1996........................................ F-4
Notes to Statement of Revenues and Direct
Operating Expenses............................................. F-5
Statement of Revenues and Direct Operating
Expenses of Vermilion Block 255 for the six
months ended June 30, 1997 - Unaudited......................... F-8
TOTAL Minatome Corporation's Interest -
Report of Independent Public Accountants............................. F-9
Statement of Historical Oil and Gas Revenues and
Direct Operating Expenses of Vermilion 255
for the year ended December 31, 1996........................... F-10
Notes to Statement of Historical Oil and Gas Revenues and
Direct Operating Expenses...................................... F-11
Supplementary Financial Information for Oil and Gas
Producing Activities - Unaudited............................... F-12
Statement of Historical Oil and Gas Revenues and
Direct Operating Expenses of Vermilion 255
for the six months ended June 30, 1997 - Unaudited............. F-14
Forest Oil Corporation's Interest -
Independent Auditors' Report......................................... F-15
Statement of Oil and Gas Revenue and Direct Lease Operating
Expenses of Vermilion Block 255 for the year
ended December 31, 1996........................................ F-16
F-1
<PAGE> 5
INDEX TO FINANCIAL STATEMENTS
(CONTINUED)
Notes to Statement of Oil and Gas Revenue
and Direct Operating Expenses.................................. F-17
Statement of Oil and Gas Revenue and Direct Lease Operating
Expenses of Vermilion Block 255 for the six
months ended June 30, 1997 - Unaudited......................... F-20
PRO FORMA FINANCIAL INFORMATION:
Pro Forma Consolidated Balance Sheet of Stone Energy
Corporation as of June 30, 1997 - Unaudited.................... F-21
Pro Forma Consolidated Statement of Operations of
Stone Energy Corporation for the year ended
December 31, 1996 - Unaudited.................................. F-22
Pro Forma Consolidated Statement of Operations of Stone Energy
Corporation for the six months ended June 30, 1997 - Unaudited. F-23
Notes to Pro Forma Consolidated Financial Statements.................... F-24
F-2
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Stone Energy Corporation:
We have audited the accompanying statement of revenues and direct operating
expenses of Aviara Energy Corporation's Interest in the Vermilion Block 255
Field for the year ended December 31, 1996, acquired by Stone Energy
Corporation. This financial statement is the responsibility of Stone Energy
Corporation's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit of a statement of revenues and direct
operating expenses includes examining, on a test basis, evidence supporting the
amounts and disclosures in that financial statement. An audit of a statement of
revenues and direct operating expenses also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit of the statement of revenues and direct operating expenses provides a
reasonable basis for our opinion.
The accompanying statement of revenues and direct operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and excludes material expenses, described in
note 1 to the financial statement, that would not be comparable to those
resulting from the proposed future operations of the oil and gas properties and
is not intended to be a complete presentation of revenues and expenses.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of Aviara Energy Corporation's Interest in the Vermilion
Block 255 Field as described in note 1 for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
September 25, 1997
F-3
<PAGE> 7
AVIARA ENERGY CORPORATION'S INTEREST
IN THE VERMILION BLOCK 255 FIELD
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
Revenues - oil and gas sales $ 10,125
Direct operating expenses 2,551
--------------
Excess of revenues over direct operating expenses $7,574
==============
See accompanying notes to statement of revenues and direct operating expenses.
F-4
<PAGE> 8
AVIARA ENERGY CORPORATION'S INTEREST
IN THE VERMILION BLOCK 255 FIELD
NOTES TO STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
1. BASIS OF PRESENTATION:
The accompanying financial statement presents the revenues and direct operating
expenses of Aviara Energy Corporation's ("Aviara") interest in the Vermilion
Block 255 Field ("Properties")for the year ended December 31, 1996. These
properties were purchased by Stone Energy Corporation ("Stone") effective April
1, 1997 for approximately $13.7 million. The Properties consist of royalty and
working interests in the Vermilion Block 255 Field (which includes interests in
Vermilion Blocks 255, 256, 267 and 268).
