1
Filed by Stone Energy Corporation
pursuant to Rule 425 under
the Securities Act of 1933
and deemed filed pursuant
to Rule 14a-12 of the
Securities Act of 1934
Stone Energy Commission File No.: 001-12074
Basin Exploration Commission File No.: 000-20125
Subject Company: Basin Exploration, Inc.
THE FOLLOWING IS A PRESS RELEASE DISSEMINATED BY STONE ENERGY CORPORATION ON
NOVEMBER 1, 2000.
STONE ENERGY CORPORATION NYSE--SGY
ANNOUNCES RECORD THIRD QUARTER 2000 RESULTS
LAFAYETTE, LA. November 1, 2000
Stone Energy Corporation announced today that it has again achieved
record breaking quarterly results in net income, net cash flow from operations
before working capital changes, oil and gas revenues and production volumes. The
third quarter of 2000 marks the sixth consecutive quarter in which the Company
has broken quarterly records for net income and net cash flow from operations
before working capital changes.
As previously announced, the Company has entered into an agreement to
acquire Basin Exploration, Inc. in a stock-for-stock transaction. In accordance
with the agreement, which is expected to be completed in early 2001, each Basin
stockholder will receive 0.3974 shares of Stone common stock for each share of
Basin common stock.
Net income for the quarter ended September 30, 2000 increased 193% to
$24.3 million, or $1.29 per share, compared to third quarter 1999 net income of
$8.3 million, or $0.47 per share. Net cash flow from operations before working
capital changes for the third quarter of 2000 increased 104% to $56 million, or
$2.97 per share, from the third quarter 1999 amount of $27.5 million or $1.55
per share. For the first nine months of 2000, net income totaled $54.3 million,
or $2.89 per share, and net cash flow from operations before working capital
changes totaled $135.6 million, or $7.22 per share. As a point of reference, net
income and net cash flow from operations before working capital changes totaled
$15.4 million ($0.95 per share) and $72.9 million ($4.51 per share),
respectively, for the nine months ended September 30, 1999.
As a result of higher production rates and realized prices, third
quarter 2000 oil and gas revenues increased 77% to $71.8 million, compared to
third quarter 1999 oil and gas revenues of $40.5 million. Oil and gas revenues
for the first nine months of 2000 increased to $177.8 million as compared to
$106.9 million during the comparable 1999 period.
The Company's average daily production rate during the third quarter of
2000 was 189.2 MMcfe. This represented a 17% increase from the 1999 annual
average daily production rate. Currently, the Company's average daily production
rate is approximately 200 MMcfe. Based on current production, the Company
estimates that its average daily production rate for the fourth quarter of 2000
will be in the range of 196-204 MMcfe.
Natural gas production during the third quarter of 2000 increased to
approximately 12.3 billion cubic feet as compared to third quarter 1999 gas
production of 9.6 billion cubic feet, while oil production during the third
quarter of 2000 totaled 855,000 barrels as compared to 925,000 barrels of oil
produced during the third quarter of 1999. Year-to-date 2000 production
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totaled 2.5 million barrels of oil and 34.4 billion cubic feet of gas while
nine-month 1999 production totaled 2.6 million barrels of oil and 29.1 billion
cubic feet of gas.
Prices realized during the third quarter of 2000 averaged $27.70 per
barrel of oil and $3.92 per Mcf of gas. This represents a 55% increase, on a
thousand cubic feet of gas equivalent (Mcfe) basis, over third quarter 1999
average realized prices of $17.34 per barrel of oil and $2.54 per Mcf of gas.
Average realized prices during the first nine months of 2000 were $25.12 per
barrel of oil and $3.35 per Mcf of gas as compared to $14.97 per barrel of oil
and $2.32 per Mcf of gas realized during the 1999 period. All unit pricing
amounts include the effects of hedging.
Normal operating costs, on a unit of production basis, for the third
quarter of 2000 were $0.40 per Mcfe as compared to $0.39 per Mcfe for the third
quarter of 1999. This variance primarily relates to an overall increase in the
costs of oil field services in addition to normal platform painting expenditures
made during the quarter.
