Stone Energy to Double Marcellus Gas Production in 2012

Stone Energy Corporation yesterday announced its planned capital budget spending plan for 2012. Stone’s projected capital budget is $625 million for the year, of which it plans to spend 30 percent (or $187.5 million) on drilling in the Marcellus Shale.

The Marcellus Shale capital budget provides for development drilling, infrastructure investments and acquisition of additional lease-hold interests. The budget includes funds for the drilling of 22-27 wells and the fracturing of 20-26 wells, predominately in the liquids rich Mary and Heather areas. Funds are also allocated for infrastructure to mitigate facility constraints and for new facilities associated with the wells expected to begin producing in 2012.*

Stone provides this operation update for their Marcellus Shale operations:

Stone drilled a total of 27 horizontal Marcellus Shale wells and fractured 16 wells in 2011. During the fourth quarter of 2011, Stone Energy tied 11 horizontal wells into the Caiman mid-stream pipeline from its Mary field in West Virginia. Production tests from the 11 individual wells had volumes of 3 to 5 MMcf per day, condensate yields of 70 to 100 Bbls per MMcf and natural gas liquids (NGL) yields greater than 40 Bbls per Mmcf.  The high condensate and NGL yields exceeded facility limitations, thus production has been curtailed until pipeline and facility modifications are completed. Stone is currently reviewing both short term and longer term condensate transportation options for the Mary area. Stone expects to increase net Appalachian volumes to over 50 MMcfe per day in the second half of 2012. The year-end 2011 net production exit rate from Appalachia, including volumes from its Heather, Buddy, Katie and Mary fields was approximately 20 MMcfe per day.*

Stone’s total estimated production for 2012 across all of their drilling operations is in a range of 240-275 mmcfe per day, representing an annual increase of 12%-29% compared to estimated production for 2011 of approximately 214 mmcfe per day.

*Stone Energy Corporation (Jan 23, 2012) – Stone Energy Corporation Announces 2011 Reserve Growth, 2012 Capital Expenditure Budget, 2012 Guidance and Operational Update