The accompanying statement of revenues and direct operating expenses of the
Properties does not include general and administrative expenses, interest
expense, depreciation, depletion and amortization, or any provision for income
taxes since historical expenses of this nature incurred by Aviara are not
necessarily indicative of the costs to be incurred by Stone.
Revenues in the accompanying statement of revenues and direct operating expenses
are recognized on the sales method. Direct operating expenses are recognized on
the accrual basis and consist of monthly operator overhead costs and other
direct costs of operating the Properties which were charged to the joint account
of working interest owners by the operators of the wells.
Historical financial information reflecting financial position, results of
operations, and cash flows of the Properties is not presented because the
purchase price was assigned to the oil and gas property interests and related
equipment acquired. Other assets acquired and liabilities assumed were not
material. In addition, the Properties were a part of a much larger enterprise
prior to acquisition by Stone and representative amounts of general and
administrative expenses, depreciation, depletion and amortization, interest and
other indirect costs were not necessarily allocated to the Properties acquired,
nor would such allocated historical costs be relevant to future operations of
the Properties. Development and exploration expenditures related to these
Properties were insignificant in the relevant period. Accordingly, the
historical statement of revenues and direct operating expenses of Aviara's
Interest in the Vermilion Block 255 Field is presented in lieu of the financial
statements required under Item 3-05 of Securities and Exchange Commission
Regulation S-X.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
F-5
<PAGE> 9
AVIARA ENERGY CORPORATION'S INTEREST
IN THE VERMILION BLOCK 255 FIELD
NOTES TO STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
2. SUPPLEMENTARY FINANCIAL INFORMATION FOR OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED):
The following reserve estimates present Stone's estimate of the proved oil and
gas reserves and net cash flow of the properties, all of which are off-shore
United States properties. Stone emphasizes that reserve estimates are inherently
imprecise and that estimates of new discoveries are more imprecise than those of
producing oil and gas properties. Accordingly, the estimates are expected to
change as future information becomes available. The estimates have been prepared
by Stone's petroleum reservoir engineers.
(A) RESERVE QUANTITY INFORMATION
Below are the net quantities of proved reserves and proved developed reserves
of the Properties.
Oil Gas
(MBbls) (MMcf)
------------- -------------
Proved reserves:
Balance at December 31, 1995 1,526 13,810
Production (314) (1,333)
------------- -------------
Balance at December 31, 1996 1,212 12,477
============= =============
Proved developed reserves:
Balance at December 31, 1996 805 6,910
============= =============
(B) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO
PROVED OIL & GAS RESERVES:
The Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil and Gas Reserves ("Standardized Measure") is a disclosure requirement under
Statement of Financial Accounting Standards No. 69.
The Standardized Measure of discounted future net cash flows does not purport to
be, nor should it be interpreted to present, the fair value of the oil and gas
reserves of the properties. An estimate of fair value would also take into
account, among other things, the recovery of reserves not presently classified
as proved, the value of unproved properties, and consideration of expected
future economic and operating conditions.
F-6
<PAGE> 10
AVIARA ENERGY CORPORATION'S INTEREST
IN THE VERMILION BLOCK 255 FIELD
NOTES TO STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
The estimates of future cash flows and future production and development costs
are based on period-end sales prices for oil and gas, estimated future
production of proved reserves, and estimated future production and development
costs of proved reserves, based on current costs and economic conditions. The
estimated future net cash flows are then discounted at a rate of 10%.