During the third quarter of 2000, the Company performed significant
workover operations on two wells at Clovelly Field and one well at Cut Off
Field. As a result, major maintenance expenses for the quarter totaled $2.8
million compared to $0.4 million for the comparable period of 1999. The Company
expects major maintenance expenses to approximate $1 million during the fourth
quarter of 2000. Production taxes for the third quarter of 2000 increased to
$1.6 million compared to $1 million for the third quarter of 1999, due to higher
oil prices and increased onshore production volumes.
General and administrative expenses for the third quarter of 2000
increased in total to $1.4 million, or $0.08 per Mcfe, from $1.1 million, or
$0.07 per Mcfe, for the third quarter of 1999. General and administrative
expenses for the third quarter of 2000 were affected by a 14% increase in the
Company's staff level over the third quarter of 1999. The Company currently
estimates that its general and administrative expenses in the fourth quarter of
2000 will be comparable to expenses reported for the preceding quarter, except
for non-recurring expenses incurred in connection with the Company's recently
announced pending merger with Basin Exploration, Inc.
Depreciation, depletion and amortization expense on the Company's oil
and gas properties increased to $20.1 million or $1.15 per Mcfe during the third
quarter of 2000, compared to $15.9 million or $1.05 per Mcfe for the third
quarter of 1999.
As a result of the repayment of the Company's borrowings under its bank
credit facility in August 1999, interest expense for the three-month period
ended September 30, 2000 decreased to $1.9 million, compared to $3 million for
the 1999 period. The Company's borrowing base is currently $200 million with
outstanding letters of credit totaling $7.5 million and no outstanding
borrowings.
One of the Company's principal goals is the generation of high cash
margins from its operations. By maintaining a low level of operating costs, the
Company is able to immediately benefit from rising commodity prices as its high
cash margins generate increased funds for exploratory and development drilling.
During the third quarter of 2000, the Company achieved a
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78% cash margin and a related 22% cost relationship for each dollar of
production revenue. This compares to a 69% cash margin and 31% cost relationship
for third quarter 1999.
The Company currently utilizes two forms of hedging contracts: fixed
price swaps and collars. The Company has not entered into any hedging contracts
subsequent to the contracts disclosed in its 1999 Form 10-K.
Capital expenditures during the third quarter of 2000 totaled $39.1
million, including $2.2 million of capitalized general and administrative costs
and $0.4 million of capitalized interest. These investments were financed by
cash flow from operations.
A summary of third quarter 2000 evaluated drilling operations is as
follows:
NET CURRENT DAILY
DATE OF FIRST PAY NO. OF PRODUCTION RATE
FIELD - WELL PRODUCTION (FEET) SANDS (MCFE) NET
------------ ------------- ------ ------ ---------------
East Cameron 64 - OCS-G 0089 No. 13 (Phogbound) Installing pipeline 72 7 N/A
Weeks Island - Myles Salt No. 47 (Andrew) 10/04/00 262 3 877
Vermilion 255 - OCS-G 3135 No. J-3 (Aetna) Logged / Drilling 39 2 N/A
Weeks Island - Continental Weeks Gall Unit No. 1 Dry hole
Weeks Island - S.L. 500 No. 2 Dry hole
Lake Hermitage - LLDSB No. 1 ST/3 (Post Oak) Dry hole
Weeks Island - Smith State Unit No. B-16 (Apatite) Dry hole
Including the seven wells drilled during the third quarter, the Company
drilled 15 successful wells and eight dry holes through September 30, 2000.
Drilling operations have been completed on the No. 13 Well on the Phogbound
Prospect at East Cameron Block 64. Installation of a pipeline is in progress to
connect the well to production facilities with first production expected by the
middle of November. At Stone's Vermilion Block 255 Field, on the Aetna Prospect,
the Company is currently drilling at 12,890 feet toward a planned total depth of
15,058 feet on the J-3 Well. To date, this well has encountered two pay sands
and has been cased to total current depth.
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A summary of fourth quarter wells in progress is as follows:
NET NO.
