Stone Energy Corp., Lafayette, La., has set an initial 2016 capital expenditure budget of $200 million, compared with capex of $464.5 million in 2015 and $884 million in 2014.
The budget is allocated 80-85% to the Gulf of Mexico basin, 10-15% to abandonment expenditures, and 3-5% in Appalachia, including minimal activity satisfying regulatory abandonment commitments and contractual seismic and leasehold commitments.
In the gulf, the budget assumes one workover project and two development wells to be drilled using a recently installed platform rig on the Pompano platform (OGJ Online, Nov. 21, 2011). Stone says it may elect to drill up to two additional development wells based on capital availability.
The workover of the A-30 well, which commenced in the first week of January, has been completed and is producing 250 boe/d. Drilling has begun on the Silverthrone development prospect and is expected to come online in late April or May. The well is expected to average gross production of 1,400 boe/d for the remainder of the year once online.
Each additional development well is expected to provide a production increase ranging 1,000-2,000 boe/d/well, and would be brought online over the course of the program. Stone holds 100% working interest in the wells.
Final Cardona well planned
Stone expects to use the Ensco 8503 rig, contracted since last year’s second quarter (OGJ Online, Oct. 7, 2014), to drill and complete the Cardona No. 7 development well project in the first quarter (OGJ Online, July 8, 2015), followed by 1-2 farm-outs of the rig and the drilling of the deepwater Lamprey or Derbio prospects assuming reductions in the firm’s working interests.
The rig is under contract until the fall of 2017. The firm already executed a farm-out starting in late February for 60-90 days, and, immediately thereafter, anticipates it may execute a second, separate farm-out agreement for another 90-120 days with another operator.
Cardona No. 7—the fourth and final well in the Cardona project on Mississippi Canyon 29—has been drilled and completed and is expected to be online in late March, with initial gross production expected to reach 4,000–5,000 boe/d. Stone holds 65% working interest in the field and is the operator.
The Derbio prospect on Mississippi Canyon 72 targets the Miocene interval. If successful, a tie-back to the nearby Pompano platform is likely, the firm says. Stone holds 100% working interest in the prospect, which is projected to spud in late 2016, although a reduction to the firm’s working interest is expected before drilling commences. The well is estimated to take 3 months to drill.
Information on the results of the Tiaras-1 exploration well, drilled by Petroleos Mexicanos during fourth-quarter 2015, is expected to prove helpful in evaluating the nearby Lamprey prospect on Alaminos Canyon block 943, Stone says. If a decision is made to move forward with the Lamprey prospect, it’s estimated that the initial well would take 2-3 months to drill and, if successful, Stone may drill a follow-up appraisal well.
Discussions with potential partners regarding the 100% owned Lamprey prospect are ongoing, with a reduction to Stone's working interest expected before drilling the well.
On Mississippi Canyon 117, meanwhile, the Rampart exploration well targets the Miocene interval and is expected to follow the Derbio exploration well. Stone currently holds 100% working interest in the prospect and is expected to reduce its working interest before drilling commences. The prospect is 9 miles from Stone's Pompano platform and a tie-back is likely. The well is estimated to take 3 months to drill.
Billion-dollar loss in 2015
The firm reported $1.09 billion net loss for 2015, including $1.36 billion in impairment charges. The full-year adjusted net loss was $28.6 million.
Stone had a fourth-quarter adjusted net income of $2.1 million, before pretax impairment charges of $351.1 million. After impairment charges, the net loss was $318.7 million for the quarter.
Net production volumes for 2015 fell to an average of 40,000 boe/d from 43,000 boe/d in 2014, primarily due to the shut-in of 100 MMcfed at Mary field (OGJ Online, Sept. 25, 2015).
At the time of the shut-in, the firm cited “unacceptable” operating margins caused by low commodity pricing—including negative differentials in the region—along with fees for transportation, processing, and gathering.
Stone’s production mix for 2015 was 41% oil, 17% natural gas liquids, and 42% natural gas.
Excluding potential production from Mary field, production guidance for 2016 is 31,000-33,000 boe/d, with 55% projected as oil, 9% projected as NGLs, and 36% projected as natural gas.
Stone’s estimated proved reserves as of Dec. 31, 2015 were 57 million boe, compared with 153 million boe at yearend 2014. The decrease in estimated proved reserves is primarily attributable to the downward revision of 95 million boe to contingent resources due to depressed commodity prices.
The yearend 2015 estimated proved reserves were 53% oil, 11% NGLs, and 36% gas equivalent. The firm replaced 104% of 2015 production.