The Standardized Measure of discounted future net cash flows relating to proved
oil and gas reserves at December 31, 1996 follows (in thousands):
<TABLE>
<S> <C>
Future cash inflows $77,470
Future production and development costs (23,677)
-------
Future net cash flows (before income taxes) 53,793
10% annual discount for estimated timing of cash flows (18,065)
-------
Standardized measure of discounted future net cash flows
(before income taxes) $35,728
=======
</TABLE>
Changes in the Standardized Measure of discounted future net cash flows (before
income taxes) relating to proved oil and gas reserves at December 31, 1996 are
as follows (in thousands):
<TABLE>
<S> <C>
Balance at beginning of period $24,118
Sales of oil and gas produced, net of production expenses (7,574)
Changes in prices and costs 16,773
Other 2,411
-------
Balance at end of period $35,728
=======
</TABLE>
Estimates of economically recoverable gas and oil reserves and of future net
revenues are based upon a number of variable factors and assumptions, all of
which are to some degree speculative and may vary considerably from actual
results. Therefore, actual production, revenues, development and operating
expenditures may not occur as estimated. The reserve data are estimates only,
are subject to many uncertainties and are based on data gained from production
histories and on assumptions as to geologic formations and other matters. Actual
quantities of gas and oil may differ materially from the amounts estimated.
F-7
<PAGE> 11
AVIARA ENERGY CORPORATION'S INTEREST
IN THE VERMILION BLOCK 255 FIELD
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1997 - UNAUDITED
(IN THOUSANDS)
Revenues - oil and gas sales $3,153
Direct operating expenses 743
---------------
Excess of revenues over direct operating expenses $2,410
===============
NOTE -- UNAUDITED
The above presented Statement of Revenues and Direct Operating Expenses
for the six months ended June 30, 1997 is unaudited; however, it includes
all adjustments (consisting only of normal recurring adjustments) which, in the
opinion of Stone Energy Corporation's management, are necessary for a fair
presentation for such periods. Accounting measurements at interim dates
inherently involve greater reliance on estimates than at year end. The results
of operations for the interim periods presented are not necessarily indicative
of the results to be expected for the entire year.
Certain footnote disclosures normally included in annual consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been omitted herein. The interim information should be read in
conjunction with the accompanying annual financial statements and notes.
F-8
<PAGE> 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder and Board of Directors of
TOTAL Minatome Corporation:
We have audited the accompanying statement of historical oil and gas revenues
and direct operating expenses relating to TOTAL Minatome Corporation's interest
in the Vermilion 255 Field (see Note 1) for the year ended December 31, 1996.
This statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of historical oil and gas revenues and
direct operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the statement of historical oil and gas revenues and direct
operating expenses referred to above presents fairly, in all material respects,
the historical oil and gas revenues and direct operating expenses relating to
the Company's interest in the Vermilion 255 Field for the year ended December
31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
September 19, 1997
F-9
<PAGE> 13
TOTAL MINATOME CORPORATION'S INTEREST
IN THE VERMILION 255 FIELD
STATEMENT OF HISTORICAL OIL AND GAS REVENUES AND
DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
Revenues - oil and gas sales $ 7,513
Direct operating expenses 1,537
--------------------
Excess of revenues over direct operating expenses $5,976
====================
See accompanying notes to statement of historical oil and gas revenues
and direct operating expenses.
F-10
<PAGE> 14
TOTAL MINATOME CORPORATION'S INTEREST
IN THE VERMILION 255 FIELD
NOTES TO STATEMENT OF HISTORICAL OIL AND GAS REVENUES
AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
1. THE VERMILION 255 FIELD:
On July 2, 1997, TOTAL Minatome Corporation (TMC) and its partners in the
Vermilion 255 Field entered into a purchase and sale agreement (the Agreement)
to sell their interests in certail oil and gas properties and related assets
(collectively, the Vermilion 255 Field or the properties) to Stone Energy
Corporation (Stone). The purchase price at the effective date of April 1, 1997
was subject to certain adjustments (as defined in the Agreement) between the
effective date and the closing date of August 1, 1997. TMC's share of the net
purchase price at the closing date was approximately $13.7 million. The purchase
price is subject to future adjustments not previously determined, up to 120 days
after the closing date.
2. BASIS OF PRESENTATION:
During the period presented, the above property was not accounted for or
operated as a separate division by TMC. Certain costs, such as depreciation,
depletion and amortization, general and administrative expenses, and corporate
income taxes were not allocated to the individual properties. Accordingly,
complete separate financial statements prepared in accordance with generally
accepted accounting principles do not exist and are not practicable to obtain in
these circumstances.
