Stone CEO lays out company's strategy

By: GEOFFREY STOUTE

MORGAN CITY — Planning ahead — as much as three years from now — is part of Lafayette-based Stone Energy Corp.’s business strategy.

The company’s President and CEO, David H. Welch, told the Atchafalaya Chapter of the American Petroleum Institute during its monthly meeting Tuesday at the Petroleum Club that the company has implemented that school of thought since he came aboard in 2004.

Among those plans outlined include the purchase of the additional assets in the Pompano field in the Gulf of Mexico’s Mississippi Canyon, where the company has signed an agreement with BP to purchase 75 percent operated working interest in the British oil giant’s five block deep water field as well as a 51 percent operated working interest in an adjacent Mississippi Canyon block, a 50 percent non-operated working interest in the Mica field — which ties back to the Pompano platform — and interests in deepwater exploration leases near the Pompano field.

Stone has put in a combined $204 million cash bid for the project, which could be closed by early 2012.

The Pompano platform is a four-leg, 12-pile fixed structure in 1,300 feet of water with 23 producing wells and production capacity of 60,000 barrels of oil per day and 135 million cubic feet of gas per day.

If the sale goes through, Welch said it could have a positive impact on the company’s stock price.

The areas for sale are about 15 to 20 miles away from the BP Macondo well that spawned the massive oil spill in the Gulf of Mexico last summer.

Stone also has a 33 percent working interest in a deep gas well at its LaPosada Prospect, also known as La Cantera, which is found in Vermilion Parish.

In July, the company announced a discovery in the well, which reaches a depth of 18,550 feet.

These are just two of the projects in the Gulf Coast, an area where the company aims to use the cash flow that is generated to not only maintain a stable shelf production but also grow its gas reserves and production in the Appalachia and Gulf Coast and profitably grow oil reserves and production in areas such as the deepwater Gulf of Mexico and its onshore areas in the Rocky Mountain region.

Interests in the Rocky Mountain region, which the company already has tapped into and hopes to continue doing, include lands in the Alberta Bakken Region in Montana and the Paradox region along the Utah and Colorado lines, as well as in Texas’ Eagleford area.

He said he is not worried about the oil prices because as long as the population continues to grow, people will need energy for their necessities.

“The price of oil is so good, if you can find it, you can make money,” he said.

The demand for the oil, though, Welch said is driven by growth in developing countries, such as China and India instead of the United States or countries in Europe.

Still, he said the demand for it will continue to grow.

“Even in a sluggish economy,” Welch said.

Of its reserves, 60 percent are gas, while 40 percent are oil.

As for production, 60 percent of its production is in oil, while 40 percent is in gas.

On the Gulf Coast, it operates in the continental shelf, the deep gas and deepwater areas.

In the continental shelf, Welch said there has been about an 80 percent success rate.

“They haven’t had a single dry hole this year,” he said.

As for the company’s deepwater area, Welch said it is “getting ready to get off the launch pad” early next year.

At the end of its three-year plan, the company hopes to be spending most of its money in the deepwater sector.

In the Appalachia Basin, the company has drilled 27 wells and production has increased from zero million cubic feet per day to 40 to 50 million cubic feet per day.

In three years, Welch said he was hopeful that production could reach 160 million cubic feet a day.

The area, he said, is very low risk and very repeatable, meaning if gas is found in one area, then its likely gas will be found in an area right next to it.

Also, he said the costs for wells offshore are millions wells than those onshore.

Since he has joined the company in 2004, Welch said the rate of accidents has dipped from four accidents for every 200 hours worked to 0.4 hours for the same number of time worked.

He said that the company also has spent million plugging wells.

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