10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-12074

STONE ENERGY CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	72-1235413
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
625 E. Kaliste Saloom Road Lafayette, Louisiana	70508
(Address of Principal Executive Offices)	(Zip Code)

(337) 237-0410

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of August 2, 2012, there were 49,530,057 shares of the registrant’s common stock, par value $.01 per share, outstanding.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheet as of June 30, 2012 and December 31, 2011	1
	Condensed Consolidated Statement of Operations for the Three and Six Months Ended June 30, 2012 and 2011	2
	Condensed Consolidated Statement of Comprehensive Income for the Three and Six Months Ended June 30, 2012 and 2011	3
	Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2012 and 2011	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	Not Applicable
Item 4.	Mine Safety Disclosures	Not Applicable
Item 5.	Other Information	Not Applicable
Item 6.	Exhibits	31
	Signature	34

PART I – FINANCIAL INFORMATION

Item  1. Financial Statements

STONE ENERGY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands of dollars)

	June 30, 2012			December 31, 2011
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	223,849		$	38,451
Accounts receivable		148,934			118,139
Fair value of hedging contracts		61,203			25,177
Current income tax receivable		24,353			19,946
Deferred taxes		7,474			26,072
Inventory		4,607			4,643
Other current assets		914			791
Total current assets		471,334			233,219
Oil and gas properties, full cost method of accounting:
Proved		6,927,917			6,648,168
Less: accumulated depreciation, depletion and amortization		(5,339,251	)		(5,174,729	)
Net proved oil and gas properties		1,588,666			1,473,439
Unevaluated		435,384			401,609
Other property and equipment, net		11,910			11,172
Fair value of hedging contracts		41,981			22,543
Other assets, net		33,955			23,769
Total assets	$	2,583,230		$	2,165,751
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	143,389		$	102,946
Undistributed oil and gas proceeds		27,248			27,328
Accrued interest		15,735			14,059
Fair value of hedging contracts		—			11,122
Asset retirement obligations		75,493			62,676
Other current liabilities		9,470			28,370
Total current liabilities		271,335			246,501
Long-term debt		808,050			620,000
Deferred taxes		298,551			247,835
Asset retirement obligations		351,785			363,103
Fair value of hedging contracts		366			815
Other long-term liabilities		20,651			19,668
Total liabilities		1,750,738			1,497,922
Commitments and contingencies
Stockholders’ equity:
Common stock, $.01 par value; authorized 100,000,000 shares; issued 48,331,956 and 48,076,860 shares, respectively		483			481
Treasury stock (16,582 shares, at cost)		(860	)		(860	)
Additional paid-in capital		1,380,568			1,338,565
Accumulated deficit		(610,704	)		(692,225	)
Accumulated other comprehensive income		63,005			21,868
Total stockholders’ equity		832,492			667,829
Total liabilities and stockholders’ equity	$	2,583,230		$	2,165,751

The accompanying notes are an integral part of this statement.

1

STONE ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Operating revenue:
Oil production	$	182,181		$	175,357		$	383,939		$	327,352
Gas production		28,146			47,884			57,003			89,044
Natural gas liquids production		9,866			10,231			23,318			16,230
Other operational income		952			864			1,842			1,749
Derivative income, net		5,416			1,398			4,931			—
Total operating revenue		226,561			235,734			471,033			434,375
Operating expenses:
Lease operating expenses		51,555			45,608			96,035			83,895
Transportation, processing and gathering expenses		5,492			2,728			9,149			4,548
Other operational expenses		71			136			113			798
Production taxes		2,358			1,801			5,736			4,336
Depreciation, depletion and amortization		87,133			72,646			171,708			140,315
Accretion expense		8,255			7,717			16,521			15,434
Salaries, general and administrative expenses		13,143			10,610			26,848			22,343
Incentive compensation expense		2,398			2,333			3,840			5,017
Derivative expense, net		—			—			—			782
Total operating expenses		170,405			143,579			329,950			277,468
Income from operations		56,156			92,155			141,083			156,907
Other (income) expenses:
Interest expense		7,684			1,980			13,415			5,091
Interest income		(79	)		(53	)		(110	)		(147	)
Other income		(366	)		(563	)		(786	)		(1,127	)
Loss on early extinguishment of debt		—			607			—			607
Other expense		—			69			—			193
Total other expenses		7,239			2,040			12,519			4,617
Net income before income taxes		48,917			90,115			128,564			152,290
Provision (benefit) for income taxes:
Current		(665	)		(2,362	)		569			(2,362	)
Deferred		19,035			35,281			46,474			57,664
Total income taxes		18,370			32,919			47,043			55,302
Net income	$	30,547		$	57,196		$	81,521		$	96,988
Basic earnings per share	$	0.62		$	1.17		$	1.65		$	1.98
Diluted earnings per share	$	0.62		$	1.17		$	1.65		$	1.98
Average shares outstanding		48,303			47,961			48,279			47,930
Average shares outstanding assuming dilution		48,344			48,006			48,322			47,973

The accompanying notes are an integral part of this statement.

2

STONE ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net income	$	30,547	$	57,196	$	81,521	$	96,988
Other comprehensive income, net of tax effect:
Adjustment for fair value accounting of derivatives		63,202		36,112		41,137		3,638
Comprehensive income	$	93,749	$	93,308	$	122,658	$	100,626

The accompanying notes are an integral part of this statement.

3

STONE ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands of dollars)

(Unaudited)

	Six Months Ended June 30,
	2012			2011
Cash flows from operating activities:
Net income	$	81,521		$	96,988
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		171,708			140,315
Accretion expense		16,521			15,434
Deferred income tax provision		46,474			57,664
Settlement of asset retirement obligations		(21,918	)		(33,568	)
Non-cash stock compensation expense		4,271			3,138
Excess tax benefits		(795	)		(1,060	)
Non-cash derivative income		(2,758	)		(118	)
Loss on early extinguishment of debt		—			607
Non-cash interest expense		5,278			959
Change in current income taxes		(3,921	)		(6,245	)
Increase in accounts receivable		(37,517	)		(37,428	)
Increase in other current assets		(124	)		(476	)
Decrease in inventory		36			1,163
Increase in accounts payable		8,413			5,854
Increase (decrease) in other current liabilities		(17,304	)		4,440
Other		(465	)		(1,135	)
Net cash provided by operating activities		249,420			246,532
Cash flows from investing activities:
Investment in oil and gas properties		(275,813	)		(272,451	)
Proceeds from sale of oil and gas properties, net of expenses		403			6,692
Sale of fixed assets		149			—
Investment in fixed and other assets		(1,900	)		(894	)
Net cash used in investing activities		(277,161	)		(266,653	)
Cash flows from financing activities:
Proceeds from bank borrowings		25,000			—
Repayments of bank borrowings		(70,000	)		—
Proceeds from issuance of senior convertible notes		300,000			—
Financing costs of senior convertible notes		(8,855	)		—
Proceeds from Sold Warrants		40,170			—
Payments for Purchased Call Options		(70,830	)		—
Deferred financing costs		—			(4,017	)
Excess tax benefits		795			1,060
Net payments for share based compensation		(3,141	)		(1,857	)
Net cash provided by (used in) financing activities		213,139			(4,814	)
Net change in cash and cash equivalents		185,398			(24,935	)
Cash and cash equivalents, beginning of period		38,451			106,956
Cash and cash equivalents, end of period	$	223,849		$	82,021

The accompanying notes are an integral part of this statement.

4

STONE ENERGY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Interim Financial Statements

The condensed consolidated financial statements of Stone Energy Corporation (“Stone”) and its subsidiaries as of June 30, 2012 and for the three and six-month periods ended June 30, 2012 and 2011 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 2011 has been derived from the audited financial statements as of that date contained in our Annual Report on Form 10-K for the year ended December 31, 2011 (“2011 Annual Report on Form 10-K”). The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations contained in our 2011 Annual Report on Form 10-K. The results of operations for the three and six-month periods ended June 30, 2012 are not necessarily indicative of future financial results. Certain prior period amounts have been reclassified to conform to current period presentation.

Note 2 – Earnings Per Share

The following table sets forth the calculation of basic and diluted weighted average shares outstanding and earnings per share for the indicated periods.

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(in thousands, except per share data)
Income (numerator):
Basic:
Net income	$	30,547		$	57,196		$	81,521		$	96,988
Net income attributable to participating securities		(742	)		(1,192	)		(1,982	)		(2,022	)
Net income attributable to common stock - basic	$	29,805		$	56,004		$	79,539		$	94,966
Diluted:
Net income	$	30,547		$	57,196		$	81,521		$	96,988
Net income attributable to participating securities		(742	)		(1,191	)		(1,980	)		(2,021	)
Net income attributable to common stock - diluted	$	29,805		$	56,005		$	79,541		$	94,967
Weighted average shares (denominator):
Weighted average shares - basic		48,303			47,961			48,279			47,930
Diluted effect of stock options		41			45			43			43
Weighted average shares - diluted		48,344			48,006			48,322			47,973
Basic income per common share	$	0.62		$	1.17		$	1.65		$	1.98
Diluted income per common share	$	0.62		$	1.17		$	1.65		$	1.98

Stock options that were considered antidilutive because the exercise price of the option exceeded the average price of our common stock for the applicable period totaled approximately 369,000 and 398,000 shares for the three and six-month periods ended June 30, 2012 and 2011, respectively.

During the three months ended June 30, 2012 and 2011, respectively, approximately 23,000 and 73,000 shares of common stock were issued upon the vesting of restricted stock by employees and nonemployee directors. During the six months ended June 30, 2012 and 2011, respectively, approximately 255,000 and 253,000 shares of common stock were issued upon the vesting of restricted stock by employees and nonemployee directors.

Because it is management’s stated intention to redeem the principal amount of our 1 ³/₄% Senior Convertible Notes due 2017 (the “2017 Convertible Notes”) (see Note 4 – Long-Term Debt) in cash, we have used the treasury method for determining potential dilution in the diluted earnings per share computation. Since the average price of our common stock was less than the effective conversion price for such notes during the reporting period, the 2017 Convertible Notes were not dilutive for such period. Additionally, since the average price of our common stock was less than the strike price of the Sold Warrants (as defined in Note 4 – Long-Term Debt) for the reporting period, such warrants were also not dilutive for such period.

5

Note 3 – Derivative Instruments and Hedging Activities

Our hedging strategy is designed to protect our near and intermediate term cash flow from future declines in oil and natural gas prices. This protection is essential to capital budget planning, which is sensitive to expenditures that must be committed to in advance such as rig contracts and the purchase of tubular goods. We enter into hedging transactions to secure a commodity price for a portion of future production that is acceptable at the time of the transaction. These hedges are designated as cash flow hedges upon entering into the contract. We do not enter into hedging transactions for trading purposes. We have no fair value hedges.

The nature of a derivative instrument must be evaluated to determine if it qualifies for hedge accounting treatment. If the instrument qualifies for hedge accounting treatment, it is recorded as either an asset or liability measured at fair value and subsequent changes in the derivative’s fair value are recognized in equity through other comprehensive income (loss), net of related taxes, to the extent the hedge is considered effective. Additionally, monthly settlements of effective hedges are reflected in revenue from oil and gas production and cash flows from operations. Instruments not qualifying for hedge accounting treatment are recorded in the balance sheet at fair value and changes in fair value are recognized in earnings through derivative expense (income). Typically, a small portion of our derivative contracts are determined to be ineffective. This is because oil and natural gas price changes in the markets in which we sell our products are not 100% correlative to changes in the underlying price basis indicated in the derivative contracts. Monthly settlements of ineffective hedges are recognized in earnings through derivative expense (income) and cash flows from operations.

We have entered into fixed-price swaps with various counterparties for a portion of our expected 2012, 2013, 2014 and 2015 oil and natural gas production from the Gulf Coast Basin. Some of our fixed-price oil swap settlements are based on an average of the New York Mercantile Exchange (“NYMEX”) closing price for West Texas Intermediate (“WTI”) during the entire calendar month, and some are based on the average of the Intercontinental Exchange (“ICE”) closing price for Brent crude oil during the entire calendar month. Our fixed-price gas swap settlements are based on the NYMEX price for the last day of a respective contract month. Swaps typically provide for monthly payments by us if prices rise above the swap price or to us if prices fall below the swap price. Our fixed-price swap contracts are with The Toronto-Dominion Bank, Barclays Bank PLC, BNP Paribas, The Bank of Nova Scotia, Bank of America and Natixis.

All of our derivative instruments at June 30, 2012 and December 31, 2011 were designated as effective cash flow hedges; however, during the six-month periods ended June 30, 2012 and 2011, certain of our derivative contracts were determined to be partially ineffective. The following tables disclose the location and fair value amounts of derivative instruments reported in our balance sheet at June 30, 2012 and December 31, 2011.

Fair Value of Derivative Instruments at June 30, 2012
(in millions)
	Asset Derivatives			Liability Derivatives
Description	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Current assets: Fair value of hedging contracts	$	61.2	Current liabilities: Fair value of hedging contracts		($—	)
	Long-term assets: Fair value of hedging contracts		42.0	Long-term liabilities: Fair value of hedging contracts		(0.4	)
		$	103.2			($0.4	)
Fair Value of Derivative Instruments at December 31, 2011
(in millions)
	Asset Derivatives			Liability Derivatives
Description	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Current assets: Fair value of hedging contracts	$	25.2	Current liabilities: Fair value of hedging contracts	($	11.1	)
	Long-term assets: Fair value of hedging contracts		22.5	Long-term liabilities: Fair value of hedging contracts		(0.8	)
		$	47.7		($	11.9	)

6

The following tables disclose the effect of derivative instruments in the statement of operations for the three and six-month periods ended June 30, 2012 and 2011.

The Effect of Derivative Instruments on the Statement of Operations for the Three Months Ended June 30, 2012 and 2011 (in millions)
Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivatives (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b)						Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion)
	2012		2011		Location	2012		2011			Location	2012		2011
Commodity contracts	$	63.2	$	36.1	Operating revenue - oil/gas production	$	9.4	($	10.5	)	Derivative income, net	$	5.4	$	1.4
Total	$	63.2	$	36.1		$	9.4	($	10.5	)		$	5.4	$	1.4

(a) Net of related tax effect of $38.1 million and $20.8 million for the three months ended June 30, 2012 and 2011, respectively.

(b) For the three months ended June 30, 2012, effective hedging contracts increased oil revenue by $2.9 million and increased gas revenue by $6.5 million. For the three months ended June 30, 2011, effective hedging contracts decreased oil revenue by $14.3 million and increased gas revenue by $3.8 million.

The Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended June 30, 2012 and 2011 (in millions)
Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivatives (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b)						Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion)
	2012		2011		Location	2012		2011			Location	2012		2011
Commodity contracts	$	41.1	$	3.6	Operating revenue - oil/gas production	$	8.4	($	14.4	)	Derivative income (expense), net	$	4.9	($	0.8	)
Total	$	41.1	$	3.6		$	8.4	($	14.4	)		$	4.9	($	0.8	)

(a) Net of related tax effect of $23.7 million and $2.1 million for the six months ended June 30, 2012 and 2011, respectively.

(b) For the six months ended June 30, 2012, effective hedging contracts decreased oil revenue by $2.9 million and increased gas revenue by $11.3 million. For the six months ended June 30, 2011, effective hedging contracts decreased oil revenue by $22.8 million and increased gas revenue by $8.4 million.

At June 30, 2012, we had accumulated other comprehensive income of $63.0 million, net of tax, which related to the fair value of our swap contracts that were outstanding as of June 30, 2012. We believe that approximately $36.9 million of the accumulated other comprehensive income will be reclassified into earnings in the next twelve months.

7

The following table illustrates our hedging positions for calendar years 2012, 2013, 2014 and 2015 as of August 2, 2012:

	Fixed-Price Swaps NYMEX (except where noted)
	Natural Gas				Oil
	Daily Volume (MMBtus/d)		Swap Price ($)		Daily  Volume (Bbls/d)			Swap Price ($)
2012		10,000		5.035		1,000			90.30
2012		10,000		5.040		1,000			90.41
2012		10,000		5.050		1,000			90.45
2012						1,000			95.50
2012						2,000			97.60
2012						1,000			98.15
2012						1,000			100.00
2012						1,000			101.55
2012						1,000			104.25
2012						1,000	†		111.02
2013		10,000		5.270		1,000			92.80
2013		10,000		5.320		1,000			94.45
2013						1,000			94.60
2013						1,000			97.15
2013						1,000			101.53
2013						1,000			103.00
2013						1,000			103.15
2013						1,000			104.25
2013						1,000			104.47
2013						1,000			104.50
2013						1,000	†		107.30
2014		10,000		4.000		1,000			90.06
2014						1,000			98.00
2014						1,000			98.30
2014						1,000			99.65
2014						1,000	†		103.30
2015		10,000		4.005

† Brent oil contract

Note 4 – Long-Term Debt

Long-term debt consisted of the following at:

	June 30, 2012		December 31, 2011
	(in millions)
6 3/4% Senior Subordinated Notes due 2014	$	200.0	$	200.0
8 5/8% Senior Notes due 2017		375.0		375.0
1 3/4% Senior Convertible Notes due 2017		233.1		—
Bank debt		—		45.0
Total long-term debt	$	808.1	$	620.0

Bank Debt

On April 26, 2011, we entered into an amended and restated revolving credit facility with commitments totaling $700 million (subject to borrowing base limitations) through a syndicated bank group, replacing our previous facility. The bank credit facility matures on September 15, 2014. However, if the 6 ³/₄% Senior Subordinated Notes due 2014 issued under our 2004 indenture are retired on or before April 15, 2014, the bank credit facility then matures on April 26, 2015. Our borrowing base under our bank credit facility is currently $400 million. As of June 30 and August 2, 2012, we had no outstanding borrowings under our bank credit facility and letters of credit totaling $27.1 million had been issued pursuant to the bank credit facility, leaving $372.9 million of availability under the facility. Our bank credit facility is guaranteed by our only material subsidiary, Stone Energy Offshore, L.L.C. (“Stone Offshore”).

8

The borrowing base under our bank credit facility is redetermined semi-annually, in May and November, by the lenders taking into consideration the estimated value of our oil and gas properties and those of our direct and indirect material subsidiaries in accordance with the lenders’ customary practices for oil and gas loans. In addition, we and the lenders each have discretion at any time, but not more than two additional times in any calendar year, to have the borrowing base redetermined. Our bank credit facility is collateralized by substantially all of Stone’s and Stone Offshore’s assets. Stone and Stone Offshore are required to mortgage, and grant a security interest in, their oil and gas reserves representing at least 80% of the discounted present value of the future net cash flows from their oil and gas reserves reviewed in determining the borrowing base. At our option, loans under our bank credit facility will bear interest at a rate based on the London Interbank Offered Rate (“Libor”) plus an applicable margin, or a rate based on the prime rate or Federal funds rate plus an applicable margin. Our bank credit facility provides for optional and mandatory prepayments, affirmative and negative covenants, and interest coverage ratio and leverage ratio maintenance covenants. We were in compliance with all covenants as of June 30, 2012.

Senior Convertible Notes

On March 6, 2012, we issued in a private offering $300 million in aggregate principal amount of 1 ³/₄% Senior Convertible Notes due 2017 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2017 Convertible Notes are fully and unconditionally guaranteed on a senior unsecured basis by Stone Offshore and by certain future restricted subsidiaries of Stone. The net proceeds from the sale of the 2017 Convertible Notes were approximately $291.1 million, after deducting fees and expenses. The 2017 Convertible Notes rank equally in right of payment with all of our existing and future senior unsecured indebtedness. The 2017 Convertible Notes are effectively subordinated to our secured indebtedness to the extent of the value of the related collateral. The 2017 Convertible Notes bear interest at a rate of 1.75% per year, payable on March 1 and September 1 of each year, beginning on September 1, 2012. The 2017 Convertible Notes mature on March 1, 2017, unless earlier converted or repurchased. We may not redeem the 2017 Convertible Notes at our option prior to the maturity date.

The 2017 Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, based on an initial conversion rate of 23.4449 shares of our common stock per $1,000 principal amount of 2017 Convertible Notes, which corresponds to an initial conversion price of approximately $42.65 per share of our common stock. On June 29, 2012, our closing share price was $25.34. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the indenture related to the 2017 Convertible Notes.

