Guarantor Financial Statements

12 Months Ended

Dec. 31, 2011

Guarantor Financial Statements [Abstract]

GUARANTOR FINANCIAL STATEMENTS:

NOTE 18 – GUARANTOR FINANCIAL STATEMENTS:

Stone Offshore is an unconditional guarantor (the “Guarantor Subsidiary”) of our 6  ³/4% Senior Subordinated Notes due 2014 and our 8  ⁵/8% Senior Notes due 2017. Our remaining subsidiaries (the “Non-Guarantor Subsidiaries”) have not provided guarantees. The following presents consolidating financial information as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009 on an issuer (parent company), guarantor subsidiary, non-guarantor subsidiaries, and consolidated basis. Elimination entries presented are necessary to combine the entities.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	37,389		$	926		$	136		$	—		$	38,451
Accounts receivable		36,463			81,452			1,353			(1,129	)		118,139
Fair value of hedging contracts		—			25,177			—			—			25,177
Current income tax receivable		19,946			—			—			—			19,946
Deferred taxes *		8,269			17,803			—			—			26,072
Inventory		4,360			283			—			—			4,643
Other current assets		791			—			—			—			791
Total current assets		107,218			125,641			1,489			(1,129	)		233,219
Oil and gas properties, full cost method:
Proved, net		387,554			1,083,192			2,693			—			1,473,439
Unevaluated		246,269			155,340			—			—			401,609
Other property and equipment, net		11,172			—			—			—			11,172
Fair value of hedging contracts		—			22,543			—			—			22,543
Other assets, net		20,873			2,896			—			—			23,769
Investment in subsidiary		733,533			(273	)		—			(733,260	)		—
Total assets	$	1,506,619		$	1,389,339		$	4,182		($	734,389	)	$	2,165,751
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	78,170		$	25,866		$	39		($	1,129	)	$	102,946
Undistributed oil and gas proceeds		26,036			1,292			—			—			27,328
Accrued interest		14,059			—			—			—			14,059
Fair value of hedging contracts		—			11,122			—			—			11,122
Asset retirement obligations		—			62,676			—			—			62,676
Other current liabilities		22,974			5,396			—			—			28,370
Total current liabilities		141,239			106,352			39			(1,129	)		246,501
Long-term debt		620,000			—			—			—			620,000
Deferred taxes *		56,970			190,865			—			—			247,835
Asset retirement obligations		7,626			351,061			4,416			—			363,103
Fair value of hedging contracts		—			815			—			—			815
Other long-term liabilities		12,955			6,713			—			—			19,668
Total liabilities		838,790			655,806			4,455			(1,129	)		1,497,922
Commitments and contingencies
Stockholders’ equity:
Common stock		481			—			—			—			481
Treasury stock		(860	)		—			—			—			(860	)
Additional paid-in capital		1,338,565			1,724,232			1,639			(1,725,871	)		1,338,565
Accumulated earnings (deficit)		(692,225	)		(1,012,567	)		(1,912	)		1,014,479			(692,225	)
Accumulated other comprehensive income (loss)		21,868			21,868			—			(21,868	)		21,868
Total stockholders’ equity		667,829			733,533			(273	)		(733,260	)		667,829
Total liabilities and stockholders’ equity	$	1,506,619		$	1,389,339		$	4,182		($	734,389	)	$	2,165,751

* Deferred income taxes have been allocated to guarantor subsidiary where related oil and gas properties reside.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2010

