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 March 31, 2000
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: (337) 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 May 8, 2000, there were 18,432,125 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 March 31, 2000 and December 31, 1999..................... 1
Condensed Consolidated Statement of Operations
for the Three Months Ended March 31, 2000 and 1999............. 2
Condensed Consolidated Statement of Cash Flows
for the Three Months Ended March 31, 2000 and 1999............. 3
Notes to Condensed Consolidated Financial Statements............ 4
Auditors' Review Report......................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 7
PART II
Item 6. Exhibits and Reports on Form 8-K................................. 10
<PAGE>
STONE ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
------------------------ ----------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................... $13,818 $13,874
Marketable securities, at market............................. 31,035 34,906
Accounts receivable.......................................... 35,256 29,729
Other current assets......................................... 76 297
------------------------ ----------------------
Total current assets....................................... 80,185 78,806
Oil and gas properties, net:
Proved....................................................... 356,648 335,959
Unevaluated.................................................. 16,957 17,182
Building and land, net........................................... 3,858 3,864
Fixed assets, net................................................ 2,865 2,850
Other assets, net................................................ 3,382 3,077
------------------------ ----------------------
Total assets............................................... $463,895 $441,738
======================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities - accounts payable and
accrued liabilities.......................................... $61,078 $55,919
Long-term debt................................................... 100,000 100,000
Production payments.............................................. 15,890 17,284
Deferred tax liability........................................... 6,871 746
Other long-term liabilities...................................... 1,152 2,202
------------------------ ----------------------
Total liabilities.......................................... 184,991 176,151
------------------------ ----------------------
Common stock..................................................... 184 183
Additional paid in capital....................................... 254,047 252,941
Retained earnings................................................ 24,673 12,463
------------------------ ----------------------
Total stockholders' equity................................. 278,904 265,587
------------------------ ----------------------
Total liabilities and stockholders' equity................. $463,895 $441,738
======================== ======================
</TABLE>
<PAGE>
STONE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------------------
2000 1999
-------------------- ---------------------
<S> <C> <C>
Revenues
Oil and gas production....................................... $47,226 $30,490
Overhead reimbursements and management fees.................. 181 161
Other income................................................. 733 271
-------------------- ---------------------
Total revenues............................................. 48,140 30,922
-------------------- ---------------------
Expenses
Normal lease operating expenses.............................. 6,263 4,828
Major maintenance expenses................................... 548 100
Production taxes............................................. 1,220 515
Depreciation, depletion and amortization..................... 17,179 17,688
Interest..................................................... 2,422 3,814
Salaries, general and administrative......................... 1,471 1,077
Incentive compensation plan.................................. 252 210
-------------------- ---------------------
Total expenses............................................. 29,355 28,232
-------------------- ---------------------
Net income before income taxes................................... 18,785 2,690
-------------------- ---------------------
Provision for income taxes
Current...................................................... - -
Deferred..................................................... 6,575 944
-------------------- ---------------------
6,575 944
-------------------- ---------------------
Net income....................................................... $12,210 $1,746
==================== =====================
Earnings per common share:
Basic earnings per share..................................... $0.67 $0.12
==================== =====================
Diluted earnings per share................................... $0.65 $0.11
==================== =====================
Average shares outstanding................................... 18,349 15,078
==================== =====================
Average shares outstanding assuming dilution................. 18,667 15,281
==================== =====================
</TABLE>
<PAGE>
STONE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------------------
2000 1999
--------------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net income...................................................... $12,210 $1,746
Adjustments to reconcile net income to net cash
provided by operating activities:
DD&A and other non-cash expenses...................... 17,234 17,688
Provision for deferred income taxes................... 6,575 944
Non-cash effect of production payments................ (1,336) -
--------------------- ---------------------
34,683 20,378
(Increase) decrease in marketable securities..........