The 2017 Convertible Notes may be converted by the holder, in multiples of $1,000 principal amount, only under the following circumstances:

• prior to December 1, 2016, on any date during any calendar quarter beginning after June 30, 2012 (and only during such calendar quarter) if the closing sale price of our common stock was more than 130% of the then current conversion price for at least 20 trading days in the period of the 30 consecutive trading days ending on the last trading day of the previous calendar quarter;

• prior to December 1, 2016, if we distribute to all or substantially all holders of our common stock rights, options or warrants entitling them to purchase, for a period of 45 calendar days or less from the declaration date for such distribution, shares of our common stock at a price per share less than the average closing sale price of our common stock for the ten consecutive trading days immediately preceding, but excluding, the declaration date for such distribution;

• prior to December 1, 2016, if we distribute to all or substantially all holders of our common stock cash, other assets, securities or rights to purchase our securities, which distribution has a per share value exceeding 10% of the closing sale price of our common stock on the trading day immediately preceding the declaration date for such distribution, or if we engage in certain corporate transactions described in the indenture related to the 2017 Convertible Notes;

• prior to December 1, 2016, during the five consecutive business-day period following any five consecutive trading-day period in which the trading price per $1,000 principal amount of 2017 Convertible Notes for each trading day during such five trading-day period was less than 98% of the closing sale price of our common stock for each trading day during such five trading-day period multiplied by the then current conversion rate; or

• on or after December 1, 2016, and prior to the close of business on the second scheduled trading day immediately preceding the maturity date of the 2017 Convertible Notes, which is March 1, 2017, without regard to the foregoing conditions.

9

Upon conversion, we will be obligated to pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. If we satisfy our conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of our common stock, the amount of cash and shares of common stock, if any, due upon conversion will be based on a daily conversion value (as described in the indenture related to the 2017 Convertible Notes) calculated on a proportionate basis for each trading day in a 25 consecutive trading-day conversion period (as described in the indenture related to the 2017 Convertible Notes). Upon any conversion, subject to certain exceptions, holders of the 2017 Convertible Notes will not receive any cash payment representing accrued and unpaid interest. Instead, interest will be deemed to be paid by the cash, shares of our common stock or a combination of cash and shares of our common stock paid or delivered, as the case may be, upon conversion of a 2017 Convertible Note.

If we undergo a fundamental change (as defined in the indenture related to the 2017 Convertible Notes) prior to maturity, holders of the 2017 Convertible Notes will have the right, at their option, to require us to repurchase for cash some or all of their 2017 Convertible Notes at a repurchase price equal to 100% of the principal amount of the 2017 Convertible Notes being repurchased, plus accrued and unpaid interest (including additional interest, if any) to, but excluding, the fundamental change repurchase date.

If holders elect to convert the 2017 Convertible Notes in connection with certain fundamental change transactions described in the indenture, we will increase the conversion rate by a number of additional shares determined by reference to the provisions contained in the indenture based on the effective date of, and the price paid (or deemed paid) per share of our common stock in, such make-whole fundamental change. If holders of our common stock receive only cash in connection with certain make-whole fundamental changes, the price paid (or deemed paid) per share will be the cash amount paid per share. Otherwise, the price paid (or deemed paid) per share will be equal to the average of the closing sale prices of our common stock on the five trading days prior to, but excluding, the effective date of such make-whole fundamental change.

In connection with the sale of the 2017 Convertible Notes, we entered into convertible note hedge transactions with respect to our common stock (the “Purchased Call Options”) with Barclays Capital Inc., acting as agent for Barclays Bank PLC, and Bank of America, N.A. (the “Dealers”). We paid an aggregate amount of approximately $70.8 million to the Dealers for the Purchased Call Options. The Purchased Call Options cover, subject to customary anti-dilution adjustments, approximately 7,033,470 shares of our common stock at a strike price that corresponds to the initial conversion price of the 2017 Convertible Notes, also subject to adjustment, and are exercisable upon conversion of the 2017 Convertible Notes.

We also entered into separate warrant transactions whereby, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, we sold to the Dealers warrants to acquire, subject to customary anti-dilution adjustments, approximately 7,033,470 shares of our common stock (the “Sold Warrants”) at a strike price of $55.91 per share of common stock. We received aggregate proceeds of approximately $40.1 million from the sale of the Sold Warrants to the Dealers. If, upon expiration of the Sold Warrants, the price per share of our common stock, as measured under the Sold Warrants, is greater than the strike price of the Sold Warrants, we will be required to issue, without further consideration, under each Sold Warrant a number of shares of our common stock with a value equal to the amount of such difference.

The Purchased Call Options and Sold Warrants are separate contracts entered into by Stone and each of the Dealers, are not part of the terms of the 2017 Convertible Notes and will not affect the holders’ rights under the 2017 Convertible Notes. The Purchased Call Options are expected generally to reduce the potential dilution upon conversion of the 2017 Convertible Notes in the event that the market value per share of our common stock at the time of exercise is greater than the strike price of the Purchased Call Options. The Sold Warrants could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the applicable strike price of the Sold Warrants.

The estimated liability and equity components of this offering were recorded in accordance with Accounting Standards Codification (“ASC”) 470-20. The initial carrying amount of the liability component of $229.2 million was determined by measuring the fair value of a similar liability that does not have an associated equity component. The carrying amount of the equity component of $70.8 million was determined by deducting the fair value of the liability component from the initial proceeds from the 2017 Convertible Notes. Transaction costs of approximately $8.9 were allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance and equity issuance costs, respectively. The cost of the convertible note hedge of $70.8 million and proceeds from the warrant transaction of $40.1 million were recorded as adjustments to equity. A summary of the entries to record the proceeds from the 2017 Convertible Notes, the cost of the Purchased Call Options and the proceeds from the Sold Warrants is as follows (in millions):

10

Cash	$	260.5
Other assets (deferred financing costs)		6.8
Long-term debt		(229.2	)
Additional paid-in capital		(38.1	)

Note 5 – Asset Retirement Obligations

The change in our asset retirement obligations during the six months ended June 30, 2012 is set forth below:

	Six Months Ended June  30, 2012
	(in millions)
Asset retirement obligations as of the beginning of the period, including current portion	$	425.8
Liabilities settled		(21.9	)
Liabilities assumed		14.5
Divestment of properties		(7.6	)
Accretion expense		16.5
Asset retirement obligations as of the end of the period, including current portion	$	427.3

Note 6 – Acquisitions

On June 18, 2012, we completed the acquisition of Anadarko U.S. Offshore Corporation’s (“APC”) 25% working interest in the five block deep water Pompano field in Mississippi Canyon, an approximate 14% working interest in Mississippi Canyon Block 29 and a 10% working interest in certain aliquots of Mississippi Canyon Block 72. The acquisition was accounted for according to the guidance provided in ASC 805, Business Combinations, which requires application of the acquisition method. This methodology requires the recordation of net assets acquired and consideration transferred at fair value (see Note 7 – Fair Value Measurements). Differences between the net fair value of assets acquired and consideration transferred are recorded as goodwill or a bargain purchase gain. The following represents the allocation of the recorded value of net assets acquired in the transaction. Consideration transferred in the transaction was $26.4 million in cash, resulting in no goodwill or bargain purchase gain.

	(in millions)
Proved oil and gas properties	$	39.2
Unevaluated oil and gas properties		1.6
Asset retirement obligations		(14.4	)
Total fair value of net assets	$	26.4

On December 28, 2011, we completed the acquisition of BP Exploration & Production Inc.’s (“BP”) 75% operated working interest in the five block deep water Pompano field in Mississippi Canyon, a 51% operated working interest in the adjacent Mississippi Canyon Block 29, a 50% non-operated working interest in the Mica field that ties back to the Pompano platform and a 75% interest in 23 deep water exploration leases located in the vicinity of the Pompano field. The following unaudited summary pro forma combined statement of operations data of Stone for the three and six-month periods ended June 30, 2011 has been prepared to give effect to the acquisition of the deep water assets from BP as if it had occurred on January 1, 2010. The pro forma financial information is not necessarily indicative of the results that might have occurred had the transaction taken place on January 1, 2010 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected in the following pro forma financial information because of normal production declines, changes in commodity prices, future acquisitions and divestitures, future development and exploration activities, and other factors.

	Three Months Ended June  30, 2011 (unaudited)		Six Months Ended June 30, 2011 (unaudited)
	(in millions, except per share amounts)
Revenues	$	279.4	$	515.0
Income from operations		117.2		204.9
Net income		72.1		125.5
Basic earnings per share	$	1.47	$	2.56
Diluted earnings per share	$	1.47	$	2.56

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Note 7 – Fair Value Measurements

U.S. Generally Accepted Accounting Principles establish a fair value hierarchy that has three levels based on the reliability of the inputs used to determine the fair value. These levels include: Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of June 30, 2012 and December 31, 2011, we held certain financial assets and liabilities that are required to be measured at fair value on a recurring basis, including our commodity derivative instruments and our investments in money market funds. We utilize the services of an independent third party to assist us in valuing our derivative instruments. We used the income approach in determining the fair value of our derivative instruments utilizing a proprietary pricing model. The model accounts for our credit risk and the credit risk of our counterparties in the discount rate applied to estimated future cash inflows and outflows. Our swap contracts are included within the Level 2 fair value hierarchy. For a more detailed description of our derivative instruments see Note 3 – Derivative Instruments and Hedging Activities. We used the market approach in determining the fair value of our investments in money market funds, which are included within the Level 1 fair value hierarchy.

The following tables present our assets and liabilities that are measured at fair value on a recurring basis at June 30, 2012:

	Fair Value Measurements at June 30, 2012
Assets	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Money market funds	$	5.9	$	5.9	$	—	$	—
Hedging contracts		103.2		—		103.2		—
Total	$	109.1	$	5.9	$	103.2	$	—

	Fair Value Measurements at June 30, 2012
Liabilities	Total			Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Hedging contracts	($	0.4	)	$	—		($0.4	)	$	—
Total	($	0.4	)	$	—		($0.4	)	$	—

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The following tables present our assets and liabilities that are measured at fair value on a recurring basis at December 31, 2011:

	Fair Value Measurements at December 31, 2011
Assets	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Money market funds	$	5.6		$	5.6	$	—		$	—
Hedging contracts		47.7			—		47.7			—
Total	$	53.3		$	5.6	$	47.7		$	—
	Fair Value Measurements at December 31, 2011
Liabilities	Total			Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Hedging contracts	($	11.9	)	$	—		($11.9	)	$	—
Total	($	11.9	)	$	—		($11.9	)	$	—

The fair value of cash and cash equivalents and our variable rate bank debt approximated book value at June 30, 2012 and December 31, 2011. As of June 30, 2012 and December 31, 2011, the fair value of our $375 million 8 ⁵/₈% Senior Notes due 2017 was approximately $384.4 million and $386.3 million, respectively. As of June 30, 2012 and December 31, 2011, the fair value of our $200 million 6 ³/₄% Senior Subordinated Notes due 2014 was approximately $201.0 million and $199.0 million, respectively. As of June 30, 2012, the fair value of our 2017 Convertible Notes was approximately $277.5 million, of which $226.1 million was attributable to the liability component. The fair value of our outstanding notes was determined based upon quotes obtained from brokers, which represent Level 2 inputs.

We applied fair value concepts in determining the liability component of our 2017 Convertible Notes (see Note 4 – Long-Term Debt) at inception and at June 30, 2012. The significant inputs in these determinations were market rates based on quotes obtained from brokers and represent Level 2 inputs.

We applied fair value concepts in the recording of deep water assets acquired from APC (see Note 6 – Acquisitions). The fair value of proved and unevaluated oil and gas properties was estimated using a market approach. Significant inputs were market value comparisons for similar transactions within an appropriate time period. These inputs were considered Level 3 inputs. Asset retirement obligations were determined in accordance with applicable accounting standards.

Note 8 – Commitments and Contingencies

We are named as a defendant in certain lawsuits and are a party to certain regulatory proceedings arising in the ordinary course of business. We do not expect that these matters, individually or in the aggregate, will have a material adverse effect on our financial condition.

Franchise Tax Action. We have been served with several petitions filed by the Louisiana Department of Revenue (“LDR”) in Louisiana state court claiming additional franchise taxes due. In addition, we received preliminary assessments from the LDR for additional franchise taxes resulting from audits of Stone and other subsidiaries. These assessments all relate to the LDR’s assertion that sales of crude oil and natural gas from properties located on the OCS, which are transported through the State of Louisiana, should be sourced to the State of Louisiana for purposes of computing the Louisiana franchise tax apportionment ratio. Total asserted claims plus estimated accrued interest amount to approximately $29.0 million. The franchise tax years 2010 and 2011 for Stone remain subject to examination, which potentially exposes us to additional estimated assessments of $1.7 million including accrued interest. We estimate the potential range of loss upon resolution of this matter to be between $0 and $31 million.

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Note 9 – Guarantor Financial Statements

Stone Offshore is an unconditional guarantor (the “Guarantor Subsidiary”) of our 2017 Convertible Notes, our 8 ⁵/₈% Senior Notes due 2017 and our 6 ³/₄% Senior Subordinated Notes due 2014. Our remaining subsidiaries (the “Non-Guarantor Subsidiaries”) have not provided guarantees. The following presents unaudited condensed consolidating financial information as of June 30, 2012 and December 31, 2011 and for the three and six-month periods ended June 30, 2012 and 2011 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

JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	192,755		$	30,958		$	136		$	—		$	223,849
Accounts receivable		73,168			218,282			1,578			(144,094	)		148,934
Fair value of hedging contracts		—			61,203			—			—			61,203
Current income tax receivable		24,353			—			—			—			24,353
Deferred taxes *		2,031			5,443			—			—			7,474
Inventory		4,324			283			—			—			4,607
Other current assets		914			—			—			—			914
Total current assets		297,545			316,169			1,714			(144,094	)		471,334
Oil and gas properties, full cost method:
Proved		815,886			6,106,980			5,051			—			6,927,917
Less: accumulated DD&A		(335,378	)		(5,001,323	)		(2,550	)		—			(5,339,251	)
Net proved oil and gas properties		480,508			1,105,657			2,501			—			1,588,666
Unevaluated		290,751			144,633			—			—			435,384
Other property and equipment, net		11,910			—			—			—			11,910
Fair value of hedging contracts		—			41,981			—			—			41,981
Other assets, net		32,387			1,568			—			—			33,955
Investment in subsidiary		893,122			(374	)		—			(892,748	)		—
Total assets	$	2,006,223		$	1,609,634		$	4,215			($1,036,842	)	$	2,583,230
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	263,942		$	23,541		$	—			($144,094	)	$	143,389
Undistributed oil and gas proceeds		25,566			1,682			—			—			27,248
Accrued interest		15,735			—			—			—			15,735
Asset retirement obligations		—			75,493			—			—			75,493
Other current liabilities		8,844			626			—			—			9,470
Total current liabilities		314,087			101,342			—			(144,094	)		271,335
Long-term debt		808,050			—			—			—			808,050
Deferred taxes *		30,278			268,273			—			—			298,551
Asset retirement obligations		7,377			339,821			4,587			—			351,785
Fair value of hedging contracts		—			366			—			—			366
Other long-term liabilities		13,939			6,712			—			—			20,651
Total liabilities		1,173,731			716,514			4,587			(144,094	)		1,750,738
Commitments and contingencies Stockholders’ equity:
Common stock		483			—			—			—			483
Treasury stock		(860	)		—			—			—			(860	)
Additional paid-in capital		1,380,568			1,724,232			1,639			(1,725,871	)		1,380,568
Accumulated earnings (deficit)		(610,704	)		(894,117	)		(2,011	)		896,128			(610,704	)
Accumulated other comprehensive income (loss)		63,005			63,005			—			(63,005	)		63,005
Total stockholders’ equity		832,492			893,120			(372	)		(892,748	)		832,492
Total liabilities and stockholders’ equity	$	2,006,223		$	1,609,634		$	4,215			($1,036,842	)	$	2,583,230

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

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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		696,975			5,946,141			5,052			—			6,648,168
Less: accumulated DD&A		(309,421	)		(4,862,949	)		(2,359	)		—			(5,174,729	)
Net proved oil and gas properties		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 the guarantor subsidiary where related oil and gas properties reside.

15

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	6,813		$	175,368		$	—		$	—		$	182,181
Gas production		5,865			22,281			—			—			28,146
Natural gas liquids production		1,710			8,156			—			—			9,866
Other operational income		762			77			113			—			952
Derivative income, net		—			5,416			—			—			5,416
Total operating revenue		15,150			211,298			113			—			226,561
Operating expenses:
Lease operating expenses		6,318			45,443			(206	)		—			51,555
Transportation, processing and gathering expenses		1,710			3,782			—			—			5,492
Other operational expenses		47			24			—			—			71
Production taxes		507			1,851			—			—			2,358
Depreciation, depletion, amortization		15,071			71,969			93			—			87,133
Accretion expense		137			8,033			85			—			8,255
Salaries, general and administrative		14,190			(1,047	)		—			—			13,143
Incentive compensation expense		2,398			—			—			—			2,398
Total operating expenses		40,378			130,055			(28	)		—			170,405
Income (loss) from operations		(25,228	)		81,243			141			—			56,156
Other (income) expenses:
Interest expense		7,672			12			—			—			7,684
Interest income		(74	)		(5	)		—			—			(79	)
Other income		(4	)		(362	)		—			—			(366	)
(Income) loss from investment in subsidiaries		(52,313	)		(140	)		—			52,453			—
Total other (income) expenses		(44,719	)		(495	)		—			52,453			7,239
Income (loss) before taxes		19,491			81,738			141			(52,453	)		48,917
Provision (benefit) for income taxes:
Current		(665	)		—			—			—			(665	)
Deferred		(10,391	)		29,426			—			—			19,035
Total income taxes		(11,056	)		29,426			—			—			18,370
Net income (loss)	$	30,547		$	52,312		$	141			($52,453	)	$	30,547
Comprehensive income (loss)	$	93,749		$	52,312		$	141			($52,453	)	$	93,749

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	732		$	174,625		$	—		$	—		$	175,357
Gas production		4,303			43,581			—			—			47,884
Natural gas liquids production		—			10,231			—			—			10,231
Other operational income		587			104			173			—			864
Derivative income, net		—			1,398			—			—			1,398
Total operating revenue		5,622			229,939			173			—			235,734
Operating expenses:
Lease operating expenses		390			45,218			—			—			45,608
Transportation, processing and gathering expenses		—			2,728			—			—			2,728
Other operational expenses		93			40			3			—			136
Production taxes		245			1,556			—			—			1,801
Depreciation, depletion, amortization		(24	)		72,426			244			—			72,646
Accretion expense		4			7,622			91			—			7,717
Salaries, general and administrative		10,562			48			—			—			10,610
Incentive compensation expense		2,333			—			—			—			2,333
Total operating expenses		13,603			129,638			338			—			143,579
Income (loss) from operations		(7,981	)		100,301			(165	)		—			92,155
Other (income) expenses:
Interest expense		1,979			1			—			—			1,980
Interest income		(53	)		—			—			—			(53	)
Other income		(13	)		(547	)		(3	)		—			(563	)
Other expense		69			—			—			—			69
Loss on early extinguishment of debt		607			—			—			—			607
(Income) loss from investment in subsidiaries		(63,621	)		162			—			63,459			—
Total other (income) expenses		(61,032	)		(384	)		(3	)		63,459			2,040
Income (loss) before taxes		53,051			100,685			(162	)		(63,459	)		90,115
Provision (benefit) for income taxes:
Current		(9	)		(2,353	)		—			—			(2,362	)
Deferred		(4,136	)		39,417			—			—			35,281
Total income taxes		(4,145	)		37,064			—			—			32,919
Net income (loss)	$	57,196		$	63,621			($162	)		($63,459	)	$	57,196
Comprehensive income (loss)	$	93,308		$	63,621			($162	)		($63,459	)	$	93,308

