UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 1-12074
STONE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 72-1235413
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
625 E. Kaliste Saloom Road 70508
Lafayette, Louisiana (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (318) 237-0410
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
As of August 11, 1999 there were 18,302,908 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet
as of June 30, 1999 and December 31, 1998......................... 1
Condensed Consolidated Statement of Operations
for the Three and Six Month Periods Ended June 30, 1999 and 1998... 2
Condensed Consolidated Statement of Cash Flows
for the Six Months Ended June 30, 1999 and 1998.................... 3
Notes to Condensed Consolidated Financial Statements................ 4
Auditors' Review Report............................................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 8
PART II
Item 6. Exhibits and Reports on Form 8-K................................... 11
<PAGE>
STONE ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1999 1998
------------------ ----------------
<S> (Unaudited)
Current assets: <C> <C>
Cash and cash equivalents.................................... $17,765 $10,550
Marketable securities, at market............................. 8,618 16,853
Accounts receivable.......................................... 27,152 26,803
Other current assets......................................... 521 184
------------------ ----------------
Total current assets....................................... 54,056 54,390
Oil and gas properties, net:
Proved....................................................... 303,688 286,098
Unevaluated.................................................. 15,570 7,726
Building and land, net........................................... 3,821 3,559
Fixed assets, net................................................ 2,454 1,336
Other assets, net................................................ 3,356 3,460
Deferred tax asset............................................... 5,995 9,821
------------------ ----------------
Total assets............................................... $388,940 $366,390
================== ================
Liabilities and Stockholders' Equity
Current liabilities - accounts payable and
accrued liabilities.......................................... $44,841 $44,506
Long-term loans.................................................. 224,600 209,936
Other long-term liabilities...................................... 6,622 6,616
------------------ ----------------
Total liabilities.......................................... 276,063 261,058
------------------ ----------------
Common stock..................................................... 151 151
Additional paid in capital....................................... 119,662 119,208
Retained deficit................................................. (6,936) (14,027)
------------------ ----------------
Total stockholders' equity................................. 112,877 105,332
------------------ ----------------
Total liabilities and stockholders' equity................. $388,940 $366,390
================== ================
</TABLE>
<PAGE>
STONE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S>
Revenues <C> <C> <C> <C>
Oil and gas production..................... $35,864 $27,824 $66,354 $56,181
Overhead reimbursements
and management fees..................... 188 164 349 310
Other income............................... 221 486 492 778
----------- ----------- ----------- -----------
Total revenues...................... 36,273 28,474 67,195 57,269
----------- ----------- ----------- -----------
Expenses
Normal lease operating expenses............ 5,231 4,312 10,059 7,909
Major maintenance expenses................. 81 314 181 769
Production taxes........................... 670 512 1,185 1,044
Depreciation, depletion and
amortization............................. 16,831 15,887 34,519 31,104
Interest................................... 3,895 3,196 7,709 5,725
Salaries, general and administrative....... 1,122 1,135 2,199 2,207
Incentive compensation plan................ 211 275 421 550
----------- ----------- ----------- -----------
Total expenses...................... 28,041 25,631 56,273 49,308
----------- ----------- ----------- -----------
Net income before income taxes............... 8,232 2,843 10,922 7,961
----------- ----------- ----------- -----------
Provision for income taxes:
Current.................................... 5 - 5 -
Deferred.................................. 2,882 1,011 3,826 2,831
----------- ----------- ----------- -----------
2,887 1,011 3,831 2,831
----------- ----------- ----------- -----------
Net income................................... $5,345 $1,832 $7,091 $5,130
=========== =========== =========== ===========
Earnings per common share:
Basic earnings per share ................. $0.35 $0.12 $0.47 $0.34
=========== =========== =========== ===========
Diluted earnings per share................ $0.35 $0.12 $0.46 $0.34
=========== =========== =========== ===========
Average shares outstanding................ 15,088 15,066 15,083 15,063
=========== =========== =========== ===========
Average shares outstanding assuming
dilution............................... 15,403 15,340 15,351 15,330
=========== =========== =========== ===========
</TABLE>
<PAGE>
STONE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1999 1998
--------------- ---------------