(Increase) decrease in accounts receivable............ 3,871 (156)
Decrease in other current assets...................... (5,527) 6,915
Decrease in accrued liabilities....................... 221 110
Other................................................. (4,977) (5,040)
164 (264)
--------------------- ---------------------
Net cash provided by operating activities....................... 28,435 21,943
--------------------- ---------------------
Cash flows from investing activities:
Investment in oil and gas properties....................... (28,472) (22,592)
Building additions and renovations......................... (20) (274)
Increase in other assets .................................. (398) (790)
--------------------- ---------------------
Net cash used in investing activities........................... (28,890) (23,656)
--------------------- ---------------------
Cash flows from financing activities:
Proceeds from borrowings..................................... - 4,000
Repayment of debt............................................ - (22)
Production payments.......................................... (58) -
Deferred financing costs..................................... (200) -
Proceeds from the exercise of stock options.................. 657 172
--------------------- ---------------------
Net cash provided by financing activities....................... 399 4,150
--------------------- ---------------------
Net increase (decrease) in cash and cash equivalents............ (56) 2,437
Cash and cash equivalents, beginning of period.................. 13,874 10,550
--------------------- ---------------------
Cash and cash equivalents, end of period........................ $13,818 $12,987
===================== =====================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized)...................... $4,408 $6,026
Income taxes.............................................. - -
</TABLE>
<PAGE>
STONE ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements of Stone Energy Corporation
at March 31, 2000 and for the three-month period 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 our Annual Report on Form 10-K for the year ended December 31,
1999. The results of operations for the three-month period ended March 31, 2000
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. There were approximately 318,000 dilutive shares and
203,000 dilutive shares for the first quarters of 2000 and 1999, respectively.
Options that were considered anti-dilutive because the exercise price of
the stock exceeded the average price for the applicable period totaled
approximately 8,200 shares and 7,800 shares in the first quarters of 2000 and
1999, respectively.
Note 3 - HEDGING ACTIVITIES
In order to reduce our exposure to the possibility of declining oil and gas
prices, from time to time we hedge with third parties certain of our crude oil
and natural gas production. We currently utilize two forms of hedging contracts:
fixed price swaps and collars. Fixed price swaps typically provide for monthly
payments by us (if prices rise) or to us (if prices fall) based on the
difference between the strike price and the agreed-upon average of NYMEX prices.
For collars, monthly payments are made by us if NYMEX prices rise above the
ceiling price and to us if NYMEX prices fall below the floor price. Oil
contracts typically settle using the average of the daily closing prices for a
calendar month. Natural gas contracts typically settle using the average closing
prices of near month NYMEX futures contracts for the three days prior to the
settlement date. Because our properties are located in the Gulf Coast Basin, we
believe that fluctuations in NYMEX prices will closely match changes in market
prices for our production.
Our current forward positions are summarized as follows:
Fixed Price Swaps
-----------------------------------------------
Gas Oil
----------------- -------------------
Volume Volume
(BBtus) Price (Bbls) Price
------- ----- ------ -----
Second Quarter, 2000 1,820 $2.518 409,500 $19.31
Third Quarter, 2000 1,840 $2.518 230,000 $19.21
Fourth Quarter, 2000 1,840 $2.518 230,000 $19.21
<PAGE>
<TABLE>
<CAPTION>
Collars
------------------------------------------------------------------
Gas Oil
--------------------------- ---------------------------
Volume Volume
(BBtus) Floor Ceiling (Bbls) Floor Ceiling
------- ----- ------- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C>
Second Quarter, 2000 3,640 $2.60 $3.50 - - -
Third Quarter, 2000 3,680 $2.60 $3.50 230,000 $21.00 $27.53
Fourth Quarter, 2000 3,680 $2.60 $3.50 230,000 $21.00 $27.53
</TABLE>
During the first quarters of 2000 and 1999, we realized net increases
(decreases) in oil and gas revenues related to hedging transactions of ($3.6)
million and $2.4 million, respectively.
Note 4 - LONG-TERM DEBT
On February 2, 2000, our credit agreement was amended to increase the
facility to $200 million and to extend the maturity date to July 30, 2005.
During April 2000, the bank group reviewed our reserves and increased the
borrowing base of the amended credit facility by $60 million to $200 million. At
March 31, 2000, we had outstanding letters of credit totaling $7.5 million and
no outstanding borrowings.