Revenues and direct operating expenses for the oil and gas properties included
in the accompanying statement represent TMC's interest in the properties and are
presented on the accrual basis of accounting and may not be representative of
future operations. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and direct
operating expenses during the reporting period. Actual results could differ from
those estimates.
3. COMMITMENTS AND CONTINGENCIES:
Pursuant to the terms of the Agreement, liability for certain claims, litigation
or disputes pending as of the effective date and certain matters arising in
connection with ownership of the properties prior to the effective date is
retained by TMC.
F-11
<PAGE> 15
SUPPLEMENTARY FINANCIAL INFORMATION FOR
TOTAL MINATOME CORPORATION'S INTEREST
IN THE VERMILION 255 FIELD
OIL AND GAS PRODUCING ACTIVITIES - UNAUDITED
Reserve information presented below is based on the December 31, 1996 reserve
report prepared in accordance with guidelines established by the Securities and
Exchange Commission ("SEC"). Accordingly, the following reserve estimates are
based upon existing economic and operating conditions at the respective dates.
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in providing the future rates of production and timing of
development expenditures. The following reserve data represents estimates only
and should not be construed as being exact. In addition, the present values
should not be construed as the current market value of the related oil and gas
properties or the cost that would be incurred to obtain equivalent reserves.
The following table sets forth Stone's analysis of TOTAL Minatome Corporation's
("TMC") share of the Vermilion 255 Field estimated quantities of net proved and
proved developed oil (including condensate) and gas reserves:
Oil Gas
(MBbls) (MMcf)
----------- ----------
Proved reserves at December 31, 1995 1,339 12,889
Production (229) (1,094)
----------- ----------
Proved reserves at December 31, 1996 1,110 11,795
=========== ==========
Proved developed reserves at December 31, 1996 960 7,690
=========== ==========
The following tables present Stone's analysis of TMC's share of the standardized
measure of future net cash flows related to proved oil and gas reserves together
with changes therein, as defined by the Financial Accounting Standards Board.
The oil, condensate and gas price structure utilized to project future net cash
flows reflects current prices at each year end. Future production and
development costs are based on current costs with no escalations. Estimated
future cash flows have been discounted to their present values based on a 10%
annual discount rate.
F-12
<PAGE> 16
SUPPLEMENTARY FINANCIAL INFORMATION FOR
TOTAL MINATOME CORPORATION'S INTEREST
IN THE VERMILION 255 FIELD
OIL AND GAS PRODUCING ACTIVITIES - UNAUDITED
Set forth below is the Standardized Measure (before income taxes) relating to
proved oil and gas reserves at December 31, 1996 (in thousands) -
Future cash inflows....................................................$72,348
Future production and development costs............................... (22,039)
--------
Future net cash inflows............................................... 50,309
10% annual discount................................................... (16,844)
--------
Standardized Measure (before income taxes)
of discounted future net cash flows..................................$33,465
========
The following is an analysis of the changes in the Standardized Measure (before
income taxes) during 1996 (in thousands) -
Standardized Measure (before income taxes) -
Beginning of year....................................................$21,871
Increases (decreases):
Sales, net of production costs...................................... (5,975)
Net changes in prices and costs..................................... 15,382
Accretion of discount............................................... 2,187
--------
Standardized Measure (before income taxes)
- End of year........................................................$33,465
========
F-13
<PAGE> 17
TOTAL MINATOME CORPORATION'S INTEREST
IN THE VERMILION 255 FIELD
STATEMENT OF HISTORICAL OIL AND GAS REVENUES AND
DIRECT OPERATING EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1997 - UNAUDITED
(IN THOUSANDS)
Revenues - oil and gas sales $ 2,605
Direct operating expenses 510
-----------------
Excess of revenues over direct operating expenses $2,095
=================
F-14
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
FOREST OIL CORPORATION:
We have audited the accompanying statement of oil and gas revenue and direct
lease operating expenses of certain oil and gas properties (the Forest
Properties) of Forest Oil Corporation (FOC) acquired by Stone Energy Corporation
for the year ended December 31, 1996. This financial statement is the
responsibility of FOC's management. Our responsibility is to express an opinion
on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of oil and gas revenue and direct lease
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of oil and gas revenue and direct lease operating expenses. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying statement of oil and gas revenue and direct lease operating
expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission and excludes material
expenses, described in Note 1 to the financial statement, that would not be
comparable to those resulting from the proposed future operations of the oil and
gas properties, as described in Note 1 and is not intended to be a complete
presentation of the Forest Properties' revenue and expenses.
