Stone Energy Corp. said Friday it had completed the sale of substantially all of its Rocky Mountain properties to Newfield Exploration Co. in two separate transactions worth $577.9 million (see NGI, May 21). Stone plans to keep a 35% proportional working stake in several undeveloped plays that are located on about 60,000 acres.

At the end of 2006, the estimated proved reserves associated with sale totaled 182.4 Bcfe, and in the first quarter, production from the properties averaged 40 MMcfe/d. The divested properties include Stone’s interests in the Pinedale Anticline, the Jonah field, the Williston Basin, the Scott field and several smaller producing areas. The sale also included about 550,000 acres net of undeveloped acreage.

Stone intends to use the proceeds from the sale to materially reduce debt, as well as provide financial flexibility to evaluate various investment opportunities. After fees and taxes, Stone expects the net cash proceeds to be in the $525-535 million range. Stone said it expects to fully pay down its outstanding bank borrowings of $109 million and to redeem its $225 million senior floating rate notes. The Lafayette-LA-based independent’s remaining debt would be its $200 million 8.25% subordinated notes due in 2011 and its $200 million 6.75% subordinated notes due in 2014.

Stone’s production guidance for the second quarter was previously disclosed at 220-240 MMcfe/d, including volumes from the Rockies properties. In the third quarter, Stone expects net daily production, excluding the Rockies, to average 180-210 MMcfe/d, depending upon hurricane, maintenance and repair downtime. Despite the divestiture, Stone still expects its full-year 2007 average daily production to be 210-230 MMcfe/d, excluding the Rockies assets in the second half of the year.

“This improvement in expected production guidance is attributable to success in the Gulf of Mexico drilling program, increased workover activity, and increased production efficiency,” Stone stated.

Stone also Friday announced the appointment of Richard L. Smith as vice president, Exploration and Business Development. Smith will join Stone in late July after his departure from Dominion Exploration and Production (E&P) Inc., where he was the general manager of deepwater Gulf of Mexico exploration. Dominion is selling its E&P assets. Smith also has worked for Exxon Corp. and the former Texaco USA.

Stone CEO David Welch said Smith’s “track record of deepwater discoveries and broad experience in many North American and international basins will significantly boost the company’s capability for future value creation.”

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