Stone Energy (SGY) 8-K Unaudited Pro Forma Consolidated Financial Statements

Exhibit 99.1

STONE ENERGY CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

On July 31, 2014, Stone Energy Corporation (“Stone”) completed the sale of its non-core Gulf of Mexico (“GOM”) conventional shelf properties to Talos Energy Offshore LLC, referred to herein as the “Sold Properties”. Additional details of the sale are described in the notes to these financial statements.

The accompanying unaudited pro forma consolidated financial statements and accompanying notes as of and for the three months ended March 31, 2014 and the year ended December 31, 2013 (the “Pro Forma Statements”), which have been prepared by Stone’s management, have been derived from the historical audited and unaudited consolidated financial statements of Stone included in the Annual Report on Form 10-K for the year ended December 31, 2013 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.

The unaudited pro forma consolidated balance sheet was prepared assuming the sale of the Sold Properties, including purchase price adjustments to date, occurred on March 31, 2014. The unaudited pro forma consolidated statements of income were prepared assuming the sale of the Sold Properties, including purchase price adjustments to date, occurred on January 1, 2013.

The Pro Forma Statements are presented for illustrative purposes only and do not indicate the results of operations or financial position of Stone had the transaction been in effect on the dates or for the periods indicated, or the results of operations or financial position of Stone for any future periods. The Pro Forma Statements should be read in conjunction with Stone’s Annual Report on Form 10-K for the year ended December 31, 2013 and Stone’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.

STONE ENERGY CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2014

(In thousands of dollars)

	Historical			Pro Forma Adjustments			Pro Forma
Assets
Current assets:
Cash and cash equivalents	$	202,761		$	175,147	(a)	$	377,908
Accounts receivable		190,573						190,573
Fair value of hedging contracts		745						745
Current income tax receivable		7,366						7,366
Deferred taxes		36,098						36,098
Inventory		4,651						4,651
Other current assets		1,774						1,774
Total current assets		443,968			175,147			619,115
Oil and gas properties, full cost method of accounting:
Proved, net		1,845,774			(307,892	) (b)		1,537,882
Unevaluated		906,043			(1,106	) (b)		904,937
Other property and equipment, net		26,975						26,975
Fair value of hedging contracts		1,867						1,867
Other assets, net		37,154						37,154
Total assets	$	3,261,781		($	133,851	)	$	3,127,930
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	165,973					$	165,973
Undistributed oil and gas proceeds		55,676						55,676
Accrued interest		22,247						22,247
Fair value of hedging contracts		15,277						15,277
Asset retirement obligations		87,927			(7,314	) (c)		80,613
Other current liabilities		28,467						28,467
Total current liabilities		375,567			(7,314	)		368,253
Long-term debt		1,030,466						1,030,466
Deferred taxes		406,477						406,477
Asset retirement obligations		416,171			(126,537	) (c)		289,634
Fair value of hedging contracts		376						376
Other long-term liabilities		46,772						46,772
Total liabilities		2,275,829			(133,851	)		2,141,978
Stockholders’ equity:
Common stock		491						491
Treasury stock		(860	)					(860	)
Additional paid-in capital		1,394,694						1,394,694
Accumulated deficit		(399,222	)					(399,222	)
Accumulated other comprehensive loss		(9,151	)					(9,151	)
Total stockholders’ equity		985,952			—			985,952
Total liabilities and stockholders’ equity	$	3,261,781		($	133,851	)	$	3,127,930

See accompanying notes to the unaudited pro forma consolidated financial statements.

STONE ENERGY CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2013

(In thousands, except per share amounts)

	Historical			Pro Forma Adjustments			Pro Forma
Operating revenue:
Oil production	$	715,104		($	116,908	) (a)	$	598,196
Gas production		190,580			(46,702	) (a)		143,878
Natural gas liquids production		60,687			(6,488	) (a)		54,199
Other operational income		7,808			(206	) (a)		7,602
Total operating revenue		974,179			(170,304	)		803,875
Operating expenses:
Lease operating expenses		201,153			(61,830	) (a)		139,323
Transportation, processing and gathering expenses		42,172			(3,369	) (a)		38,803
Production taxes		15,029			(1,942	) (a)		13,087
Depreciation, depletion and amortization		350,574			(75,747	) (c)		274,827
Accretion expense		33,575			(8,906	) (b)		24,669
Salaries, general and administrative expenses		59,524						59,524
Franchise tax settlement		12,590						12,590
Incentive compensation expense		15,340						15,340
Other operational expenses		151			(28	) (a)		123
Derivative expense, net		2,090						2,090
Total operating expenses		732,198			(151,822	)		580,376
Income from operations		241,981			(18,482	)		223,499
Other (income) expenses:
Interest expense		32,837						32,837
Interest income		(1,695	)					(1,695	)
Other income		(2,799	)					(2,799	)
Loss on early extinguishment of debt		27,279						27,279
Total other expenses		55,622			—			55,622
Income before income taxes		186,359			(18,482	)		167,877
Provision (benefit) for income taxes:
Current		(10,904	)					(10,904	)
Deferred		79,629			(6,654	) (d)		72,975
Total income taxes		68,725			(6,654	)		62,071
Net income	$	117,634		($	11,828	)	$	105,806
Basic earnings per share	$	2.36					$	2.12
Diluted earnings per share	$	2.36					$	2.12
Average shares outstanding		48,693						48,693
Average shares outstanding assuming dilution		48,735						48,735

