Lafayette, LA-based Stone Energy Corp., which announced a merger with Plains Exploration in April, on Friday formally received a $2.2 billion competing purchase offer from New Orleans-based independent producer Energy Partners Ltd (EPL). EPL said its offer, which was first announced in May, represents about a 13% premium to the Plains deal (see Daily GPI, April 25; May 30).

It values Stone’s equity at $1.4 billion and includes $800 million of Stone debt. Under the terms of the deal EPL has offered to acquire all of the outstanding shares of Stone for $51 in cash or stock, subject to a collar and other limitations. The offer expires at 9 pm EDT on June 18. EPL said the financial terms of the offer reflect factors including additional Stone debt related to an acquisition contemplated by Stone in the Gulf of Mexico, as well as the vesting of 361,000 restricted Stone shares that will result from the merger with EPL.

EPL said it expects the transaction to be immediately accretive to EPL’s cash flow per share and to deliver substantial annual cost savings. EPL has received a commitment letter from Bank of America, N.A. and affiliates for the financing of the transaction.

“Given our highly complementary fit, the financial benefits of our offer remain compelling for Stone shareholders,” said EPL CEO Richard A. Bachmann. “We now look forward to the Stone board’s determination that our offer is superior to the existing agreement with Plains Exploration and Production Co.”

Assuming that Stone shareholders receive a combination of half cash and half stock, the current value of the total consideration would be $49.10/share based upon EPL’s closing stock price of $18.69 on June 15, EPL said. This represents a premium of 13% over the current value of the Plains Exploration and Production Co.’s offer for Stone based upon the Plains closing stock price of $34.74 on June 15. EPL’s offer is subject to a determination by Stone’s board that it is a “Target Superior Proposal” compared to the Plains offer, Stone said.

In March, Stone shares hit their lowest point in more than two years after the company completed a restatement of four years of earnings. Last October, Stone revised its oil and natural gas reserves downward by 171 Bcfe, triggering an informal investigation by the Securities and Exchange Commission and a class action lawsuit by shareholders (see Daily GPI, Nov. 10, 2005).

Stone’s proved reserves at the end of 2005 totaled 593 Bcfe (99 million boe) compared to 670 Bcfe in 2004. Its reserves are located primarily in the Gulf Coast and Gulf of Mexico (76%) with the remaining 24% in the Rockies. Stone’s production at the end of last year totaled about 200 MMcfe/d (58% gas) compared to 241 MMcfe/d in 2004. The decrease was attributed primarily to the impact of the hurricanes on Stone’s Gulf of Mexico production.

In comparison, PXP had about 268 Bcf of gas reserves and 356 MMboe of oil reserves (401 MMboe total) at the end of 2005 and 62,900 boe/d of production from onshore and offshore California, West Texas and the Gulf Coast region. EPL is an independent oil and gas exploration and production company with 59.3 MMboe of reserves and operations focused along the U.S. Gulf Coast, both onshore in south Louisiana and offshore in the Gulf of Mexico (87% on the outer continental shelf and 10% in the deepwater).

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