SPUD CURRENT TOTAL PAY OF
FIELD - WELL DATE STATUS DEPTH DEPTH (FEET) SANDS
------------ ---- ------ ----- ----- ------ -----
Eugene Island 243- No. D-2 (Narwhal) 8/15/00 Drilling 14,597 15,592 155 * 1 of 2
West Cameron 176- No. 10 Sidetrack 9/29/00 Hook-up for prod. 11,246 11,246 28 * 2
Cut Off- Clovelly No. 35 10/6/00 Completing 10,862 10,862 119 * 7
Weeks Island- Weeks Heirs No. 1 (Amber) 10/18/00 Drilling 9,800 17,700 N/A N/A
South Park - LL&E Fee No. 2 10/23/00 Drilling 5,000 14,550 N/A N/A
Vermilion Block 46- No. 7 (Spec) 10/28/00 Drilling 2,000 15,650 N/A N/A
* Logged in October 2000.
As of November 1, 2000, the Company has invested in a total of 29
wells, 18 successful (two of which are still in progress) and eight dry holes
with five wells drilling. During 2000, the Company expects to drill and evaluate
31 wells compared to 15 wells in 1999. Stone Energy's 2000 capital expenditures
budget, excluding future acquisitions, is currently $165.1 million for
properties it owns and operates. The Company expects to finance its fourth
quarter 2000 capital expenditures with cash flow from operations.
On October 16, 2000, the Company announced what it believes is an
important discovery on the Narwhal Prospect in the D-2 Well at Eugene Island
Block 243. After drilling to a depth of 14,597 feet, logging tools were stuck in
the hole that we have had no success in recovering. The Company is currently
sidetracking adjacent to the original hole and plans to set 7" casing across the
logged productive sand to a depth of 14,450 feet before drilling ahead to the
planned total depth of 15,592 feet. After completing the D-2 Well, the Company
expects to drill the D-3, a delineation well to a bottom hole location one-half
mile west of the D-2 discovery. The D-3 is planned to drill to total depth of
14,550 feet.
Drilling operations are in progress on the Spec Prospect, a planned
15,650 foot test of the field pay 15,300 foot sand, a geo-pressured reservoir
that has produced approximately 30 Bcf of gas from two wells in an adjacent
fault block.
The Company believes that its Vermilion Block 255 will be an important
source of future production growth. A project to evaluate a portion of this
potential is underway on a three to five well exploratory program that commenced
with the drilling of the previously described J-3 Well on the Aetna Prospect.
The Company expects to spud the Indigo Prospect in November 2000, followed by
the Rhodes Prospect in the first quarter of 2001. All three wells will target
field pay sands in fault traps around a salt-shale plug.
During the third quarter of 2000, the Company entered into a farmin
agreement on Vermilion Block 261 and plans to spud the A-3 Sidetrack Well on
this block during November. The well will be drilled to what we believe to be a
proven productive reservoir from an existing platform and is expected to test
Upper Pliocene age reservoirs that have produced in excess of 175 Bcf of gas
along the same major fault system from two large reservoirs. Following the A-3
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Sidetrack Well, the Company plans to drill the Stone No. 1 Well on the Minotaur
Prospect from an open water location for the same objective sands in a separate
fault trap. Stone will have a 75% working interest in the initial well on the
prospect.
During the second quarter of 2000, the Company entered into a farmin
agreement on Ship Shoal Block 339. In November, we plan to spud the OCS-G-18029
No. 1 Well on the Wombat Prospect, a planned 8,730 foot open water test. The
well will target Pleistocene age sands in a fault trap that exhibits seismic
amplitude anomalies that are analogous to producing sands at nearby Ship Shoal
Block 300. Stone will have a 75% working interest in the prospect.
During November, we will begin operations on the Dolphin Prospect on
East Cameron Block 281 using a recently contracted drilling rig. The OCSG-2050
No. 7 Well, which will be drilled to a depth of 3,731 feet at an open water
location, is designed to test a number of shallow reservoirs that are prolific
producers on adjacent blocks. Stone has an 81.8% working interest in the Dolphin
Prospect.
