Attached files

file filename
EX-31.1 - EXHIBIT 31.1 - STONE ENERGY CORPsgy93015ex311.htm
EX-31.2 - EXHIBIT 31.2 - STONE ENERGY CORPsgy93015ex312.htm
EX-32.1 - EXHIBIT 32.1 - STONE ENERGY CORPsgy93015ex321.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________ 
FORM 10-Q
__________________________________________________________ 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 1-12074
__________________________________________________________ 
STONE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
__________________________________________________________
Delaware
72-1235413
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
625 E. Kaliste Saloom Road
 
Lafayette, Louisiana
70508
(Address of principal executive offices)
(Zip Code)
(337) 237-0410
(Registrant’s telephone number, including area code) 
__________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
ý
Accelerated filer
¨
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  ý
As of November 3, 2015, there were 57,094,064 shares of the registrant’s common stock, par value $.01 per share, outstanding.
 



TABLE OF CONTENTS
 
 
 
Page
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
Item 1.
Item 1A.
Item 2.
Item 6.
 
 



PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
STONE ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of dollars)
 
September 30,
2015
 
December 31,
2014
 
(Unaudited)
 
(Note 1)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
74,474

 
$
74,488

Restricted cash

 
177,647

Accounts receivable
57,859

 
120,359

Fair value of derivative contracts
65,700

 
139,179

Current income tax receivable

 
7,212

Inventory
3,709

 
3,709

Other current assets
9,203

 
8,118

Total current assets
210,945

 
530,712

Oil and gas properties, full cost method of accounting:
 
 
 
Proved
9,204,693

 
8,817,268

Less: accumulated depreciation, depletion and amortization
(8,199,973
)
 
(6,970,631
)
Net proved oil and gas properties
1,004,720

 
1,846,637

Unevaluated
518,963

 
567,365

Other property and equipment, net
30,327

 
32,340

Fair value of derivative contracts
5,734

 
14,333

Other assets, net
25,623

 
27,224

Total assets
$
1,796,312

 
$
3,018,611

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable to vendors
$
66,054

 
$
132,629

Undistributed oil and gas proceeds
10,461

 
23,232

Accrued interest
22,241

 
9,022

Deferred taxes

 
20,119

Asset retirement obligations
42,624

 
69,400

Other current liabilities
42,134

 
49,505

Total current liabilities
183,514

 
303,907

Long-term debt
1,052,183

 
1,041,035

Deferred taxes

 
286,343

Asset retirement obligations
243,567

 
247,009

Fair value of derivative contracts
172

 

Other long-term liabilities
25,347

 
38,714

Total liabilities
1,504,783

 
1,917,008

Commitments and contingencies

 

Stockholders’ equity:
 
 
 
Common stock, $.01 par value; authorized 150,000,000 shares; issued 55,302,325 and 54,884,542 shares, respectively
553

 
549

Treasury stock (16,582 shares, at cost)
(860
)
 
(860
)
Additional paid-in capital
1,643,746

 
1,633,307

Accumulated deficit
(1,386,967
)
 
(614,708
)
Accumulated other comprehensive income
35,057

 
83,315

Total stockholders’ equity
291,529

 
1,101,603

Total liabilities and stockholders’ equity
$
1,796,312

 
$
3,018,611

 The accompanying notes are an integral part of this balance sheet.


1



STONE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Operating revenue:
 
 
 
 
 
 
 
Oil production
$
105,013

 
$
123,795

 
$
324,105

 
$
404,477

Natural gas production
17,367

 
30,154

 
72,611

 
133,183

Natural gas liquids production
5,980

 
21,014

 
29,379

 
64,920

Other operational income
1,392

 
2,468

 
3,184

 
5,515

Derivative income, net
2,444

 
5,782

 
4,871

 
2,667

Total operating revenue
132,196

 
183,213

 
434,150

 
610,762

Operating expenses:
 
 
 
 
 
 
 
Lease operating expenses
24,244

 
43,561

 
79,250

 
139,918

Transportation, processing and gathering expenses
18,208

 
16,721

 
55,851

 
45,445

Production taxes
2,052

 
3,651

 
6,394

 
9,970

Depreciation, depletion and amortization
61,936

 
80,291

 
226,309

 
255,772

Write-down of oil and gas properties
295,679

 
47,130

 
1,011,385

 
47,130

Accretion expense
6,498

 
6,539

 
19,315

 
21,827

Salaries, general and administrative expenses
19,552

 
16,286

 
52,977

 
49,252

Incentive compensation expense
794

 
3,092

 
3,621

 
10,129

Other operational expenses
442

 
298

 
1,612

 
510

Total operating expenses
429,405

 
217,569

 
1,456,714

 
579,953

Income (loss) from operations
(297,209
)
 
(34,356
)
 
(1,022,564
)
 
30,809

Other (income) expenses:
 
 
 
 
 
 
 
Interest expense
10,872

 
10,323

 
31,709

 
28,593

Interest income
(47
)
 
(169
)
 
(235
)
 
(505
)
Other income
(411
)
 
(695
)
 
(1,167
)
 
(2,124
)
Other expense
148

 
95

 
148

 
274

Total other expenses
10,562

 
9,554

 
30,455

 
26,238

Income (loss) before income taxes
(307,771
)
 
(43,910
)
 
(1,053,019
)
 
4,571

Provision (benefit) for income taxes:
 
 
 
 
 
 
 
Deferred
(15,806
)
 
(14,495
)
 
(280,760
)
 
3,599

Total income taxes
(15,806
)
 
(14,495
)
 
(280,760
)
 
3,599

Net income (loss)
$
(291,965
)
 
$
(29,415
)
 
$
(772,259
)
 
$
972

Basic earnings (loss) per share
$
(5.28
)
 
$
(0.54
)
 
$
(13.98
)
 
$
0.02

Diluted earnings (loss) per share
$
(5.28
)
 
$
(0.54
)
 
$
(13.98
)
 
$
0.02

Average shares outstanding
55,282

 
54,866

 
55,238

 
51,998

Average shares outstanding assuming dilution
55,282

 
54,866

 
55,238

 
52,139

 
The accompanying notes are an integral part of this statement.


