Stone Energy Corp., which focuses its operations offshore in the Gulf of Mexico and in the Rocky Mountains, reported a 25% increase in earnings in the second quarter, but its natural gas output was down and oil equivalent barrels were flat compared with a year earlier.

The Lafayette, LA-based producer’s net income was $35.9 million ($1.33/share), compared with $28.6 million ($1.08) in 2Q2003. Revenue reached $142.2 million versus $117.2 million. Cash flow was $108.8 million compared with $88.9 million, and net cash flow totaled $89.1 million versus $103.8 million in 2Q2003. Prices averaged $37.09/bbl of oil and $5.86/Mcf of gas on average daily production volumes of 261 MMcfe, which was flat compared with a year ago. Gas production was down, however, to 159 MMcf/d versus 170 MMcf/d, which Stone partly attributed to non-core divestitures.

Major maintenance expenses totaled $5.8 million in the quarter compared with $2.5 million a year earlier. The maintenance consisted primarily of replacement wells in the Gulf of Mexico on Mississippi Canyon Block 109 and Vermilion Block 131. Stone expects 3Q2004 expenses to increase 75% over 2Q2004 based upon planned operations.

During the quarter, Stone evaluated 16 new wells, 12 of which were productive. And through Aug. 6, Stone has spudded 37 of the 57 wells planned for 2004.

In July, Stone sold its interests in 21 non-core properties located in various regions of the Rocky Mountains for approximately $8 million. The sale, said management, was made to allow an increased focus on higher potential drilling opportunities in the Rockies as it attempts to growth this business. The divested properties comprised 1% of Stone’s total estimated proved reserves at Dec. 31, 2003 and included approximately 28% of Stone’s well count in the Rockies. At the time of the sale, Stone estimated that average net daily production from the 21 properties was less than 2 MMcfe.

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