The Company has planned a conference call for 3:00 p.m. CST on
Thursday, November 2, 2000 to discuss the operational and financial results for
the third quarter of 2000. Anyone wishing to participate should dial
1-800-365-3378 and request the "Stone Energy Call". In addition, today's new
release, along with other information about the Company, is available on the
Internet at www.stoneenergy.com.
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. 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.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT. Except for the
historical and present factual information contained herein, the matters set
forth in this press release, including statements as to the expected benefits of
the merger such as efficiencies, cost savings, market profile and financial
strength, and the competitive ability and position of the combined company, and
other statements identified by words such as "expects," "projects," "plans," and
similar expressions are forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially, including the possibility
that the anticipated benefits from the merger cannot be fully realized, the
possibility that costs or difficulties related to the integration of our
businesses will be greater than expected, the impact of competition and other
risk factors relating to our industry as detailed from time to time in each of
Stone's and Basin's reports filed with the SEC. Stone and Basin disclaim any
responsibility to update these forward-looking statements.
ADDITIONAL INFORMATION. Stone and Basin will file a proxy statement/prospectus
and other relevant documents concerning the proposed merger transaction with the
SEC. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES
AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. You will be able to obtain the documents free of
charge at the website maintained by the SEC at www.sec.gov. In addition, you may
obtain documents filed with the SEC by Stone free of
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charge by requesting them in writing from Stone Energy Corporation, 625 East
Kaliste Saloom Road, Lafayette, Louisiana 70508, Attention: Corporate Secretary,
or by telephone at (337) 237-0410.
Stone and Basin, and their respective directors and executive officers, many be
deemed to be participants in the solicitation of proxies from the stockholders
of Stone and Basin in connection with the merger. Information about the
directors and executive officers of Stone and their ownership of Stone stock is
set forth in the proxy statement for Stone's 2000 Annual Meeting of
stockholders. Information about the directors and executive officers of Basin
and their ownership of Basin stock is set forth in the proxy statement for
Basin's 2000 Annual Meeting of stockholders. Investors may obtain additional
information regarding the interests of such participants by reading the proxy
statement/prospectus when it becomes available.
Investors should read the proxy statement/prospectus carefully when it becomes
available before making any voting or investment decisions.
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STONE ENERGY CORPORATION
SUMMARY STATISTICS
(In thousands, except per share/unit amounts)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ----------------------------
2000 1999 2000 1999
-------- -------- -------- --------
TOTAL AMOUNTS
Net income $ 24,269 $ 8,288 $ 54,266 $ 15,379
Net income before taxes 37,337 12,765 83,486 23,687
Net cash flow from operations (1) 56,028 27,511 135,637 72,947
EBITDA (2) 59,569 31,922 146,277 85,072
TOTALS PER SHARE
Net income $ 1.29 $ 0.47 $ 2.89 $ 0.95
Net income before taxes 1.98 0.72 4.44 1.47
Net cash flow from operations (1) 2.97 1.55 7.22 4.51
EBITDA (2) 3.16 1.80 7.78 5.27
PRODUCTION QUANTITIES (3)
Oil (MBbls) 855 925 2,494 2,631
Gas (MMcf) 12,272 9,637 34,353 29,130
Oil and gas (MMcfe) 17,402 15,187 49,317 44,916
AVERAGE DAILY PRODUCTION (3)
Oil (MBbls) 9.3 10.1 9.1 9.6
Gas (MMcf) 133.4 104.8 125.4 106.7
Oil and gas (MMcfe) 189.2 165.1 180.0 164.5
SALES DATA (3) (4)
Total oil sales $ 23,684 $ 16,042 $ 62,638 $ 39,396
Total gas sales 48,123 24,462 115,201 67,462
Total oil and gas sales 71,807 40,504 177,839 106,858
AVERAGE SALES PRICES (3) (4)
Oil (per Bbl) $ 27.70 $ 17.34 $ 25.12 $ 14.97
Gas (per Mcf) 3.92 2.54 3.35 2.32
Per Mcfe 4.13 2.67 3.61 2.38
COST DATA
Operating costs $ 6,894 $ 5,967 $ 19,563 $ 16,026
General and administrative 1,384 1,083 4,265 3,282
DD&A on oil and gas properties 20,092 15,881 55,747 49,812
AVERAGE COSTS (PER MCFE)
Operating costs $ 0.40 $ 0.39 $ 0.40 $ 0.36
General and administrative 0.08 0.07 0.09 0.07
DD&A on oil and gas properties 1.15 1.05 1.13 1.11
AVERAGE SHARES OUTSTANDING - DILUTED 18,869 17,711 18,796 16,157
- ----------
(1) Excludes working capital changes.