In our opinion, the statement of oil and gas revenue and direct lease operating
expenses referred to above presents fairly, in all material respects, the oil
and gas revenue and direct lease operating expenses of the Forest Properties as
described in Note 1 for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
October 3, 1997
F-15
<PAGE> 19
FOREST OIL CORPORATION'S INTEREST
IN THE VERMILION BLOCK 255 FIELD
STATEMENT OF OIL AND GAS REVENUE AND
DIRECT LEASE OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
Revenues - oil and gas sales $ 1,614
Direct lease operating expenses 463
-------------------
Revenue in excess of direct lease operating expenses $1,151
===================
See accompanying notes to the financial statement.
F-16
<PAGE> 20
FOREST OIL CORPORATION'S INTEREST
IN THE VERMILION BLOCK 255 FIELD
NOTES TO STATEMENT OF OIL AND GAS REVENUE AND
DIRECT LEASE OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
1. PURCHASE OF OIL AND GAS PROPERTIES AND BASIS OF PRESENTATION:
The accompanying financial statement presents the revenues and direct operating
expenses of certain oil and gas properties and related equipment of Forest Oil
Corporation (Forest Properties) for the year ended December 31, 1996. These
properties were purchased by Stone Energy Corporation (Stone) effective April 1,
1997 for approximately $6.52 million. The properties consist of revenue and
working interests in oil and gas properties located offshore, in the Gulf of
Mexico.
The accompanying statement of oil and gas revenue and direct lease operating
expenses of the Forest Properties was prepared to comply with certain rules and
regulations of the Securities and Exchange Commission and does not include
general and administrative expenses, interest expense, a provision for
depreciation, depletion and amortization, or any provision for income taxes
since historical expenses of this nature incurred by Forest Oil Corporation are
not necessarily indicative of the costs to be incurred by Stone.
Revenue in the accompanying statement of oil and gas revenue and direct lease
operating expenses is recognized on the sales method. Direct lease operating
expenses are recognized on the accrual basis and consist of monthly
administrative overhead costs, production taxes, and other direct costs of
operating the Forest Properties.
2. SUPPLEMENTARY FINANCIAL INFORMATION FOR OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED):
(A) RESERVE QUANTITY INFORMATION
The following table presents Stone's estimate of the proved oil and gas reserves
attributable to the Forest Properties, all of which are located in the United
States. Stone emphasizes that reserve estimates are inherently imprecise and
that estimates of new discoveries are more imprecise than those of producing oil
and gas properties. Accordingly, the estimates are expected to change as future
information becomes available. The estimates have been prepared by Stone's
petroleum reservoir engineers.
F-17
<PAGE> 21
FOREST OIL CORPORATION'S INTEREST
IN THE VERMILION BLOCK 255 FIELD
NOTES TO STATEMENT OF OIL AND GAS REVENUE AND
DIRECT LEASE OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
Oil Gas
(MBbls) (MMcf)
------------- --------------
Proved reserves:
Balance at December 31, 1995 484 2,954
Production (57) (141)
------------- --------------
Balance at December 31, 1996 427 2,813
============= ==============
Proved developed reserves:
Balance at December 31, 1996 317 1,340
============= ==============
(B) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO
PROVED OIL AND GAS RESERVES:
The Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil and Gas Reserves (Standardized Measure) is a disclosure requirement under
Statement of Financial Accounting Standards No. 69.
