December 9, 2005
Mr. Kenneth H. Beer
Senior Vice President and Chief Financial Officer
Stone Energy Corporation
625 E. Kaliste Saloom Road
Lafayette, LA 70508
Re: Stone Energy Corporation
Form 10-K for the Fiscal Year Ended December 31, 2004
Filed March 9, 2005
File No. 001-12074
Response letter dated November 14, 2005
Form 8-K filed December 5, 2005
Dear Mr. Beer:
We have reviewed your response letter and filings and have
the
following comments. Where indicated, we think you should revise
your
documents in response to these comments. If you disagree, we will
consider your explanation as to why our comment is inapplicable or
a
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may ask you to provide
us
with information so we may better understand your disclosure.
After
reviewing this information, we may raise additional comments.
Form 10-K for the Fiscal Year Ended December 31, 2004
General
1. We note that you have not filed your third quarter interim
report
on Form 10-Q, which was due November 9, 2005. We wish to remind
you
of your financial reporting obligations under Rule 13a-13 of the
Exchange Act.
Results of Operations, page 21
Reserves, page 22
2. We have read your response to prior comment 1, explaining that
you
believe no revision is necessary as a result of not following the
guidance in SAB Topic 12(D)(3)(b), requiring hedge adjusted prices
to
be utilized in conducting ceiling tests under the full cost
methodology, as the results would not have differed. We believe
that
your accounting policy disclosures should be revised to reflect an
acceptable methodology.
Note 4 - Investment in Oil and Gas Properties, page F-14
3. We understand from your response to prior comment 4 that you
have
combined capitalized interest with the acquisition and exploration
cost totals in your table of costs not subject to amortization.
Under Rule 4-10(c)(7) of Regulation S-X, capitalized interest is a
separate category of cost that should be presented in the required
table.
Form 8-K filed December 5, 2005
4. We note your disclosure that the final report from Davis Polk &
Wardwell (Davis Polk) identified several factors that contributed
to
the write-down of reserves, which led to the restatement of your
financial statements for the years and each of the quarters in the
years 2004, 2003, 2002, 2001, and the first and second quarter of
2005. Please explain to us how you intend to address the effects
of
the Davis Polk findings on your disclosure controls and procedures
and internal controls over financial reporting previously
evaluated
and determined to be effective for the periods being restated.
Engineering Comments
Form 10-K for the Fiscal Year Ended December 31, 2004
5. Regarding your response number 6 our comment may not have been
clear. Please expand your disclosure in the 10-K report based on
Instruction 3 of Item 102 of Regulation S-K. Item 102 requires
disclosure of production, reserves, location, development and
nature
of your interest for your significant properties. Significant
properties are leases or fields and not broad geographic areas
such
as the Rocky Mountains or Gulf of Mexico.
6. We note your prior response number 11 but reiterate that
comment.
7. Regarding response number 13 tell us what properties the
negative
revisions of 19 BCF occurred and the specific nature of these
revisions. Tell us if you are saying that this 19 BCF negative
revision of 2% of your total reserves and a 6% reserve revision
the
prior year prompted this review of all of your reserves and the
subsequent 25% reduction in overall reserves.
8. It appears from response 15 that all of the revisions were
booked
based on volumetric analysis. However, we note that proved
producing
reserves actually increased in your fall reserve review.
Therefore,
tell us the percent of revisions and where they were located that
were due to the following:
* proved reserves booked that were below lowest known oil
penetrated
by a well;
* proved reserves booked that were in un-drilled fault blocks;
* proved reserves that were booked due to the use of invalid
pricing;
* proved reserves that were booked more than one offset well from
an
economic well without significant technical support;
* proved reserves that were booked using obvious overstated
volumetric parameters such as net feet, oil saturation, recovery
factors, drainage areas and/or porosity;
* proved reserves that were added due to secondary recovery
projects
that did not have adequate technical support;
* proved producing reserves booked that are not performing as
originally estimated;
* any other cause of improper booking of proved reserves.
9. For each of the last four years provide to us on a well-by-well
basis your pre-drill reserve estimate and the estimated EUR for
each
subsequent year for wells drilled in the Gulf of Mexico.
10. Regarding response number 19, we note that numerous wells
drilled
in 2005 have not yet been put on production. Tell us, if after
testing and well log and core evaluations, you have reduced the
reserves on these wells or if you anticipate additional reserve
write
downs from these wells after they go on production.
11. Provide us with a copy of the Davis Polk report.
Closing Comments
As appropriate, please amend your filings and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
You may contact Mark A. Wojciechowski at (202) 551-3759 or,
in
his absence, Karl Hiller at (202) 551-3686 if you have questions
regarding comments on the financial statements and related
matters.
You may contact James Murphy, Petroleum Engineer, at (202) 551-
3703
if you have questions related to engineering issues and related
disclosures. Please contact me at (202) 551-3740 with any other
questions.
Sincerely,
H. Roger Schwall
Assistant Director
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Mr. Kenneth H. Beer
Stone Energy Corporation
December 9, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE
MAIL STOP 7010