2



STONE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Net income (loss)
$
(291,965
)
 
$
(29,415
)
 
$
(772,259
)
 
$
972

Other comprehensive income (loss), net of tax effect:
 
 
 
 
 
 
 
Derivatives
(5,353
)
 
30,975

 
(45,691
)
 
14,620

Foreign currency translation
(246
)
 
(1,625
)
 
(2,567
)
 
(1,369
)
Comprehensive income (loss)
$
(297,564
)
 
$
(65
)
 
$
(820,517
)
 
$
14,223

 
The accompanying notes are an integral part of this statement.

3



STONE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
 
Nine Months Ended
September 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(772,259
)
 
$
972

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
226,309

 
255,772

Write-down of oil and gas properties
1,011,385

 
47,130

Accretion expense
19,315

 
21,827

Deferred income tax (benefit) provision
(280,760
)
 
3,599

Settlement of asset retirement obligations
(59,826
)
 
(47,217
)
Non-cash stock compensation expense
9,163

 
8,409

Non-cash derivative (income) expense
10,854

 
(2,386
)
Non-cash interest expense
13,210

 
12,393

Change in current income taxes
7,211

 
(6
)
(Increase) decrease in accounts receivable
33,895

 
(1,805
)
Increase in other current assets
(1,090
)
 
(10
)
Decrease in accounts payable
(11,592
)
 
(3,547
)
Increase (decrease) in other current liabilities
(6,753
)
 
37,441

Other
(82
)
 
(172
)
Net cash provided by operating activities
198,980

 
332,400

Cash flows from investing activities:
 
 
 
Investment in oil and gas properties
(385,528
)
 
(727,488
)
Proceeds from sale of oil and gas properties, net of expenses
11,643

 
223,299

Investment in fixed and other assets
(1,455
)
 
(8,790
)
Change in restricted funds
179,475

 
(185,752
)
Net cash used in investing activities
(195,865
)
 
(698,731
)
Cash flows from financing activities:
 
 
 
Proceeds from bank borrowings
5,000

 

Repayment of bank borrowings
(5,000
)
 

Net proceeds from issuance of common stock

 
225,999

Deferred financing costs

 
(3,329
)
Net payments for share-based compensation
(3,127
)
 
(7,161
)
Net cash provided by (used in) financing activities
(3,127
)
 
215,509

Effect of exchange rate changes on cash
(2
)
 
(95
)
Net change in cash and cash equivalents
(14
)
 
(150,917
)
Cash and cash equivalents, beginning of period
74,488

 
331,224

Cash and cash equivalents, end of period
$
74,474

 
$
180,307

 
The accompanying notes are an integral part of this statement.

4



STONE ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Note 1 – Interim Financial Statements
 
The condensed consolidated financial statements of Stone Energy Corporation (“Stone”) and its subsidiaries as of September 30, 2015 and for the three and nine month periods ended September 30, 2015 and 2014 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 2014 has been derived from the audited financial statements as of that date contained in our Annual Report on Form 10-K for the year ended December 31, 2014 (our “2014 Annual Report on Form 10-K”). The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in our 2014 Annual Report on Form 10-K. The results of operations for the three and nine month periods ended September 30, 2015 are not necessarily indicative of future financial results.
 
Note 2 – Earnings Per Share
 
The following table sets forth the calculation of basic and diluted weighted average shares outstanding and earnings per share for the indicated periods:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands, except per share data)
Income (numerator):
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Net income (loss)
$
(291,965
)
 
$
(29,415
)
 
$
(772,259
)
 
$
972

Net income attributable to participating securities

 

 

 
(22
)
Net income (loss) attributable to common stock - basic
$
(291,965
)
 
$
(29,415
)
 
$
(772,259
)
 
$
950

Diluted:
 
 
 
 
 
 
 
Net income (loss)
$
(291,965
)
 
$
(29,415
)
 
$
(772,259
)
 
$
972

Net income attributable to participating securities

 

 

 
(22
)
Net income (loss) attributable to common stock - diluted
$
(291,965
)
 
$
(29,415
)
 
$
(772,259
)
 
$
950

Weighted average shares (denominator):
 
 
 
 
 
 
 
Weighted average shares - basic
55,282

 
54,866

 
55,238

 
51,998

Dilutive effect of stock options

 

 

 
53

Dilutive effect of convertible notes

 

 

 
88

Weighted average shares - diluted
55,282

 
54,866

 
55,238

 
52,139

Basic earnings (loss) per share
$
(5.28
)
 
$
(0.54
)
 
$
(13.98
)
 
$
0.02

Diluted earnings (loss) per share
$
(5.28
)
 
$
(0.54
)
 
$
(13.98
)
 
$
0.02

 
All outstanding stock options were considered antidilutive during the three and nine months ended September 30, 2015 (approximately 145,000 shares) and during the three months ended September 30, 2014 (approximately 205,000 shares) because we had a net loss for such periods. Stock options that were considered antidilutive because the exercise price of the options exceeded the average price of our common stock totaled approximately 116,000 shares during the nine months ended September 30, 2014.
 
During the three months ended September 30, 2015 and 2014, approximately 19,000 shares and 10,000 shares of our common stock, respectively, were issued from authorized shares upon the lapsing of forfeiture restrictions of restricted stock by employees and nonemployee directors. During the nine months ended September 30, 2015 and 2014, approximately 418,000 shares and 382,000 shares of our common stock, respectively, were issued from authorized shares upon the lapsing of forfeiture restrictions of restricted stock by employees and nonemployee directors. In May 2014, 5,750,000 shares of our common stock were issued in a public offering.
 
Because it is management’s stated intention to redeem the principal amount of our 1 3⁄4% Senior Convertible Notes due 2017 (the “2017 Convertible Notes”) (see Note 4 – Long-Term Debt) in cash, we have used the treasury method for determining dilution in the diluted earnings per share computation. For the three and nine months ended September 30, 2015 and the three months ended September 30, 2014, there was no dilutive effect on the diluted earnings per share computation because we had a net loss for such periods. For the three months ended June 30, 2014, the average price of our common stock exceeded the effective conversion price for

5



such notes, resulting in a dilutive effect on the diluted earnings per share computation for the nine months ended September 30, 2014. For all periods presented, the average price of our common stock was less than the strike price of the Sold Warrants (as defined in Note 4 – Long-Term Debt) and therefore, such warrants were not dilutive for such periods. Based on the terms of the Purchased Call Options (as defined in Note 4 – Long-Term Debt), such call options are antidilutive and therefore were not included in the calculation of diluted earnings per share.
 