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	105,115		$	1,659		$	182		$	—		$	106,956
Restricted cash		5,500			—			—			—			5,500
Accounts receivable		26,760			61,560			902			(693	)		88,529
Fair value of hedging contracts		12,955			—			—			—			12,955
Deferred taxes *		27,274			—			—			—			27,274
Inventory		6,168			297			—			—			6,465
Other current assets		753			15			—			—			768
Total current assets		184,525			63,531			1,084			(693	)		248,447
Oil and gas properties, full cost method:
Proved, net		260,434			720,309			3,886			—			984,629
Unevaluated		337,725			75,455			—			—			413,180
Other property and equipment, net		10,722			—			—			—			10,722
Other assets, net		22,112			—			—			—			22,112
Investment in subsidiary		427,273			1,561			—			(428,834	)		—
Total assets	$	1,242,791		$	860,856		$	4,970		($	429,527	)	$	1,679,090
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	60,019		$	43,881		$	—		($	692	)	$	103,208
Undistributed oil and gas proceeds		9,491			546			—			—			10,037
Accrued interest		14,062			—			—			—			14,062
Fair value of hedging contracts		32,144			—			—			—			32,144
Asset retirement obligations		—			42,300			—			—			42,300
Current income tax payable		239			—			—			—			239
Other current liabilities		16,075			—			—			—			16,075
Total current liabilities		132,030			86,727			—			(692	)		218,065
Long-term debt		575,000			—			—			—			575,000
Deferred taxes *		(41,804	)		141,031			—			—			99,227
Asset retirement obligations		129,100			198,105			4,415			—			331,620
Fair value of hedging contracts		3,606			—			—			—			3,606
Other long-term liabilities		14,502			6,713			—			—			21,215
Total liabilities		812,434			432,576			4,415			(692	)		1,248,733
Commitments and contingencies
Stockholders’ equity:
Common stock		478			—			—			—			478
Treasury stock		(860	)		—			—			—			(860	)
Additional paid-in capital		1,331,500			1,673,598			1,640			(1,675,238	)		1,331,500
Accumulated earnings (deficit)		(886,557	)		(1,245,318	)		(1,085	)		1,246,403			(886,557	)
Accumulated other comprehensive loss		(14,204	)		—			—			—			(14,204	)
Total stockholders’ equity		430,357			428,280			555			(428,835	)		430,357
Total liabilities and stockholders’ equity	$	1,242,791		$	860,856		$	4,970		($	429,527	)	$	1,679,090

* Deferred income taxes have been allocated to guarantor subsidiary where related oil and gas properties reside.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	5,675		$	658,283		$	—		$	—		$	663,958
Gas production		19,470			175,773			—			—			195,243
Other operational income		3,085			249			604			—			3,938
Derivative income, net		—			1,418			—			—			1,418
Total operating revenue		28,230			835,723			604			—			864,557
Operating expenses:
Lease operating expenses		6,632			172,612			231			—			179,475
Other operational expenses		1,404			745			—			—			2,149
Production taxes		1,434			7,946			—			—			9,380
Depreciation, depletion, amortization		17,860			261,326			834			—			280,020
Accretion expense		15			30,385			364			—			30,764
Salaries, general and administrative		40,073			94			2			—			40,169
Incentive compensation expense		11,600			—			—			—			11,600
Total operating expenses		79,018			473,108			1,431			—			553,557
Income (loss) from operations		(50,788	)		362,615			(827	)		—			311,000
Other (income) expenses:
Interest expense		9,043			246			—			—			9,289
Interest income		(178	)		(242	)		—			—			(420	)
Other (income) expense, net		(52	)		(1,890	)		—			—			(1,942	)
Loss on early extinguishment of debt		607			—			—			—			607
(Income) loss from investment in subsidiaries		(232,751	)		827			—			231,924			—
Total other (income) expenses		(223,331	)		(1,059	)		—			231,924			7,534
Income (loss) before taxes		172,543			363,674			(827	)		(231,924	)		303,466
Provision (benefit) for income taxes:
Current		(20,386	)		—			—			—			(20,386	)
Deferred		(1,403	)		130,923			—			—			129,520
Total income taxes		(21,789	)		130,923			—			—			109,134
Net income (loss)	$	194,332		$	232,751		($	827	)	($	231,924	)	$	194,332