Note 5 - PRODUCTION PAYMENTS
In June 1999, we acquired a 100% working interest in the Lafitte Field by
executing an agreement that included a dollar-denominated production payment to
be satisfied through the sale of production from the purchased property. Based
on the quarterly revaluation of this transaction, at March 31, 2000, the
production payment associated with this purchase totaled $2.4 million.
In July 1999, we acquired an additional working interest in East Cameron
Block 64 and a 100% working interest in West Cameron Block 176 in exchange for a
volumetric production payment. This agreement requires that 7.3 MMcf of gas per
day be delivered to the seller from South Pelto Block 23 until 8 Bcf of gas have
been distributed. We amortize the volumetric production payment as specified
deliveries of gas are made to the seller and recognize non-cash revenue in the
form of gas production revenues. At March 31, 2000, the volumetric production
payment was $13.4 million and $1.5 million had been recognized as gas revenue
during the quarter.
Note 6 - NEW ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards that require every derivative instrument (including certain
derivative instruments embedded in other contracts) to be recorded in the
balance sheet as either an asset or liability measured at its fair value and
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. We expect to adopt SFAS No.
133 on January 1, 2001. The adoption may create volatility in equity through
changes in other comprehensive income due to the marking to market of our
hedging contracts, however, we believe these instruments will be treated as
hedges under SFAS No. 133 and thus we do not anticipate that the standard will
have a material impact on our results of operations.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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 March 31, 2000, and the
related condensed consolidated statements of operations and cash flows for the
three-month periods ended March 31, 2000 and 1999. 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 auditing standards generally accepted in the United States, 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 accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet of Stone Energy Corporation as
of December 31, 1999 (not presented herein), and, in our report dated March 6,
2000, 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, 1999, 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
April 27, 2000
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Throughout this document we make statements that are classified as
"forward-looking". Please refer to the "Forward-Looking Statements" section on
page 10 of this document for an explanation of these types of assertions. We
also use the terms "Stone", "Stone Energy", "Company", "we", "us" and "our" to
refer to Stone Energy Corporation.
OVERVIEW
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. We have been active
in the Gulf Coast Basin since 1973 and have established extensive geophysical,
technical and operational expertise in this area.
Our business strategy is to increase production, cash flow and reserves
through the acquisition and development of mature properties located in the Gulf
Coast Basin. Since implementing our business strategy in 1990, we have acquired
interests in 20 fields in the Gulf Coast Basin from major and large independent
oil and gas companies. At March 31, 2000, we served as operator on all of our
properties, which enables us to better control the timing and cost of
rejuvenation activities. We believe that there will continue to be numerous
attractive opportunities to acquire properties in the Gulf Coast Basin due to
the increased focus by major and large independent companies on projects away
from the onshore and shallow water shelf regions of the the Gulf.
RESULTS OF OPERATIONS
The following table sets forth certain operating information with respect
to our oil and gas operations.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
PRODUCTION:
Oil (MBbls)................................................ 753 830
Gas (MMcf):
Produced excluding volumetric production payment........ 10,259 9,918
Volumetric production payment........................... 667 -
--------------- ----------------
Total gas volumes produced.............................. 10,926 9,918
Oil and gas (MMcfe):
Produced excluding volumetric production payment........ 14,777 14,898
Volumetric production payment........................... 667 -
----------------- ----------------
Total volumes produced.................................. 15,444 14,898
SALES DATA (IN THOUSANDS) (a):
Oil....................................................... $18,137 $9,804
Gas:
Gas sales excluding volumetric production payment....... 27,595 20,686
Volumetric production payment........................... 1,494 -
------------------ ----------------
Total gas sales......................................... 29,089 20,686
AVERAGE SALES PRICES (a):
Oil (per Bbl)............................................. $24.09 $11.81
Gas (per Mcf):
Price excluding volumetric production payment........... 2.69 2.09
Volumetric production payment........................... 2.24 -
Net average price....................................... 2.66 2.09
Oil and gas (per Mcfe):
Price excluding volumetric production payment........... 3.09 2.05
Volumetric production payment........................... 2.24 -
Net average price ...................................... 3.06 2.05
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
EXPENSES (PER MCFE):
Normal lease operating expenses (b)....................... $0.41 $0.32
Salaries, general and administrative...................... 0.10 0.07
DD&A on oil and gas properties............................ 1.10 1.17
(a) Includes the effects of hedging
(b) Excludes major maintenance expenses
</TABLE>
For the first quarter of 2000, we reported net income totaling $12.2
million, or $0.65 per share, compared to net income reported for the first
quarter of 1999 of $1.7 million, or $0.11 per share. The favorable results in
net income were due to improvements in the following components:
PRODUCTION. Volumes of natural gas produced during the first quarter of
2000 increased to approximately 10.9 billion cubic feet as compared to first
quarter 1999 gas production volumes of 9.9 billion cubic feet, while volumes of
oil produced during the first quarter of 2000 declined to approximately 753,000
barrels as compared to 830,000 barrels of oil produced during the first quarter
of 1999. On a Mcfe basis, first quarter 2000 production was 4% higher than first
quarter 1999 production volumes.