Note 3 – Derivative Instruments and Hedging Activities
 
Our hedging strategy is designed to protect our near and intermediate term cash flows from future declines in oil and natural gas prices. This protection is essential to capital budget planning, which is sensitive to expenditures that must be committed to in advance, such as rig contracts and the purchase of tubular goods. We enter into derivative transactions to secure a commodity price for a portion of our expected future production that is acceptable at the time of the transaction. These derivatives are generally designated as cash flow hedges upon entering into the contracts. We do not enter into derivative transactions for trading purposes. We have no fair value hedges.
 
The nature of a derivative instrument must be evaluated to determine if it qualifies as a hedging instrument. If the instrument qualifies as a hedging instrument, it is recorded as either an asset or liability measured at fair value and subsequent changes in the derivative’s fair value are recognized in stockholders’ equity through other comprehensive income (loss), net of related taxes, to the extent the hedge is considered effective. Monthly settlements of effective hedges are reflected in revenue from oil and natural gas production and cash flows from operating activities. Instruments not qualifying as hedging instruments are recorded in our balance sheet at fair value and subsequent changes in fair value are recognized in earnings through derivative expense (income). Monthly settlements of ineffective hedges and derivative instruments not qualifying as hedging instruments are recognized in earnings through derivative expense (income) and cash flows from operating activities.
 
We have entered into fixed-price swaps and costless collars with various counterparties for a portion of our expected 2015 and 2016 oil and natural gas production from the Gulf Coast Basin. Our fixed-price oil swap settlements and oil collar settlements are based on an average of the New York Mercantile Exchange (“NYMEX”) closing price for West Texas Intermediate crude oil during the entire calendar month. Our fixed-price gas swap settlements are based on the NYMEX price for the last day of a respective contract month. Swaps typically provide for monthly payments by us if prices rise above the swap price or monthly payments to us if prices fall below the swap price. Collar contracts typically require payments by us if the NYMEX average closing price is above the ceiling price or payments to us if the NYMEX average closing price is below the floor price. Our fixed-price swap contracts are with The Toronto-Dominion Bank, Barclays Bank PLC, The Bank of Nova Scotia, Bank of America and Natixis. Our oil collar contract is with The Bank of Nova Scotia.
 
The following tables illustrate our derivative positions for calendar years 2015 and 2016 as of November 3, 2015:
 
Fixed-Price Swaps (NYMEX)
 
Natural Gas
 
Oil
 
Daily Volume
(MMBtus/d)
 
Swap Price
($)
 
Daily Volume
(Bbls/d)
 
Swap Price
($)
2015
10,000

 
4.005

 
1,000

 
89.00

2015
10,000

 
4.120

 
1,000

 
90.00

2015
10,000

 
4.150

 
1,000

 
90.25

2015
10,000

 
4.165

 
1,000

 
90.40

2015
10,000

 
4.220

 
1,000

 
91.05

2015
10,000

 
4.255

 
1,000

 
93.28

2015
 
 
 
 
1,000

 
93.37

2015
 
 
 
 
1,000

 
94.85

2015
 
 
 
 
1,000

 
95.00

2016
10,000

 
4.110

 
1,000

 
49.75

2016
10,000

 
4.120

 
1,000

 
52.78

2016


 


 
1,000

 
90.00

 

6



 
Costless Collar (NYMEX)
 
Oil
 
Daily Volume
(Bbls/d)
 
Floor Price ($)
 
Ceiling Price ($)
2016
1,000

 
45.00

 
54.75

 
 
 
 
 
 

During 2014, certain of our natural gas derivative instruments no longer qualified as cash flow hedges, as it was no longer probable, subsequent to the sale of our non-core Gulf of Mexico (“GOM”) conventional shelf properties (see Note 7 – Divestitures), that GOM natural gas production would be sufficient to cover the GOM volumes hedged. Accordingly, we discontinued hedge accounting for three natural gas contracts for the months of January through December 2015. Additionally, a small portion of our cash flow hedges are typically determined to be ineffective because oil and natural gas price changes in the markets in which we sell our products are not 100% correlative to changes in the underlying price basis indicative in the derivative contract. At September 30, 2015, we had accumulated other comprehensive income of $41.1 million, net of tax, related to the fair value of our effective cash flow hedges that were outstanding as of September 30, 2015. We believe that approximately $37.7 million, net of tax, of accumulated other comprehensive income will be reclassified into earnings in the next 12 months.
 
Derivatives qualifying as hedging instruments:
 
The following tables disclose the location and fair value amounts of derivatives qualifying as hedging instruments, as reported in our balance sheet, at September 30, 2015 and December 31, 2014:
Fair Value of Derivatives Qualifying as Hedging Instruments at
September 30, 2015
(In millions)
 
Asset Derivatives
 
Liability Derivatives
Description
Balance Sheet Location
 
Fair
Value
 
Balance Sheet Location
 
Fair
Value
Commodity contracts
Current assets: Fair value of
derivative contracts
 
$
61.4

 
Current liabilities: Fair value
of derivative contracts
 
$

 
Long-term assets: Fair value
of derivative contracts
 
5.7

 
Long-term liabilities: Fair
value of derivative contracts
 
0.2

 
 
 
$
67.1

 
 
 
$
0.2

 
 
 
 
 
 
 
 
Fair Value of Derivatives Qualifying as Hedging Instruments at
December 31, 2014
(In millions)
 
Asset Derivatives
 
Liability Derivatives
Description
Balance Sheet Location
 
Fair
Value
 
Balance Sheet Location
 
Fair
Value
Commodity contracts
Current assets: Fair value of
derivative contracts
 
$
127.0

 
Current liabilities: Fair value
of derivative contracts
 
$

 
Long-term assets: Fair value
of derivative contracts
 
14.3

 
Long-term liabilities: Fair
value of derivative contracts
 

 
 
 
$
141.3

 
 
