Lafayette, Louisiana-based Stone Energy Corporation (SGY) intends to publicly offer $100 million aggregate principal amount of its 8.625% Senior Notes due 2017. Stone said that the new offering is an additional issuance of the company’s outstanding 8.625% Senior Notes due 2017, which was issued in January 2010 in an aggregate principal amount of $275 million.
The proceeds from the offering will be utilized for general corporate purposes including repayment of debt under the existing credit facility and the payment of amounts outstanding related to the acquisition of additional lease acreage in Appalachia.
Although the deepwater Gulf of Mexico (GoM) moratorium adversely affected Stone’s operations, the region remains the company’s principal area for growth with increasing focus on Appalachia.
For effective fund management and repair in the balance sheet, the issuance of Stone’s notes is an appreciable event following largely unimpressive third quarter results.
While project related delays hurt the company’s production in the third quarter, management said the company is doing well in oil production. Stone will drill more for oil within its existing assets in the GoM. Importantly, year-end reserves will likely grow with the success in the GoM and the Marcellus Shale program.
Stone Energy competes with peers like Cabot Oil and Gas Corp. (COG) and Apache Corp. (APA).
Stone continues to gain momentum with its drilling program at the Marcellus Shale, additional wells at Amberjack, deep onshore exploration results and Alberta Basin Bakken results. However, we want to see more catalysts on Stone’s deck that can aid valuation. Till then, we maintain our Neutral recommendation with the Zacks #3 Rank (Hold).
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