The increase in 2000 production rates, as compared to 1999, was due
primarily to increases at three of our fields. First, in July 1999, we increased
our interest, and therefore our share of production, at East Cameron Block 64
through the acquisition of an additional 62.5% working interest in that field.
Also during 1999, we successfully executed an aggressive exploration and
development program at Vermilion Block 255 by completing and placing on
production three exploratory wells and two development wells. In February 2000,
production from the OCS-G 2899 No. A-7 Well (Orca Prospect) was brought on-line,
boosting production volumes at Eugene Island Block 243. These production
increases were partially offset by normal production declines at other fields.
PRICES. Average realized prices during the first quarter of 2000 were
$24.09 per barrel of oil and $2.66 per Mcf of gas and represented a 49%
increase, on a Mcfe basis, over average prices of $11.81 per barrel and $2.09
per Mcf realized in the 1999 period, including the effects of hedging. From time
to time, we enter into various hedging contracts in order to reduce our exposure
to the possibility of declining oil and gas prices. During the first quarter of
2000, hedging transactions reduced the average price we received for oil by
$5.12 per barrel and increased the average price received for gas by $0.03 per
Mcf as compared to a net increase of $0.25 per Mcf of gas for the comparable
period in 1999.
OIL AND GAS REVENUES. The favorable increases in commodities prices
combined with the increase in production rates resulted in oil and gas revenues
increasing 55% to $47.2 million for the first quarter of 2000, compared to first
quarter 1999 oil and gas revenues of $30.5 million.
EXPENSES. Normal operating costs during the first quarter of 2000 increased
to $6.3 million, compared to $4.8 million during the 1999 period. On a unit of
production basis, first quarter 2000 operating costs were $0.41 per Mcfe as
compared to $0.32 per Mcfe for the first quarter of 1999. The increase in
operating costs was due primarily to a 50% increase in the number of producing
wells that we operate as a result of the acquisitions of Lafitte Field, West
Cameron Block 176 and East Cameron Block 46, the increases in working interest
at East Cameron Block 64, Eugene Island Block 243 and Weeks Island Field and
discoveries at many of our fields including Vermilion Block 255, Vermilion Block
131, Clovelly Field and Eugene Island Block 243, in addition to an overall
increase in the cost of oil field services.
<PAGE>
As a result of higher oil and gas prices and increased onshore production
volumes, production revenues from onshore properties during the first quarter of
2000 increased 137% from first quarter 1999. Therefore, production taxes for the
first quarter of 2000 increased to $1.2 million compared to $0.5 million for the
first quarter of 1999.
General and administrative expenses for the first quarter of 2000 increased
in total to $1.5 million, or $0.10 per Mcfe, from $1.1 million, or $0.07 per
Mcfe, for the first quarter of 1999. Both general and administrative and
incentive compensation expenses for the first quarter of 2000 were affected by a
26% increase in our staff level over the first quarter of 1999.
Depreciation, depletion and amortization (DD&A) expense on our oil and gas
properties decreased to $16.9 million or $1.10 per Mcfe during the first quarter
of 2000, compared to $17.4 million or $1.17 per Mcfe for the first quarter of
1999. This decrease resulted primarily from the increase in average commodities
prices realized during the first quarter of 2000.