(2) EBITDA represents earnings before interest, taxes and depreciation,
depletion and amortization.
(3) Results from July 1, 1999 forward include net daily production of 7.3 MMcf
at $2.24 per Mcf associated with the amortization of a volumetric
production payment.
(4) Includes the effects of hedging.
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STONE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND NET CASH FLOW INFORMATION
(In thousands)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
STATEMENT OF OPERATIONS
REVENUES
Oil and gas production $ 71,807 $ 40,504 $ 177,839 $ 106,858
Overhead reimbursements and management fees 179 161 540 510
Other income 783 359 2,165 851
--------- --------- --------- ---------
TOTAL REVENUES 72,769 41,024 180,544 108,219
--------- --------- --------- ---------
EXPENSES
Normal lease operating expenses 6,894 5,967 19,563 16,026
Major maintenance expenses 2,831 437 5,046 618
Production taxes 1,587 983 4,301 2,168
Depreciation, depletion and amortization 20,364 16,189 56,528 50,708
Interest 1,868 2,968 6,263 10,677
General and administrative costs 1,384 1,083 4,265 3,282
Incentive compensation plan 504 632 1,092 1,053
--------- --------- --------- ---------
TOTAL EXPENSES 35,432 28,259 97,058 84,532
--------- --------- --------- ---------
NET INCOME BEFORE INCOME TAXES 37,337 12,765 83,486 23,687
--------- --------- --------- ---------
PROVISION FOR INCOME TAXES
Current 205 0 272 5
Deferred 12,863 4,477 28,948 8,303
--------- --------- --------- ---------
13,068 4,477 29,220 8,308
--------- --------- --------- ---------
NET INCOME $ 24,269 $ 8,288 $ 54,266 $ 15,379
========= ========= ========= =========
NET CASH FLOW INFORMATION
Net income $ 24,269 $ 8,288 $ 54,266 $ 15,379
DD&A and other non-cash expenses 20,423 16,189 56,702 50,708
Deferred taxes 12,863 4,477 28,948 8,303
Non-cash effects of production payment obligations (1,527) (1,443) (4,279) (1,443)
--------- --------- --------- ---------
Net cash flow from operations excluding working
capital changes $ 56,028 $ 27,511 $ 135,637 $ 72,947
========= ========= ========= =========
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STONE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 64,379 $ 13,874
Marketable securities 300 34,906
Accounts receivable 53,916 29,729
Other current assets 130 297
-------- --------
TOTAL CURRENT ASSETS 118,725 78,806
Oil and gas properties, net
Proved 395,508 335,959
Unevaluated 19,617 17,182
Building and land, net 4,792 3,864
Fixed assets, net 2,952 2,850
Other assets, net 3,388 3,077
-------- --------
TOTAL ASSETS $544,982 $441,738
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable to vendors $ 47,391 $ 36,060
Undistributed oil and gas proceeds 27,161 13,130
Other accrued liabilities 4,141 6,729
-------- --------
TOTAL CURRENT LIABILITIES 78,693 55,919
Long-term debt 100,000 100,000
Production payments 12,549 17,284
Deferred tax liability 27,679 746
Other long-term liabilities 1,196 2,202
-------- --------
TOTAL LIABILITIES 220,117 176,151
-------- --------
Common stock 185 183
Additional paid in capital 257,951 252,941
Retained earnings 66,729 12,463
-------- --------
TOTAL EQUITY 324,865 265,587
-------- --------
TOTAL LIABILITIES AND EQUITY $544,982 $441,738
======== ========