See accompanying notes to the unaudited pro forma consolidated financial statements.

STONE ENERGY CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2014

(In thousands, except per share amounts)

	Historical			Pro Forma Adjustments			Pro Forma
Operating revenue:
Oil production	$	138,289		($	30,324	) (a)	$	107,965
Gas production		56,362			(13,448	) (a)		42,914
Natural gas liquids production		27,970			(2,971	) (a)		24,999
Other operational income		1,209			(268	) (a)		941
Total operating revenue		223,830			(47,011	)		176,819
Operating expenses:
Lease operating expenses		46,903			(16,287	) (a)		30,616
Transportation, processing and gathering expenses		14,626			(1,648	) (a)		12,978
Production taxes		3,062			(573	) (a)		2,489
Depreciation, depletion and amortization		82,646			(17,306	) (c)		65,340
Accretion expense		7,555			(2,065	) (b)		5,490
Salaries, general and administrative expenses		16,329						16,329
Incentive compensation expense		3,134						3,134
Other operational expenses		424						424
Derivative expense, net		599						599
Total operating expenses		175,278			(37,879	)		137,399
Income from operations		48,552			(9,132	)		39,420
Other (income) expenses:
Interest expense		8,357						8,357
Interest income		(143	)					(143	)
Other income		(707	)					(707	)
Total other expenses		7,507			—			7,507
Income before income taxes		41,045			(9,132	)		31,913
Provision (benefit) for income taxes:
Deferred		15,102			(3,287	) (d)		11,815
Total income taxes		15,102			(3,287	)		11,815
Net income	$	25,943		($	5,845	)	$	20,098
Basic earnings per share	$	0.52					$	0.40
Diluted earnings per share	$	0.52					$	0.40
Average shares outstanding		49,013						49,013
Average shares outstanding assuming dilution		49,062						49,062

See accompanying notes to the unaudited pro forma consolidated financial statements.

STONE ENERGY CORPORATION

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

On July 31, 2014, Stone completed the sale of its non-core GOM conventional shelf properties (the “Sold Properties”) to Talos Energy Offshore LLC. The net cash proceeds received from the sale totaled approximately $177.6 million, representing gross proceeds of $200.0 million adjusted by $22.4 million for preliminary purchase price adjustments for operations related to the Sold Properties after April 1, 2014, the effective date of the transaction. Estimated transaction costs associated with the sale are approximately $2.5 million.

The historical financial information has been derived from the historical audited and unaudited consolidated financial statements of Stone included in the Annual Report on Form 10-K for the year ended December 31, 2013 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2014. The unaudited pro forma consolidated balance sheet was prepared as if the sale occurred as of March 31, 2014. The unaudited pro forma consolidated statements of income were prepared as if the sale occurred as of January 1, 2013.

The pro forma adjustments were based on actual information and estimates made by management. These unaudited pro forma consolidated financial statements are provided for illustrative purposes only and may or may not provide an indication of results in the future.

Note 2 – Pro Forma Adjustments

The unaudited pro forma consolidated balance sheet at March 31, 2014 reflects the following adjustments:

(a) Adjustment for net cash proceeds of approximately $175.1 million, which represents the gross sales price of $200.0 million, less purchase price adjustments of $22.4 million, and less estimated transaction costs of $2.5 million.

(b) Adjustment to reflect the application of proceeds as an adjustment to the capitalized costs of oil and gas properties.

(c) Adjustment to eliminate the asset retirement obligations associated with the Sold Properties.

The unaudited pro forma consolidated statements of income for the year ended December 31, 2013 and the three months ended March 31, 2014 reflect the following adjustments:

(a) Adjustment to eliminate oil and gas revenues and direct operating expenses associated with the Sold Properties.

(b) Adjustment to eliminate accretion expense attributable to asset retirement obligations associated with the Sold Properties.

(c) Adjustment to eliminate depreciation, depletion and amortization expense relative to the Sold Properties.

(d) Adjustment to income tax expense for the effects of the above pro forma adjustments.