<S>
Cash flows from operating activities: <C> <C>
Net income.................................................... $7,091 $5,130
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization.............. 34,519 31,104
Provision for deferred income taxes................... 3,826 2,831
--------------- ----------------
45,436 39,065
(Increase) decrease in marketable securities......... 8,235 (13,450)
(Increase) decrease in accounts receivable............ (349) 3,464
Increase in other current assets...................... (364) (505)
Increase in accrued liabilities....................... 1,767 6,774
Other................................................. 17 184
--------------- ----------------
Net cash provided by operating activities....................... 54,742 35,532
--------------- ----------------
Cash flows from investing activities:
Investment in oil and gas properties.......................... (56,109) (90,768)
Building additions and renovations............................ (311) (9)
(Increase) decrease in other assets .......................... (1,450) 1,096
--------------- ----------------
Net cash used in investing activities........................... (57,870) (89,681)
--------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings..................................... 13,000 55,000
Repayment of debt............................................ (3,024) (40)
Deferred financing costs..................................... - (160)
Expenses for stock offering.................................. (87) -
Exercise of stock options.................................... 454 284
--------------- ----------------
Net cash provided by financing activities....................... 10,343 55,084
--------------- ----------------
Net increase in cash and cash equivalents....................... 7,215 935
Cash and cash equivalents, beginning of period.................. 10,550 10,304
--------------- ----------------
Cash and cash equivalents, end of period........................ $17,765 $11,239
=============== ================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized)...................... $9,602 $5,424
Income taxes.............................................. 5 -
</TABLE>
STONE ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements of Stone Energy Corporation
(the "Company") at June 30, 1999 and for the three- and six-month periods then
ended are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for the
interim period. The condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial condition and
results of operations, contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998. The results of operations for the three- and
six-month periods ended June 30, 1999 are not necessarily indicative of future
financial results. Certain prior period amounts have been reclassified to
conform to current period presentation.
NOTE 2 - EARNINGS PER SHARE
Basic net income per share of common stock was calculated by dividing net
income applicable to common stock by the weighted-average number of common
shares outstanding during the period. Diluted net income per share of common
stock was calculated by dividing net income applicable to common stock by the
weighted-average number of common shares outstanding during the period plus the
weighted-average number of dilutive stock options granted to outside directors
and certain employees which totaled approximately 315,000 shares and 274,000
shares in the second quarter of 1999 and 1998, respectively, and 268,000 shares
and 267,000 shares in the first six months of 1999 and 1998, respectively.
Options which were considered antidilutive because the exercise price of the
options exceeded the average price for the applicable period totaled 16 shares
and 758 shares in the second quarter of 1999 and 1998, respectively, and 3,388
shares and 598 shares in the first six months of 1999 and 1998, respectively.
NOTE 3 - HEDGING ACTIVITIES
In order to reduce its exposure to the possibility of declining oil and gas
prices, from time to time the Company hedges with third parties certain of its
crude oil and natural gas production in various swap agreement contracts. The
crude oil contracts are tied to the price of NYMEX light sweet crude oil futures
and are settled monthly based on the differences between contract prices and the
average NYMEX prices for that month applied to the related contract volumes.
Settlement for gas swap contracts is based on the average closing prices of
either the last three days or last full month of trading on the NYMEX for each
month of the swap.
<PAGE>
The Company's current forward positions are summarized as follows:
<TABLE>
<CAPTION>
Oil Gas
----------------------------- -----------------------------
Average Average
MBbls Price Bbtu Price
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Third quarter, 1999 694.4 $17.95 4,600 $2.211
Fourth quarter, 1999 368.0 19.30 4,600 2.450
First quarter, 2000 273.0 19.26 4,550 2.528
Second quarter, 2000 273.0 19.26 - -
Third quarter, 2000 92.0 18.92 - -
Fourth quarter, 2000 92.0 18.92 - -
</TABLE>
For the three- and six-month periods ended June 30, 1999, the Company
recognized net hedging gains of $0.2 million and $2.6 million, respectively,
which were recorded in the accompanying condensed consolidated statement of
operations as additions to revenues from oil and gas production. Second quarter
and six-month 1998 oil and gas revenues included net hedging gains of $0.6
million and $2.5 million, respectively.