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	13,047		$	370,892		$	—		$	—		$	383,939
Gas production		11,496			45,507			—			—			57,003
Natural gas liquids production		5,574			17,744			—			—			23,318
Other operational income		1,456			140			246			—			1,842
Derivative income, net		—			4,931			—			—			4,931
Total operating revenue		31,573			439,214			246			—			471,033
Operating expenses:
Lease operating expenses		11,222			84,830			(17	)		—			96,035
Transportation, processing and gathering expenses		4,198			4,951			—			—			9,149
Other operational expenses		89			24			—			—			113
Production taxes		1,670			4,066			—			—			5,736
Depreciation, depletion, amortization		26,548			144,969			191			—			171,708
Accretion expense		285			16,065			171			—			16,521
Salaries, general and administrative		26,844			4			—			—			26,848
Incentive compensation expense		3,840			—			—			—			3,840
Total operating expenses		74,696			254,909			345			—			329,950
Income (loss) from operations		(43,123	)		184,305			(99	)		—			141,083
Other (income) expenses:
Interest expense		13,518			(103	)		—			—			13,415
Interest income		(104	)		(6	)		—			—			(110	)
Other income		(23	)		(763	)		—			—			(786	)
(Income) loss from investment in subsidiaries		(118,450	)		99			—			118,351			—
Total other (income) expenses		(105,059	)		(773	)		—			118,351			12,519
Income (loss) before taxes		61,936			185,078			(99	)		(118,351	)		128,564
Provision (benefit) for income taxes:
Current		569			—			—			—			569
Deferred		(20,154	)		66,628			—			—			46,474
Total income taxes		(19,585	)		66,628			—			—			47,043
Net income (loss)	$	81,521		$	118,450			($99	)		($118,351	)	$	81,521
Comprehensive income (loss)	$	122,658		$	118,450			($99	)		($118,351	)	$	122,658

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	1,518		$	325,834		$	—		$	—		$	327,352
Gas production		5,583			83,461			—			—			89,044
Natural gas liquids production		—			16,230			—			—			16.230
Other operational income		1,309			85			355			—			1,749
Total operating revenue		8,410			425,610			355			—			434,375
Operating expenses:
Lease operating expenses		746			83,149			—			—			83,895
Transportation, processing and gathering expenses		—			4,548			—			—			4,548
Other operational expenses		93			702			3			—			798
Production taxes		392			3,944			—			—			4,336
Depreciation, depletion, amortization		5,918			133,936			461			—			140,315
Accretion expense		8			15,244			182			—			15,434
Salaries, general and administrative		22,293			50			—			—			22,343
Incentive compensation expense		5,017			—			—			—			5,017
Derivative expense, net		—			782			—			—			782
Total operating expenses		34,467			242,355			646			—			277,468
Income (loss) from operations		(26,057	)		183,255			(291	)		—			156,907
Other (income) expenses:
Interest expense		5,010			81			—			—			5,091
Interest income		(141	)		(6	)		—			—			(147	)
Other income		(13	)		(1,114	)		—			—			(1,127	)
Other expense		192			1			—			—			193
Loss on early extinguishment of debt		607			—			—			—			607
(Income) loss from investment in subsidiaries		(116,944	)		291			—			116,653			—
Total other (income) expenses		(111,289	)		(747	)		—			116,653			4,617
Income (loss) before taxes		85,232			184,002			(291	)		(116,653	)		152,290
Provision (benefit) for income taxes:
Current		(9	)		(2,353	)		—			—			(2,362	)
Deferred		(11,747	)		69,411			—			—			57,664
Total income taxes		(11,756	)		67,058			—			—			55,302
Net income (loss)	$	96,988		$	116,944			($291	)		($116,653	)	$	96,988
Comprehensive income (loss)	$	100,626		$	116,944			($291	)		($116,653	)	$	100,626

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	81,521		$	118,450		($	99	)	($	118,351	)	$	81,521
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		26,548			144,969			191			—			171,708
Accretion expense		285			16,065			171			—			16,521
Deferred income tax provision (benefit)		(20,154	)		66,628			—			—			46,474
Settlement of asset retirement obligations		—			(21,918	)		—			—			(21,918	)
Non-cash stock compensation expense		4,271			—			—			—			4,271
Excess tax benefits		(795	)		—			—			—			(795	)
Non-cash derivative income		—			(2,758	)		—			—			(2,758	)
Non-cash interest expense		5,278			—			—			—			5,278
Change in current income taxes		(3,921	)		—			—			—			(3,921	)
Change in intercompany receivables/payables		142,965			(142,720	)		(245	)		—			—
(Increase) decrease in accounts receivable		(36,705	)		(833	)		21			—			(37,517	)
Increase in other current assets		(124	)		—			—			—			(124	)
Decrease in inventory		36			—			—			—			36
Increase (decrease) in accounts payable		5,238			3,214			(39	)		—			8,413
Decrease in other current liabilities		(12,924	)		(4,380	)		—			—			(17,304	)
Other		(118,152	)		(663	)		(1	)		118,351			(465	)
Net cash provided by (used in) operating activities		73,367			176,054			(1	)		—			249,420
Cash flows from investing activities:
Investment in oil and gas properties		(129,792	)		(146,022	)		1			—			(275,813	)
Proceeds from sale of oil and gas properties, net of expenses		403			—			—			—			403
Sale of fixed assets		149			—			—			—			149
Investment in fixed and other assets		(1,900	)		—			—			—			(1,900	)
Net cash provided by (used in) investing activities		(131,140	)		(146,022	)		1			—			(277,161	)
Cash flows from financing activities:
Proceeds from bank borrowings		25,000			—			—			—			25,000
Repayments of bank borrowings		(70,000	)		—			—			—			(70,000	)
Proceeds from issuance of senior convertible notes		300,000			—			—			—			300,000
Financing costs of senior convertible notes		(8,855	)		—			—			—			(8,855	)
Proceeds from Sold Warrants		40,170			—			—			—			40,170
Payments for Purchased Call Options		(70,830	)		—			—			—			(70,830	)
Excess tax benefits		795			—			—			—			795
Net payments for share based compensation		(3,141	)		—			—			—			(3,141	)
Net cash provided by financing activities		213,139			—			—			—			213,139
Net change in cash and cash equivalents		155,366			30,032			—			—			185,398
Cash and cash equivalents, beginning of period		37,389			926			136			—			38,451
Cash and cash equivalents, end of period	$	192,755		$	30,958		$	136		$	—		$	223,849

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	96,988		$	116,944		($	291	)	($	116,653	)	$	96,988
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		5,918			133,936			461			—			140,315
Accretion expense		8			15,244			182			—			15,434
Deferred income tax provision (benefit)		(11,747	)		69,411			—			—			57,664
Settlement of asset retirement obligations		—			(33,568	)		—			—			(33,568	)
Non-cash stock compensation expense		3,138			—			—			—			3,138
Excess tax benefits		(1,060	)		—			—			—			(1,060	)
Non-cash derivative income		—			(118	)		—			—			(118	)
Loss on early extinguishment of debt		607			—			—			—			607
Non-cash (income) loss from investment in subsidiaries		(116,944	)		291			—			116,653			—
Non-cash interest expense		959			—			—			—			959
Change in current income taxes		(3,893	)		(2,352	)		—			—			(6,245	)
Change in intercompany receivables/payables		149,716			(149,290	)		(426	)		—			—
(Increase) decrease in accounts receivable		(15,198	)		(22,239	)		9			—			(37,428	)
(Increase) decrease in other current assets		(491	)		15			—			—			(476	)
Decrease in inventory		1,149			14			—			—			1,163
Increase in accounts payable		2,494			3,360			—			—			5,854
Increase (decrease) in other current liabilities		(224	)		4,664			—			—			4,440
Other		(21	)		(1,114	)		—			—			(1,135	)
Net cash provided by (used in) operating activities		111,399			135,198			(65	)		—			246,532
Cash flows from investing activities:
Investment in oil and gas properties		(134,792	)		(137,655	)		(4	)		—			(272,451	)
Proceeds from sale of oil and gas properties, net of expenses		5,575			1,117			—			—			6,692
Investment in fixed and other assets		(894	)		—			—			—			(894	)
Net cash used in investing activities		(130,111	)		(136,538	)		(4	)		—			(266,653	)
Cash flows from financing activities:
Deferred financing costs		(4,017	)		—			—			—			(4,017	)
Excess tax benefits		1,060			—			—			—			1,060
Net payments for share based compensation		(1,857	)		—			—			—			(1,857	)
Net cash used in financing activities		(4,814	)		—			—			—			(4,814	)
Net change in cash and cash equivalents		(23,526	)		(1,340	)		(69	)		—			(24,935	)
Cash and cash equivalents, beginning of period		105,115			1,659			182			—			106,956
Cash and cash equivalents, end of period	$	81,589		$	319		$	113		$	—		$	82,021

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The information in this Quarterly Report on Form 10-Q and other publicly available documents include “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical or current facts, that address activities, events, outcomes and other matters that we plan, expect, intend, assume, believe, budget, predict, forecast, project, estimate or anticipate (and other similar expressions) will, should or may occur in the future are forward-looking statements. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements as described in our 2011 Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q.

Forward-looking statements appear in a number of places and include statements with respect to, among other things:

• any expected results or benefits associated with our acquisitions;

• estimates of our future oil and natural gas production, including estimates of any increases in oil and gas production;

• planned capital expenditures and the availability of capital resources to fund capital expenditures;

• our outlook on oil and gas prices;

• estimates of our oil and gas reserves;

• any estimates of future earnings growth;

• the impact of political and regulatory developments;

• our outlook on the resolution of pending litigation and government inquiry;

• estimates of the impact of new accounting pronouncements on earnings in future periods;

• our future financial condition or results of operations and our future revenues and expenses;

• our access to capital and our anticipated liquidity;

• estimates of future income taxes; and

• our business strategy and other plans and objectives for future operations.

We caution you that these forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, incident to the exploration for and development, production and marketing of oil and natural gas. These risks include, among other things:

• commodity price volatility;

• domestic and worldwide economic conditions;

• the availability of capital on economic terms to fund our capital expenditures and acquisitions;

• our level of indebtedness;

• declines in the value of our oil and gas properties resulting in a decrease in our borrowing base under our bank credit facility and ceiling test write-downs and impairments;

• our ability to replace and sustain production;

• the impact of a financial crisis on our business operations, financial condition and ability to raise capital;

• the ability of financial counterparties to perform or fulfill their obligations under existing agreements;

• third party interruption of sales to market;

• lack of availability and cost of goods and services;

• regulatory and environmental risks associated with drilling and production activities;

• drilling and other operating risks;

• unsuccessful exploration and development drilling activities;

• hurricanes and other weather conditions;

• the adverse effects of changes in applicable tax, environmental, derivatives and other regulatory legislation, including changes affecting our offshore and Appalachian operations;

• consequences of the Deepwater Horizon oil spill and resulting stringent regulatory requirements;

• the uncertainty inherent in estimating proved oil and natural gas reserves and in projecting future rates of production and timing of development expenditures; and

• the other risks described in our 2011 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.

Should one or more of the risks or uncertainties described above, in our 2011 Annual Report on Form 10-K or in our Quarterly Reports on Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. We specifically disclaim all responsibility to publicly

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update any information contained in a forward-looking statement or any forward-looking statement in its entirety and therefore disclaim any resulting liability for potentially related damages. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contained in this Form 10-Q should be read in conjunction with the MD&A contained in our 2011 Annual Report on Form 10-K.

Overview

We are an independent oil and gas company engaged in the acquisition, exploration, exploitation, development and operation of oil and gas properties. We have been operating in the Gulf Coast Basin since our incorporation in 1993 and have established a technical and operational expertise in this area. More recently, we have expanded our reserve base outside of the conventional shelf of the Gulf of Mexico (“GOM”) and into the more prolific reserve basins of the GOM deep water and Gulf Coast deep gas as well as onshore oil and gas shale opportunities, including the Marcellus Shale in Appalachia.

Critical Accounting Policies

Our 2011 Annual Report on Form 10-K describes the accounting policies that we believe are critical to the reporting of our financial position and operating results and that require management’s most difficult, subjective or complex judgments. Our most significant estimates are:

• remaining proved oil and gas reserves volumes and the timing of their production;

• estimated costs to develop and produce proved oil and gas reserves;

• accruals of exploration costs, development costs, operating costs and production revenue;

• timing and future costs to abandon our oil and gas properties;

• the effectiveness and estimated fair value of derivative positions;

• classification of unevaluated property costs;

• capitalized general and administrative costs and interest;

• insurance recoveries related to hurricanes and other events;

• estimates of fair value in business combinations;

• current income taxes; and

• contingencies.

This Quarterly Report on Form 10-Q should be read together with the discussion contained in our 2011 Annual Report on Form 10-K regarding these critical accounting policies.

Other Factors Affecting Our Business and Financial Results

In addition to the matters discussed above, our business, financial condition and results of operations are affected by a number of other factors. This Quarterly Report on Form 10-Q should be read in conjunction with the discussion in Part I, Item 1A, of our 2011 Annual Report on Form 10-K regarding these other risk factors and in this report under Part II, Item 1A. “Risk Factors.”

Known Trends and Uncertainties

Hurricanes – Since the majority of our production originates in the GOM, we are particularly vulnerable to the effects of hurricanes on production. Additionally, affordable insurance coverage for property damage to our facilities for hurricanes has been difficult to obtain for some time. We have narrowed our insurance coverage to selected properties, increased our deductibles and are assuming more hurricane related risk in the environment of rising insurance rates. Significant hurricane impacts could include reductions and/or deferrals of future oil and natural gas production and revenues, increased lease operating expenses for evacuations and repairs and possible acceleration of plugging and abandonment costs.

Louisiana Franchise Taxes – We have been involved in litigation with the State of Louisiana over the proper computation of franchise taxes allocable to the state. This litigation relates to the state’s position that sales of crude oil and natural gas from properties located on the Outer Continental Shelf (“OCS”), which are transported through the State of Louisiana, should be sourced to Louisiana for purposes of computing franchise taxes. We disagree with the state’s position. However, if the state’s position were to be upheld, we could incur additional expenses for alleged underpaid franchise taxes in prior years and higher franchise tax expense in future years. See “Part II, Item 1. Legal Proceedings.”

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Earnings Per Share – On March 6, 2012, we issued $300 million of 2017 Convertible Notes. These notes are convertible into cash, shares of our common stock or combination thereof at our election. Current accounting standards require us to use the treasury method for determining potential dilution in our diluted earnings per share computation since it is management’s intention to settle the principal in cash. However, if due to changes in facts and circumstances beyond our control such intention were to change, or it becomes probable that we will be unable to settle the principal in cash, we could be required to change our methodology for determining fully diluted earnings per share to the if-converted method. The if-converted method would result in a substantial dilutive effect on diluted earnings per share when compared to the treasury method.

Liquidity and Capital Resources

At August 2, 2012, we had $372.9 million of availability under our bank credit facility and cash on hand of approximately $190 million. Our capital expenditure budget for 2012 has been set at $625 million, which excludes material acquisitions and capitalized salaries, general and administrative expenses and interest. We intend to finance our capital expenditure budget primarily with cash on hand and cash flow from operations.

Cash Flow and Working Capital. Net cash flow provided by operating activities totaled $249.4 million during the six months ended June 30, 2012 compared to $246.5 million in the comparable period in 2011. Based on our outlook of commodity prices and our estimated production, we expect to fund our 2012 capital expenditures with cash on hand, cash flow provided by operating activities and borrowings under our bank credit facility.

Net cash flow used in investing activities totaled $277.2 million and $266.7 million during the six months ended June 30, 2012 and 2011, respectively, which primarily represents our investment in oil and natural gas properties.

Net cash flow provided by financing activities totaled $213.1 million for the six months ended June 30, 2012, which primarily represents $291.1 million of net proceeds from the issuance of our 2017 Convertible Notes and $40.1 million of proceeds from the Sold Warrants, partially offset by $70.8 million for the cost of the Purchased Call Options. Additionally, we had $25.0 million of borrowings and $70.0 million of repayments of borrowings under our bank credit facility during the six months ended June 30, 2012. Net cash flow used in financing activities totaled $4.8 million for the six months ended June 30, 2011, which primarily represents $4.0 million of deferred financing costs associated with our bank credit facility and $1.9 million of net payments for share based compensation, slightly offset by $1.1 million of excess tax benefits related to share based compensation.

We had working capital at June 30, 2012 of $200.0 million. Included in working capital at June 30, 2012 is a portion of the proceeds received from the issuance of our 2017 Convertible Notes (see Senior Convertible Notes below).

Capital Expenditures. During the three months ended June 30, 2012, additions to oil and gas property costs of $214.6 million included $41.8 million of lease and property acquisition costs, $6.7 million of capitalized salaries, general and administrative expenses (inclusive of incentive compensation) and $9.4 million of capitalized interest. During the six months ended June 30, 2012, additions to oil and gas property costs of $313.5 million included $43.0 million of lease and property acquisition costs, $12.3 million of capitalized salaries, general and administrative expenses (inclusive of incentive compensation) and $18.1 million of capitalized interest. These investments were financed with cash flow from operations and the net proceeds from the 2017 Convertible Notes.

Bank Credit Facility. On April 26, 2011, we entered into an amended and restated revolving credit facility totaling $700 million through a syndicated bank group, replacing our previous $700 million facility. The bank credit facility matures on September 15, 2014. However, if the notes issued under our 2004 indenture are retired on or before April 15, 2014, the bank credit facility then matures on April 26, 2015. Our borrowing base under our bank credit facility is currently $400 million. As of June 30 and August 2, 2012, we had no outstanding borrowings under our bank credit facility and letters of credit totaling $27.1 million had been issued pursuant to the bank credit facility, leaving $372.9 million of availability under the facility. Our bank credit facility is guaranteed by our only material subsidiary, Stone Offshore.

The borrowing base under our bank credit facility is redetermined by the lenders semi-annually, on May 1 and November 1, taking into consideration the estimated value of our oil and gas properties and those of our direct and indirect material subsidiaries in accordance with the lenders’ customary practices for oil and gas loans. In addition, we and the lenders each have discretion at any time, but not more than two additional times in any calendar year, to have the borrowing base redetermined. Our bank credit facility is collateralized by substantially all of Stone’s and Stone Offshore’s assets. Stone and Stone Offshore are required to mortgage, and grant a security interest in, their oil and gas reserves representing at least 80% of the discounted present value of the future net cash flows from their oil and gas reserves reviewed in determining the borrowing base. At our option, loans under the bank credit facility will bear interest at a rate based on the Libor Rate plus an applicable margin, or a rate based on the prime rate or Federal funds rate plus an applicable margin. Our bank credit facility provides for optional and mandatory prepayments, affirmative and negative covenants, and interest coverage ratio and leverage ratio maintenance covenants. We were in compliance with all covenants as of June 30, 2012.

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Senior Convertible Notes. On March 6, 2012, we issued in a private offering $300 million in aggregate principal amount of 1 ³/₄% Senior Convertible Notes due 2017 to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2017 Convertible Notes are fully and unconditionally guaranteed on a senior unsecured basis by Stone Offshore and by certain future restricted subsidiaries of Stone. The net proceeds from the sale of the 2017 Convertible Notes were approximately $291.1 million, after deducting fees and expenses. The 2017 Convertible Notes bear interest at a rate of 1.75% per year, payable on March 1 and September 1 of each year, beginning on September 1, 2012. The 2017 Convertible Notes mature on March 1, 2017, unless earlier converted or repurchased. We may not redeem the 2017 Convertible Notes at our option prior to the maturity date.

The 2017 Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, based on an initial conversion rate of 23.4449 shares of our common stock per $1,000 principal amount of 2017 Convertible Notes, which corresponds to an initial conversion price of approximately $42.65 per share of our common stock. On June 29, 2012, our closing share price was $25.34. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the indenture related to the 2017 Convertible Notes. Upon conversion, we will be obligated to pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. Prior to December 1, 2016, the Convertible Notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the second scheduled trading day immediately preceding the maturity date.

In connection with the offering, we entered into convertible note hedge transactions in respect of our common stock. These convertible note hedge transactions are expected to reduce the potential dilution upon future conversion of the 2017 Convertible Notes. In addition, we entered into separate warrant transactions at a higher strike price. The warrant transactions could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the applicable strike price of the warrants.

We applied a portion of the net proceeds of $291.1 million from the sale of the 2017 Convertible Notes and the proceeds from the warrant transactions of $40.1 million to fund the cost of the convertible note hedge transactions of $70.8 million. We also used a portion of the net proceeds to repay $70 million of outstanding borrowings under our bank credit facility.

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Results of Operations

The following tables set forth certain information with respect to our oil and gas operations.