 
$

 
The following tables disclose the before tax effect of derivatives qualifying as hedging instruments, as reported in the statement of operations, for the three and nine months ended September 30, 2015 and 2014:

7



Effect of Derivatives Qualifying as Hedging Instruments on the Statement of Operations
for the Three Months Ended September 30, 2015 and 2014
(In millions)
Derivatives in
Cash Flow Hedging
Relationships
 
Amount of Gain
(Loss) Recognized
in Other
Comprehensive
Income on
Derivatives
 
Gain (Loss) Reclassified from
Accumulated Other Comprehensive
Income into Income
(Effective Portion) (a)
 
Gain (Loss) Recognized in Income
on Derivatives
(Ineffective Portion)
 
 
2015
 
2014
 
Location
 
2015
 
2014
 
Location
 
2015
 
2014
Commodity contracts
 
$
31.6

 
$
47.1

 
Operating revenue -
oil/natural gas production
 
$
39.9

 
$
(1.3
)
 
Derivative income
(expense), net
 
$
1.2

 
$
2.1

Total
 
$
31.6

 
$
47.1

 
 
 
$
39.9

 
$
(1.3
)
 
 
 
$
1.2

 
$
2.1


(a)
For the three months ended September 30, 2015, effective hedging contracts increased oil revenue by $36.3 million and increased natural gas revenue by $3.6 million. For the three months ended September 30, 2014, effective hedging contracts (decreased) oil revenue by $1.3 million and had a minimal effect on natural gas revenue.
 
Effect of Derivatives Qualifying as Hedging Instruments on the Statement of Operations
for the Nine Months Ended September 30, 2015 and 2014
(In millions)
Derivatives in
Cash Flow Hedging
Relationships
 
Amount of Gain
(Loss) Recognized
in Other
Comprehensive
Income on
Derivatives
 
Gain (Loss) Reclassified from
Accumulated Other Comprehensive
Income into Income
(Effective Portion) (a)
 
Gain (Loss) Recognized in Income
on Derivatives
(Ineffective Portion)
 
 
2015
 
2014
 
Location
 
2015
 
2014
 
Location
 
2015
 
2014
Commodity contracts
 
$
35.7

 
$
3.7

 
Operating revenue -
oil/natural gas production
 
$
107.1

 
$
(17.6
)
 
Derivative income
(expense), net
 
$
1.7

 
$
0.5

Total
 
$
35.7

 
$
3.7

 
 
 
$
107.1

 
$
(17.6
)
 
 
 
$
1.7

 
$
0.5


(a)
For the nine months ended September 30, 2015, effective hedging contracts increased oil revenue by $96.8 million and increased natural gas revenue by $10.3 million. For the nine months ended September 30, 2014, effective hedging contracts (decreased) oil revenue by $10.0 million and (decreased) natural gas revenue by $7.6 million.
 
Derivatives not qualifying as hedging instruments:
 
The following table discloses the location and fair value amounts of our derivatives not qualifying as hedging instruments, as reported in our balance sheet, at September 30, 2015 and December 31, 2014:
Fair Value of Derivatives Not Qualifying as Hedging Instruments
(In millions)
Description
Balance Sheet Location
 
September 30,
2015
 
December 31,
2014
Commodity contracts
Current assets: Fair value of derivative contracts
 
$
4.3

 
$
12.1

 
Gains or losses related to changes in fair value and cash settlements for derivatives not qualifying as hedging instruments are recorded as derivative income (expense) in the statement of operations. The following table discloses the before tax effect of our derivatives not qualifying as hedging instruments on the statement of operations, for the three and nine months ended September 30, 2015 and 2014.

8



Amount of Gain (Loss) Recognized in Derivative Income (Expense)
(In millions)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Description
2015
 
2014
 
2015
 
2014
Commodity contracts:
 
 
 
 
 
 
 
Cash settlements
$
3.8

 
$
0.7

 
$
11.0

 
$
0.7

Change in fair value
(2.6
)
 
3.0

 
(7.9
)
 
1.5

Total gains (losses) on non-qualifying hedges
$
1.2

 
$
3.7

 
$
3.1

 
$
2.2

 
Offsetting of derivative assets and liabilities:
 
Our derivative contracts are subject to netting arrangements. It is our policy to not offset our derivative contracts in presenting the fair value of these contracts as assets and liabilities in our balance sheet. The following table presents the potential impact of the offset rights associated with our recognized assets and liabilities at September 30, 2015 (in millions):
 
 
As Presented Without Netting
 
Effects of Netting
 
With Effects of Netting
 
 
 
 
 
 
 
Current assets: Fair value of derivative contracts
 
$
65.7

 
$

 
$
65.7

Long-term assets: Fair value of derivative contracts
 
5.7

 
(0.2
)
 
5.5

Current liabilities: Fair value of derivative contracts
 

 

 

Long-term liabilities: Fair value of derivative contracts
 
(0.2
)
 
0.2

 

 
As of December 31, 2014, all of our derivative contracts were in an asset position and therefore, there was no potential impact of the rights of offset.

Note 4 – Long-Term Debt
 
Long-term debt consisted of the following at:
 
September 30,
2015
 
December 31,
2014
 
(In millions)
1 34% Senior Convertible Notes due 2017
$
277.2

 
$
266.0

7 12% Senior Notes due 2022
775.0

 
775.0

Bank debt

 

Total long-term debt
$
1,052.2

 
$
1,041.0

 
Bank Debt. On June 24, 2014, we entered into an amended and restated revolving credit facility with commitments totaling $900 million (subject to borrowing base limitations) through a syndicated bank group, replacing our previous facility. The bank credit facility matures on July 1, 2019. On September 30, 2015, our borrowing base under the bank credit facility was $500 million, we had no outstanding borrowings and $19.2 million of letters of credit had been issued pursuant to the bank credit facility, leaving $480.8 million of availability under the bank credit facility. On October 13, 2015, our borrowing base under the bank credit facility was reaffirmed at $500 million. As of November 3, 2015, we had no outstanding borrowings under the bank credit facility and $19.2 million of letters of credit had been issued pursuant to the bank credit facility, leaving $480.8 million of availability under the bank credit facility. Subject to certain exceptions, the bank credit facility is required to be guaranteed by all of our material domestic direct and indirect subsidiaries. As of September 30, 2015, the bank credit facility was guaranteed by Stone Energy Offshore, L.L.C. (“Stone Offshore”), SEO A LLC and SEO B LLC (collectively, the “Guarantor Subsidiaries”).
 