As a result of the July 1999 stock offering and the subsequent repayment of
all outstanding borrowings under our bank credit facility, interest expense
during the three-month period ended March 31, 2000 decreased to $2.4 million,
compared to $3.8 million during the 1999 period.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW AND WORKING CAPITAL. Net cash flow from operations before
working capital changes for the first quarter of 2000 was $34.7 million,
compared to $20.4 million reported for the same period of 1999. Working capital
at March 31, 2000 totaled $19.1 million.
CAPITAL EXPENDITURES. Capital expenditures during the first quarter of 2000
totaled $37.4 million and included $2.0 million of capitalized general and
administrative costs. These investments were financed by a combination of cash
flow from operations and cash.
DEVELOPMENT COSTS. During the first quarter of 2000, we completed numerous
development drilling, workover and recompletion operations and facilities
installations in an effort to develop our property base and to increase cash
flow from proved reserves. During 2000, we drilled two development wells, both
of which were successful, consisting of the West Cameron Block 176 No. 2 Well
and the LLDSB No. 30 Well at Lake Hermitage Field. The quarter's most
significant recompletion projects included the East Cameron Block 64 No. 9 Well,
the Vermilion Block 131 No. C-6 Well and the Rigolets No. 161 Well at Lafitte
Field, all of which were successful. In order to accommodate additional
production capacity, facilities upgrades were performed at many of our fields
with the most significant being the upgrades and oil pipeline installation at
East Cameron Block 64.
EXPLORATORY COSTS. In an effort to provide additions to our existing oil
and gas reserve base, during the first quarter of 2000, we completed drilling
operations on six exploratory wells, four of which were successful. These four
wells include the State Lease 14905 No. 2 Well at the Osprey Prospect, the OCS-G
2082 No. G-5 Well at Vermilion Block 255's Corinth Prospect, the LL&E No. 198
Well at Lafitte Field's Pinehurst Prospect and the LLDSB No. 9 Well at Lake
Hermitage Field's Sweetgum Prospect. In addition to completed wells, in the
first quarter we spudded the OCS-G 0775 No. 21 Well at Vermilion Block 131's
Whiptail Prospect, the LL&E No. 1 Well at Lake Hermitage Field's Locust Prospect
and the LL&E No. 2 Well at Lake Hermitage Field's Magnolia Prospect.
BUDGETED CAPITAL EXPENDITURES AND LONG-TERM FINANCING. For the year 2000,
we have budgeted what would be a record year for drilling wells with 30 new
wells scheduled. We have budgeted $130.5 million for our 2000 exploration and
development plans including $30.7 million for drilling on properties acquired
during 1999. Approximately 54% of our capital expenditures budget has been
allocated for activities at the Vermilion Block 255, Eugene Island Block 243,
South Timbalier Block 8, East Cameron Block 64 and South Pelto Block 23 Fields.
Based upon our outlook on oil and gas prices and production rates, we
believe that our cash flow from operations and existing working capital will be
sufficient to fund the current 2000 capital expenditures budget. If oil and gas
prices or production rates fall below our current expectations, we believe that
the available borrowings under our bank credit facility will be sufficient to
fund the capital expenditures in excess of operating cash flow.
On February 2, 2000, our credit agreement was amended to increase the
facility to $200 million and to extend the maturity date to July 30, 2005.
During April 2000, the bank group reviewed our reserves and increased the
borrowing base of the amended credit facility by $60 million to $200 million. At
March 31, 2000, we had outstanding letters of credit totaling $7.5 million and
no outstanding borrowings.
We believe that the opportunity for acquisitions in our area of operations
remains strong due to the general exodus from the shallow water and shelf region
of the Gulf. Although we do not budget acquisitions, we are aggressively
evaluating properties and transaction alternatives to add to our existing
property base. One or a combination of certain of these possible transactions
could fully utilize our existing sources of capital. Although we have no plans
to access the public markets for purposes of capital, if the opportunity arose,
we would consider such funding sources to provide capital in excess of what is
currently available to us. We would compare and contrast the cost of debt
financing with the potential dilution of equity offerings to determine the
appropriate financing vehicle to maximize stockholder value.