	Three Months Ended June 30,
	2012		2011		Variance			% Change
Production:
Oil (MBbls)		1,691		1,667		24			1	%
Natural gas (MMcf)		10,422		10,398		24			0	%
Natural gas liquids (MBbls)		253		152		101			66	%
Oil, natural gas and NGLs (MMcfe)		22,086		21,312		774			4	%
Revenue data (in thousands) (a):
Oil revenue	$	182,181	$	175,357	$	6,824			4	%
Natural gas revenue		28,146		47,884		(19,738	)		(41	%)
Natural gas liquids revenue		9,866		10,231		(365	)		(4	%)
Total oil, natural gas and NGL revenue	$	220,193	$	233,472		($13,279	)		(6	%)
Average prices (a):
Oil (per Bbl)	$	107.74	$	105.19	$	2.55			2	%
Natural gas (per Mcf)		2.70		4.61		(1.91	)		(41	%)
Natural gas liquids (per Bbl)		39.00		67.31		(28.31	)		(42	%)
Oil, natural gas and NGLs (per Mcfe)		9.97		10.95		(0.98	)		(9	%)
Expenses (per Mcfe):
Lease operating expenses	$	2.33	$	2.14	$	0.19			9	%
Salaries, general and administrative expenses (b)		0.60		0.50		0.10			20	%
DD&A expense on oil and gas properties		3.91		3.37		0.54			16	%

(a) Includes the cash settlement of effective hedging contracts.

(b) Exclusive of incentive compensation expense.

	Six Months Ended June 30,
	2012		2011		Variance			% Change
Production:
Oil (MBbls)		3,553		3,283		270			8	%
Natural gas (MMcf)		20,416		19,481		935			5	%
Natural gas liquids (MBbls)		453		280		173			62	%
Oil, natural gas and NGLs (MMcfe)		44,452		40,859		3,593			9	%
Revenue data (in thousands) (a):
Oil revenue	$	383,939	$	327,352	$	56,587			17	%
Natural gas revenue		57,003		89,044		(32,041	)		(36	%)
Natural gas liquids revenue		23,318		16,230		7,088			44	%
Total oil, natural gas and NGL revenue	$	464,260	$	432,626	$	31,634			7	%
Average prices (a):
Oil (per Bbl)	$	108.06	$	99.71	$	8.35			8	%
Natural gas (per Mcf)		2.79		4.57		(1.78	)		(39	%)
Natural gas liquids (per Bbl)		51.47		57.96		(6.49	)		(11	%)
Oil, natural gas and NGLs (per Mcfe)		10.44		10.59		(0.15	)		(1	%)
Expenses (per Mcfe):
Lease operating expenses	$	2.16	$	2.05	$	0.11			5	%
Salaries, general and administrative expenses (b)		0.60		0.55		0.05			9	%
DD&A expense on oil and gas properties		3.83		3.38		0.45			13	%

(a) Includes the cash settlement of effective hedging contracts.

(b) Exclusive of incentive compensation expense.

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Net Income. During the three months ended June 30, 2012, we reported net income totaling $30.5 million, or $0.62 per share, compared to net income for the three months ended June 30, 2011 of $57.2 million, or $1.17 per share. During the six months ended June 30, 2012, we reported net income totaling $81.5 million, or $1.65 per share, compared to net income for the six months ended June 30, 2011 of $97.0 million, or $1.98 per share. All per share amounts are on a diluted basis.

In the first quarter of 2012, we began reporting natural gas liquid (“NGL”) volumes and revenues separate from gas volumes. Historically, we reported “wet” gas volumes, which included entrained liquids. We will now report NGLs and “dry” gas (shrunk for removal of liquids) volumes. Prior period production volumes, revenues and prices have been reclassified to conform to the current presentation.

The variance in the three and six-month periods’ results was due to the following components:

Production. During the three months ended June 30, 2012, total production volumes increased to 22.1 Bcfe compared to 21.3 Bcfe produced during the comparable 2011 period. Oil production during the three months ended June 30, 2012 totaled approximately 1,691,000 Bbls compared to 1,667,000 Bbls produced during the three months ended June 30, 2011; natural gas production totaled 10.4 Bcf during the three months ended June 30, 2012 and 2011; and NGL production during the three months ended June 30, 2012 totaled approximately 253,000 Bbls compared to 152,000 Bbls produced during the comparable period of 2011.

During the six months ended June 30, 2012, total production volumes increased to 44.5 Bcfe compared to 40.9 Bcfe produced during the comparable 2011 period, representing a 9% increase. Oil production during the six months ended June 30, 2012 totaled approximately 3,553,000 Bbls compared to 3,283,000 Bbls produced during the six months ended June 30, 2011; natural gas production totaled 20.4 Bcf during the six months ended June 30, 2012 compared to 19.5 Bcf produced during the comparable period of 2011; and NGL production during the six months ended June 30, 2012 totaled approximately 453,000 Bbls compared to 280,000 Bbls produced during the comparable period of 2011. The increase in NGL production resulted from our liquids rich Pompano and Appalachia gas streams coming on line. Production commenced from our deep water Pyrenees well at Garden Banks 293 during the first quarter of 2012. The six months ended June 30, 2012 includes production from our Pompano field, which was acquired in late 2011.

Prices. Prices realized during the three months ended June 30, 2012 averaged $107.74 per Bbl of oil, $2.70 per Mcf of natural gas and $39.00 per Bbl of NGLs, or 9% lower, on an Mcfe basis, than average realized prices of $105.19 per Bbl of oil, $4.61 per Mcf of natural gas and $67.31 per Bbl of NGLs during the comparable 2011 period. Prices realized during the six months ended June 30, 2012 averaged $108.06 per Bbl of oil, $2.79 per Mcf of natural gas and $51.47 per Bbl of NGLs compared to average realized prices of $99.71 per Bbl of oil, $4.57 per Mcf of natural gas and $57.96 per Bbl of NGLs during the comparable 2011 period. All unit pricing amounts include the cash settlement of effective hedging contracts.

We enter into various hedging contracts in order to reduce our exposure to the possibility of declining oil and gas prices. Our effective hedging transactions increased our average realized natural gas price by $0.63 per Mcf and increased our average realized oil price by $1.69 per Bbl during the three months ended June 30, 2012. During the three months ended June 30, 2011, our effective hedging transactions increased our average realized natural gas price by $0.37 per Mcf and decreased our average realized oil price by $8.60 per Bbl. During the six months ended June 30, 2012, effective hedging transactions increased our average realized natural gas price by $0.55 per Mcf and decreased our average realized oil price by $0.84 per Bbl. During the six months ended June 30, 2011, effective hedging transactions increased our average realized natural gas price by $0.43 per Mcf and decreased our average realized oil price by $6.94 per Bbl.

Revenue. Oil, natural gas and NGL revenue was $220.2 million during the three months ended June 30, 2012, compared to $233.5 million during the comparable period of 2011. The decrease is attributable to a 9% decrease in average realized prices. Oil, natural gas and NGL revenue for the six months ended June 30, 2012 was $464.3 million compared to $432.6 million during the comparable period of 2011. The increase is attributable to a 9% increase in production quantities on a gas equivalent basis.

Expenses. Lease operating expenses during the three months ended June 30, 2012 and 2011 totaled $51.6 million and $45.6 million, respectively. For the six months ended June 30, 2012 and 2011, lease operating expenses totaled $96.0 million and $83.9 million, respectively. On a unit of production basis, lease operating expenses were $2.16 per Mcfe and $2.05 per Mcfe for the six months ended June 30, 2012 and 2011, respectively. The increase in lease operating expenses in 2012 was primarily attributable to the impact of expenses at our Pompano field, which was acquired in December 2011.

Transportation, processing and gathering expenses during the three months ended June 30, 2012 and 2011 totaled $5.5 million and $2.7 million, respectively. During the six months ended June 30, 2012, transportation, processing and gathering expenses totaled $9.1 million compared to $4.5 million for the six months ended June 30, 2011. The increase resulted from our liquids rich Pompano and Appalachia gas streams coming on line in early 2012.

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The other operational expense charge of $0.8 million during the six months ended June 30, 2011 primarily related to the settlement of litigation associated with an expensed operation.

Depreciation, depletion and amortization (“DD&A”) expense on oil and gas properties for the three months ended June 30, 2012 totaled $86.4 million, or $3.91 per Mcfe, compared to $71.8 million, or $3.37 per Mcfe, during the comparable period of 2011. For the six months ended June 30, 2012 and 2011, DD&A expense totaled $170.2 million, or $3.83 per Mcfe, and $138.2 million, or $3.38 per Mcfe, respectively. The increase in DD&A expense on a unit basis in 2012 is attributable to the unit cost of current year net reserve additions (including future development costs) exceeding the per unit amortizable base as of the beginning of the year.

Salaries, general and administrative (“SG&A”) expenses (exclusive of incentive compensation) for the three months ended June 30, 2012 were $13.1 million compared to $10.6 million for the three months ended June 30, 2011. For the six months ended June 30, 2012 and 2011, SG&A expenses (exclusive of incentive compensation) totaled $26.8 million and $22.3 million, respectively. The increase is primarily the result of increased staffing and compensation adjustments (including stock based compensation) and a management fee of $1.0 million for transition services related to our Pompano acquisition.

For the three months ended June 30, 2012 and 2011, incentive compensation expense totaled $2.4 million and $2.3 million, respectively. For the six months ended June 30, 2012 and 2011, incentive compensation expense totaled $3.8 million and $5.0 million, respectively. These amounts relate to the accrual of estimated incentive compensation bonuses calculated based on the projected achievement of certain strategic objectives for each fiscal year.

Interest expense for the three months ended June 30, 2012 totaled $7.7 million, net of $9.4 million of capitalized interest, compared to interest expense of $2.0 million, net of $10.8 million of capitalized interest, during the comparable 2011 period. For the six months ended June 30, 2012, interest expense totaled $13.4 million, net of $18.1 million of capitalized interest, compared to interest expense of $5.1 million, net of $20.5 million of capitalized interest, during the comparable 2011 period. The increase in interest expense is primarily the result of interest associated with the 2017 Convertible Notes issued on March 6, 2012.

Off Balance Sheet Arrangements

None.

Recent Accounting Developments

None.

Defined Terms

Oil, condensate and NGLs are stated in barrels (“Bbls”) or thousand barrels (“MBbls”). Natural gas is stated herein in billion cubic feet (“Bcf”), million cubic feet (“MMcf”) or thousand cubic feet (“Mcf”). Oil, condensate and NGLs are converted to natural gas at a ratio of one barrel of liquids per six Mcf of gas. Bcfe, MMcfe, and Mcfe represent one billion cubic feet, one million cubic feet and one thousand cubic feet of gas equivalent, respectively. MMBtu represents one million British Thermal Units and BBtu represents one billion British Thermal Units. An active property is an oil and gas property with existing production. A primary term lease is an oil and gas property with no existing production, in which we have a specific time frame to establish production without losing the rights to explore the property. Liquidity is defined as the ability to obtain cash quickly either through the conversion of assets or incurrence of liabilities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

Our major market risk exposure continues to be the pricing applicable to our oil and natural gas production. Our revenues, profitability and future rate of growth depend substantially upon the market prices of oil and natural gas, which fluctuate widely. Oil and natural gas price declines and volatility could adversely affect our revenues, cash flows and profitability. Price volatility is expected to continue. In order to manage our exposure to oil and natural gas price declines, we occasionally enter into oil and natural gas price hedging arrangements to secure a price for a portion of our expected future production.

Our hedging policy provides that not more than 50% of our estimated production quantities can be hedged without the consent of the Board of Directors. We believe our current hedging positions have hedged approximately 39% of our estimated 2012 production from estimated proved reserves, 36% of our estimated 2013 production from estimated proved reserves, 21% of our estimated 2014 production from estimated proved reserves and 6% of our estimated 2015 production from estimated proved reserves. See Item 1. Financial Statements—Note 3 – Derivative Instruments and Hedging Activities for a detailed discussion of hedges in place to manage our exposure to oil and natural gas price declines.

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Since the filing of our 2011 Annual Report on Form 10-K, there have been no material changes in reported market risk as it relates to commodity prices.

Interest Rate Risk

We had total debt outstanding of $808.1 million at June 30, 2012, all of which bears interest at fixed rates. The $808.1 million of fixed-rate debt is comprised of $233.1 million ($300.0 million face value) of 1 ³/₄% Senior Convertible Notes due 2017, $375 million of 8 ⁵/₈% Senior Notes due 2017 and $200 million of 6 ³/₄% Senior Subordinated Notes due 2014. We currently have no interest rate hedge positions in place to reduce our exposure to changes in interest rates.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to provide reasonable assurance that material information relating to Stone Energy Corporation and its consolidated subsidiaries (as used in this Item 4, collectively “Stone”) is made known to the officers who certify Stone’s financial reports and the Board of Directors. Disclosure controls and procedures, as defined in the rules and regulations of the Exchange Act, means controls and other procedures of an issuer that are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. §78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s (the “SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Our principal executive officer and our principal financial officer, with the participation of other members of our senior management, reviewed and evaluated the effectiveness of Stone’s disclosure controls and procedures as of the end of the quarterly period ended June 30, 2012. Based on this evaluation, our principal executive officer and principal financial officer have concluded that as of the end of the quarterly period ended June 30, 2012:

• Stone’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by Stone in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

• Stone’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by Stone in the reports that it files or submits under the Exchange Act was accumulated and communicated to Stone’s management, including Stone’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

There has not been any change in our internal control over financial reporting that occurred during the quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Franchise Tax Action. On December 30, 2004, Stone was served with two petitions (civil action numbers 2004-6227 and 2004-6228) filed by the Louisiana Department of Revenue (“LDR”) in the 15th Judicial District Court (Parish of Lafayette, Louisiana) claiming additional franchise taxes due. In one case, the LDR is seeking additional franchise taxes from Stone in the amount of $640,000, plus accrued interest of $352,000 (calculated through December 15, 2004), for the franchise tax year 2001.

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In the other case, the LDR is seeking additional franchise taxes from Stone (as successor to Basin Exploration, Inc.) in the amount of $274,000, plus accrued interest of $159,000 (calculated through December 15, 2004), for the franchise tax years 1999, 2000 and 2001. On December 29, 2005, the LDR filed another petition in the 15^th Judicial District Court claiming additional franchise taxes due for the taxable years ended December 31, 2002 and 2003 in the amount of $2.6 million, plus accrued interest of $1.2 million (calculated through December 15, 2005). Also, on January 2, 2008, Stone was served with a petition (civil action number 2007-6754) claiming $1.5 million of additional franchise taxes due for the 2004 franchise tax year, plus accrued interest of $800,000 (calculated through November 30, 2007). Further, on January 7, 2009, Stone was served with a petition (civil action number 2008-7193) claiming additional franchise taxes due for the taxable years ended December 31, 2005 and 2006 in the amount of $4.0 million, plus accrued interest of $1.7 million (calculated through October 21, 2008). In addition, we have received proposed assessments from the LDR for additional franchise taxes in the amount of $8.1 million resulting from audits of Stone and our subsidiaries. These assessments all relate to the LDR’s assertion that sales of crude oil and natural gas from properties located on the OCS, which are transported through the State of Louisiana, should be sourced to the State of Louisiana for purposes of computing the Louisiana franchise tax apportionment ratio. Stone disagrees with these contentions and intends to vigorously defend itself against these claims. The franchise tax years 2010 and 2011 for Stone remain subject to examination.

Litigation is subject to substantial uncertainties concerning the outcome of material factual and legal issues relating to the litigation. Accordingly, we cannot currently predict the manner and timing of the resolution of these matters and are unable to estimate a range of possible losses or any minimum loss from such matters.

Item 1A. Risk Factors

There have been no material changes with respect to Stone’s risk factors previously reported in Stone’s 2011 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 24, 2007, our Board of Directors authorized a share repurchase program for an aggregate amount of up to $100 million. The shares may be repurchased from time to time in the open market or through privately negotiated transactions. The repurchase program is subject to business and market conditions, and may be suspended or discontinued at any time. Additionally, shares were withheld from certain employees to pay taxes associated with the employees’ vesting of restricted stock. The following table sets forth information regarding our repurchases or acquisitions of common stock during the three months ended June 30, 2012:

Period	Total Number of Shares (or Units) Purchased			Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs
Share Repurchase Program:
April 2012		—			—		—
May 2012		—			—		—
June 2012		—			—		—
		—			—		—	$	92,928,632
Other:
April 2012		—		$	—		—
May 2012		4,776	(a)		22.55		—
June 2012		—			—		—
		4,776		$	22.55		—		N/A
Total		4,776		$	22.55		—

(a) Amount includes shares withheld from employees and nonemployee directors upon the vesting of restricted stock in order to satisfy the required tax withholding obligations.

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Item 6. Exhibits

1.1	Purchase Agreement, dated February 29, 2012, among Stone Energy Corporation, Stone Energy Offshore, L.L.C., Barclays Capital Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and the other initial purchasers named in Schedule I to the Purchase Agreement (incorporated by reference to Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
*3.1	Certificate of Incorporation of the Registrant, as amended on June 4, 1993, February 1, 2001 and February 19, 2002.
3.2	Amended & Restated Bylaws of Stone Energy Corporation, dated May 15, 2008 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed May 21, 2008 (File No. 001-12074)).
4.1	Indenture between Stone Energy Corporation and JPMorgan Chase Bank, National Association, as trustee, dated December 15, 2004 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed December 17, 2004 (File No. 001-12074)).
4.2	First Supplemental Indenture, dated August 28, 2008, to the Indenture between Stone Energy Corporation and JPMorgan Chase Bank, National Association, as trustee, dated December 15, 2004 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed August 29, 2008 (File No. 001-12074)).
4.3	Second Supplemental Indenture, dated January 26, 2010, among Stone Energy Corporation, Stone Energy Offshore, L.L.C., and The Bank of New York Mellon Trust Company, N.A., successor to JPMorgan Chase Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed January 29, 2010 (File No. 001-12074)).
4.4	Indenture, dated January 26, 2010, among Stone Energy Corporation, Stone Energy Offshore, L.L.C., and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed January 29, 2010 (File No. 001-12074)).
4.5	First Supplemental Indenture, dated January 26, 2010, among Stone Energy Corporation, Stone Energy Offshore, L.L.C., and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed January 29, 2010 (File No. 001-12074)).
4.6	Indenture related to the 1 3/4% Senior Convertible Notes due 2017, dated as of March 6, 2012, among Stone Energy Corporation, Stone Energy Offshore, L.L.C. and The Bank of New York Mellon Trust Company, N.A., as trustee (including form of 1 3/4% Senior Convertible Senior Note due 2017) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.1	Amendment No. 1 and Consent dated as of February 28, 2012 to the Third Amended and Restated Credit Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 5, 2012 (File No. 001-12074)).
10.2	Base Bond Hedge Confirmation dated as of February 29, 2012, by and between Stone Energy Corporation and Barclays Capital Inc., acting as agent for Barclays Bank PLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.3	Base Bond Hedge Confirmation dated as of February 29, 2012, by and between Stone Energy Corporation and Bank of America N.A. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).

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10.4	Additional Bond Hedge Confirmation dated as of March 2, 2012, by and between Stone Energy Corporation and Barclays Capital Inc., acting as agent for Barclays Bank PLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.5	Additional Bond Hedge Confirmation dated as of March 2, 2012, by and between Stone Energy Corporation and Bank of America N.A. (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.6	Base Warrant Confirmation dated as of February 29, 2012, by and between Stone Energy Corporation and Barclays Capital Inc., acting as agent for Barclays Bank PLC (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.7	Base Warrant Confirmation dated as of February 29, 2012, by and between Stone Energy Corporation and Bank of America N.A. (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.8	Additional Warrant Confirmation dated as of March 2, 2012, by and between Stone Energy Corporation and Barclays Capital Inc., acting as agent for Barclays Bank PLC (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.9	Additional Warrant Confirmation dated as of March 2, 2012, by and between Stone Energy Corporation and Bank of America N.A. (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.10	Amendment to Base Warrant Confirmation and Additional Warrant Confirmation dated March 5, 2012, by and between Stone Energy Corporation and Barclays Capital Inc., acting as agent for Barclays Bank PLC (incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.11	Amendment to Base Warrant Confirmation and Additional Warrant Confirmation dated March 5, 2012, by and between Stone Energy Corporation and Bank of America N.A. (incorporated by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
*31.1	Certification of Principal Executive Officer of Stone Energy Corporation as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.
*31.2	Certification of Principal Financial Officer of Stone Energy Corporation as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.
*#32.1	Certification of Chief Executive Officer and Chief Financial Officer of Stone Energy Corporation pursuant to 18 U.S.C. § 1350.
**101.INS	XBRL Instance Document
**101.SCH	XBRL Schema Document
**101.CAL	XBRL Calculation Linkbase Document
**101.DEF	XBRL Definition Linkbase Document
**101.LAB	XBRL Label Linkbase Document
**101.PRE	XBRL Presentation Linkbase Document

* Filed or furnished herewith.