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2010

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	51,357		$	366,591		$	—		$	—		$	417,948
Gas production		61,137			171,918			—			—			233,055
Other operational income		4,831			(54	)		1,139			—			5,916
Derivative income, net		3,265			—			—			—			3,265
Total operating revenue		120,590			538,455			1,139			—			660,184
Operating expenses:
Lease operating expenses		64,868			87,458			—			—			152,326
Other operational expenses		2,097			3,482			—			—			5,579
Production taxes		3,631			2,177			—			—			5,808
Depreciation, depletion, amortization		40,351			206,856			994			—			248,201
Accretion expense		14,503			19,524			442			—			34,469
Salaries, general and administrative		42,741			17			1			—			42,759
Incentive compensation expense		5,888			—			—			—			5,888
Total operating expenses		174,079			319,514			1,437			—			495,030
Income (loss) from operations		(53,489	)		218,941			(298	)		—			165,154
Other (income) expenses:
Interest expense		12,192			—			—			—			12,192
Interest income		(1,439	)		(25	)		—			—			(1,464	)
Other (income) expense, net		548			(692	)		39			—			(105	)
Loss on early extinguishment of debt		1,820			—			—			—			1,820
(Income) loss from investment in subsidiary		(140,366	)		337			—			140,029			—
Total other (income) expenses		(127,245	)		(380	)		39			140,029			12,443
Income (loss) before taxes		73,756			219,321			(337	)		(140,029	)		152,711
Provision (benefit) for income taxes:
Current		5,896			(88	)		—			—			5,808
Deferred		(28,569	)		79,043			—			—			50,474
Total income taxes		(22,673	)		78,955			—			—			56,282
Net income (loss)	$	96,429		$	140,366		($	337	)	($	140,029	)	$	96,429