The Standardized Measure of discounted future net cash flows does not purport to
be, nor should it be interpreted to present, the fair value of the oil and gas
reserves of the properties. An estimate of fair value would also take into
account, among other things, the recovery of reserves not presently classified
as proved, the value of unproved properties, and consideration of expected
future economic and operating conditions.
Future oil and gas sales and production and development costs have been
estimated using prices and costs in effect at the end of the year. Future income
tax expense has not been considered as the properties are not a tax paying
entity. Future general and administrative and interest expenses have also not
been considered.
F-18
<PAGE> 22
FOREST OIL CORPORATION'S INTEREST
IN THE VERMILION BLOCK 255 FIELD
NOTES TO STATEMENT OF OIL AND GAS REVENUE AND
DIRECT LEASE OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
The Standardized Measure of discounted future net cash flows relating to proved
oil and gas reserves at December 31, 1996 (in thousands of dollars) follows:
Future cash inflows $21,365
Future production and development costs (9,866)
--------
Future net cash inflows 11,499
10% annual discount for estimated timing of cash flows (3,908)
--------
Standardized Measure of discounted future net cash flows $ 7,591
========
Changes in the Standardized Measure of discounted future net cash flows relating
to proved oil and gas reserves at December 31, 1996 (in thousands of dollars)
are as follows:
Balance at January 1, 1996 $ 4,146
Sales of oil and gas produced, net of production expenses (1,151)
Changes in prices and costs 4,182
Other 414
---------
Balance at December 31, 1996 $ 7,591
=========
Estimates of economically recoverable gas and oil reserves and of future net
revenues are based upon a number of variable factors and assumptions, all of
which are to some degree speculative and may vary considerably from actual
results. Therefore, actual production, revenues, development, and operating
expenditures may not occur as estimated. The reserve data are estimates only,
are subject to many uncertainties and are based on data gained from production
histories and on assumptions as to geologic formations and other matters. Actual
quantities of gas and oil may differ materially from the amounts estimated.
F-19
<PAGE> 23
FOREST OIL CORPORATION'S INTEREST
IN THE VERMILION BLOCK 255 FIELD
STATEMENT OF OIL AND GAS REVENUE AND
DIRECT LEASE OPERATING EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1997 - UNAUDITED
(IN THOUSANDS)
Revenues - oil and gas sales $ 832
Direct lease operating expenses 147
-----------------
Revenue in excess of direct lease operating expenses $685
=================
See preceding notes to the financial statement.
F-20
<PAGE> 24
STONE ENERGY CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA COMBINED
COMPANY ADJUSTMENT PRO FORMA
-------------- ---------------- ---------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 10,396 $ 10,396
Marketable securities........................... 16,003 16,003
Accounts receivable............................. 11,443 11,443
Other current assets............................ 432 432
-------------- ---------------
Total current assets.............................. 38,274 38,274
Oil and gas properties, net....................... 210,159 34,200 (a) 244,359
Building and land, net............................ 3,606 3,606
Other assets, net................................. 1,517 1,517
-------------- ---------------
Total assets................................... $253,556 $287,756
============== ===============
LIABILITIES AND EQUITY
Current liabilities:
Notes payable..................................... $ 79 $ 79
Accounts payable and accrued liabilities.......... 35,467 35,467
-------------- ---------------
Total current liabilities...................... 35,546 35,546
Long-term loans................................... 51,137 34,200 (a) 85,337
Deferred tax liability............................ 15,264 15,264
Other long-term liabilities....................... 2,079 2,079
-------------- ---------------
Total liabilities.............................. 104,026 138,226
-------------- ---------------
Common stock...................................... 150 150
Additional paid in capital........................ 118,502 118,502
Retained earnings................................. 30,878 30,878
-------------- ---------------
Total equity................................... 149,530 149,530
-------------- ---------------
Total liabilities and equity................... $253,556 $287,756
============== ===============
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-21
<PAGE> 25
STONE ENERGY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
VERMILION BLOCK 255 PRO
-------------------------------------- FORMA
AVIARA'S TMC'S FOREST'S ADJUST- COMBINED
COMPANY INTEREST INTEREST INTEREST MENTS PRO FORMA
-------- ---------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Oil and gas production................... $55,839 $10,125 $7,513 $1,614 $75,091