** Furnished, not filed. Users of this data submitted electronically herewith are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

32

# Not considered to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

33

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	STONE ENERGY CORPORATION
Date: August 7, 2012	By:	/s/ J. Kent Pierret
		J. Kent Pierret
		Senior Vice President, Chief Accounting Officer and Treasurer (On behalf of the Registrant and as Chief Accounting Officer)

34

EXHIBIT INDEX

Exhibit Number	Description
1.1	Purchase Agreement, dated February 29, 2012, among Stone Energy Corporation, Stone Energy Offshore, L.L.C., Barclays Capital Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and the other initial purchasers named in Schedule I to the Purchase Agreement (incorporated by reference to Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
*3.1	Certificate of Incorporation of the Registrant, as amended on June 4, 1993, February 1, 2001 and February 19, 2002.
3.2	Amended & Restated Bylaws of Stone Energy Corporation, dated May 15, 2008 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed May 21, 2008 (File No. 001-12074)).
4.1	Indenture between Stone Energy Corporation and JPMorgan Chase Bank, National Association, as trustee, dated December 15, 2004 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed December 17, 2004 (File No. 001-12074)).
4.2	First Supplemental Indenture, dated August 28, 2008, to the Indenture between Stone Energy Corporation and JPMorgan Chase Bank, National Association, as trustee, dated December 15, 2004 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed August 29, 2008 (File No. 001-12074)).
4.3	Second Supplemental Indenture, dated January 26, 2010, among Stone Energy Corporation, Stone Energy Offshore, L.L.C., and The Bank of New York Mellon Trust Company, N.A., successor to JPMorgan Chase Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed January 29, 2010 (File No. 001-12074)).
4.4	Indenture, dated January 26, 2010, among Stone Energy Corporation, Stone Energy Offshore, L.L.C., and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed January 29, 2010 (File No. 001-12074)).
4.5	First Supplemental Indenture, dated January 26, 2010, among Stone Energy Corporation, Stone Energy Offshore, L.L.C., and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed January 29, 2010 (File No. 001-12074)).
4.6	Indenture related to the 1 3/4% Senior Convertible Notes due 2017, dated as of March 6, 2012, among Stone Energy Corporation, Stone Energy Offshore, L.L.C. and The Bank of New York Mellon Trust Company, N.A., as trustee (including form of 1 3/4% Senior Convertible Senior Note due 2017) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.1	Amendment No. 1 and Consent dated as of February 28, 2012 to the Third Amended and Restated Credit Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 5, 2012 (File No. 001-12074)).
10.2	Base Bond Hedge Confirmation dated as of February 29, 2012, by and between Stone Energy Corporation and Barclays Capital Inc., acting as agent for Barclays Bank PLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.3	Base Bond Hedge Confirmation dated as of February 29, 2012, by and between Stone Energy Corporation and Bank of America N.A. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).

35

10.4	Additional Bond Hedge Confirmation dated as of March 2, 2012, by and between Stone Energy Corporation and Barclays Capital Inc., acting as agent for Barclays Bank PLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.5	Additional Bond Hedge Confirmation dated as of March 2, 2012, by and between Stone Energy Corporation and Bank of America N.A. (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.6	Base Warrant Confirmation dated as of February 29, 2012, by and between Stone Energy Corporation and Barclays Capital Inc., acting as agent for Barclays Bank PLC (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.7	Base Warrant Confirmation dated as of February 29, 2012, by and between Stone Energy Corporation and Bank of America N.A. (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.8	Additional Warrant Confirmation dated as of March 2, 2012, by and between Stone Energy Corporation and Barclays Capital Inc., acting as agent for Barclays Bank PLC (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.9	Additional Warrant Confirmation dated as of March 2, 2012, by and between Stone Energy Corporation and Bank of America N.A. (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.10	Amendment to Base Warrant Confirmation and Additional Warrant Confirmation dated March 5, 2012, by and between Stone Energy Corporation and Barclays Capital Inc., acting as agent for Barclays Bank PLC (incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
10.11	Amendment to Base Warrant Confirmation and Additional Warrant Confirmation dated March 5, 2012, by and between Stone Energy Corporation and Bank of America N.A. (incorporated by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed March 6, 2012 (File No. 001-12074)).
*31.1	Certification of Principal Executive Officer of Stone Energy Corporation as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.
*31.2	Certification of Principal Financial Officer of Stone Energy Corporation as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.
*#32.1	Certification of Chief Executive Officer and Chief Financial Officer of Stone Energy Corporation pursuant to 18 U.S.C. § 1350.
**101.INS	XBRL Instance Document
**101.SCH	XBRL Schema Document
**101.CAL	XBRL Calculation Linkbase Document
**101.DEF	XBRL Definition Linkbase Document
**101.LAB	XBRL Label Linkbase Document
**101.PRE	XBRL Presentation Linkbase Document

* Filed or furnished herewith.

** Furnished, not filed. Users of this data submitted electronically herewith are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

36

# Not considered to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

37

EX-3.1

Exhibit 3.1

PAGE 1

I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS ON FILE OF “STONE ENERGY CORPORATION” AS RECEIVED AND FILED IN THIS OFFICE.

THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED:

CERTIFICATE OF INCORPORATION, FILED THE FIFTEENTH DAY OF MARCH, A.D. 1993, AT 10:25 O’CLOCK A.M.

CERTIFICATE OF AMENDMENT, FILED THE FOURTH DAY OF JUNE, A.D. 1993, AT 9 O’CLOCK A.M.

CERTIFICATE OF AMENDMENT, FILED THE FIRST DAY OF FEBRUARY, A.D. 2001, AT 2:59 O’CLOCK P.M.

CERTIFICATE OF OWNERSHIP, FILED THE NINETEENTH DAY OF FEBRUARY, A.D. 2002, AT 12 O’CLOCK P.M.

AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION, “STONE ENERGY CORPORATION”.

		/s/ Harriet Smith Windsor Harriet Smith Windsor, Secretary of State
2329102 8100H 060219694		AUTHENTICATION: 4608256                                          DATE: 03–21–06

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 10: 25 AM 03/15/1993

930745230—2329102

CERTIFICATE OF INCORPORATION

OF

STONE ENERGY CORPORATION

FIRST: The name of the corporation is Stone Energy Corporation.

SECOND: The address of the registered office of the corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the registered agent of the corporation at such address is The Corporation Trust Company.

THIRD: The nature of the business or purposes to he conducted or promoted by the corporation is to engage in any lawful business, act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

FOURTH: The total number of shares of capital stock of the corporation shall be 1,000, which shall consist of 100 shares of Preferred Stock of the par value of $.01 per share and 900 shares of Common Stock of the par value of $.01 per share.

The following is a statement fixing certain of the designations and powers, voting powers, preferences, and relative, participating, optional or other rights of the Preferred Stock and the Common Stock of the corporation, and the qualifications, limitations or restrictions thereof, and the authority with respect thereto expressly granted to the Board of Directors of the corporation to fix any such provisions not fixed by this Certificate:

I. Preferred Stock

The Preferred Stock may be divided into and issued from time to time in one or more series as may be fixed and determined by the Board of Directors. The relative rights and preferences of the Preferred Stock of each series shall be such as shall be stated in any resolution or resolutions adopted by the Board of Directors setting forth the designations of the series and fixing and detemining the relative rights and preferences thereof, any such resolution or resolutions being herein called a “Preferred Stock Series Resolution”. The Board of Directors is hereby authorized to fix and determine such variations in the designations, preferences, and relative, participating, optional or other special rights (including, without limitation, special voting rights, preferential rights to receive dividends or assets upon liquidation, rights of conversion into Common Stock or other securities, redemption provisions or sinking fund provisions) as between series and as between the Preferred Stock or any series thereof and the Common Stock, and the

qualifications, limitations or restrictions of such rights, all as shall be stated in a Preferred Stock Series Resolution, and the shares of Preferred Stock or any series thereof may have full or limited voting powers, or be without voting powers, all as shall be stated in a Preferred Stock Series Resolution.

Any of the Series Terms, including voting rights, of any series may be made dependent upon facts ascertainable outside the Certificate of Incorporation and the Preferred Stock Series Resolution, provided that the manner in which such facts shall operate upon such Series Terms is clearly and expressly set forth in the Certificate of Incorporation or in the Preferred Stock Series Resolution.

Except in respect of characteristics of a particular series fixed by the Board of Directors, all shares of Preferred Stock shall be of equal rank and shall be identical. All shares of any one series of Preferred Stock so designated by the Board of Directors shall be alike in every particular, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative.

II. Common Stock

1. Dividends. Subject to the provisions of any Preferred Stock Series Resolution, the Board of Directors may, in its discretion, out of funds legally available for the payment of dividends and at such times and in such manner as determined by the Board of Directors, declare and pay dividends on the Common Stock of the corporation.

No dividend (other than a dividend in capital stock ranking on a parity with the Common Stock or cash in lieu of fractional shares with respect to such stock dividend) shall be declared or paid on any share or shares of any class of stock or series thereof ranking on a parity with the Common Stock in respect of payment of dividends for any dividend period unless there shall have been declared, for the same dividend period, like proportionate dividends on all shares of Common Stock then outstanding.

2. Liquidation. In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the corporation and payment or setting aside for payment of any preferential amount due to the holders of any other class or series of stock, the holders of the Common Stock shall be entitled to receive ratably any or all assets remaining to be paid or distributed.

3. Voting Rights. The holders of the Common Stock of the corporation shall be entitled to one vote for each share of such stock held by them.

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III. Prior, Parity or Junior Stock

Whenever reference is made in this Article Fourth to shares “ranking prior to” another class of stock or “on a parity with” another class of stock, such reference shall mean and include all other shares of the corporation in respect of which the rights of the holders thereof as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation are given preference over, or rank on an equal basis with, as the case may be, the rights of the holders of such other class of stock. Whenever reference is made to shares “ranking junior to” another class of stock, such reference shall mean and include all shares of the corporation in respect of which the rights of the holders thereof as to the payment of dividends and as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation are junior and subordinate to the rights of the holders of such class of stock.

Except as otherwise provided herein or in any Preferred Stock Series Resolution, each series of Preferred Stock ranks on a parity with each other and each ranks prior to the Common Stock. Common Stock ranks junior to Preferred Stock.

IV. Reservation and Retirement of Shares

The corporation shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock or out of shares of Common Stock held in its treasury, the full number of shares of Common Stock into which all shares of any series of Preferred Stock having conversion privileges from time to time outstanding are convertible.

Unless otherwise provided in a Preferred Stock Series Resolution with respect to a particular series of Preferred Stock, all shares of Preferred Stock redeemed or acquired (as a result of conversion or otherwise) shall be retired and restored to the status of authorized but unissued shares.

V. No Preemptive Rights

No holder of shares of stock of the corporation shall have any preemptive or other rights, except as such rights are expressly provided by contract, to purchase or subscribe for or receive any shares of any class, or series thereof, of stock of the corporation, whether now or hereafter authorized, or any warrants, options, bonds, debentures or other securities convertible into, exchangeable for or carrying any right to purchase any shares

-3-

of any class, or series thereof, of stock; but such additional shares of stock and such warrants, options, bonds, debentures or other securities convertible into, exchangeable for or carrying any right to purchase any shares of any class, or series thereof, of stock may be issued or disposed of by the Board of Directors to such persons, and on such terms and for such lawful consideration, as in its discretion it shall deem advisable or as to which the corporation shall have by binding contract agreed.

FIFTH: The incorporator of the corporation is P. Michelle Grace and her mailing address is c/o Vinson & Elkins, L.L.P., 2500 First City Tower, 1001 Fannin, Houston, Texas 77002-6760.

SIXTH: The names and mailing addresses of the persons who are to serve as directors of the corporation until the first annual meeting of stockholders and until their successors are elected and qualified are as follows:

Name	Mailing Address
James H. Stone	625 E. Kaliste Saloom Road Lafayette, LA 70508
D. Peter Canty	625 E. Kaliste Saloom Road Lafayette, LA 70508
Joe R. Klutts	625 E. Kaliste Saloom Road Lafayette, LA 70508
Michael L. Finch	625 E. Kaliste Saloom Road Lafayette, LA 70508
David R. Voelker	Johnson, Rice & Company 639 Loyola Avenue, Ste. 2775 New Orleans, LA 70113

The number of directors of the corporation shall be fixed as specified or provided for in the by-laws of the corporation. Election of directors need not be by written ballot unless the by-laws shall so provide. No holders of Preferred Stock or Common Stock of the corporation shall have any right to cumulate votes in the election of directors.

-4-

SEVENTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of §291 of the General Corporation Law of the State of Delaware or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of §279 of the General Corporation Law of the State of Delaware order a meeting of the creditors or class of creditors, or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the compromise or arrangement and the reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation.

EIGHTH: In furtherance of, and not in limitation of, the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend or repeal the by-laws of the corporation or adopt new by-laws, without any action on the part of the stockholders; provided, however, that no such adoption, amendment, or repeal shall be valid with respect to by-law provisions which have been adopted, amended, or repealed by the stockholders; and further provided, that by-laws adopted or amended by the Directors and any powers thereby conferred may be amended, altered, or repealed by the stockholders.

NINTH: A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for such liability as is expressly not subject to limitation under the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended to further limit or eliminate such liability. Moreover, the corporation shall, to the fullest extent permitted by law, indemnify any and all officers and directors of the corporation, and may, to the fullest extent permitted by law or to such lesser extent as is determined in the discretion of the Board of Directors, indemnify any and all other persons whom it shall have power to indemnify, from and against all expenses, liabilities or other matters arising out of their status as such or their acts, omissions or services rendered in such capacities. The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability.

-5-

TENTH: The corporation shall have the right, subject to any express provisions or restrictions contained in the Certificate of Incorporation or by-laws of the corporation, from time to time, to amend the Certificate of Incorporation or any provision thereof in any manner now or hereafter provided by law, and all rights and powers of any kind conferred upon a director or stockholder of the corporation by the Certificate of Incorporation or any amendment thereof are conferred subject to such right.

ELEVENTH: Except as otherwise provided by statute, any action that might have been taken at a meeting of stockholders by a vote of the stockholders may be taken with the written consent of all of the stockholders that are entitled to vote on such proposed corporate action.

IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 12th day of March, 1993.

/s/ P. Michelle Grace

P. Michelle Grace

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STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 09:00 AM 06/04/1993

931555255—2329102

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATON

OF

STONE ENERGY CORPORATION

Stone Energy Corporation, a corporation organized and existing under and by virtue of the General Corporation Lew of the State of Delaware (the “Company”),

DOES HEREBY CERTIFY:

FIRST: That the Board of Directors of the Company duly adopted resolution setting forth a proposed amendment of the Certificate of Incorporation of the Company, which Certificate of Incorporation was filed with the Secretary of State of Delaware on March 15,1993, approving said amendment, declaring it to be advisable and recommending said amendment to the stockholder of the Company for approval thereof. The resolution setting forth the proposed amendment it as follows:

RESOLVED, that the Board of Directors hereby approves the amendment of Article FOURTH of the Certificate of Incorporation of the Company to increase the number of authorized shares of Common Stock and to increase the number of authorized shares of preferred stock of the Company in order to have a sufficient number of shares to effect the Exchange Offer and the Initial Public Offering and to take such other action as may be necessary or advisable to effect such amendment of the Company’s Certificate of Incorporation, and that the Board of Directors hereby proposes and declares to the stockholder of the Company the advisability of amending Article FOURTH and directs that such amendment be considered by the sole stockholder of the Company, such amendment to be made by deleting the language of the first paragraph of Article FOURTH and amending such first paragraph of Article FOURTH to read in its entirety as follows:

FOURTH: The total number of shares of capital stock of the corporation shall be 30,000,000, which shall consist of 5,000,000 shares of Preferred Stock of the par value of S.01 per share and 25,000,000 shares of Common Stock of the par value of $.01 per share. provided,

however, that the right to withdraw such amendment prior to any vote at a special meeting is hereby reserved by the Board of Directors.

SECOND: That in lieu of a special meeting and vote of the sole stockholder, the sole stockholder of the Company, by written consent, approved, adopted and consented to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.

THIRD: That said amendment was duly adopted in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Company has caused this certificate to be signed by James H. Stone, its President and attested by Thomas A. Stone, its Secretary, this 2nd day of June, 1993.

ATTEST:	STONE EXPLORATION CORPORATION
/s/ Thomas A. Stone	By	/s/ James H. Stone
Thomas A. Stone Secretary		James H. Stone President

-2-

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 02:59 PM 02/01/2001

010053852—2329102

CERTIFICATE OF AMENDMENT OF THE CERTIFICATE

OF INCORPORATION OF STONE ENERGY

CORPORATION

Stone Energy Corporation (the “Company”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify, in accordance with Section 242 of the Delaware General Corporation Law:

FIRST: That the Board of Directors of the Company duly adopted resolutions setting forth a proposed amendment of the Certificate of Incorporation of the Company, which Certificate of Incorporation was filed with the Secretary of State of Delaware on March 15, 1993, as amended by a Certificate of Amendment filed with the Secretary of State of Delaware on June 4, 1993, approving said amendment, declaring it to be advisable and recommending said amendment to the stockholders of the Company for approval thereof. The resolutions setting forth the proposed amendment are as follows:

RESOLVED, that this Board of Directors hereby determines that it is desirable and in the best interests of the Company and its stockholders to amend the Company’s Certificate of Incorporation, as amended, to increase the number of shares of authorized Common Stock (the “Certificate Amendment”):

RESOLVED, that, pursuant to Section 242 of the Delaware General Corporation Law (the “DGCL”), and authority granted to and vested in the Board of Directors by the provisions of the Company’s Certificate of Incorporation, as amended, the Board of Directors hereby approves the following proposed amendment to the Company’s Certificate of Incorporation, as amended, and directs that such amendment be submitted to the stockholders of the Company for approval at the Special Meeting provided for in these resolutions in the form set forth below:

“Resolved, that the first sentence of Article FOURTH of the Company’s Certificate of Incorporation, as amended, be, and it hereby is, amended to read as follows:

FOURTH: The total number of shares of capital stock of the corporation shall be 105.000,000, which shall consist of 5,000,000 shares of Preferred Stock, par value of $.01 per share, and 100,000,000 shares of Common Stock, par value of $.01 per share. “

RESOLVED, that, if the stockholders shall have voted for the Certificate Amendment, the Authorized Officers of the Company be, and each of them hereby is, authorized and directed, in the name and on behalf of the Company, to prepare, execute and file with the Secretary of State of the State of Delaware a certificate of amendment to the Certificate of Incorporation, as amended, in such form with such changes therein as the officers executing the same shall approve, the signature of such officers of the Company thereon to be conclusive evidence of the approval of such changes.

SECOND: That at a special meeting of stockholders held on February 1, 2001, the foregoing amendment was duly approved by more than a majority of the outstanding shares of Common Stock of the Company entitled to vote thereon, all in accordance with Section 242 of the Delaware General Corporation Law.

IN WITNESS WHEREOF, the Company has caused this certificate to be signed by D. Peter Canty, its President and Chief Executive Officer, and attested by Andrew L. Gates, III, its Secretary, this 1 st day of February. 2001.

ATTEST:	STONE ENERGY CORPORATION
/s/ Andrew L. Gates	By:	/s/ D. Peter Canty
Andrew L. Gates, III Secretary		D. Peter Canty President and Chief Executive Officer

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 12:00 PM 02/19/2002

02010 7226—2329102

CERTIFICATE OF OWNERSHIP AND MERGER

OF

CONOCO OFFSHORE INC.

