While some producers may be scaling back exploration and acquisition plans in view of current low prices, Stone Energy, which operates in the shallow Gulf of Mexico, is seizing the opportunity to add to its portfolio of prospects.

Stone picked up an assortment of Gulf of Mexico properties last week through asset and stock purchase agreements for up to $300 million. The company said a substantial portion of the offered price is attributable to properties that are subject to elections by third party working interest owners to exercise their preferential rights. Conoco has acknowledged it was the main seller in the deal. The properties fit in with Stone’s strategy to capitalize on shallow prospects and low-cost operations.

And while others have abandoned the shallow Gulf, “we see it as an opportunity,” D. Peter Canty, Stone Energy president, told an investors’ conference earlier this month, sponsored by Connecticut-based John S. Herold. Canty said the fact that fewer companies are operating there makes it easier for Stone. “We like the Gulf because it has existing infrastructure, which reduces the capital requirements and allows for a high rate of return by getting your wells on quickly.” Also on the plus side, Canty said, is the availability of an extensive field history, more predictable cost, and “the political stability that comes from what we believe to be the best lessor in the world.”

Canty said the majors, which usually divest mature properties, haven’t been following that strategy during the recent period of high prices. Rather they have added compression and done some recompletions to push out more production. That, however, is about to change, Canty said. He expects to see some large divestitures in the near future, and Stone “is positioned with dry powder to take advantage of what we anticipate to be a large divestiture.”

He pointed out that restrictions on drilling rights sales that were imposed as part of some very large mergers are about to come off, and about 383 shelf blocks will become available.

Using Stone’s technology “large reserve volumes remain be discovered on these properties,” Canty said. Stone has been successful in finding shallow reserves that other drillers have gone right through on their way to larger discoveries. Stone specializes in “rejuvenation” of shallow water and onshore properties in the Gulf Coast Basin. Some 89% of its reserves and 97% of production are in the basin.

The company capitalizes on new seismic applications, better imagery, and re-running multiple assessments of properties to pick up new areas, not evident on previous data sets. Besides its work on shallow production, Stone also is acquiring some sub-salt properties in the expectation they will be viable with new technologies in the future.

©Copyright 2001 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.