Stone Energy Corp. is cutting its 2016 capital expenditure (capex) budget by more than 50% from 2015 levels, saying its $200 million spending plan for next year would be reviewed and depend upon commodity prices, liquidity and working interest sales, among other things.
The company would continue to narrow its focus on the deepwater Gulf of Mexico (GOM), as it has this year. Last January, the company said it would wrap up its Appalachian drilling program and suspend core operations there (see Shale Daily, Jan. 21). Months later it buckled down, going further and shutting in its largest Appalachian asset, the Mary Field in West Virginia, where it holds 39,200 acres and said it would curtail up to 110 MMcfe/d of Marcellus Shale production indefinitely over low commodity prices and negative differentials (see Shale Daily, Sept. 25).
Next year's projected capex would be far less than what the company spent this year. It said Tuesday that it expects to exit 2015 having spent between $460-470 million. About 80% of next year's budget would be spent in the GOM, with up to 5% going toward the Appalachian Basin to satisfy contractual seismic and leasehold commitments. Another 10% or so would go toward abandonment expenditures.
In the GOM, Stone said it would drill three development wells next year using a platform rig for its Pompano program. It also expects to use the Ensco 8503 deepwater rig to drill and complete its Cardona No. 7 development well in 1Q2016. After that, it hopes to limit its exposure to the contracted Ensco rig by farming it out. If that fails, the rig would be sent to one of two other GOM prospects.
Stone also has a dual-purpose Utica/Marcellus rig on its hands that has been idled until commodity prices and differentials improve in the region. While it offered no 2016 production guidance, the company said shut-ins throughout the Mary Field and unexpected downtime in the GOM related to a third party pipeline cut into projected 4Q2015 guidance. The company now expects to exit the year with production of 39,000 boe/d, which would be at the low-end of its previously announced 39,000-43,000 boe/d guidance. The company produced 42,600 boe/d in 2014.
The Ensco rig completed operations and a well test at the company's Amethyst well in the Mississippi Canyon block 26 this month. That well is expected to come online in 1Q2016 with initial production expected to be up to 60 MMcfe/d. Stone has a 100% working interest in the Amethyst.
The company is also in negotiations with potential partners about reducing its interests in the 100%-owned Lamprey and Derbio prospects. It hopes to reduce those costs before drilling either well. The company is also searching for an experienced operator to farm out its Ensco deepwater rig or potential projects that could utilize it. Stone added that it spent $3 million on a dry hole in the fourth quarter, which it plugged and abandoned at its Vernaccia exploration prospect in Mississippi Canyon block 35. While the company owned a 22% working interest in the well, it only shared a 4% drilling cost on the project.