(a Delaware corporation)

WITH AND INTO

STONE ENERGY CORPORATION

(a Delaware corporation)

It is hereby certified that:

1. Stone Energy Corporation (the “Corporation”) is a business corporation of the State of Delaware.

2. The Corporation is the owner of all of the outstanding shares of the stock of Conoco Offshore Inc. which is also a business corporation of the State of Delaware.

3. The Corporation hereby merges Conoco Offshore Inc. into the Corporation.

4. On February 15,2002, the Board of Directors of the Corporation adopted the following resolutions to merge Conoco Offshore Inc. into the Corporation:

RESOLVED that the Board of Directors finds it advisable and in the best interest of the Corporation that Conoco Offshore Inc. be merged into this Corporation, and that the merger contemplated therein of Conoco Offshore Inc. with and into the Corporation be, and hereby is, in all respects approved; and further

RESOLVED that Conoco Offshore Inc. be merged into this Corporation, and that all of the estate, property, rights, privileges, powers and franchises of Conoco Offshore Inc. be vested in and held and enjoyed by this Corporation as fully and entirely and without change or diminution as the same were before held and enjoyed by Conoco Offshore Inc. in its name; and further

RESOLVED that this Corporation shall assume all of the obligations of Conoco Offshore Inc.; and further

RESOLVED that this Corporation shall cause to be executed and filed and/or recorded the documents prescribed by the laws of the State of Delaware and by the laws of any other appropriate jurisdiction and will cause to be performed all necessary acts within the State of Delaware and within any other appropriate jurisdiction to effect the above resolutions.

Executed on: February 15, 2002

STONE ENERGY CORPORATION
By:	/s/ D. Pete Canty
Name:	D. Pete Canty
Title:	President and Chief Executive Officer

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, David H. Welch, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Stone Energy Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ David H. Welch
August 7, 2012	David H. Welch
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Kenneth H. Beer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Stone Energy Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Kenneth H. Beer
August 7, 2012	Kenneth H. Beer
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER

Pursuant to 18 U.S.C. § 1350 and in connection with the accompanying report on Form 10-Q of Stone Energy Corporation (the “Company”) for the quarterly period ended June 30, 2012 that is being filed concurrently with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, to the best of his knowledge, that:

(i.) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii.) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 7, 2012

/s/ David H. Welch

David H. Welch

President and Chief Executive Officer

/s/ Kenneth H. Beer

Kenneth H. Beer

Executive Vice President and Chief Financial Officer

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Guarantor Financial Statements (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities:
Net income	$ 30,547	$ 57,196	$ 81,521	$ 96,988
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	87,133	72,646	171,708	140,315
Accretion expense	8,255	7,717	16,521	15,434
Deferred income tax provision	19,035	35,281	46,474	57,664
Settlement of asset retirement obligations			(21,918)	(33,568)
Non-cash stock compensation expense			4,271	3,138
Excess tax benefits			(795)	(1,060)
Non-cash derivative income			(2,758)	(118)
Loss on early extinguishment of debt				607
Non-cash interest expense			5,278	959
Change in current income taxes			(3,921)	(6,245)
Increase in accounts receivable			(37,517)	(37,428)
Increase in other current assets			(124)	(476)
Decrease in inventory			36	1,163
Increase in accounts payable			8,413	5,854
Decrease in other current liabilities			(17,304)	4,440
Other			(465)	(1,135)
Net cash provided by operating activities			249,420	246,532
Cash flows from investing activities:
Investment in oil and gas properties			(275,813)	(272,451)
Proceeds from sale of oil and gas properties, net of expenses			403	6,692
Sale of fixed assets			149
Investment in fixed and other assets			(1,900)	(894)
Net cash used in investing activities			(277,161)	(266,653)
Cash flows from financing activities:
Proceeds from bank borrowings			25,000
Repayments of bank borrowings			(70,000)
Proceeds from issuance of senior convertible notes			300,000
Financing costs of senior convertible notes			(8,855)
Proceeds from Sold Warrants			40,170
Payments for Purchased Call Options			(70,830)
Deferred financing costs				(4,017)
Excess tax benefits			795	1,060
Net payments for share based compensation			(3,141)	(1,857)
Net cash provided by (used in) financing activities			213,139	(4,814)
Net change in cash and cash equivalents			185,398	(24,935)
Cash and cash equivalents, beginning of period			38,451	106,956
Cash and cash equivalents, end of period	223,849	82,021	223,849	82,021
Parent [Member]
Cash flows from operating activities:
Net income	30,547	57,196	81,521	96,988
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	15,071	(24)	26,548	5,918
Accretion expense	137	4	285	8
Deferred income tax provision	(10,391)	(4,136)	(20,154)	(11,747)
Non-cash stock compensation expense			4,271	3,138
Excess tax benefits			(795)	(1,060)
Loss on early extinguishment of debt				607
Non-cash interest expense				(116,944)
Non-cash interest expense			5,278	959
Change in current income taxes			(3,921)	(3,893)
Change in intercompany receivable/payables			142,965	149,716
Increase in accounts receivable			(36,705)	(15,198)
Increase in other current assets			(124)	(491)
Decrease in inventory			36	1,149
Increase in accounts payable			5,238	2,494
Decrease in other current liabilities			(12,924)	(224)
Other			(118,152)	(21)
Net cash provided by operating activities			73,367	111,399
Cash flows from investing activities:
Investment in oil and gas properties			(129,792)	(134,792)
Proceeds from sale of oil and gas properties, net of expenses			403	5,575
Sale of fixed assets			149
Investment in fixed and other assets			(1,900)	(894)
Net cash used in investing activities			(131,140)	(130,111)
Cash flows from financing activities:
Proceeds from bank borrowings			25,000
Repayments of bank borrowings			(70,000)
Proceeds from issuance of senior convertible notes			300,000
Financing costs of senior convertible notes			(8,855)
Proceeds from Sold Warrants			40,170
Payments for Purchased Call Options			(70,830)
Deferred financing costs				(4,017)
Excess tax benefits			795	1,060
Net payments for share based compensation			(3,141)	(1,857)
Net cash provided by (used in) financing activities			213,139	(4,814)
Net change in cash and cash equivalents			155,366	(23,526)
Cash and cash equivalents, beginning of period			37,389	105,115
Cash and cash equivalents, end of period	192,755	81,589	192,755	81,589
Guarantor Subsidiary [Member]
Cash flows from operating activities:
Net income	52,312	63,621	118,450	116,944
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	71,969	72,426	144,969	133,936
Accretion expense	8,033	7,622	16,065	15,244
Deferred income tax provision	29,426	39,417	66,628	69,411
Settlement of asset retirement obligations			(21,918)	(33,568)
Non-cash derivative income			(2,758)	(118)
Non-cash interest expense				291
Change in current income taxes				(2,352)
Change in intercompany receivable/payables			(142,720)	(149,290)
Increase in accounts receivable			(833)	(22,239)
Increase in other current assets				15
Decrease in inventory				14
Increase in accounts payable			3,214	3,360
Decrease in other current liabilities			(4,380)	4,664
Other			(663)	(1,114)
Net cash provided by operating activities			176,054	135,198
Cash flows from investing activities:
Investment in oil and gas properties			(146,022)	(137,655)
Proceeds from sale of oil and gas properties, net of expenses				1,117
Net cash used in investing activities			(146,022)	(136,538)
Cash flows from financing activities:
Net change in cash and cash equivalents			30,032	(1,340)
Cash and cash equivalents, beginning of period			926	1,659
Cash and cash equivalents, end of period	30,958	319	30,958	319
Non-Guarantor Subsidiaries [Member]
Cash flows from operating activities:
Net income	141	(162)	(99)	(291)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	93	244	191	461
Accretion expense	85	91	171	182
Change in intercompany receivable/payables			(245)	(426)
Increase in accounts receivable			21	9
Increase in accounts payable			(39)
Other			(1)
Net cash provided by operating activities			(1)	(65)
Cash flows from investing activities:
Investment in oil and gas properties			1	(4)
Net cash used in investing activities			1	(4)
Cash flows from financing activities:
Net change in cash and cash equivalents				(69)
Cash and cash equivalents, beginning of period			136	182
Cash and cash equivalents, end of period	136	113	136	113
Eliminations [Member]
Cash flows from operating activities:
Net income	(52,453)	(63,459)	(118,351)	(116,653)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Non-cash interest expense				116,653
Other			118,351
Cash flows from investing activities:
Proceeds from sale of oil and gas properties, net of expenses			403
Cash flows from financing activities:
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period

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Acquisitions (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011	Jun. 18, 2012	Jun. 18, 2012 Mississippi Canyon Block 72 [Member]	Dec. 28, 2011 BP Exploration and Production Inc [Member]	Dec. 28, 2011 Adjacent Mississippi Canyon Block 29 [Member]	Dec. 28, 2011 Mica Field [Member]	Dec. 28, 2011 Pompano Field [Member]	Jun. 18, 2012 Block Deep Water Pompano Field Mississippi Canyon [Member]	Jun. 18, 2012 Mississippi Canyon Block 29 [Member]
Allocation of the recorded value of net assets acquired in the transaction
Proved oil and gas properties			$ 39.2
Unevaluated oil and gas properties			1.6
Asset retirement obligations			(14.4)
Total fair value of net assets			26.4
Pro forma of financial information
Revenues	279.4	515.0
Income from operations	117.2	204.9
Net income	72.1	125.5
Basic earnings per share	$ 1.47	$ 2.56
Diluted earnings per share	$ 1.47	$ 2.56
Acquisitions and Divestitures (Textual) [Abstract]
Percentage of working interest acquired				10.00%					25.00%	14.00%
Percentage of operated working capital acquired					75.00%	51.00%
Percentage of non-operated working capital acquired							50.00%	75.00%
Cash consideration transferred			$ 26.4

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Derivative Instruments and Hedging Activities (Details) (Commodity contracts [Member], USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Asset Derivatives
Fair Value of Derivative Instruments, Assets	$ 103.2	$ 47.7
Liability Derivatives
Fair Value of Derivative Instruments, Liabilities	(0.4)	(11.9)
Current assets [Member]
Asset Derivatives
Fair Value of Derivative Instruments, Assets	61.2	25.2
Current liabilities [Member]
Liability Derivatives
Fair Value of Derivative Instruments, Liabilities		(11.1)
Long-term assets [Member]
Asset Derivatives
Fair Value of Derivative Instruments, Assets	42.0	22.5
Long-term liabilities [Member]
Liability Derivatives
Fair Value of Derivative Instruments, Liabilities	$ (0.4)	$ (0.8)

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Guarantor Financial Statements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 223,849	$ 38,451	$ 82,021	$ 106,956
Accounts receivable	148,934	118,139
Fair value of hedging contracts	61,203	25,177
Current income tax receivable	24,353	19,946
Deferred taxes	7,474	26,072
Inventory	4,607	4,643
Other current assets	914	791
Total current assets	471,334	233,219
Oil and gas properties, full cost method
Proved	6,927,917	6,648,168
Less: accumulated depreciation, depletion and amortization	(5,339,251)	(5,174,729)
Net proved oil and gas properties	1,588,666	1,473,439
Unevaluated	435,384	401,609
Other property and equipment, net	11,910	11,172
Fair value of hedging contracts	41,981	22,543
Other assets, net	33,955	23,769
Total assets	2,583,230	2,165,751
Current liabilities:
Accounts payable to vendors	143,389	102,946
Undistributed oil and gas proceeds	27,248	27,328
Accrued interest	15,735	14,059
Fair value of hedging contracts		11,122
Asset retirement obligations	75,493	62,676
Other current liabilities	9,470	28,370
Total current liabilities	271,335	246,501
Long-term debt	808,050	620,000
Deferred taxes	298,551	247,835
Asset retirement obligations	351,785	363,103
Fair value of hedging contracts	366	815
Other long-term liabilities	20,651	19,668
Total liabilities	1,750,738	1,497,922
Commitments and contingencies
Stockholders' equity:
Common stock	483	481
Treasury stock (16,582 shares, at cost)	(860)	(860)
Additional paid-in capital	1,380,568	1,338,565
Accumulated earnings (deficit)	(610,704)	(692,225)
Accumulated other comprehensive income	63,005	21,868
Total stockholders' equity	832,492	667,829
Total liabilities and stockholders' equity	2,583,230	2,165,751
Parent [Member]
Current assets:
Cash and cash equivalents	192,755	37,389	81,589	105,115
Accounts receivable	73,168	36,463
Current income tax receivable	24,353	19,946
Deferred taxes	2,031	8,269
Inventory	4,324	4,360
Other current assets	914	791
Total current assets	297,545	107,218
Oil and gas properties, full cost method
Proved	815,886	696,975
Less: accumulated depreciation, depletion and amortization	(335,378)	(309,421)
Net proved oil and gas properties	480,508	387,554
Unevaluated	290,751	246,269
Other property and equipment, net	11,910	11,172
Other assets, net	32,387	20,873
Investment in subsidiary	893,122	733,533
Total assets	2,006,223	1,506,619
Current liabilities:
Accounts payable to vendors	263,942	78,170
Undistributed oil and gas proceeds	25,566	26,036
Accrued interest	15,735	14,059
Other current liabilities	8,844	22,974
Total current liabilities	314,087	141,239
Long-term debt	808,050	620,000
Deferred taxes	30,278	56,970
Asset retirement obligations	7,377	7,626
Other long-term liabilities	13,939	12,955
Total liabilities	1,173,731	838,790
Commitments and contingencies
Stockholders' equity:
Common stock	483	481
Treasury stock (16,582 shares, at cost)	(860)	(860)
Additional paid-in capital	1,380,568	1,338,565
Accumulated earnings (deficit)	(610,704)	(692,225)
Accumulated other comprehensive income	63,005	21,868
Total stockholders' equity	832,492	667,829
Total liabilities and stockholders' equity	2,006,223	1,506,619
Guarantor Subsidiary [Member]
Current assets:
Cash and cash equivalents	30,958	926	319	1,659
Accounts receivable	218,282	81,452
Fair value of hedging contracts	61,203	25,177
Deferred taxes	5,443	17,803
Inventory	283	283
Total current assets	316,169	125,641
Oil and gas properties, full cost method
Proved	6,106,980	5,946,141
Less: accumulated depreciation, depletion and amortization	(5,001,323)	(4,862,949)
Net proved oil and gas properties	1,105,657	1,083,192
Unevaluated	144,633	155,340
Fair value of hedging contracts	41,981	22,543
Other assets, net	1,568	2,896
Investment in subsidiary	(374)	(273)
Total assets	1,609,634	1,389,339
Current liabilities:
Accounts payable to vendors	23,541	25,866
Undistributed oil and gas proceeds	1,682	1,292
Fair value of hedging contracts		11,122
Asset retirement obligations	75,493	62,676
Other current liabilities	626	5,396
Total current liabilities	101,342	106,352
Deferred taxes	268,273	190,865
Asset retirement obligations	339,821	351,061
Fair value of hedging contracts	366	815
Other long-term liabilities	6,712	6,713
Total liabilities	716,514	655,806
Commitments and contingencies
Stockholders' equity:
Additional paid-in capital	1,724,232	1,724,232
Accumulated earnings (deficit)	(894,117)	(1,012,567)
Accumulated other comprehensive income	63,005	21,868
Total stockholders' equity	893,120	733,533
Total liabilities and stockholders' equity	1,609,634	1,389,339
Non-Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents	136	136	113	182
Accounts receivable	1,578	1,353
Total current assets	1,714	1,489
Oil and gas properties, full cost method
Proved	5,051	5,052
Less: accumulated depreciation, depletion and amortization	(2,550)	(2,359)
Net proved oil and gas properties	2,501	2,693
Total assets	4,215	4,182
Current liabilities:
Accounts payable to vendors		39
Total current liabilities		39
Asset retirement obligations	4,587	4,416
Total liabilities	4,587	4,455
Commitments and contingencies
Stockholders' equity:
Additional paid-in capital	1,639	1,639
Accumulated earnings (deficit)	(2,011)	(1,912)
Total stockholders' equity	(372)	(273)
Total liabilities and stockholders' equity	4,215	4,182
Eliminations [Member]
Current assets:
Cash and cash equivalents
Accounts receivable	(144,094)	(1,129)
Total current assets	(144,094)	(1,129)
Oil and gas properties, full cost method
Investment in subsidiary	(892,748)	(733,260)
Total assets	(1,036,842)	(734,389)
Current liabilities:
Accounts payable to vendors	(144,094)	(1,129)
Total current liabilities	(144,094)	(1,129)
Total liabilities	(144,094)	(1,129)
Commitments and contingencies
Stockholders' equity:
Additional paid-in capital	(1,725,871)	(1,725,871)
Accumulated earnings (deficit)	896,128	1,014,479
Accumulated other comprehensive income	(63,005)	(21,868)
Total stockholders' equity	(892,748)	(733,260)
Total liabilities and stockholders' equity	$ (1,036,842)	$ (734,389)

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Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

Note 3 – Derivative Instruments and Hedging Activities

Our hedging strategy is designed to protect our near and intermediate term cash flow from future declines in oil and natural gas prices. This protection is essential to capital budget planning, which is sensitive to expenditures that must be committed to in advance such as rig contracts and the purchase of tubular goods. We enter into hedging transactions to secure a commodity price for a portion of future production that is acceptable at the time of the transaction. These hedges are designated as cash flow hedges upon entering into the contract. We do not enter into hedging transactions for trading purposes. We have no fair value hedges.

The nature of a derivative instrument must be evaluated to determine if it qualifies for hedge accounting treatment. If the instrument qualifies for hedge accounting treatment, it is recorded as either an asset or liability measured at fair value and subsequent changes in the derivative’s fair value are recognized in equity through other comprehensive income (loss), net of related taxes, to the extent the hedge is considered effective. Additionally, monthly settlements of effective hedges are reflected in revenue from oil and gas production and cash flows from operations. Instruments not qualifying for hedge accounting treatment are recorded in the balance sheet at fair value and changes in fair value are recognized in earnings through derivative expense (income). Typically, a small portion of our derivative contracts are determined to be ineffective. This is because oil and natural gas price changes in the markets in which we sell our products are not 100% correlative to changes in the underlying price basis indicated in the derivative contracts. Monthly settlements of ineffective hedges are recognized in earnings through derivative expense (income) and cash flows from operations.

We have entered into fixed-price swaps with various counterparties for a portion of our expected 2012, 2013, 2014 and 2015 oil and natural gas production from the Gulf Coast Basin. Some of our fixed-price oil swap settlements are based on an average of the New York Mercantile Exchange (“NYMEX”) closing price for West Texas Intermediate (“WTI”) during the entire calendar month, and some are based on the average of the Intercontinental Exchange (“ICE”) closing price for Brent crude oil during the entire calendar month. Our fixed-price gas swap settlements are based on the NYMEX price for the last day of a respective contract month. Swaps typically provide for monthly payments by us if prices rise above the swap price or to us if prices fall below the swap price. Our fixed-price swap contracts are with The Toronto-Dominion Bank, Barclays Bank PLC, BNP Paribas, The Bank of Nova Scotia, Bank of America and Natixis.

All of our derivative instruments at June 30, 2012 and December 31, 2011 were designated as effective cash flow hedges; however, during the six-month periods ended June 30, 2012 and 2011, certain of our derivative contracts were determined to be partially ineffective. The following tables disclose the location and fair value amounts of derivative instruments reported in our balance sheet at June 30, 2012 and December 31, 2011.

Fair Value of Derivative Instruments at June 30, 2012
(in millions)
	Asset Derivatives			Liability Derivatives
Description	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Current assets: Fair value of hedging contracts	$	61.2	Current liabilities: Fair value of hedging contracts		($—	)
	Long-term assets: Fair value of hedging contracts		42.0	Long-term liabilities: Fair value of hedging contracts		(0.4	)
		$	103.2			($0.4	)
Fair Value of Derivative Instruments at December 31, 2011
(in millions)
	Asset Derivatives			Liability Derivatives
Description	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Current assets: Fair value of hedging contracts	$	25.2	Current liabilities: Fair value of hedging contracts	($	11.1	)
	Long-term assets: Fair value of hedging contracts		22.5	Long-term liabilities: Fair value of hedging contracts		(0.8	)
		$	47.7		($	11.9	)

The following tables disclose the effect of derivative instruments in the statement of operations for the three and six-month periods ended June 30, 2012 and 2011.