FORWARD-LOOKING STATEMENTS. This Form 10-Q and the information incorporated
by reference contain statements that constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The words "expect", "project", "estimate", "believe",
"anticipate", "intend", "budget", "plan", "forecast", "predict" and other
similar expressions are intended to identify forward-looking statements. These
statements appear in a number of places and include statements regarding our
plans, beliefs or current expectations, including the plans, beliefs and
expectations of our officers and directors.
When considering any forward-looking statement, you should keep in mind the
risk factors that could cause our actual results to differ materially from those
contained in any forward-looking statement. 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 risk factors as described in our Annual Report on
Form 10-K as filed with the Securities and Exchange Commission. Furthermore, the
assumptions that support our forward-looking statements are based upon
information that is currently available and is subject to change. We
specifically disclaim all responsibility to publicly update any information
contained in a forward-looking statement or any forward-looking statement in its
entirety and therefore disclaim any resulting liability for potentially related
damages.
All forward-looking statements attributable to Stone Energy Corporation are
expressly qualified in their entirety by this cautionary statement.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*10.1 - Third Amendment and Restatement of the Third Amended and
Restated Credit Agreement between the Registrant, the financial
institutions named therein and Bank of America N.A., as Agent, dated
as of February 2, 2000.
*15.1 - Letter from Arthur Andersen LLP dated May 5, 2000, regarding
unaudited interim financial information.
*27.1 - Financial Data Schedule
*Filed herewith
(b) There were no reports on Form 8-K filed for the three months ended
March 31, 2000.
<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: May 10, 2000 By: /s/James H. Prince
------------------------------
James H. Prince
Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
EXHIBIT 10.1
AMENDMENT AND RESTATEMENT NO. 3
This Amendment and Restatement No. 3 dated as of February 2, 2000
("Agreement") is among Stone Energy Corporation, a Delaware corporation
("Borrower"), the banks party to the Credit Agreement described below ("Banks"),
and Bank of America, N.A., as Agent for the Banks ("Agent").
INTRODUCTION
A. The Borrower, the Agent, and the Banks are parties to the Third Amended
and Restated Credit Agreement dated as of July 30, 1997 (the "Original Credit
Agreement"), Amendment and Restatement No. 1 to the Credit Agreement dated as of
March 31, 1998 ("Amendment No. 1") and Amendment and Restatement No. 2 to the
Credit Agreement dated as of May 3, 1999 ("Amendment No. 2"). The Original
Credit Agreement, as amended by Amendment No. 1 and Amendment No. 2, shall
herein be referred to as the "Credit Agreement."
B. The Borrower has requested that the Banks agree to increase the
commitments under the Credit Agreement and to make certain other amendments to
the Credit Agreement.
THEREFORE, the Borrower, the Agent, and the Banks hereby agree as follows:
Section 1. Definitions; References. Unless otherwise defined in this
Agreement, terms used in this Agreement which are defined in the Credit
Agreement shall have the meanings assigned to such terms in the Credit
Agreement.
Section 2. Amendments.
(a) In Section 1.01:
(i) the definition of Applicable Margin is amended in its entirety to
read as follows:
"Applicable Margin" means, for any day, the following percentages
based upon the ratio of (a) the aggregate outstanding amount of Revolving
Advances plus the Letter of Credit Exposure to (b) the Borrowing Base as of
such day:
<TABLE>
<CAPTION>
Ratio of Outstanding
Revolving Advances to Applicable Margin Applicable Margin Applicable Margin
Borrowing Base Base Rate Advances Eurodollar Advances Commitment Fees
--------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
<.30 0.00% 0.625% 0.25%
>=.30 0.00% 0.875% 0.25%
>=.60 0.00% 1.25% 0.30%
>=.90 0.00% 1.50% 0.375%
</TABLE>
(ii) the definition of "Majority Banks" is amended in its entirety to
read as follows:
"Majority Banks" means, at any time and except as provided in the last
sentence of this definition, Banks holding at least 66-2/3% of the then
aggregate unpaid principal amount of the Notes held by the Banks and the
Letter of Credit Exposure of the Banks at such time, but in no event less
than two Banks at any time when there are three or more Banks; provided
that if no such principal amount or Letter of Credit Exposure is then
outstanding, "Majority Banks" shall mean Banks having at least 66-2/3% of
the aggregate amount of the Revolving Commitments at such time, but in no
event less than two Banks at any time when there are three or more Banks.