NOTE 4 - LONG-TERM LOANS
In June 1999, the Company's bank group increased the borrowing base under
the Company's bank credit facility from $127.5 million to $140.0 million. The
borrowing base limitation is based on a borrowing base amount established by the
banks for the Company's oil and gas properties. Interest under the revolver is
payable quarterly and at June 30, 1999, the weighted-average interest rate of
the facility was 6.4% per annum, the total outstanding principal balance was
$120 million and letters of credit totaling $7.5 million had been issued
pursuant to the facility. In August 1999, the Company retired all outstanding
borrowings under its revolving credit facility with the net proceeds from its
recent stock offering (See-Note 6 Subsequent Events).
In June 1999, the Company acquired a majority interest in the Lafitte Field
by executing an agreement that included a production payment to be satisfied
through the delivery of production from the purchased property. In connection
with this transaction, the Company recorded a production payment loan of $4.6
million representing the discounted present value of production payments to be
made over a three-year period.
NOTE 5 - NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Company expects to adopt SFAS No. 133
during the first quarter of 2001. Because of the nature of the Company's only
derivative instrument, the Company does not expect that the adoption will have a
material impact on the Company's results of operations. However, the adoption
may create volatility in equity through changes in other comprehensive income.
<PAGE>
NOTE 6 - SUBSEQUENT EVENTS
On July 28, 1999, the Company completed a secondary offering of 3.16
million shares of its common stock at a price to the public of $43.75 per share.
After payment of the underwriting discount and estimated expenses, the Company
received net proceeds of $130.9 million. The proceeds will be used to finance
recent acquisitions, to fund specifically identified exploration and development
activities, to finance potential property acquisitions and for other general
corporate purposes. The Company reduced indebtedness under its credit facility
pending such uses.
In July 1999, the Company acquired an additional 62.5% working interest in
the East Cameron Block 64 Field and a 100% working interest in the West Cameron
Block 176 Field as well as control of operations for both fields. The purchase
was made pursuant to a non-monetary exchange for a volumetric production payment
of natural gas to be delivered free of all production and transportation costs
in the total volume of 8 Bcf of gas over a three-year period from the South
Pelto Block 23 Field. During July 1999, the Company recorded a production
payment liability of $17.9 million representing the discounted present value of
the production payments to be made.
<PAGE>
AUDITORS' REVIEW REPORT
TO THE STOCKHOLDERS OF
STONE ENERGY CORPORATION:
We have reviewed the accompanying condensed consolidated balance sheet of
Stone Energy Corporation (a Delaware corporation) as of June 30, 1999, and the
related condensed consolidated statements of operations for the three-month and
six-month periods ended June 30, 1999 and 1998, and the condensed consolidated
statements of cash flows for the six-month periods ended June 30, 1999 and 1998.
These financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Stone Energy Corporation as of December 31, 1998
(not presented herein), and, in our report dated March 2, 1999, we expressed an
unqualified opinion on that statement. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1998, is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
August 2, 1999
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Stone Energy Corporation is an independent oil and gas company engaged in
the acquisition, exploration, development and operation of oil and gas
properties onshore and in shallow waters offshore Louisiana. The Company and its
predecessors have been active in the Gulf Coast Basin since 1973, which gives
the Company extensive geophysical, technical and operational expertise in this
area. The Company's business strategy is to increase production, cash flow and
reserves through the acquisition and development of mature properties located in
the Gulf Coast Basin.