Overhead reimbursements
and management fees................... 814 814
Other income............................. 1,312 1,312
-------- ---------- -------- -------- -----------
Total revenues.................... 57,965 10,125 7,513 1,614 77,217
-------- ---------- -------- -------- -----------
EXPENSES
Normal lease operating costs............. 8,625 2,551 1,537 463 13,176
Major maintenance expenses............... 427 427
Production taxes......................... 3,399 3,399
Depreciation, depletion and
amortization.......................... 19,564 6,348 (b) 25,912
Interest................................. 3,574 2,902 (a) 6,476
Salaries and other employee costs........ 2,062 2,062
Incentive compensation plan.............. 928 928
General and administrative............... 1,447 1,447
-------- ---------- -------- -------- -----------
Total expenses.................... 40,026 2,551 1,537 463 53,827
-------- ---------- -------- -------- -----------
Net income before income taxes............. 17,939 7,574 5,976 1,151 23,390
-------- ---------- -------- -------- -----------
Provision for income taxes:
Current.................................. 208 208
Deferred................................. 6,698 2,099 (c) 8,797
-------- ---------- -------- -------- -----------
Total income taxes................ 6,906 0 0 0 9,005
-------- ---------- -------- -------- -----------
Net income................................. $11,033 $ 7,574 $5,976 $1,151 $14,385
======== ========== ======== ======== ===========
Pro forma earnings per share
Net income per share..................... $ 0.89 $ 1.16
======== ===========
Net income per share assuming
full dilution......................... $ 0.88 $1.15
======== ===========
Average shares outstanding............... 12,356 12,356
======== ===========
Average shares outstanding assuming
full dilution......................... 12,486 12,486
======== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-22
<PAGE> 26
STONE ENERGY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
VERMILION BLOCK 255 PRO
-------------------------------------- FORMA
AVIARA'S TMC'S FOREST'S ADJUST- COMBINED
COMPANY INTEREST INTEREST INTEREST MENTS PRO FORMA
-------- ---------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Oil and gas production................... $29,005 $3,153 $2,605 $832 $35,595
Overhead reimbursements
and management fees................... 255 255
Other income............................. 639 639
-------- --------- -------- -------- ----------
Total revenues.................... 29,899 3,153 2,605 832 36,489
-------- --------- -------- -------- ----------
EXPENSES
Normal lease operating costs............. 4,362 743 510 147 5,762
Major maintenance expenses............... 486 486
Production taxes......................... 1,499 1,499
Depreciation, depletion and
amortization.......................... 11,929 2,689 (b) 14,618
Interest................................. 1,103 1,442 (a) 2,545
Salaries and other employee costs........ 1,046 1,046
Incentive compensation plan.............. 316 316
General and administrative............... 713 713
-------- --------- -------- -------- ----------
Total expenses.................... 21,454 743 510 147 26,985
-------- --------- -------- -------- ----------
Net income before income taxes............. 8,445 2,410 2,095 685 9,504
-------- --------- -------- -------- ----------
Provision for income taxes:
Current.................................. 100 100
Deferred................................. 3,152 408 (c) 3,560
-------- --------- -------- -------- ----------
Total income taxes................ 3,252 0 0 0 3,660
-------- --------- -------- -------- ----------
Net income................................. $ 5,193 $2,410 $2,095 $685 $ 5,844
======== ========= ======== ======== ==========
Pro forma earnings per share
Net income per share..................... $ 0.33 $ 0.38
======== ==========
Net income per share assuming
full dilution......................... $ 0.33 $ 0.38
======== ==========
Average shares outstanding............... 15,312 15,312
======== ==========
Average shares outstanding assuming
full dilution......................... 15,327 15,327
======== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-23
<PAGE> 27
STONE ENERGY CORPORATION
NOTES TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
On August 1, 1997, Stone Energy Corporation (the "Company") closed the
purchase of certain interests in Vermilion Block 255 Field (the "Property") from
three entities for $36.6 million. The sellers were Aviara Energy Corporation,
Forest Oil Corporation and TOTAL Minatome Corporation. The field consists of
interests in four Vermilion blocks (255, 256, 267 and 268), and the working
interests acquired range from 66.7% to 83.3%. The effective date of the
acquisition was April 1, 1997, and net cash flow from the property from April
through July 1997, estimated at $2.4 million, will be recorded as a reduction of
the investment in the property.