The borrowing base under the bank credit facility is redetermined semi-annually, typically in May and November, by the lenders, taking into consideration the estimated loan value of our oil and gas properties and those of our subsidiaries that guarantee the bank credit facility in accordance with the lenders’ customary practices for oil and gas loans. In addition, we and the lenders each have discretion at any time, but not more than two additional times in any calendar year, to have the borrowing base redetermined. If a reduction in our borrowing base were to fall below any outstanding balances under the bank credit facility plus any outstanding letters of credit, our agreement with the banks allows us one or more of three options to cure the borrowing base deficiency. We may (1) repay amounts outstanding sufficient to cure the deficiency within 10 days after our written election to do so; (2) add additional oil

9



and gas properties acceptable to the banks to the borrowing base and take such actions necessary to grant the banks a mortgage in the properties within 30 days after our written election to do so; and/or (3) arrange to pay the deficiency in six equal monthly installments.
 
The bank credit facility is collateralized by substantially all of the assets of Stone and its material subsidiaries. They are required to mortgage, and grant a security interest in, their oil and natural gas reserves representing at least 80% of the discounted present value of the future net cash flows from their proved oil and natural gas reserves reviewed in determining the borrowing base. Interest on loans under the bank credit facility is calculated using the London Interbank Offering (“LIBOR”) rate or the base rate, at the election of Stone. The margin for loans at the LIBOR rate is determined based on borrowing base utilization and ranges from 1.500% to 2.500%. The bank credit facility provides for optional and mandatory prepayments and affirmative and negative covenants, including interest coverage ratio and leverage ratio maintenance covenants. We were in compliance with all covenants as of September 30, 2015.
 
2017 Convertible Notes. On March 6, 2012, we issued in a private offering $300 million in aggregate principal amount of the 2017 Convertible Notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2017 Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, based on an initial conversion rate of 23.4449 shares of our common stock per $1,000 principal amount of 2017 Convertible Notes, which corresponds to an initial conversion price of approximately $42.65 per share of our common stock. On September 30, 2015, our closing share price was $4.96 per share. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the indenture related to the 2017 Convertible Notes. Upon conversion, we will be obligated to pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock. Prior to December 1, 2016, the 2017 Convertible Notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the second scheduled trading day immediately preceding the maturity date.

The 2017 Convertible Notes will be due on March 1, 2017, unless earlier converted or repurchased by us at the option of the holder(s). On the maturity date, each holder will be entitled to receive $1,000 in cash for each $1,000 in principal amount of 2017 Convertible Notes, together with any accrued and unpaid interest to, but excluding, the maturity date.
 
In connection with the offering, we entered into convertible note hedge transactions with respect to our common stock (the “Purchased Call Options”) with Barclays Capital Inc., acting as agent for Barclays Bank PLC and Bank of America, N.A. (the “Dealers”). We paid an aggregate amount of approximately $70.8 million to the Dealers for the Purchased Call Options. The Purchased Call Options cover, subject to customary antidilution adjustments, approximately 7,033,470 shares of our common stock at a strike price that corresponds to the initial conversion price of the 2017 Convertible Notes, also subject to adjustment, and are exercisable upon conversion of the 2017 Convertible Notes.
 
We also entered into separate warrant transactions whereby, in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act, we sold to the Dealers warrants to acquire, subject to customary antidilution adjustments, approximately 7,033,470 shares of our common stock (the “Sold Warrants”) at a strike price of $55.91 per share of our common stock. We received aggregate proceeds of approximately $40.1 million from the sale of the Sold Warrants to the Dealers. If, upon expiration of the Sold Warrants, the price per share of our common stock, as measured under the Sold Warrants, is greater than the strike price of the Sold Warrants, we will be required to issue, without further consideration, under each Sold Warrant a number of shares of our common stock with a value equal to the amount of such difference.
 
As of September 30, 2015, the carrying amount of the liability component of the 2017 Convertible Notes was $277.2 million. During the three and nine months ended September 30, 2015, we recognized $3.8 million and $11.1 million, respectively, of interest expense for the amortization of the discount and $0.4 million and $1.1 million, respectively, of interest expense for the amortization of deferred financing costs related to the 2017 Convertible Notes. During the three and nine months ended September 30, 2014, we recognized $3.5 million and $10.4 million, respectively, of interest expense for the amortization of the discount and $0.3 million and $1.0 million, respectively, of interest expense for the amortization of deferred financing costs related to the 2017 Convertible Notes. During the three and nine months ended September 30, 2015, we recognized $1.3 million and $3.9 million, respectively, of interest expense related to the contractual interest coupon on the 2017 Convertible Notes. During the three and nine months ended September 30, 2014, we recognized $1.3 million and $3.9 million, respectively, of interest expense related to the contractual interest coupon on the 2017 Convertible Notes.
 

10



Note 5 – Asset Retirement Obligations
 
The change in our asset retirement obligations during the nine months ended September 30, 2015 is set forth below:
 
Nine Months Ended
September 30, 2015
 
(In millions)
Asset retirement obligations as of the beginning of the period, including current portion
$
316.4

Liabilities incurred
10.3

Liabilities settled
(59.8
)
Accretion expense
19.3

Asset retirement obligations as of the end of the period, including current portion
$
286.2

 
Note 6 – Income Taxes
 
For the three and nine months ended September 30, 2015, we recorded income tax benefits of $15.8 million and $280.8 million, respectively. The income tax benefits were a result of our losses before income taxes attributable primarily to ceiling test write-downs of our oil and gas properties (see Note 10 - Investment in Oil and Gas Properties). Our effective tax rate for the three and nine months ended September 30, 2015 was 5.1% and 26.7%, respectively. These percentages differed from the federal statutory rate of 35.0% primarily due to the establishment of a valuation allowance against deferred tax assets, state income taxes and other permanent differences.