RESULTS OF OPERATIONS
The following table sets forth certain operating information with respect
to the oil and gas operations of the Company for the three- and six-month
periods ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ----------------------------
1999 1998 1999 1998
------------- ------------- ----------- ------------
<S>
Production: <C> <C> <C> <C>
Oil (MBbls)........................................... 876 674 1,706 1,312
Gas (MMcf)............................................ 9,575 7,891 19,492 15,201
Oil and gas (MMcfe)................................... 14,831 11,935 29,728 23,073
Sales data (in thousands) (a):
Total oil sales....................................... $13,550 $9,131 $23,354 $19,416
Total gas sales....................................... 22,314 18,693 43,000 36,765
Average sales prices (a):
Oil (per Bbl)......................................... $15.47 $13.55 $13.69 $14.80
Gas (per Mcf)......................................... 2.33 2.37 2.21 2.42
Per Mcfe.............................................. 2.42 2.33 2.23 2.43
Average costs (per Mcfe):
Normal lease operating expenses (b)................... $0.35 $0.36 $0.34 $0.34
Salaries, general and administrative.................. 0.08 0.10 0.07 0.10
DD&A on oil and gas properties........................ 1.12 1.31 1.14 1.33
(a) Includes the effects of hedging
(b) Excludes major maintenance expenses
</TABLE>
For the second quarter of 1999, the Company reported net income totaling
$5.3 million or $0.35 per share, compared to net income reported for the second
quarter of 1998 of $1.8 million, or $0.12 per share. Net income for the first
six months of 1999 and 1998 totaled $7.1 million and $5.1 million, respectively.
<PAGE>
Production volumes of oil and gas during the second quarter of 1999,
compared to the 1998 quarter, rose 30% and 21%, respectively, totaling
approximately 876,000 barrels of oil and 9.6 billion cubic feet of gas. On a
thousand cubic feet of gas equivalent (Mcfe) basis, production rates for the
second quarter of 1999 were 24% higher than the comparative 1998 period.
Second quarter 1999 oil and gas revenues increased 29% to $35.9 million,
compared to second quarter 1998 oil and gas revenues of $27.8 million. For the
first six months of 1999, oil and gas revenues increased 18% to $66.4 million,
compared to oil and gas revenues of $56.2 million during the first half of 1998.
Prices during the second quarter of 1999 averaged $15.47 per barrel of oil and
$2.33 per Mcf of gas, compared to averages of $13.55 per barrel and $2.37 per
Mcf received in the 1998 period. Both total and unit revenue amounts include the
effects of hedging transactions.
Normal operating costs during the second quarter of 1999 increased to $5.2
million, compared to $4.3 million during the 1998 period due to an increase in
the Company's property base relative to the number of producing wells and higher
production rates. However, on a unit of production basis, second quarter 1999
operating costs declined 3% as operating costs were $0.35 per Mcfe for the
second quarter of 1999 compared to $0.36 per Mcfe for the second quarter of
1998.
General and administrative expenses of $1.1 million during the second
quarter of 1999 were unchanged from the comparable 1998 period. However, on a
unit basis, these costs declined 20% during the 1999 quarter to $0.08 per Mcfe,
compared to $0.10 per Mcfe during the 1998 period. Depreciation, depletion and
amortization (DD&A) expense on the Company's oil and gas properties increased to
$16.6 million during the second quarter of 1999, compared to $15.7 million for
the 1998 period because of higher production rates. However, as a result of the
ceiling test write-down of the Company's oil and gas properties in December
1998, unit DD&A expense for 1999's second quarter declined to $1.12 per Mcfe
versus $1.31 per Mcfe for the comparable 1998 period. As a result of the
increase in the Company's outstanding borrowings under its bank credit facility,
interest expense during the three-month period ended June 30, 1999 increased to
$3.9 million, compared to $3.2 million during the 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL AND CASH FLOW. In order to reduce interest expense, pending
the use of proceeds from the stock offering, in August 1999 the Company retired
all of the outstanding borrowings under its revolving credit facility. The
Company believes that the available borrowings under its bank credit facility
combined with cash flow from operations will be sufficient to fund the Company's
current 1999 capital expenditures budget. Working capital at June 30, 1999
totaled $9.2 million. Net cash flow from operations before working capital
changes for the first six months of 1999 was $45.4 million, compared to $39.1
million reported for the same period of 1998.