Eight platforms and 48 wells exist on the field, with 10 wells
currently producing at the aggregate daily rates of approximately 1,500 barrels
of oil and 18 million cubic feet of gas. Stone Energy is now the field operator,
and the remaining interests in the property are owned by CNG Producing Company.
In addition to the purchase price, Stone Energy provided a bond in the amount of
$8.8 million to secure abandonment obligations.
The pro forma consolidated balance sheet at June 30, 1997 and the
related pro forma consolidated statement of operations for the year ended
December 31, 1996 and the six months ended June 30, 1997 have been prepared
assuming that the Property acquisition was consummated on January 1, 1996. The
preparation of the combined pro forma financial statements is based on certain
adjustments to the historical financial statements of the Company and the
historical statements of revenues and direct operating expenses of the Property
and are not necessarily indicative of the financial position or results of
operations had the above described property acquisition occurred on the assumed
date. These pro forma financial statements should be read in conjunction with
the financial statements of the Property included in this Form 8-K/A and of the
Company contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 and Quarterly Report on Form 10-Q for the period ended June
30, 1997.
NOTE 2 - PRO FORMA ADJUSTMENTS
Pro forma entries necessary to adjust the historical financial
statements are as follows:
(a) To record net purchase price of the Property and related
borrowings under Company's credit facility and interest expense
at the bank's prime rate.
(b) To adjust depreciation, depletion and amortization amounts
on a historical basis
F-24
<PAGE> 28
STONE ENERGY CORPORATION
NOTES TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
to amounts that would have been recorded if the property had
been included in the financial statements effective January 1,
1996.
(c) To record a provision for Federal and state income taxes at
a corporate statutory rate of 38.5%.
F-25
<PAGE> 29
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of KPMG Peat Marwick LLP.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement on Form S-8 (Registration No. 33-67332) and the Registration Statement
on Form S-3 (Registration No. 33- 72236) of Stone Energy Corporation (the
"Company") of our report dated September 25, 1997 relating to the Statements of
Revenues and Direct Operating Expenses for the year ended December 31, 1996
of Aviara Energy Corporation's Interest in the Vermilion Block 255 Field,
which appears in the Company's Amendment No. 1 to Form 8-K on Form 8-K/A.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Dallas, Texas
October 14, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation, in
this Form 8-K/A of Stone Energy Corporation (the "Company"), of our report dated
September 19, 1997 on the Statement of Historical Oil and Gas Revenues and
Direct Operating Expenses for the year ended December 31, 1996 of the property
acquired by the Company from TOTAL Minatome Corporation, and the incorporation
by reference of such report into the Company's previously filed Registration
Statements on Form S-8 (Registration No. 33-67332) and Form S-3 (Registration
No. 33-72236).
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
October 13, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (Registration No. 33-67332) and the Registration Statement on Form S-3
(Registration No. 33- 72236) of Stone Energy Corporation (the "Company") of our
report dated October 3, 1997 with respect to the Statement of Oil and Gas
Revenue and Direct Lease Operating Expenses for the year ended December 31, 1996
of certain oil and gas properties acquired by the Company from Forest Oil
Corporation, which report appears in the Company's Amendment No. 1 on Form 8-K/A
to Form 8-K dated August 15, 1997.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
October 14, 1997