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2009

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Operating revenue:
Oil production	$	136,513		$	302,429		$	—	$	—		$	438,942
Gas production		123,511			148,842			—		—			272,353
Other operational income		3,475			(36	)		887		—			4,326
Derivative income, net		3,061			—			—		—			3,061
Total operating revenue		266,560			451,235			887		—			718,682
Operating expenses:
Lease operating expenses		36,563			120,223			—		—			156,786
Other operational expenses		10,742			1,056			—		—			11,798
Production taxes		6,022			1,898			—		—			7,920
Depreciation, depletion, amortization		47,695			211,465			479		—			259,639
Write-down of oil and gas properties		3,849			505,140			—		—			508,989
Accretion expense		16,058			23,203			45		—			39,306
Salaries, general and administrative		41,178			184			5		—			41,367
Incentive compensation expense		6,402			—			—		—			6,402
Total operating expenses		168,509			863,169			529		—			1,032,207
Income (loss) from operations		98,051			(411,934	)		358		—			(313,525	)
Other (income) expenses:
Interest expense		21,183			178			—		—			21,361
Interest income		(515	)		(13	)		—		—			(528	)
Other (income) expense, net		(49	)		187			334		—			472
(Income) loss from investment in subsidiary		268,011			3			—		(268,014	)		—
Total other (income) expenses		288,630			355			334		(268,014	)		21,305
Income (loss) before taxes		(190,579	)		(412,289	)		24		268,014			(334,830	)
Provision (benefit) for income taxes:
Current		30,376			—			—		—			30,376
Deferred		(2,657	)		(144,278	)		—		—			(146,935	)
Total income taxes		27,719			(144,278	)		—		—			(116,559	)
Net income (loss)		(218,298	)		(268,011	)		24		268,014			(218,271	)
Less: net income attributable to non-controlling interest		—			—			—		27			27
Net income (loss) attributable to Stone Energy Corporation	($	218,298	)	($	268,011	)	$	24	$	267,987		($	218,298	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	194,332		$	232,751		($	827	)	($	231,924	)	$	194,332
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		17,860			261,326			834			—			280,020
Accretion expense		15			30,385			364			—			30,764
Deferred income tax provision (benefit)		(1,403	)		130,923			—			—			129,520
Settlement of asset retirement obligations		—			(63,391	)		—			—			(63,391	)
Non-cash stock compensation expense		5,905			—			—			—			5,905
Excess tax benefits		(1,493	)		—			—			—			(1,493	)
Non-cash derivative income		—			(2,216	)		—			—			(2,216	)
Loss on early extinguishment of debt		607			—			—			—			607
Non-cash (income) loss from investment in subsidiaries		(230,861	)		(1,063	)		—			231,924			—
Other non-cash expenses		306			—			—			—			306
Change in current income taxes		(19,451	)		—			—			—			(19,451	)
Change in intercompany receivables/payables		217,287			(217,724	)		437			—			—
Increase in accounts receivable		(11,022	)		(7,688	)		(890	)		—			(19,600	)
(Increase) decrease in other current assets		(80	)		14			—			—			(66	)
Decrease in inventory		1,605			14			—			—			1,619
Increase in accounts payable		2,658			3,341			40			—			6,039
Increase in other current liabilities		23,440			6,143			—			—			29,583
Other		(1,628	)		—			—			—			(1,628	)
Net cash provided by (used in) operating activities		198,077			372,815			(42	)		—			570,850
Cash flows from investing activities:
Investment in oil and gas properties		(309,026	)		(455,903	)		(4	)		—			(764,933	)
Proceeds from sale of oil and gas properties, net of expenses		5,575			82,355			—			—			87,930
Investment in fixed and other assets		(2,247	)		—			—			—			(2,247	)
Net cash used in investing activities		(305,698	)		(373,548	)		(4	)		—			(679,250	)
Cash flows from financing activities:
Proceeds from bank borrowings		75,000			—			—			—			75,000
Repayment of bank borrowings		(30,000	)		—			—			—			(30,000	)
Deferred financing costs		(4,017	)		—			—			—			(4,017	)
Excess tax benefits		1,493			—			—			—			1,493
Net payments for share based compensation		(2,581	)		—			—			—			(2,581	)
Net cash provided by financing activities		39,895			—			—			—			39,895
Net decrease in cash and cash equivalents		(67,726	)		(733	)		(46	)		—			(68,505	)
Cash and cash equivalents, beginning of period		105,115			1,659			182			—			106,956
Cash and cash equivalents, end of period	$	37,389		$	926		$	136		$	—		$	38,451

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2010

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	96,429		$	140,366		($	337	)	($	140,029	)	$	96,429
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		40,351			206,856			994			—			248,201
Accretion expense		14,503			19,524			442			—			34,469
Deferred income tax provision (benefit)		(28,569	)		79,043			—			—			50,474
Settlement of asset retirement obligations		(6,461	)		(30,440	)		—			—			(36,901	)
Non-cash stock compensation expense		5,692			—			—			—			5,692
Excess tax benefits		(299	)		—			—			—			(299	)
Non-cash derivative income		(324	)		—			—			—			(324	)
Loss on early extinguishment of debt		1,820			—			—			—			1,820
Non-cash (income) loss from investment in subsidiary		(140,366	)		337			—			140,029			—
Other non-cash expenses		1,837			—			—			—			1,837
Change in current income taxes		(10,783	)		(88	)		—			—			(10,871	)
Change in intercompany receivable/payables		349,118			(347,941	)		(1,177	)		—			—
(Increase) decrease in accounts receivable		(11,556	)		61,254			(65	)		—			49,633
Decrease in other current assets		18			56			—			—			74
Decrease in inventory		1,848			275			—			—			2,123
Increase (decrease) in accounts payable		(1,045	)		272			—			—			(773	)
Decrease in other current liabilities		(17,423	)		(665	)		—			—			(18,088	)
Other expenses		1,230			68			—			—			1,298
Net cash provided by (used in) operating activities		296,020			128,917			(143	)		—			424,794
Cash flows from investing activities:
Investment in oil and gas properties		(265,198	)		(136,394	)		(175	)		—			(401,767	)
Proceeds from sale of oil and gas properties, net of expenses		25,455			6,180			—			—			31,635
Acquisition of non-controlling interest		—			(1,007	)		—			—			(1,007	)
Investment in fixed and other assets		(2,949	)		—			—			—			(2,949	)
Net cash used in investing activities		(242,692	)		(131,221	)		(175	)		—			(374,088	)
Cash flows from financing activities:
Repayment of bank borrowings		(175,000	)		—			—			—			(175,000	)
Redemption of senior subordinated notes		(200,503	)		—			—			—			(200,503	)
Proceeds from issuance of senior notes		375,000			—			—			—			375,000
Deferred financing costs		(11,474	)		—			—			—			(11,474	)
Excess tax benefits		299			—			—			—			299
Net payments for share based compensation		(1,365	)		—			—			—			(1,365	)
Net cash used in financing activities		(13,043	)		—			—			—			(13,043	)
Net increase (decrease) in cash and cash equivalents		40,285			(2,304	)		(318	)		—			37,663
Cash and cash equivalents, beginning of period		64,830			3,963			500			—			69,293
Cash and cash equivalents, end of period	$	105,115		$	1,659		$	182		$	—		$	106,956