Capital expenditures during the second quarter of 1999 totaled $36.3
million and primarily consisted of acquisition costs at the Lafitte and Weeks
Island Fields and exploration and development expenditures at Vermilion Block
255, Eugene Island Block 243 and Vermilion Block 131. The Company invested $59.4
million in its oil and gas properties during the first half of 1999, compared to
investments of $95.3 million during the six-month 1998 period. Capital
expenditures for the second quarter and first six months of 1999 included $1.4
million and $2.9 million, respectively, of capitalized general and
administrative costs and $0.1 million and $0.2 million, respectively, of
capitalized interest. These investments were financed by a combination of cash
flow from operations and borrowings under the Company's bank credit facility.
<PAGE>
During 1999, the Company acquired additional interests in three of its
existing fields and completed the acquisition of two new fields. In May 1999,
the Company acquired an additional 32% working interest in a portion of the
Weeks Island Field for $5.7 million. In June 1999, the Company acquired a
majority interest and control of operations in the Lafitte Field for $6.1
million in cash and a production payment to be satisfied through the delivery of
production from the purchased property. In June 1999, the Company acquired an
additional 29% working interest and 24.24% net revenue interest in the Eugene
Island Block 243 Field from a co-owner for $0.1 million. Finally, in July 1999,
the Company acquired a 62.5% working interest in the East Cameron Block 64 Field
and a 100% working interest in the West Cameron Block 176 Field, as well as
control of operations for both fields, in exchange for a volumetric production
payment of 8 Bcf of gas to be delivered over a three-year period from the South
Pelto Block 23 Field. With the 1999 acquisitions, the Company now serves as
operator on all of its 17 properties.
LONG-TERM FINANCING. On July 28, 1999, the Company completed a secondary
offering of 3.16 million shares of its common stock at a price to the public of
$43.75 per share. After payment of the underwriting discount and estimated
expenses, the Company received net proceeds of $130.9 million. The proceeds will
be used to finance recent acquisitions, to fund specifically identified
exploration and development activities, to finance potential property
acquisitions and for other general corporate purposes. The Company reduced
indebtedness under its credit facility pending such uses.
In June 1999, the Company and its bank group increased the borrowing base
under the Company's bank credit facility from $127.5 million to $140.0 million.
The borrowing base limitation is based on a borrowing base amount established by
the banks for the Company's oil and gas properties. Interest under the Revolver
is payable quarterly and, at June 30, 1999, the weighted average interest rate
of the facility was 6.4% per annum, the total outstanding principal balance was
$120.0 million and letters of credit totaling $7.5 million had been issued
pursuant to the facility. In August 1999, the Company retired all of the
outstanding borrowings under its revolving credit facility with the net proceeds
from its stock offering.
During June 1999, the term loan relative to the purchase of the Riverstone
office building was repaid with borrowings under the Company's bank credit
facility.
The Company has a capital expenditures budget of approximately $51.1
million for the last two quarters of 1999 and $100.7 million for the year 2000
for oil and gas properties it now owns. The Company is currently evaluating a
significant number of potential acquisitions, although no future acquisitions
can be assured. Significant investments are planned at the Weeks Island,
Lafitte, East Cameron Block 64, Eugene Island Block 243 and Vermilion Block 255
Fields. The planned activities include projects which seek to increase cash flow
from proved reserves and provide additions to the Company's reserve base.
YEAR 2000 COMPLIANCE. The Year 2000 ("Y2K") issue is the result of
computerized systems being written to store and process the year portion of
dates from and after January 1, 2000 without critical systems failure. During
1998, the Company's executive management and Board of Directors implemented a
program to identify, evaluate and address the Company's Y2K risks to ensure that
its critical Information Technology ("IT") Systems and Non-IT Systems will be
Y2K compliant. The Company, with the assistance of outside consultants,
completed the evaluation of its IT Systems for Y2K compliance and began
replacing or modifying non-compliant systems during the first quarter of 1999.
The Company believes that its critical non-compliant IT Systems have been
replaced or modified to Y2K compliant systems.