As a result of the significant declines in commodity prices and the resulting ceiling test write-downs and net losses incurred over the past four quarters, we determined that it was more likely than not that a portion of our deferred tax assets will not be realized in the future. Accordingly, we established a $96.5 million valuation allowance against a portion of our deferred tax assets in the third quarter of 2015. Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities.

Note 7 – Divestitures
 
On July 31, 2014, we completed the sale of certain of our non-core properties in the GOM conventional shelf for cash consideration of approximately $177.6 million, after giving effect to preliminary purchase price adjustments. All of the proceeds from this sale were deposited with a Qualified Intermediary (under the terms of a Qualified Trust Agreement and Exchange Agreement) for potential reinvestment in like-kind replacement property as defined under Section 1031 of the Internal Revenue Code and were included in our balance sheet as restricted cash at December 31, 2014. Compliance with provisions under the Qualified Trust Agreement and Exchange Agreement provided for deferral of taxable gain on these sales proceeds. We identified qualified replacement properties and had until January 27, 2015 to close on an acquisition of such properties in order to achieve deferral of our taxable gain. We did not close on such a transaction by January 27, 2015, and the funds were released from restrictions and reclassified to cash and cash equivalents at such date.
 
Note 8 – Fair Value Measurements
 
U.S. Generally Accepted Accounting Principles establish a fair value hierarchy that has three levels based on the reliability of the inputs used to determine the fair value. These levels include: Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.
 
As of September 30, 2015 and December 31, 2014, we held certain financial assets and liabilities that are required to be measured at fair value on a recurring basis, including our commodity derivative instruments and our investments in marketable securities. We utilize the services of an independent third party to assist us in valuing our derivative instruments. We used the income approach in determining the fair value of our derivative instruments utilizing a proprietary pricing model. The model accounts for our credit risk and the credit risk of our counterparties in the discount rate applied to estimated future cash inflows and outflows. Our swap and collar contracts are included within the Level 2 fair value hierarchy. For a more detailed description of our derivative instruments, see Note 3 – Derivative Instruments and Hedging Activities. We used the market approach in determining the fair value of our investments in marketable securities, which are included within the Level 1 fair value hierarchy.
 

11



The following tables present our assets and liabilities that are measured at fair value on a recurring basis at September 30, 2015:
 
Fair Value Measurements at
 
September 30, 2015
Assets
Total
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(In millions)
Marketable securities (Other assets)
$
8.3

 
$
8.3

 
$

 
$

Derivative contracts
71.4

 

 
71.4

 

Total
$
79.7

 
$
8.3

 
$
71.4

 
$

 
 
Fair Value Measurements at
 
September 30, 2015
Liabilities
Total
 
Quoted Prices
in Active
Markets for
Identical
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(In millions)
Derivative contracts
$
0.2

 
$

 
$
0.2

 
$

Total
$
0.2

 
$

 
$
0.2

 
$

 
The following tables present our assets and liabilities that are measured at fair value on a recurring basis at December 31, 2014:
 
Fair Value Measurements at
 
December 31, 2014
Assets
Total
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(In millions)
Marketable securities (Other assets)
$
8.4

 
$
8.4

 
$

 
$

Derivative contracts
153.5

 

 
153.5

 

Total
$
161.9

 
$
8.4

 
$
153.5

 
$

 
 
Fair Value Measurements at
 
December 31, 2014
Liabilities
Total
 
Quoted Prices
in Active
Markets for
Identical
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(In millions)
Derivative contracts
$

 
$

 
$

 
$

Total
$

 
$

 
$

 
$

 
The fair value of cash and cash equivalents approximated book value at September 30, 2015 and December 31, 2014. As of September 30, 2015 and December 31, 2014, the fair value of the liability component of the 2017 Convertible Notes was approximately $244.0 million and $252.6 million, respectively. As of September 30, 2015 and December 31, 2014, the fair value of the 7 12% Senior Notes due 2022 (the “2022 Notes”) was approximately $484.4 million and $664.6 million, respectively.
 
The fair value of the 2022 Notes was determined based on quotes obtained from brokers, which represent Level 1 inputs. We applied fair value concepts in determining the liability component of the 2017 Convertible Notes (see Note 4 – Long-Term Debt) at inception, September 30, 2015 and December 31, 2014. The fair value of the liability was estimated using an income approach. The

12



significant inputs in these determinations were market interest rates based on quotes obtained from brokers and represent Level 2 inputs.
 
Note 9 – Accumulated Other Comprehensive Income (Loss)
 
Changes in accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2015 were as follows (in millions):
 
Cash Flow
Hedges
 
Foreign
Currency
Items
 
Total
Three Months Ended September 30, 2015
 
 
 
 
 
Beginning balance, net of tax
$
46.5

 
$
(5.8
)
 
$
40.7

Other comprehensive income (loss) before reclassifications:
 
 
 
 
 
Change in fair value of derivatives
31.6

 

 
31.6

Foreign currency translations

 
(0.2
)
 
(0.2
)
Income tax effect
(11.5
)
 

 
(11.5
)
Net of tax
20.1

 
(0.2
)
 
19.9

Amounts reclassified from accumulated other comprehensive income:
 
 
 
 
 
Operating revenue: oil/natural gas production
39.9

 

 
39.9

Income tax effect
(14.4
)
 

 
(14.4
)
Net of tax
25.5

 

 
25.5

Other comprehensive income (loss), net of tax
(5.4
)
 
(0.2
)
 
(5.6
)
Ending balance, net of tax
$
41.1

 
$
(6.0
)
 
$
35.1

 
 
Cash Flow
Hedges
 
Foreign
Currency
Items
 
Total
Nine Months Ended September 30, 2015
 
 
 
 
 
Beginning balance, net of tax
$
86.8

 
$
(3.5
)
 
$
83.3

Other comprehensive income (loss) before reclassifications:
 
 
 
 
 
Change in fair value of derivatives
35.7

 

 
35.7

Foreign currency translations

 
(2.5
)
 
(2.5
)
Income tax effect
(12.8
)
 

 
(12.8
)
Net of tax
22.9

 
(2.5
)
 
20.4

Amounts reclassified from accumulated other comprehensive income:
 
 
 
 
 
Operating revenue: oil/natural gas production
107.1

 

 
107.1

Income tax effect
(38.5
)
 

