UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): February 21, 2001
STONE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 1-12074 72-1235413
(State or other jurisdiction (Commission File (I.R.S. employer
of incorporation or organization) Number) identification no.)
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625 E. Kaliste Saloom Road
Lafayette, Louisiana 70508
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (337) 237-0410
Item 5. OTHER EVENTS
Stone Energy Corporation reported the results of recently completed
independent engineering reports of its estimated proved oil and gas reserves
dated as of December 31, 2000. Effective February 1, 2001, Basin Exploration,
Inc. merged with Stone Energy. Accordingly, the table below sets forth summary
proved reserve information at December 31, 2000 and 1999 for Stone Energy and
for Stone Energy on a pro forma basis to reflect the addition of the Basin
reserves. The oil and gas prices used in the preparation of the reports for both
years were based upon the rules and regulations of the Securities and Exchange
Commission (the "SEC").
December 31, 2000 December 31, 1999
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Stone Pro Forma Stone Pro Forma
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Total estimated proved reserves in
equivalent cubic feet of gas (Bcfe) (1) 400.2 600.3 387.4 596.9
Estimated proved oil reserves (MMBbls) 21.3 33.6 22.6 35.2
Estimated proved gas reserves (Bcf) (1) 272.2 398.5 251.6 385.7
Present value of estimated future $2,029.4 $2,941.8 $561.3 $830.6
pre-tax net cash flows @ 10%
annual discount ($MM)
Future capital expenditures ($MM) $159.3 $249.6 $135.1 $209.9
Average oil price at end of period ($/Bbl) $28.01 $27.30 $25.07 $24.83
Average gas price at end of period ($/Mcf) $10.13 $9.97 $2.47 $2.42
(1) Excludes 4 Bcf and 6.7 Bcf of gas at December 31, 2000 and 1999,
respectively, dedicated to a production payment.
At December 31, 2000, 89% of Stone's estimated proved reserves on a pro
forma basis were located in the Gulf Coast Basin and 11% were located in the
Rocky Mountains. At year-end 1999, the pro forma estimated proved reserves were
split 87% in the Gulf Coast Basin and 13% in the Rocky Mountains.
The increase in Stone's estimated proved reserves during 2000 was primarily
attributable to drilling results and acquisitions made during the year. With the
exception of the 1999 pro forma data, the reserve estimates above were prepared
by independent petroleum consultants in accordance with the guidelines
established by the SEC. The adherence to these guidelines limits the booking of
proved reserves on certain successfully drilled wells to the extent of the base
of known productive sands. Actual limits of the productive sands will ultimately
be determined through production or additional drilling.
Prior to 2000, Basin's reserve report had been prepared by Basin and
audited by independent petroleum engineers. Stone contracted the services of
Ryder Scott to prepare an independent engineered report of Basin's proved
reserves at December 31, 2000. The Ryder Scott year-end 2000 estimated proved
reserves for Basin included a downward revision of approximately 32 Bcfe and a
difference of 9.4 Bcfe when compared to the published year-end 1999 proved
reserve estimates. Those revisions are reflected in the pro forma reserve tables
above. The Ryder Scott 2000 estimated proved reserves were comparable to the
proved reserve estimates used by Stone in its pro forma business model after
evaluating Basin's prospects and reserves.
Stone's production during 2000 once again set new records for an annual
period totaling 3.3 million barrels of oil and 46.5 billion cubic feet of gas or
a total of approximately 66.5 billion cubic feet of gas equivalent, an overall
increase of approximately 13% from 1999. On a pro forma basis, production for
2000 totaled 98.9 billion cubic feet of gas equivalent or approximately 8%
higher than pro forma 1999 production and was split 96% from the Gulf Coast
Basin and 4% from the Rocky Mountains. Based on the independently engineered
estimates of proved reserves, Stone's reserve replacement ratio for 2000 was
119% and was 103% after integrating the Basin results which includes the
downwardly revised proved reserve estimates.
During 2000, Stone successfully drilled 22 out of 32 gross wells. Including
Basin's drilling results for 2000, the combined company was successful on 57 out
of 74 gross wells during the year for a pro forma drilling success rate of 77%.
2001 OUTLOOK
In connection with the merger, Basin stockholders received 0.3974 of a
share of Stone common stock for each share of Basin common stock. As a result,
Stone issued approximately 7.4 million shares of common stock in the
transaction. In addition, Stone assumed, and subsequently retired with cash on
hand, $48 million in Basin bank debt. Stone expects to record non-recurring
merger expenses of approximately $27 million in the first quarter of 2001.
The merger increased Stone's daily production, reserves and prospect
inventory by approximately 50% and increased its Gulf Coast Basin property base
from 21 to 45 producing properties. As a result, Stone expects to implement a
significantly expanded capital expenditures program during 2001. With an
estimated capital expenditures budget of approximately $253 million, Stone
expects to drill 77 gross wells during 2001, 43 in the onshore coastal marsh and
offshore shelf regions of the Gulf Coast Basin and 34 in the recently integrated
Rocky Mountain properties. Currently, 90% of the total capital expenditures
budget is allocated to Gulf Coast Basin operations with the remaining 10%
allocated to the Rocky Mountains. Stone estimates that approximately 65% of the
total estimated drilling costs during 2001 will be dedicated to exploratory
targets with 35% allocated to the development of existing reserves. The 2001
capital expenditures budget excludes acquisition costs. However, Stone continues
to evaluate opportunities that fit its specific acquisition profile.
Based on Stone's commodity price and production projections, we expect to
finance the 2001 capital expenditures budget with cash flow from operations. As
previously announced, Stone's production goal for 2001 is to increase production
15% over 2000's pro forma production of 98.9 Bcfe.
To reduce the risk of significant declines in the prices of oil and gas,
Stone purchased put options on a portion of its production volumes. The put
options establish a floor on hedged production while allowing full participation
in any increases in commodity prices. The following table summarizes Stone's
current hedge positions:
Gas Puts Oil Puts
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MMbtu/d (1) Floor Cost Bbls/d Floor Cost
----------- ----- ------------ ------- ----- ------------
2001 80,000 $3.50 $1.3 million 3,500 $25.00 $1.8 million
2002 60,000 3.50 5.2 million 3,500 24.00 3.2 million
Gas Swaps (2)
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MMbtu/d Price
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2001 20,000 $2.33
2002 10,000 2.15
2003 10,000 2.15
(1) Gas put volumes for 2001 relate to production from April-December 2001
(2) Contracts that were assumed by Stone in connection with the merger
Stone Energy is an independent oil and gas company headquartered in
Lafayette, Louisiana, and is engaged in the acquisition, exploitation and
operation of oil and gas properties located in the Gulf Coast Basin and Rocky
Mountains.
For additional information, contact James H. Prince, Chief Financial
Officer at 337-237-0410-phone, 337-237-0426-fax or via e-mail at
princejh@stoneenergy.com.
Certain statements in this press release are forward-looking and are based
upon the Company's current belief as to the outcome and timing of future events.
All statements, other than statements of historical facts, that address
activities that the Company plans, expects, believes, projects, estimates or
anticipates will, should or may occur in the future, including future production
of oil and gas, future capital expenditures and drilling of wells and future
financial or operating results, are forward-looking statements. 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 the Company's 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 could differ materially from those expressed
in the forward-looking statements.
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: February 22, 2001 By: /s/ James H. Prince
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James H. Prince
Chief Financial Officer