Regarding the Company's Non-IT Systems, which primarily consist of systems
with embedded technology, the Company has completed its assessment of all
date-sensitive components and believes that it has replaced or modified all
critical non-compliant Non-IT Systems. Costs incurred as of June 30, 1999, and
estimated remaining costs related to Y2K compliance total approximately $15,000.
In addition to the expensed Y2K compliance costs, the Company capitalized a
total $1.3 million of costs related to computer hardware and software upgrades
during the fourth quarter of 1998 and the first half of 1999. The upgrades were
necessary due to the growth in the Company's number of employees and level of
operations over the past 24 months. The Company does not separately track
internal payroll costs incurred for employees involved in the Y2K compliance
effort.
Based on preliminary risk assessments, the Company believes the most likely
Y2K related failure would be a temporary disruption in certain materials and
services provided by third parties, which would not be expected to have a
material adverse effect on the Company's financial condition or results of
operations. Based on the Company's assessment of the Y2K risk associated with
third parties' systems, the Company believes that the probability of the
occurrence of a disruption is low. The Company will develop specific contingency
plans to address certain risk areas, as needed. There can be no assurance that
the Company will not be materially adversely affected by Y2K problems or related
costs.
FORWARD-LOOKING STATEMENTS. Certain of the statements in this Form 10-Q are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements other than statements of historical facts
included in this Form 10-Q, regarding budgeted capital expenditures, increases
in oil and gas production, the Company's financial position, the assessment of
the Company's Year 2000 compliance, business strategy and other plans and
objectives for future operations, are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from those in the forward-looking statements herein include
the timing and extent of changes in commodity prices for oil and gas, operating
risks and other factors as disclosed under "Risk Factors" and elsewhere in the
Company's 1998 Annual Report on Form 10-K as filed with the Securities and
Exchange Commission. Should one or more of these risks or uncertainties occur,
or should underlying assumptions prove incorrect, the Company's actual results
and plans for 1999 and beyond could differ materially from those expressed in
forward-looking statements. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by such factors.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*15.1 - Letter from Arthur Andersen LLP dated August 9, 1999,
regarding unaudited interim financial information.
*27.1 - Financial Data Schedule
(b) Reports on Form 8-K
The following reports were filed after March 31, 1999:
Date of Report Item Reported
-------------- -------------
May 24, 1999 Items 6 and 7
July 28, 1999 Items 5 and 7
* Filed with this report.
<PAGE>
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: August 11, 1999 By: /s/ James H. Prince
----------------
James H. Prince
Vice President, Treasurer
Principal Financial and Accounting Officer)
EXHIBIT 15.1
August 9, 1999
Stone Energy Corporation
Post Office Box 52807
Lafayette, LA 70505
Gentlemen:
We are aware that Stone Energy Corporation has incorporated by reference in its
Registration Statements (File Nos. 33-62362, 33-72236, 33-67332, 33-93486,
333-38425) its Form 10-Q for the quarter ended June 30, 1999, which includes our
report dated August 2, 1999, covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the Securities Act of
1993 (the Act), this report is not considered a "part" of the registration
statements prepared or certified by our firm or a "report" prepared or certified
by our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Stone Energy Corporation as of June 30, 1999
and the related statement of operations for the six months ended June 30, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 17,765
<SECURITIES> 8,618
<RECEIVABLES> 27,152
<ALLOWANCES> 0
<INVENTORY> 0
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<PP&E> 11,760
<DEPRECIATION> 2,129
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<CURRENT-LIABILITIES> 44,841
<BONDS> 100,000
0
0
<COMMON> 151
<OTHER-SE> 112,726
<TOTAL-LIABILITY-AND-EQUITY> 388,940
<SALES> 66,354
<TOTAL-REVENUES> 67,195
<CGS> 0
<TOTAL-COSTS> 45,944
<OTHER-EXPENSES> 2,620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,709
<INCOME-PRETAX> 10,922
<INCOME-TAX> 3,831
<INCOME-CONTINUING> 7,091
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<EXTRAORDINARY> 0
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<NET-INCOME> 7,091
<EPS-BASIC> 0.35
<EPS-DILUTED> 0.35
</TABLE>