 
(38.5
)
Net of tax
68.6

 

 
68.6

Other comprehensive income (loss), net of tax
(45.7
)
 
(2.5
)
 
(48.2
)
Ending balance, net of tax
$
41.1

 
$
(6.0
)
 
$
35.1

 

13



Changes in accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2014, were as follows (in millions):
 
Cash Flow
Hedges
 
Foreign
Currency
Items
 
Total
Three Months Ended September 30, 2014
 
 
 
 
 
Beginning balance, net of tax
$
(17.8
)
 
$
(0.4
)
 
$
(18.2
)
Other comprehensive income (loss) before reclassifications:
 
 
 
 
 
Change in fair value of derivatives
47.1

 

 
47.1

Foreign currency translations

 
(1.6
)
 
(1.6
)
Income tax effect
(16.9
)
 

 
(16.9
)
Net of tax
30.2

 
(1.6
)
 
28.6

Amounts reclassified from accumulated other comprehensive income:
 
 
 
 
 
Operating revenue: oil/natural gas production
(1.3
)
 

 
(1.3
)
Income tax effect
0.5

 

 
0.5

Net of tax
(0.8
)
 

 
(0.8
)
Other comprehensive income (loss), net of tax
31.0

 
(1.6
)
 
29.4

Ending balance, net of tax
$
13.2

 
$
(2.0
)
 
$
11.2

 
 
Cash Flow
Hedges
 
Foreign
Currency
Items
 
Total
Nine Months Ended September 30, 2014
 
 
 
 
 
Beginning balance, net of tax
$
(1.4
)
 
$
(0.7
)
 
$
(2.1
)
Other comprehensive income (loss) before reclassifications:
 
 
 
 
 
Change in fair value of derivatives
3.7

 

 
3.7

Foreign currency translations

 
(1.3
)
 
(1.3
)
Income tax effect
(1.2
)
 

 
(1.2
)
Net of tax
2.5

 
(1.3
)
 
1.2

Amounts reclassified from accumulated other comprehensive income:
 
 
 
 
 
Operating revenue: oil/natural gas production
(17.6
)
 

 
(17.6
)
Derivative expense, net
(1.5
)
 

 
(1.5
)
Income tax effect
7.0

 

 
7.0

Net of tax
(12.1
)
 

 
(12.1
)
Other comprehensive income (loss), net of tax
14.6

 
(1.3
)
 
13.3

Ending balance, net of tax
$
13.2

 
$
(2.0
)
 
$
11.2

 
Note 10 – Investment in Oil and Gas Properties
 
Under the full cost method of accounting, we compare, at the end of each financial reporting period, the present value of estimated future net cash flows from proved reserves (adjusted for hedges and excluding cash flows related to estimated abandonment costs) to the net capitalized costs of proved oil and gas properties, net of related deferred taxes. We refer to this comparison as a ceiling test. If the net capitalized costs of proved oil and gas properties exceed the estimated discounted future net cash flows from proved reserves, we are required to write down the value of our oil and gas properties to the value of the discounted cash flows. At September 30, 2015, our ceiling test computation resulted in a write-down of our U.S. oil and gas properties of $295.7 million based on twelve-month average prices, net of applicable differentials, of $57.76 per barrel of oil, $2.44 per Mcf of natural gas and $23.04 per barrel of natural gas liquids ("NGLs"). The write-down at September 30, 2015 was decreased by $42.7 million as a result of hedges. At June 30, 2015, our ceiling test computation resulted in a write-down of our U.S. oil and gas properties of $179.1 million based on twelve-month average prices, net of applicable differentials, of $68.68 per barrel of oil, $2.47 per Mcf of natural gas and $29.13 per barrel of NGLs. The write-down at June 30, 2015 was decreased by $47.8 million as a result of hedges. At March 31, 2015, our ceiling test computation resulted in a write-down of our U.S. oil and gas properties of $491.4 million based on twelve-month average prices, net of applicable differentials, of $78.99 per barrel of oil, $2.96 per Mcf of natural gas and $28.82 per barrel of NGLs. The write-down at March 31, 2015 was decreased by $28.7 million as a result of hedges.
 

14



In April 2013, we entered into an agreement to participate in the drilling of exploratory wells in Canada. Upon a more complete evaluation of this project and in response to the significant decline in commodity prices over the last several months, we have suspended our business development effort in Canada. Accordingly, at June 30, 2015, we recognized a write-down of our Canadian oil and gas properties of $45.2 million.
 
Note 11 – Commitments and Contingencies
 
We are named as a party in certain lawsuits and regulatory proceedings arising in the ordinary course of business. We do not expect that these matters, individually or in the aggregate, will have a material adverse effect on our financial condition.
 
On August 2, 2013, Kimmeridge Energy Exploration Fund, L.P. (“Kimmeridge”) filed a lawsuit against Stone in the 15th Judicial District Court in Lafayette Parish, Louisiana seeking damages in the amount of $18,372,819 plus interest, costs and attorney fees. Kimmeridge alleged that Stone was obligated to pay Kimmeridge (1) $1,118,878 for brokerage costs incurred pursuant to a letter of understanding and (2) $17,253,941 pursuant to a letter of intent which, according to Kimmeridge’s pleadings, required Stone to negotiate in good faith and close an acquisition of mineral interests in the Illinois basin. The court granted summary judgment in favor of Stone, limiting damages on Kimmeridge’s $17,253,941 claim to $1,000,000 and reducing Stone’s exposure at trial for both claims to $2,118,878. During the three months ended June 30, 2015, Stone and Kimmeridge settled both claims for an amount within the previously disclosed range of loss (between $0 and $2,118,878).
 
Note 12 – Guarantor Financial Statements
 
Our Guarantor Subsidiaries, including Stone Offshore, SEO A LLC and SEO B LLC, are unconditional guarantors of the 2017 Convertible Notes and the 2022 Notes. Our other subsidiaries (the “Non-Guarantor Subsidiaries”) have not provided guarantees. The following presents unaudited condensed consolidating financial information as of September 30, 2015 and December 31, 2014 and for the three and nine month periods ended September 30, 2015 and 2014 on an issuer (parent company), Guarantor Subsidiaries, Non-Guarantor Subsidiaries and consolidated basis. Elimination entries presented are necessary to combine the entities.
 

