Stone Energy Corp.’s board said Monday that Energy Partners’ (EPL) $1.4 billion cash and stock offer (plus $800 million in assumed debt) is “superior” to the the deal already made with Plains Exploration & Production. As a result, Plains has five days to raise its offer.

If the Plains deal is terminated, Stone must pay Plains a $43.5 million break-up fee, which EPL has agreed to cover.

Under the terms of the EPL offer, each share of Stone stock would be converted into the right to receive $51 in cash or EPL shares. There’s a limit on the total cash at $723 million and a limit on EPL shares of 35 million. Based on the closing price of EPL common stock on June 16 of $18.75/share, the EPL offer would equate to a blended average of $49.17 per share of Stone common stock. On June 16, the Stone’s closing price was $46.75 (see Daily GPI, June 19). According to the Plains offer, Stone stockholders would receive 1.25 shares of PXP common stock, or about $43.88/share as of June 16 closing price, for each share of Stone common stock (see Daily GPI, April 25, May 30).

Stone noted that the proposed EPL merger agreement is, except for the amount offered, “substantially similar to the terms of the Plains merger agreement.”

Plains shares tumbled 4.25% on the news to $33.61 as of 3 p.m. Monday.

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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