For any determination under Section 2.02, "66-2/3%" in the foregoing
sentence shall be "85%."
(iii) the definition of "Revolving Maturity Date" is amended by
substituting "July 30, 2005" for "July 30, 2001".
(b) Paragraph (a) of Section 2.02 is amended in its entirety to read
as follows:
(a) The Borrowing Base as of January 26, 2000 has been set by the
Majority Banks and acknowledged by the Borrower as $140,000,000.00.
(c) Paragraph (b) of Section 2.12 is amended by adding "for such
increased cost" at the end of the first sentence.
(d) Paragraph (c) of Section 6.02 is amended by substituting
"$5,000,000.00" for "$2,500,000.00".
(e) Paragraph (b) of Section 6.04 is amended by substituting
"$3,000,000.00" for "$1,000,000.00".
(f) Section 6.11 is amended by substituting "$3,000,000.00" for
"$1,000,000.00".
(g) Section 6.13 is amended in its entirety to read as follows:
Section 6.13. Current Ratio. The Borrower shall not permit the
ratio of the Borrower's consolidated current assets, plus, to the
extent not included in current assets, the amount of aggregate unused
Revolving Commitments to the Borrower's consolidated current
liabilities to be less than 1.00 to 1.00 as of the last day of any
fiscal quarter.
Section 3. Increase in Revolving Commitments. The Borrower, the Agent,
and the Banks hereby agree that the Revolving Commitments of the Banks
under the Credit Agreement shall be modified to reflect the Revolving
Commitments for the Banks set forth on the attached Schedule 1 and upon the
effectiveness of this Agreement pursuant to Section 5 below, each such
Bank's Revolving Commitment shall be the Revolving Commitment set forth on
the attached Schedule 1 (such Revolving Commitment being subject to further
amendment, reduction or termination pursuant to the terms of the Credit
Agreement).
Section 4. Titles. Bank of America, N.A., is hereby designated as Lead
Arranger and Lead Book Runner, BankBoston, N.A. is designated as
Documentation Agent, and Bank One, Louisiana, N.A. is designated as
syndication agent, in each case under the Credit Agreement.
Section 5. Representations and Warranties. The Borrower represents and
warrants to the Agent and the Banks that:
(a) the representations and warranties set forth in the Credit
Agreement and in the other Credit Documents are true and correct in all
material respects as of the date of this Agreement;
(b) (i) the execution, delivery and performance of this Agreement and
the replacement promissory notes referred to below are within the corporate
power and authority of the Borrower and have been duly authorized by
appropriate proceedings and (ii) each of this Agreement and the replacement
promissory notes constitutes a legal, valid, and binding obligation of the
Borrower, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting the rights of creditors generally and general principles of
equity; and
(c) as of the effectiveness of this Agreement, no Default or Event of
Default has occurred and is continuing.
Section 6. Effectiveness. This Agreement shall become effective as of
the date of this Agreement, and the Credit Agreement shall be amended as
provided in this Agreement upon the occurrence of the following conditions
precedent:
(a) the Borrower, the Agent, and the Banks shall have delivered duly
and validly executed originals of this Agreement to the Agent;
(b) the representations and warranties in this Agreement shall be true
and correct in all material respects;
(c) the Borrower shall have executed and delivered an original
Revolving Note to each of the Banks whose Commitment increased under the
terms of this Agreement in the maximum principal amount of such Bank's
Commitment after such increase;
(d) the Borrower shall have delivered an opinion of its counsel in
form and substance satisfactory to the Agent and the Banks;
(e) the Borrower shall have delivered a certificate of its Secretary
or Assistant Secretary certifying its certificate of incorporation, bylaws,
resolutions and incumbency and in form and substance satisfactory to the
Agent and the Banks; and
(f) the Borrower shall have paid all amounts and expenses required to
be paid in connection with this Agreement and the amendments evidenced
hereby.
Section 7. Effect on Loan Documents.
(a) Except as amended herein, the Credit Agreement and the Credit
Documents remain in full force and effect as originally executed. Nothing
herein shall act as a waiver of any of the Agents' or Banks' rights under
the Credit Documents, as amended, including the waiver of any Default or
Event of Default, however denominated.