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2009

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	($	218,298	)	($	268,011	)	$	24		$	268,014		($	218,271	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		47,695			211,465			479			—			259,639
Write-down of oil and gas properties		3,849			505,140			—			—			508,989
Accretion expense		16,058			23,203			45			—			39,306
Deferred income tax benefit		(2,657	)		(144,278	)		—			—			(146,935	)
Settlement of asset retirement obligations		(9,364	)		(57,416	)		—			—			(66,780	)
Non-cash stock compensation expense		5,944			—			—			—			5,944
Excess tax benefits		(2	)		—			—			—			(2	)
Non-cash derivative expense		5,142			—			—			—			5,142
Non-cash (income) loss from investment in subsidiary		268,011			3			—			(268,014	)		—
Other non-cash expenses		9,915			1,056			—			—			10,971
Change in current income taxes		64,481			1,704			—			—			66,185
(Increase) decrease in accounts receivable		177,984			(127,809	)		440			(456	)		50,159
Decrease in other current assets		585			42			—			—			627
Decrease in inventory		16,478			1,083			—			—			17,561
Decrease in accounts payable		(5,652	)		(3,787	)		(761	)		—			(10,200	)
Increase (decrease) in other current liabilities		(19,448	)		5,017			—			—			(14,431	)
Other expenses		739			(856	)		—			—			(117	)
Net cash provided by (used in) operating activities		361,460			146,556			227			(456	)		507,787
Cash flows from investing activities:
Investment in oil and gas properties		(177,341	)		(143,405	)		76			456			(320,214	)
Proceeds from sale of oil and gas properties, net of expenses		5,553			—			—			—			5,553
Sale of fixed assets		—			35			—			—			35
Investment in fixed and other assets		(1,412	)		—			—			—			(1,412	)
Acquisition of non-controlling interest in subsidiary		—			(41	)		—			—			(41	)
Net cash provided by (used in) investing activities		(173,200	)		(143,411	)		76			456			(316,079	)
Cash flows from financing activities:
Repayments of bank borrowings		(250,000	)		—			—			—			(250,000	)
Proceeds from stock offering		60,447			—			—			—			60,447
Deferred financing costs		(141	)		—			—			—			(141	)
Excess tax benefits		2			—			—			—			2
Purchase of treasury stock		(347	)		—			—			—			(347	)
Net payments for share based compensation		(513	)		—			—			—			(513	)
Net cash used in financing activities		(190,552	)		—			—			—			(190,552	)
Net increase (decrease) in cash and cash equivalents		(2,292	)		3,145			303			—			1,156
Cash and cash equivalents, beginning of period		67,122			818			197			—			68,137
Cash and cash equivalents, end of period	$	64,830		$	3,963		$	500		$	—		$	69,293