Stone Energy slashes capex as loss deepens

American oil and gas corporation Stone Energy reduced its capex guidance for 2016 as the loss widened in the second quarter. 

In early 2016, Stone’s 2016 capital expenditure budget was authorized at $200 million, excluding rig subsidies or rig stacking expenses that were projected to be approximately $40 million to $50 million.

The budget was primarily focused on the Pompano platform rig development program and the utilization of the Ensco 8503 deepwater rig for a development well and one or two exploration wells.

However, to further reduce capital expenditures for 2016, Stone said it elected to temporarily stack the Pompano platform drilling rig in place.

The company said it expects to resume drilling operations in early 2017. In addition, Stone recently reached an agreement with Ensco to terminate the Ensco 8503 deepwater rig contract for total consideration of $20 million and payment of a $5 million deposit to be used against future drilling activities initiated before March 31, 2017, subject to extension in certain circumstances.

This updated rig schedule and other cost reduction efforts have decreased Stone’s projected annual capital expenditures, which are now expected to approximate $160 million to $170 million for 2016.

In addition, Stone on Tuesday reported a wider second quarter of 2016 net loss of $195.8 million on oil and gas revenue of $89 million, compared to a net loss of $152.9 million, on oil and gas revenue of $149.5 million in the second quarter of 2015.

The adjusted net loss, which excludes impairment charges of $118.6 million, was $41.6 million.

The company’s net daily production during the second quarter of 2016 averaged 29.0 thousand barrels of oil equivalent (MBoe) per day (174 million cubic feet of gas equivalent (MMcfe) per day), compared to net daily production of 48.6 MBoe (291 MMcfe) per day in the second quarter of 2015.

Production guidance for the third quarter of 2016 is estimated at 35 – 37 MBoe per day (210 – 222 MMcfe per day). The company’s updated production guidance for 2016 is 33 – 35 MBoe (198 – 210 MMcfe) per day.

Prices realized during the second quarter of 2016 averaged $46.97 per barrel of oil, compared to average realized prices for the second quarter of 2015 of $72.74 per barrel of oil.

Capital expenditures for the second quarter of 2016 were approximately $32.7 million, which included $6.0 million of plugging and abandonment expenditures, while second quarter 2015 capital expenditures were approximately $91.1 million.

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