(b) This Agreement is a Credit Document for the purposes of the
provisions of the other Credit Documents. Without limiting the foregoing,
any breach of representations, warranties, and covenants under this
Agreement may be a Default or Event of Default under other Credit
Documents.
Section 8. Choice of Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Texas.
Section 9. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original.
PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, A
LOAN AGREEMENT IN WHICH THE AMOUNT INVOLVED IN THE LOAN AGREEMENT EXCEEDS
$50,000 IN VALUE IS NOT ENFORCEABLE UNLESS THE LOAN AGREEMENT IS IN WRITING AND
SIGNED BY THE PARTY TO BE BOUND OR THAT PARTY'S AUTHORIZED REPRESENTATIVE.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO AN AGREEMENT SUBJECT TO
THE PRECEDING PARAGRAPH SHALL BE DETERMINED SOLELY FROM THE WRITTEN LOAN
AGREEMENT, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY
AND MERGED INTO THE LOAN AGREEMENT. THIS WRITTEN AGREEMENT AND THE CREDIT
DOCUMENTS, AS DEFINED IN THE CREDIT AGREEMENT, REPRESENT THE FINAL AGREEMENT
AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
EXECUTED as of the date first above written.
BORROWER:
--------
STONE ENERGY CORPORATION
By: /s/James H. Prince
-----------------------------------------------
Name: James H. Prince
-----------------------------------------------
Title: Vice-President and Chief Financial Officer
-----------------------------------------------
By: /s/J. Kent Pierret
-----------------------------------------------
Name: J. Kent Pierret
-----------------------------------------------
Title: Vice President and Chief Accounting Officer
-----------------------------------------------
AGENT:
-----
BANK OF AMERICA, N.A.
By: /s/Paul A. Squires
-----------------------------------------------
Paul A. Squires
Managing Director
BANKS:
-----
BANK OF AMERICA, N.A.
By: /s/Paul A. Squires
-----------------------------------------------
Paul A. Squires
Managing Director
BANKBOSTON, N.A.
By: /s/Terrence Ronan
-----------------------------------------------
Name: Terrence Ronan
-----------------------------------------------
Title: Director
-----------------------------------------------
BANK ONE, LOUISIANA, N.A., SUCCESSOR BY
MERGER TO FIRST NATIONAL BANK OF COMMERCE
By: /s/Christine M. Macan
-----------------------------------------------
Name: Christine M. Macan
-----------------------------------------------
Title: Vice President
-----------------------------------------------
HIBERNIA NATIONAL BANK
By: /s/David R. Reid
-----------------------------------------------
Name: David R. Reid
-----------------------------------------------
Title: Senior Vice President
-----------------------------------------------
<PAGE>
SCHEDULE 1
Revolving Commitments
---------------------
1. Bank of America, N.A. $70,000,000.00
2. Bank One, Louisiana, N.A., $60,000,000.00
3. BankBoston, N.A. $50,000,000.00
4. Hibernia National Bank $20,000,000.00
--------------
$200,000,000
EXHIBIT 15.1
May 5, 2000
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 March 31, 2000, which includes
our report dated April 27, 2000, covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the Securities Act of
1933 (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 March 31, 2000 and
the related statement of operations for the three months ended March 31, 2000
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<CASH> 13,818
<SECURITIES> 31,035
<RECEIVABLES> 35,256
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 80,185
<PP&E> 13,160
<DEPRECIATION> 3,055
<TOTAL-ASSETS> 463,895
<CURRENT-LIABILITIES> 61,078
<BONDS> 100,000
0
0
<COMMON> 184
<OTHER-SE> 278,720
<TOTAL-LIABILITY-AND-EQUITY> 463,895
<SALES> 47,226
<TOTAL-REVENUES> 48,140
<CGS> 0
<TOTAL-COSTS> 25,210
<OTHER-EXPENSES> 1,723
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,422
<INCOME-PRETAX> 18,785
<INCOME-TAX> 6,575
<INCOME-CONTINUING> 12,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,210
<EPS-BASIC> 0.67
<EPS-DILUTED> 0.65
</TABLE>
