Lehman Brothers analyst Jeffrey W. Robertson is pessimistic about Stone Energy being able to meet its 2003 and 2004 gas production targets and has lowered his share price projections on the company.

Lafayette, LA-based Stone Energy (SGY) said Thursday that its July and August production volumes came in well below expectations, and the company indicated that it will have a difficult time reaching its full-year projections. SGY shares tumbled 6.5% by 2 p.m. to $35.99.

Stone said it will be providing estimated monthly production data following the end of each month during the remainder of 2003. During the months of July and August 2003, the company estimates that net daily production approximated 255 MMcfe, which includes production of 25% from properties operated by others. In order to achieve an annual production rate equal to that in 2002, as indicated in prior guidance, the company will have to average 348 MMcfe of net daily production during the fourth quarter of 2003.

“The company can give no assurance that it will achieve this rate for the remainder of the year,” Stone said in a statement. “The company’s ability to meet this rate is dependent on its current production base and the success of unevaluated wells and operations in its capital program for the remainder of this year.”

Robertson said Stone’s July and August production was 11% below his expectations. He lowered his 2003 and 2004 production estimates for the company by 7% and 8%, respectively and cut his year end stock price target by $3 to $45/share.

“The updated July/August rates indicate that well performance/operations issues that caused second quarter volumes to come in below expectations have continued into the third quarter,” Robertson said in an equity research note.

“Although the company seems to have had some success with its exploration/development program this year which should result in reserve growth, we believe the shares will continue to trade below peer multiples until the success is converted into production and cash flow.”

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