Stone Energy Corp. expects to receive $113 million from unwinding most of its 2009 natural gas and crude oil hedges, the company said Monday.

A “substantial portion” of the proceeds will be used to build its cash position and reduce its debt, the Lafayette, LA-based producer said. Stone focuses its U.S. production efforts in the Gulf of Mexico; it also has exploration prospects onshore in the Appalachian Basin and Rocky Mountains.

“The unwinding of most of our 2009 hedges provides Stone with additional financial flexibility,” said CEO David Welch. “We are reviewing all of our investment opportunities, including the purchase of Stone common shares and Stone public debt, which we believe are trading at very attractive prices.”

Stone was trading up at around $2.55/share at midday Monday. It has traded as high as $73.96/share in the past year.

“We are certainly aware of the significant decline in our stock and bond prices and do not believe they reflect the true value of Stone or Stone’s current financial and operational position,” said Welch. “We believe Stone has a strong inventory of projects and prospects and are working hard to generate value for our shareholders.”

The cash raised from unwinding most of its 2009 hedge contracts, combined with projected operational 2009 cash flow, still should allow Stone to execute on its $300 million capital program with projected excess cash available for debt reduction or stock repurchase, said CFO Kenneth Beer. Before the hedges were terminated, Stone had $77 million in cash as of March 1, Beer said.

Stone’s bank borrowing redetermination is to be completed in April, and the company’s “overall position has been bolstered by bringing forward the cash value of these hedges,” said Beer.

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