The Effect of Derivative Instruments on the Statement of Operations for the Three Months Ended June 30, 2012 and 2011 (in millions)
Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivatives (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b)						Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion)
	2012		2011		Location	2012		2011			Location	2012		2011
Commodity contracts	$	63.2	$	36.1	Operating revenue - oil/gas production	$	9.4	($	10.5	)	Derivative income, net	$	5.4	$	1.4
Total	$	63.2	$	36.1		$	9.4	($	10.5	)		$	5.4	$	1.4

(a) Net of related tax effect of $38.1 million and $20.8 million for the three months ended June 30, 2012 and 2011, respectively.

(b) For the three months ended June 30, 2012, effective hedging contracts increased oil revenue by $2.9 million and increased gas revenue by $6.5 million. For the three months ended June 30, 2011, effective hedging contracts decreased oil revenue by $14.3 million and increased gas revenue by $3.8 million.

The Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended June 30, 2012 and 2011 (in millions)
Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivatives (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b)						Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion)
	2012		2011		Location	2012		2011			Location	2012		2011
Commodity contracts	$	41.1	$	3.6	Operating revenue - oil/gas production	$	8.4	($	14.4	)	Derivative income (expense), net	$	4.9	($	0.8	)
Total	$	41.1	$	3.6		$	8.4	($	14.4	)		$	4.9	($	0.8	)

(a) Net of related tax effect of $23.7 million and $2.1 million for the six months ended June 30, 2012 and 2011, respectively.

(b) For the six months ended June 30, 2012, effective hedging contracts decreased oil revenue by $2.9 million and increased gas revenue by $11.3 million. For the six months ended June 30, 2011, effective hedging contracts decreased oil revenue by $22.8 million and increased gas revenue by $8.4 million.

At June 30, 2012, we had accumulated other comprehensive income of $63.0 million, net of tax, which related to the fair value of our swap contracts that were outstanding as of June 30, 2012. We believe that approximately $36.9 million of the accumulated other comprehensive income will be reclassified into earnings in the next twelve months.

The following table illustrates our hedging positions for calendar years 2012, 2013, 2014 and 2015 as of August 2, 2012:

	Fixed-Price Swaps NYMEX (except where noted)
	Natural Gas				Oil
	Daily Volume (MMBtus/d)		Swap Price ($)		Daily  Volume (Bbls/d)			Swap Price ($)
2012		10,000		5.035		1,000			90.30
2012		10,000		5.040		1,000			90.41
2012		10,000		5.050		1,000			90.45
2012						1,000			95.50
2012						2,000			97.60
2012						1,000			98.15
2012						1,000			100.00
2012						1,000			101.55
2012						1,000			104.25
2012						1,000	†		111.02
2013		10,000		5.270		1,000			92.80
2013		10,000		5.320		1,000			94.45
2013						1,000			94.60
2013						1,000			97.15
2013						1,000			101.53
2013						1,000			103.00
2013						1,000			103.15
2013						1,000			104.25
2013						1,000			104.47
2013						1,000			104.50
2013						1,000	†		107.30
2014		10,000		4.000		1,000			90.06
2014						1,000			98.00
2014						1,000			98.30
2014						1,000			99.65
2014						1,000	†		103.30
2015		10,000		4.005

† Brent oil contract

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Long - Term Debt (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Computation of long term debt
Long-term debt	$ 808,050	$ 620,000
6.75 % Senior Subordinated Notes due 2014 [Member]
Computation of long term debt
Long-term debt	200,000	200,000
8.625 % Senior Notes due 2017 [Member]
Computation of long term debt
Long-term debt	375,000	375,000
1.75 % Senior Convertible Notes due 2017 [Member]
Computation of long term debt
Long-term debt	233,100
Bank debt [Member]
Computation of long term debt
Long-term debt		$ 45,000

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Derivative Instruments and Hedging Activities (Details Textual) (USD $)	3 Months Ended	6 Months Ended			3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Jun. 30, 2012 Oil [Member]	Jun. 30, 2011 Oil [Member]	Jun. 30, 2012 Oil [Member]	Jun. 30, 2011 Oil [Member]	Jun. 30, 2012 Natural Gas [Member]	Jun. 30, 2011 Natural Gas [Member]	Jun. 30, 2012 Natural Gas [Member]	Jun. 30, 2011 Natural Gas [Member]
Derivative Instruments, Gain (Loss) Recognized in Income, Net
Increase in gas revenue owing to effective hedging contracts									$ 6,500,000	$ 3,800,000	$ 11,300,000	$ 8,400,000
Decrease/Increase in oil revenue owing to effective hedging contracts					2,900,000	14,300,000	2,900,000	22,800,000
Derivative Instruments and Hedging Activities (Textual) [Abstract]
Maximum correlation between price of oil & natural gas in market and underlying price basis indicative in the derivative contract		100.00%
Derivative Instruments net of related tax effect	20,800,000	23,700,000	2,100,000
Accumulated other comprehensive Income, net of tax		63,005,000		21,868,000
Accumulated other comprehensive Income, to be reclassified into earning in the next twelve months		$ 36,900,000

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Long -Term Debt (Details 1) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Summary of records from the proceeds of 2017 Convertible Notes
Long-term debt	$ 808,050,000	$ 620,000,000
Senior Convertible Notes Due 2017 [Member]
Summary of records from the proceeds of 2017 Convertible Notes
Cash	260,500,000
Other assets (deferred financing costs)	6,800,000
Long-term debt	233,100,000
Additional paid-in capital	$ (38,100,000)

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Long - Term Debt (Details Textual) (USD $)	6 Months Ended		6 Months Ended						6 Months Ended						6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 Bank Credit Facility [Member]	Aug. 02, 2012 Bank Credit Facility [Member]	Jun. 30, 2012 8.625 % Senior Notes due 2017 [Member]	Dec. 31, 2011 8.625 % Senior Notes due 2017 [Member]	Jun. 30, 2012 6.75 % Senior Subordinated Notes due 2014 [Member]	Dec. 31, 2011 6.75 % Senior Subordinated Notes due 2014 [Member]	Jun. 30, 2012 Bank debt [Member]	Aug. 02, 2012 Bank debt [Member]	Dec. 31, 2011 Bank debt [Member]	Apr. 26, 2011 Bank debt [Member]	Aug. 02, 2012 Letter of Credit [Member]	Jun. 30, 2012 Letter of Credit [Member]	Jun. 30, 2012 Senior Convertible Notes Due 2017 [Member]	Jun. 29, 2012 Senior Convertible Notes Due 2017 [Member]	Mar. 06, 2012 Senior Convertible Notes Due 2017 [Member]
Long Term Debt (Textual) [Abstract]
Credit facility initial date									Apr. 26, 2011
Redetermined base borrowing and Credit Facility			$ 400,000,000									$ 700,000,000
Bank credit facility maturing with Syndicated Bank Group									Sep. 15, 2014
Maturity of new credit facility if note issue under 2004 indenture are retired on or before April 15, 2014			Apr. 26, 2015						Apr. 15, 2014						Apr. 01, 2017
Initial bank and availability under facility									400,000,000	372,900,000
Aggregate Principal amount of Senior Subordinated Notes																	300,000,000
Outstanding borrowing under bank credit facility				0					0				27,100,000	27,100,000
Oil and gas reserve as a proportion of discounted present value of the future net cash flow, for Mortgage									80.00%
Proceeds from issuance of senior notes	300,000,000														291,100,000
Interest rate due on convertible note due 2017																	1.75%
Initial conversion rate of convertible note 2017															Initial conversion rate of 23.4449 shares of our common stock per $1,000 principal amount of 2017 Convertible Notes
Initial conversion price of convertible note 2017															$ 42.65
Closing share price																$ 25.34
Convertible notes principal amount															1,000
Percentage of current conversion price lower than closing sale price															130.00%
Maximum trading day															20 days
Consecutive trading days ending on last trading day															30 days
Period in which distribution is made to all holders of common stock rights, option or warrants															45 days
Consecutive trading days immediately preceding, but excluding, declaration date															10 days
Percentage in which distribution has per share value exceeding closing sale price of common stock															10.00%
Percentage in which closing sale price of common stock is excess of convertible notes															98.00%
Number of consecutive business day															5 days
Number of consecutive trading day															P5D
Number consecutive trading-day conversion period															25 days
Payment for call option															70,800,000
Strike price per share															$ 55.91
Percentage of convertible notes principal amount															100.00%
Anti-dilution adjustments for purchases of call option															7,033,470
Proceeds from sale of sold warrants															40,100,000
Carrying amount of liability component															229,200,000
Carrying amount of equity component															70,800,000
Transaction costs allocated to liability and equity components															8,900,000
Accrued interest	15,735,000	14,059,000
Long-term debt	$ 808,050,000	$ 620,000,000			$ 375,000,000	$ 375,000,000	$ 200,000,000	$ 200,000,000			$ 45,000,000				$ 233,100,000

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Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Note 2 – Earnings Per Share

The following table sets forth the calculation of basic and diluted weighted average shares outstanding and earnings per share for the indicated periods.

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(in thousands, except per share data)
Income (numerator):
Basic:
Net income	$	30,547		$	57,196		$	81,521		$	96,988
Net income attributable to participating securities		(742	)		(1,192	)		(1,982	)		(2,022	)
Net income attributable to common stock - basic	$	29,805		$	56,004		$	79,539		$	94,966
Diluted:
Net income	$	30,547		$	57,196		$	81,521		$	96,988
Net income attributable to participating securities		(742	)		(1,191	)		(1,980	)		(2,021	)
Net income attributable to common stock - diluted	$	29,805		$	56,005		$	79,541		$	94,967
Weighted average shares (denominator):
Weighted average shares - basic		48,303			47,961			48,279			47,930
Diluted effect of stock options		41			45			43			43
Weighted average shares - diluted		48,344			48,006			48,322			47,973
Basic income per common share	$	0.62		$	1.17		$	1.65		$	1.98
Diluted income per common share	$	0.62		$	1.17		$	1.65		$	1.98

Stock options that were considered antidilutive because the exercise price of the option exceeded the average price of our common stock for the applicable period totaled approximately 369,000 and 398,000 shares for the three and six-month periods ended June 30, 2012 and 2011, respectively.

During the three months ended June 30, 2012 and 2011, respectively, approximately 23,000 and 73,000 shares of common stock were issued upon the vesting of restricted stock by employees and nonemployee directors. During the six months ended June 30, 2012 and 2011, respectively, approximately 255,000 and 253,000 shares of common stock were issued upon the vesting of restricted stock by employees and nonemployee directors.

Because it is management’s stated intention to redeem the principal amount of our 1 ³/₄ % Senior Convertible Notes due 2017 (the “2017 Convertible Notes”) (see Note 4 – Long-Term Debt) in cash, we have used the treasury method for determining potential dilution in the diluted earnings per share computation. Since the average price of our common stock was less than the effective conversion price for such notes during the reporting period, the 2017 Convertible Notes were not dilutive for such period. Additionally, since the average price of our common stock was less than the strike price of the Sold Warrants (as defined in Note 4 – Long-Term Debt) for the reporting period, such warrants were also not dilutive for such period.

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Asset Retirement Obligations (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Changes in Asset Retirement Obligations
Asset retirement obligations as of the beginning of the period, including current portion			$ 425,800,000
Liabilities settled			(21,900,000)
Liabilities assumed			14,500,000
Divestment of Properties			(7,600,000)
Accretion expense	8,255,000	7,717,000	16,521,000	15,434,000
Asset retirement obligations as of the end of the year, including current portion	$ 427,300,000		$ 427,300,000

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Condensed Consolidated Balance Sheet (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 223,849	$ 38,451	$ 82,021	$ 106,956
Accounts receivable	148,934	118,139
Fair value of hedging contracts	61,203	25,177
Current income tax receivable	24,353	19,946
Deferred taxes	7,474	26,072
Inventory	4,607	4,643
Other current assets	914	791
Total current assets	471,334	233,219
Oil and gas properties, full cost method of accounting:
Proved	6,927,917	6,648,168
Less: accumulated depreciation, depletion and amortization	(5,339,251)	(5,174,729)
Net proved oil and gas properties	1,588,666	1,473,439
Unevaluated	435,384	401,609
Other property and equipment, net	11,910	11,172
Fair value of hedging contracts	41,981	22,543
Other assets, net	33,955	23,769
Total assets	2,583,230	2,165,751
Current liabilities:
Accounts payable to vendors	143,389	102,946
Undistributed oil and gas proceeds	27,248	27,328
Accrued interest	15,735	14,059
Fair value of hedging contracts		11,122
Asset retirement obligations	75,493	62,676
Other current liabilities	9,470	28,370
Total current liabilities	271,335	246,501
Long-term debt	808,050	620,000
Deferred taxes	298,551	247,835
Asset retirement obligations	351,785	363,103
Fair value of hedging contracts	366	815
Other long-term liabilities	20,651	19,668
Total liabilities	1,750,738	1,497,922
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; authorized 100,000,000 shares; issued 48,331,956 and 48,076,860 shares, respectively	483	481
Treasury stock (16,582 shares, at cost)	(860)	(860)
Additional paid-in capital	1,380,568	1,338,565
Accumulated deficit	(610,704)	(692,225)
Accumulated other comprehensive income	63,005	21,868
Total stockholders' equity	832,492	667,829
Total liabilities and stockholders' equity	$ 2,583,230	$ 2,165,751

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Condensed Consolidated Statement of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities:
Net income	$ 81,521	$ 96,988
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	171,708	140,315
Accretion expense	16,521	15,434
Deferred income tax provision	46,474	57,664
Settlement of asset retirement obligations	(21,918)	(33,568)
Non-cash stock compensation expense	4,271	3,138
Excess tax benefits	(795)	(1,060)
Non-cash derivative income	(2,758)	(118)
Loss on early extinguishment of debt		607
Non-cash interest expense	5,278	959
Change in current income taxes	(3,921)	(6,245)
Increase in accounts receivable	(37,517)	(37,428)
Increase in other current assets	(124)	(476)
Decrease in inventory	36	1,163
Increase in accounts payable	8,413	5,854
Increase (decrease) in other current liabilities	(17,304)	4,440
Other	(465)	(1,135)
Net cash provided by operating activities	249,420	246,532
Cash flows from investing activities:
Investment in oil and gas properties	(275,813)	(272,451)
Proceeds from sale of oil and gas properties, net of expenses	403	6,692
Sale of fixed assets	149
Investment in fixed and other assets	(1,900)	(894)
Net cash used in investing activities	(277,161)	(266,653)
Cash flows from financing activities:
Proceeds from bank borrowings	25,000
Repayments of bank borrowings	(70,000)
Proceeds from issuance of senior convertible notes	300,000
Financing costs of senior convertible notes	(8,855)
Proceeds from Sold Warrants	40,170
Payments for Purchased Call Options	(70,830)
Deferred financing costs		(4,017)
Excess tax benefits	795	1,060
Net payments for share based compensation	(3,141)	(1,857)
Net cash provided by (used in) financing activities	213,139	(4,814)
Net change in cash and cash equivalents	185,398	(24,935)
Cash and cash equivalents, beginning of period	38,451	106,956
Cash and cash equivalents, end of period	$ 223,849	$ 82,021

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Fair Value Measurements (Details Textual) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Debt Instrument Value (Textual) [Abstract]
Long term debt, Book value	$ 808,050,000	$ 620,000,000
Convertible Notes Due 2017 [Member]
Debt Instrument Value (Textual) [Abstract]
Fair value of 2017 convertible notes	277,500,000
Liability attributable to Fair value of 2017 convertible	226,100,000
8.625 % Senior Notes Due 2017 [Member]
Debt Instrument Value (Textual) [Abstract]
Long term debt, Book value	375,000,000
Long term debt, Fair Value	384,400,000	386,300,000
Fair value of 2017 convertible notes		375,000,000
6.75 % Senior Notes Due 2014 [Member]
Debt Instrument Value (Textual) [Abstract]
Long term debt, Book value	200,000,000	200,000,000
Long term debt, Fair Value	$ 201,000,000	$ 199,000,000

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Guarantor Financial Statements (Tables)

6 Months Ended

Jun. 30, 2012

Guarantor Financial Statements [Abstract]

Condensed Consolidating Balance Sheet

CONDENSED CONSOLIDATING BALANCE SHEET

JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	192,755		$	30,958		$	136		$	—		$	223,849
Accounts receivable		73,168			218,282			1,578			(144,094	)		148,934
Fair value of hedging contracts		—			61,203			—			—			61,203
Current income tax receivable		24,353			—			—			—			24,353
Deferred taxes *		2,031			5,443			—			—			7,474
Inventory		4,324			283			—			—			4,607
Other current assets		914			—			—			—			914
Total current assets		297,545			316,169			1,714			(144,094	)		471,334
Oil and gas properties, full cost method:
Proved		815,886			6,106,980			5,051			—			6,927,917
Less: accumulated DD&A		(335,378	)		(5,001,323	)		(2,550	)		—			(5,339,251	)
Net proved oil and gas properties		480,508			1,105,657			2,501			—			1,588,666
Unevaluated		290,751			144,633			—			—			435,384
Other property and equipment, net		11,910			—			—			—			11,910
Fair value of hedging contracts		—			41,981			—			—			41,981
Other assets, net		32,387			1,568			—			—			33,955
Investment in subsidiary		893,122			(374	)		—			(892,748	)		—
Total assets	$	2,006,223		$	1,609,634		$	4,215			($1,036,842	)	$	2,583,230
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	263,942		$	23,541		$	—			($144,094	)	$	143,389
Undistributed oil and gas proceeds		25,566			1,682			—			—			27,248
Accrued interest		15,735			—			—			—			15,735
Asset retirement obligations		—			75,493			—			—			75,493
Other current liabilities		8,844			626			—			—			9,470
Total current liabilities		314,087			101,342			—			(144,094	)		271,335
Long-term debt		808,050			—			—			—			808,050
Deferred taxes *		30,278			268,273			—			—			298,551
Asset retirement obligations		7,377			339,821			4,587			—			351,785
Fair value of hedging contracts		—			366			—			—			366
Other long-term liabilities		13,939			6,712			—			—			20,651
Total liabilities		1,173,731			716,514			4,587			(144,094	)		1,750,738
Commitments and contingencies Stockholders’ equity:
Common stock		483			—			—			—			483
Treasury stock		(860	)		—			—			—			(860	)
Additional paid-in capital		1,380,568			1,724,232			1,639			(1,725,871	)		1,380,568
Accumulated earnings (deficit)		(610,704	)		(894,117	)		(2,011	)		896,128			(610,704	)
Accumulated other comprehensive income (loss)		63,005			63,005			—			(63,005	)		63,005
Total stockholders’ equity		832,492			893,120			(372	)		(892,748	)		832,492
Total liabilities and stockholders’ equity	$	2,006,223		$	1,609,634		$	4,215			($1,036,842	)	$	2,583,230

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

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		696,975			5,946,141			5,052			—			6,648,168
Less: accumulated DD&A		(309,421	)		(4,862,949	)		(2,359	)		—			(5,174,729	)
Net proved oil and gas properties		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 the guarantor subsidiary where related oil and gas properties reside.

