Stone Energy's CEO Presents At Barclays Capital CEO Energy-Power Conference - Transcript

Stone Energy Corporation (SGY)

Barclays Capital CEO Energy-Power Conference

September 04, 2012, 14:25 p.m. ET

Executives

Dave Welch - Chairman, President and CEO

Analysts

Jeffrey Robertson - Barclays Capital

Presentation

Jeffrey Robertson - Barclays Capital

We'd like to start our next presentation, we would like to welcome to our conference Stone Energy, with us from the company today to do the presentation is Dave Welch, Stone's CEO and I will turn it over to Dave.

Dave Welch

Thank you, Jeff. It's pleasure to be here with you. And we have a new format that we are going to unveil this afternoon and Thank you for being here to listen to it. I'll just skip the disclosure but obviously everyone knows that there is some speculative information in our presentation.

To tell you little bit about our company, we are growing E&P Company, we are about $2 billion enterprise value, we have a 12 month trailing EBITDA of about $640 million and cash on the balance sheet a little over $200 million. We are about $875 million of long-term debt in addition we have a $400 million bank facility and revolving facility with zero drawn on that facility.

We are growing our reserve base and also diversifying that reserve base at the same time we have about 100 million barrels of oil equivalent as of the beginning of this year. You can see the breakdown in the pie chart on the upper left that shows that about 27 million of this barrels are currently producing an importantly 33 million barrels are behind pipe, meaning we just have to put those on production when the zone on the bottom of the well waters out are pressure depletes we just set a plug and move up hole that’s generally less than $5 a barrel to conduct those operations. Than we have about 40 million barrel equivalents of proved but undeveloped reserves most of those are in the Marcellus Shale and our liquids rich Marcellus area.

We have grown our reserves about 20% since 2009, 20% compound annual interest rate our compound growth rate and our reserve base is also becoming more diversified if you were to look back just to the beginning of 2010 or the end of 2009 we had about 80% of our reserves were located in the conventional shelve which is our legacy asset base. We past forward to today, we were about equally spread in three different areas, the conventional shelf is about a third, the Appalachia is about a third, and the Deep Water Gulf of Mexico is about a third. Also our proved developed reserves base, the 27 million barrels I alluded to above, you can see the pie chart on the lower right, that’s about 56% oil and about 4% NGLs and 40% gas. So, we have a slight liquids waiting in our reserve proved producing reserve base.

We are also growing our production and diversifying it. If you look at the picture on the left you see our 2012 production guidance is 41 to 43,000 barrels of oil per day. As you know you just had hurricane Isaac that came through the Gulf of Mexico that has deferred some of our production, we now estimate that we will still be within this range but maybe toward the middle to lower end on the full-year annualized basis.

You see our production by commodity split is about 54% liquids, roughly 50% oil and 4% NGLs and about 46% natural gas. We have been able to also diversify our production base about half of that not quite half of it, it's is from our legacy asset and the other equal amounts basically from Appalachia and from the Deep Water Gulf of Mexico. You can see on the right there, that we have been able to grow our production base at about an 18% rate from last year to this year as well.

What we are really focused on doing is becoming excellent in exploration and in operations. I think there is an evidence to prove to you that we are doing that. Our strategy is to leverage the high cash flows that we enjoy from the conventional Gulf of Mexico to grow oil in material impact areas, to grow gas in priced advantage basins which means liquids rich today, to limit our reinvestment in our legacy assets, exercise discipline to what we are doing there is investing only in oil development programs, so we are not chasing any gas prospects that are in the Gulf of Mexico conventional shale and exercising discipline in our reinvestment plan there. And then we are also always interested in acquiring high quality properties.

From a portfolio management point of view we are balanced across different risk profiles, you will see that if you look at the chart on the right there, we have a mix of very low risk liquids rich Marcellus Shale, development opportunities and shelf oil development opportunities that generally have an 80% plus probability of working, balanced with some exploration at the high end in Deep Water Gulf of Mexico and in deep liquids gas exploration which is currently onshore South Louisiana. So, we have both ends of the spectrum covered there with low risk development and some higher risk but potentially higher reward exploration.

We have multi-year low risk inventory, we have a multi-year catalyst inventory. We balanced across both commodities and geography between the Gulf, Louisiana onshore and the Appalachia area.

Read the rest of this transcript for free on seekingalpha.com

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