15



CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2015
(In thousands)
 
Parent
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
63,322

 
$
10,042

 
$
1,110

 
$

 
$
74,474

Accounts receivable
25,445

 
88,193

 
13

 
(55,792
)
 
57,859

Fair value of derivative contracts

 
65,700

 

 

 
65,700

Inventory
3,426

 
283

 

 

 
3,709

Other current assets
9,162

 

 
41

 

 
9,203

Total current assets
101,355

 
164,218

 
1,164

 
(55,792
)
 
210,945

Oil and gas properties, full cost method:
 
 
 
 
 
 
 
 
 
Proved
1,821,870

 
7,341,224

 
41,599

 

 
9,204,693

Less: accumulated DD&A
(2,046,465
)
 
(6,111,909
)
 
(41,599
)
 

 
(8,199,973
)
Net proved oil and gas properties
(224,595
)
 
1,229,315

 

 

 
1,004,720

Unevaluated
301,501

 
215,085

 
2,377

 

 
518,963

Other property and equipment, net
30,327

 

 

 

 
30,327

Fair value of derivative contracts

 
5,734

 

 

 
5,734

Other assets, net
24,217

 
1,191

 
215

 

 
25,623

Investment in subsidiary
1,280,184

 

 
3,590

 
(1,283,774
)
 

Total assets
$
1,512,989

 
$
1,615,543

 
$
7,346

 
$
(1,339,566
)

$
1,796,312

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable to vendors
$
66,623

 
$
45,487

 
$
9,736

 
$
(55,792
)
 
$
66,054

Undistributed oil and gas proceeds
9,644

 
817

 

 

 
10,461

Accrued interest
22,241

 

 

 

 
22,241

Asset retirement obligations

 
42,624

 

 

 
42,624

Other current liabilities
41,575

 
559

 

 

 
42,134

Total current liabilities
140,083

 
89,487

 
9,736

 
(55,792
)
 
183,514

Long-term debt
1,052,183

 

 

 

 
1,052,183

Asset retirement obligations
3,847

 
239,720

 

 

 
243,567

Fair value of derivative contracts

 
172

 

 

 
172

Other long-term liabilities
25,347

 

 

 

 
25,347

Total liabilities
1,221,460

 
329,379

 
9,736

 
(55,792
)
 
1,504,783

Commitments and contingencies

 

 

 

 

Stockholders’ equity:
 
 
 
 
 
 
 
 
 
Common stock
553

 

 

 

 
553

Treasury stock
(860
)
 

 

 

 
(860
)
Additional paid-in capital
1,643,746

 
1,367,434

 
100,047

 
(1,467,481
)
 
1,643,746

Accumulated deficit
(1,386,967
)
 
(122,362
)
 
(90,368
)
 
212,730

 
(1,386,967
)
Accumulated other comprehensive income (loss)
35,057

 
41,092

 
(12,069
)
 
(29,023
)
 
35,057

Total stockholders’ equity
291,529

 
1,286,164

 
(2,390
)
 
(1,283,774
)
 
291,529

Total liabilities and stockholders’ equity
$
1,512,989

 
$
1,615,543

 
$
7,346

 
$
(1,339,566
)
 
$
1,796,312





16



CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2014
(In thousands)
 
Parent
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
72,886

 
$
1,450

 
$
152

 
$

 
$
74,488

Restricted cash
177,647

 

 

 

 
177,647

Accounts receivable
73,711

 
46,615

 
33

 

 
120,359

Fair value of derivative contracts

 
139,179

 

 

 
139,179

Current income tax receivable
7,212

 

 

 

 
7,212

Deferred taxes *
4,095

 

 

 
(4,095
)
 

Inventory
1,011

 
2,698

 

 

 
3,709

Other current assets
8,112

 

 
6

 

 
8,118

Total current assets
344,674

 
189,942

 
191

 
(4,095
)
 
530,712

Oil and gas properties, full cost method:
 
 
 
 
 
 
 
 
 
Proved
1,689,802

 
7,127,466

 

 

 
8,817,268

Less: accumulated DD&A
(970,387
)
 
(6,000,244
)
 

 

 
(6,970,631
)
Net proved oil and gas properties
719,415

 
1,127,222

 

 

 
1,846,637

Unevaluated
289,556

 
241,230

 
36,579

 

 
567,365

Other property and equipment, net
32,340

 

 

 

 
32,340

Fair value of derivative contracts

 
14,333

 

 

 
14,333

Other assets, net
20,857

 
1,360

 
5,007

 

 
27,224

Investment in subsidiary
1,050,546

 

 
41,638

 
(1,092,184
)
 

Total assets
$
2,457,388

 
$
1,574,087

 
$
83,415

 
$
(1,096,279
)
 
$
3,018,611

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable to vendors
$
74,756

 
$
57,873

 
$

 
$

 
$
132,629

Undistributed oil and gas proceeds
22,158

 
1,074

 

 

 
23,232

Accrued interest
9,022

 

 

 

 
9,022

Deferred taxes *

 
24,214

 

 
(4,095
)
 
20,119

Asset retirement obligations

 
69,400

 

 

 
69,400

Other current liabilities
49,306

 
199

 

 

 
49,505

Total current liabilities
155,242

 
152,760

 

 
(4,095
)
 
303,907

Long-term debt
1,041,035

 

 

 

 
1,041,035

Deferred taxes *
117,206

 
169,137

 

 

 
286,343

Asset retirement obligations
3,588

 
243,421

 

 

 
247,009

Other long-term liabilities
38,714

 

 

 

 
38,714

Total liabilities
1,355,785

 
565,318

 

 
(4,095
)
 
1,917,008

Commitments and contingencies

 

 

 

 

Stockholders’ equity:
 
 
 
 
 
 
 
 
 
Common stock
549

 

 

 

 
549

Treasury stock
(860
)
 

 

 

 
(860
)
Additional paid-in capital
1,633,307

 
1,362,684

 
90,339

 
(1,453,023
)
 
1,633,307

Accumulated earnings (deficit)
(614,708
)
 
(440,699
)
 
12

 
440,687

 
(614,708
)
Accumulated other comprehensive income (loss)
83,315