Consolidating Statement of Operations

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	6,813		$	175,368		$	—		$	—		$	182,181
Gas production		5,865			22,281			—			—			28,146
Natural gas liquids production		1,710			8,156			—			—			9,866
Other operational income		762			77			113			—			952
Derivative income, net		—			5,416			—			—			5,416
Total operating revenue		15,150			211,298			113			—			226,561
Operating expenses:
Lease operating expenses		6,318			45,443			(206	)		—			51,555
Transportation, processing and gathering expenses		1,710			3,782			—			—			5,492
Other operational expenses		47			24			—			—			71
Production taxes		507			1,851			—			—			2,358
Depreciation, depletion, amortization		15,071			71,969			93			—			87,133
Accretion expense		137			8,033			85			—			8,255
Salaries, general and administrative		14,190			(1,047	)		—			—			13,143
Incentive compensation expense		2,398			—			—			—			2,398
Total operating expenses		40,378			130,055			(28	)		—			170,405
Income (loss) from operations		(25,228	)		81,243			141			—			56,156
Other (income) expenses:
Interest expense		7,672			12			—			—			7,684
Interest income		(74	)		(5	)		—			—			(79	)
Other income		(4	)		(362	)		—			—			(366	)
(Income) loss from investment in subsidiaries		(52,313	)		(140	)		—			52,453			—
Total other (income) expenses		(44,719	)		(495	)		—			52,453			7,239
Income (loss) before taxes		19,491			81,738			141			(52,453	)		48,917
Provision (benefit) for income taxes:
Current		(665	)		—			—			—			(665	)
Deferred		(10,391	)		29,426			—			—			19,035
Total income taxes		(11,056	)		29,426			—			—			18,370
Net income (loss)	$	30,547		$	52,312		$	141			($52,453	)	$	30,547
Comprehensive income (loss)	$	93,749		$	52,312		$	141			($52,453	)	$	93,749

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	732		$	174,625		$	—		$	—		$	175,357
Gas production		4,303			43,581			—			—			47,884
Natural gas liquids production		—			10,231			—			—			10,231
Other operational income		587			104			173			—			864
Derivative income, net		—			1,398			—			—			1,398
Total operating revenue		5,622			229,939			173			—			235,734
Operating expenses:
Lease operating expenses		390			45,218			—			—			45,608
Transportation, processing and gathering expenses		—			2,728			—			—			2,728
Other operational expenses		93			40			3			—			136
Production taxes		245			1,556			—			—			1,801
Depreciation, depletion, amortization		(24	)		72,426			244			—			72,646
Accretion expense		4			7,622			91			—			7,717
Salaries, general and administrative		10,562			48			—			—			10,610
Incentive compensation expense		2,333			—			—			—			2,333
Total operating expenses		13,603			129,638			338			—			143,579
Income (loss) from operations		(7,981	)		100,301			(165	)		—			92,155
Other (income) expenses:
Interest expense		1,979			1			—			—			1,980
Interest income		(53	)		—			—			—			(53	)
Other income		(13	)		(547	)		(3	)		—			(563	)
Other expense		69			—			—			—			69
Loss on early extinguishment of debt		607			—			—			—			607
(Income) loss from investment in subsidiaries		(63,621	)		162			—			63,459			—
Total other (income) expenses		(61,032	)		(384	)		(3	)		63,459			2,040
Income (loss) before taxes		53,051			100,685			(162	)		(63,459	)		90,115
Provision (benefit) for income taxes:
Current		(9	)		(2,353	)		—			—			(2,362	)
Deferred		(4,136	)		39,417			—			—			35,281
Total income taxes		(4,145	)		37,064			—			—			32,919
Net income (loss)	$	57,196		$	63,621			($162	)		($63,459	)	$	57,196
Comprehensive income (loss)	$	93,308		$	63,621			($162	)		($63,459	)	$	93,308

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	13,047		$	370,892		$	—		$	—		$	383,939
Gas production		11,496			45,507			—			—			57,003
Natural gas liquids production		5,574			17,744			—			—			23,318
Other operational income		1,456			140			246			—			1,842
Derivative income, net		—			4,931			—			—			4,931
Total operating revenue		31,573			439,214			246			—			471,033
Operating expenses:
Lease operating expenses		11,222			84,830			(17	)		—			96,035
Transportation, processing and gathering expenses		4,198			4,951			—			—			9,149
Other operational expenses		89			24			—			—			113
Production taxes		1,670			4,066			—			—			5,736
Depreciation, depletion, amortization		26,548			144,969			191			—			171,708
Accretion expense		285			16,065			171			—			16,521
Salaries, general and administrative		26,844			4			—			—			26,848
Incentive compensation expense		3,840			—			—			—			3,840
Total operating expenses		74,696			254,909			345			—			329,950
Income (loss) from operations		(43,123	)		184,305			(99	)		—			141,083
Other (income) expenses:
Interest expense		13,518			(103	)		—			—			13,415
Interest income		(104	)		(6	)		—			—			(110	)
Other income		(23	)		(763	)		—			—			(786	)
(Income) loss from investment in subsidiaries		(118,450	)		99			—			118,351			—
Total other (income) expenses		(105,059	)		(773	)		—			118,351			12,519
Income (loss) before taxes		61,936			185,078			(99	)		(118,351	)		128,564
Provision (benefit) for income taxes:
Current		569			—			—			—			569
Deferred		(20,154	)		66,628			—			—			46,474
Total income taxes		(19,585	)		66,628			—			—			47,043
Net income (loss)	$	81,521		$	118,450			($99	)		($118,351	)	$	81,521
Comprehensive income (loss)	$	122,658		$	118,450			($99	)		($118,351	)	$	122,658

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	1,518		$	325,834		$	—		$	—		$	327,352
Gas production		5,583			83,461			—			—			89,044
Natural gas liquids production		—			16,230			—			—			16.230
Other operational income		1,309			85			355			—			1,749
Total operating revenue		8,410			425,610			355			—			434,375
Operating expenses:
Lease operating expenses		746			83,149			—			—			83,895
Transportation, processing and gathering expenses		—			4,548			—			—			4,548
Other operational expenses		93			702			3			—			798
Production taxes		392			3,944			—			—			4,336
Depreciation, depletion, amortization		5,918			133,936			461			—			140,315
Accretion expense		8			15,244			182			—			15,434
Salaries, general and administrative		22,293			50			—			—			22,343
Incentive compensation expense		5,017			—			—			—			5,017
Derivative expense, net		—			782			—			—			782
Total operating expenses		34,467			242,355			646			—			277,468
Income (loss) from operations		(26,057	)		183,255			(291	)		—			156,907
Other (income) expenses:
Interest expense		5,010			81			—			—			5,091
Interest income		(141	)		(6	)		—			—			(147	)
Other income		(13	)		(1,114	)		—			—			(1,127	)
Other expense		192			1			—			—			193
Loss on early extinguishment of debt		607			—			—			—			607
(Income) loss from investment in subsidiaries		(116,944	)		291			—			116,653			—
Total other (income) expenses		(111,289	)		(747	)		—			116,653			4,617
Income (loss) before taxes		85,232			184,002			(291	)		(116,653	)		152,290
Provision (benefit) for income taxes:
Current		(9	)		(2,353	)		—			—			(2,362	)
Deferred		(11,747	)		69,411			—			—			57,664
Total income taxes		(11,756	)		67,058			—			—			55,302
Net income (loss)	$	96,988		$	116,944			($291	)		($116,653	)	$	96,988
Comprehensive income (loss)	$	100,626		$	116,944			($291	)		($116,653	)	$	100,626

Consolidating Statement of Cash Flows

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	81,521		$	118,450		($	99	)	($	118,351	)	$	81,521
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		26,548			144,969			191			—			171,708
Accretion expense		285			16,065			171			—			16,521
Deferred income tax provision (benefit)		(20,154	)		66,628			—			—			46,474
Settlement of asset retirement obligations		—			(21,918	)		—			—			(21,918	)
Non-cash stock compensation expense		4,271			—			—			—			4,271
Excess tax benefits		(795	)		—			—			—			(795	)
Non-cash derivative income		—			(2,758	)		—			—			(2,758	)
Non-cash interest expense		5,278			—			—			—			5,278
Change in current income taxes		(3,921	)		—			—			—			(3,921	)
Change in intercompany receivables/payables		142,965			(142,720	)		(245	)		—			—
(Increase) decrease in accounts receivable		(36,705	)		(833	)		21			—			(37,517	)
Increase in other current assets		(124	)		—			—			—			(124	)
Decrease in inventory		36			—			—			—			36
Increase (decrease) in accounts payable		5,238			3,214			(39	)		—			8,413
Decrease in other current liabilities		(12,924	)		(4,380	)		—			—			(17,304	)
Other		(118,152	)		(663	)		(1	)		118,351			(465	)
Net cash provided by (used in) operating activities		73,367			176,054			(1	)		—			249,420
Cash flows from investing activities:
Investment in oil and gas properties		(129,792	)		(146,022	)		1			—			(275,813	)
Proceeds from sale of oil and gas properties, net of expenses		403			—			—			—			403
Sale of fixed assets		149			—			—			—			149
Investment in fixed and other assets		(1,900	)		—			—			—			(1,900	)
Net cash provided by (used in) investing activities		(131,140	)		(146,022	)		1			—			(277,161	)
Cash flows from financing activities:
Proceeds from bank borrowings		25,000			—			—			—			25,000
Repayments of bank borrowings		(70,000	)		—			—			—			(70,000	)
Proceeds from issuance of senior convertible notes		300,000			—			—			—			300,000
Financing costs of senior convertible notes		(8,855	)		—			—			—			(8,855	)
Proceeds from Sold Warrants		40,170			—			—			—			40,170
Payments for Purchased Call Options		(70,830	)		—			—			—			(70,830	)
Excess tax benefits		795			—			—			—			795
Net payments for share based compensation		(3,141	)		—			—			—			(3,141	)
Net cash provided by financing activities		213,139			—			—			—			213,139
Net change in cash and cash equivalents		155,366			30,032			—			—			185,398
Cash and cash equivalents, beginning of period		37,389			926			136			—			38,451
Cash and cash equivalents, end of period	$	192,755		$	30,958		$	136		$	—		$	223,849

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	96,988		$	116,944		($	291	)	($	116,653	)	$	96,988
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		5,918			133,936			461			—			140,315
Accretion expense		8			15,244			182			—			15,434
Deferred income tax provision (benefit)		(11,747	)		69,411			—			—			57,664
Settlement of asset retirement obligations		—			(33,568	)		—			—			(33,568	)
Non-cash stock compensation expense		3,138			—			—			—			3,138
Excess tax benefits		(1,060	)		—			—			—			(1,060	)
Non-cash derivative income		—			(118	)		—			—			(118	)
Loss on early extinguishment of debt		607			—			—			—			607
Non-cash (income) loss from investment in subsidiaries		(116,944	)		291			—			116,653			—
Non-cash interest expense		959			—			—			—			959
Change in current income taxes		(3,893	)		(2,352	)		—			—			(6,245	)
Change in intercompany receivables/payables		149,716			(149,290	)		(426	)		—			—
(Increase) decrease in accounts receivable		(15,198	)		(22,239	)		9			—			(37,428	)
(Increase) decrease in other current assets		(491	)		15			—			—			(476	)
Decrease in inventory		1,149			14			—			—			1,163
Increase in accounts payable		2,494			3,360			—			—			5,854
Increase (decrease) in other current liabilities		(224	)		4,664			—			—			4,440
Other		(21	)		(1,114	)		—			—			(1,135	)
Net cash provided by (used in) operating activities		111,399			135,198			(65	)		—			246,532
Cash flows from investing activities:
Investment in oil and gas properties		(134,792	)		(137,655	)		(4	)		—			(272,451	)
Proceeds from sale of oil and gas properties, net of expenses		5,575			1,117			—			—			6,692
Investment in fixed and other assets		(894	)		—			—			—			(894	)
Net cash used in investing activities		(130,111	)		(136,538	)		(4	)		—			(266,653	)
Cash flows from financing activities:
Deferred financing costs		(4,017	)		—			—			—			(4,017	)
Excess tax benefits		1,060			—			—			—			1,060
Net payments for share based compensation		(1,857	)		—			—			—			(1,857	)
Net cash used in financing activities		(4,814	)		—			—			—			(4,814	)
Net change in cash and cash equivalents		(23,526	)		(1,340	)		(69	)		—			(24,935	)
Cash and cash equivalents, beginning of period		105,115			1,659			182			—			106,956
Cash and cash equivalents, end of period	$	81,589		$	319		$	113		$	—		$	82,021

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Commitments and Contingencies (Details Textual) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Commitments and Contingencies (Textual)
Approximate asserted claims plus accrued interest assessed by Louisiana Department of Revenue	$ 29.0
Additional estimated assessments including interest by Louisiana Department of Revenue	1.7
Minimum potential range contingency loss	0
Maximum potential range contingency loss	$ 31

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Earnings Per Share (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Earnings Per Share (Textual) [Abstract]
Outstanding Stock options antidilutive	369,000	398,000	369,000	398,000
Common Stock, shares issued	23,000	73,000	255,000	253,000

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Interim Financial Statements

6 Months Ended

Jun. 30, 2012

Interim Financial Statements [Abstract]

Interim Financial Statements

Note 1 – Interim Financial Statements

The condensed consolidated financial statements of Stone Energy Corporation (“Stone”) and its subsidiaries as of June 30, 2012 and for the three and six-month periods ended June 30, 2012 and 2011 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 2011 has been derived from the audited financial statements as of that date contained in our Annual Report on Form 10-K for the year ended December 31, 2011 (“2011 Annual Report on Form 10-K”). The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations contained in our 2011 Annual Report on Form 10-K. The results of operations for the three and six-month periods ended June 30, 2012 are not necessarily indicative of future financial results. Certain prior period amounts have been reclassified to conform to current period presentation.

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Condensed Consolidated Balance Sheet (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheet [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	48,331,956	48,076,860
Treasury stock, shares	16,582	16,582

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Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities [Abstract]

Location and fair value amounts of derivative instruments reported in balance sheet

Fair Value of Derivative Instruments at June 30, 2012
(in millions)
	Asset Derivatives			Liability Derivatives
Description	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Current assets: Fair value of hedging contracts	$	61.2	Current liabilities: Fair value of hedging contracts		($—	)
	Long-term assets: Fair value of hedging contracts		42.0	Long-term liabilities: Fair value of hedging contracts		(0.4	)
		$	103.2			($0.4	)
Fair Value of Derivative Instruments at December 31, 2011
(in millions)
	Asset Derivatives			Liability Derivatives
Description	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Current assets: Fair value of hedging contracts	$	25.2	Current liabilities: Fair value of hedging contracts	($	11.1	)
	Long-term assets: Fair value of hedging contracts		22.5	Long-term liabilities: Fair value of hedging contracts		(0.8	)
		$	47.7		($	11.9	)

Effect of Derivative Instruments in the statement of operations

The Effect of Derivative Instruments on the Statement of Operations for the Three Months Ended June 30, 2012 and 2011 (in millions)
Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivatives (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b)						Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion)
	2012		2011		Location	2012		2011			Location	2012		2011
Commodity contracts	$	63.2	$	36.1	Operating revenue - oil/gas production	$	9.4	($	10.5	)	Derivative income, net	$	5.4	$	1.4
Total	$	63.2	$	36.1		$	9.4	($	10.5	)		$	5.4	$	1.4

(a) Net of related tax effect of $38.1 million and $20.8 million for the three months ended June 30, 2012 and 2011, respectively.

(b) For the three months ended June 30, 2012, effective hedging contracts increased oil revenue by $2.9 million and increased gas revenue by $6.5 million. For the three months ended June 30, 2011, effective hedging contracts decreased oil revenue by $14.3 million and increased gas revenue by $3.8 million.

The Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended June 30, 2012 and 2011 (in millions)
Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivatives (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b)						Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion)
	2012		2011		Location	2012		2011			Location	2012		2011
Commodity contracts	$	41.1	$	3.6	Operating revenue - oil/gas production	$	8.4	($	14.4	)	Derivative income (expense), net	$	4.9	($	0.8	)
Total	$	41.1	$	3.6		$	8.4	($	14.4	)		$	4.9	($	0.8	)

(a) Net of related tax effect of $23.7 million and $2.1 million for the six months ended June 30, 2012 and 2011, respectively.

(b) For the six months ended June 30, 2012, effective hedging contracts decreased oil revenue by $2.9 million and increased gas revenue by $11.3 million. For the six months ended June 30, 2011, effective hedging contracts decreased oil revenue by $22.8 million and increased gas revenue by $8.4 million.

Hedging Positions

	Fixed-Price Swaps NYMEX (except where noted)
	Natural Gas				Oil
	Daily Volume (MMBtus/d)		Swap Price ($)		Daily  Volume (Bbls/d)			Swap Price ($)
2012		10,000		5.035		1,000			90.30
2012		10,000		5.040		1,000			90.41
2012		10,000		5.050		1,000			90.45
2012						1,000			95.50
2012						2,000			97.60
2012						1,000			98.15
2012						1,000			100.00
2012						1,000			101.55
2012						1,000			104.25
2012						1,000	†		111.02
2013		10,000		5.270		1,000			92.80
2013		10,000		5.320		1,000			94.45
2013						1,000			94.60
2013						1,000			97.15
2013						1,000			101.53
2013						1,000			103.00
2013						1,000			103.15
2013						1,000			104.25
2013						1,000			104.47
2013						1,000			104.50
2013						1,000	†		107.30
2014		10,000		4.000		1,000			90.06
2014						1,000			98.00
2014						1,000			98.30
2014						1,000			99.65
2014						1,000	†		103.30
2015		10,000		4.005

† Brent oil contract

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 02, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	STONE ENERGY CORP
Entity Central Index Key	0000904080
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		49,530,057

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Long - Term Debt (Tables)

6 Months Ended

Jun. 30, 2012

Long-Term Debt [Abstract]

Computation of Long Term Debt

	June 30, 2012		December 31, 2011
	(in millions)
6 3/ 4% Senior Subordinated Notes due 2014	$	200.0	$	200.0
8 5/ 8% Senior Notes due 2017		375.0		375.0
1 3/ 4% Senior Convertible Notes due 2017		233.1		—
Bank debt		—		45.0
Total long-term debt	$	808.1	$	620.0

Summary of records from the proceeds of 2017 Convertible Notes

Cash	$	260.5
Other assets (deferred financing costs)		6.8
Long-term debt		(229.2	)
Additional paid-in capital		(38.1	)

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Condensed Consolidated Statement of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Operating revenue:
Oil production	$ 182,181	$ 175,357	$ 383,939	$ 327,352
Gas production	28,146	47,884	57,003	89,044
Natural gas liquids production	9,866	10,231	23,318	16,230
Other operational income	952	864	1,842	1,749
Derivative income, net	5,416	1,398	4,931
Total operating revenue	226,561	235,734	471,033	434,375
Operating expenses:
Lease operating expenses	51,555	45,608	96,035	83,895
Transportation, processing and gathering expenses	5,492	2,728	9,149	4,548
Other operational expenses	71	136	113	798
Production taxes	2,358	1,801	5,736	4,336
Depreciation, depletion and amortization	87,133	72,646	171,708	140,315
Accretion expense	8,255	7,717	16,521	15,434
Salaries, general and administrative expenses	13,143	10,610	26,848	22,343
Incentive compensation expense	2,398	2,333	3,840	5,017
Derivative expense, net				782
Total operating expenses	170,405	143,579	329,950	277,468
Income from operations	56,156	92,155	141,083	156,907
Other (income) expenses:
Interest expense	7,684	1,980	13,415	5,091
Interest income	(79)	(53)	(110)	(147)
Other income	(366)	(563)	(786)	(1,127)
Loss on early extinguishment of debt		607		607
Other expense		69		193
Total other expenses	7,239	2,040	12,519	4,617
Net income before income taxes	48,917	90,115	128,564	152,290
Provision (benefit) for income taxes:
Current	(665)	(2,362)	569	(2,362)
Deferred	19,035	35,281	46,474	57,664
Total income taxes	18,370	32,919	47,043	55,302
Net income	$ 30,547	$ 57,196	$ 81,521	$ 96,988
Basic earnings per share	$ 0.62	$ 1.17	$ 1.65	$ 1.98
Diluted earnings per share	$ 0.62	$ 1.17	$ 1.65	$ 1.98
Average shares outstanding	48,303	47,961	48,279	47,930
Average shares outstanding assuming dilution	48,344	48,006	48,322	47,973

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Acquisitions

6 Months Ended

Jun. 30, 2012

Acquisitions [Abstract]

Acquisitions

Note 6 – Acquisitions

On June 18, 2012, we completed the acquisition of Anadarko U.S. Offshore Corporation’s (“APC”) 25% working interest in the five block deep water Pompano field in Mississippi Canyon, an approximate 14% working interest in Mississippi Canyon Block 29 and a 10% working interest in certain aliquots of Mississippi Canyon Block 72. The acquisition was accounted for according to the guidance provided in ASC 805, Business Combinations, which requires application of the acquisition method. This methodology requires the recordation of net assets acquired and consideration transferred at fair value (see Note 7 – Fair Value Measurements). Differences between the net fair value of assets acquired and consideration transferred are recorded as goodwill or a bargain purchase gain. The following represents the allocation of the recorded value of net assets acquired in the transaction. Consideration transferred in the transaction was $26.4 million in cash, resulting in no goodwill or bargain purchase gain.

	(in millions)
Proved oil and gas properties	$	39.2
Unevaluated oil and gas properties		1.6
Asset retirement obligations		(14.4	)
Total fair value of net assets	$	26.4

On December 28, 2011, we completed the acquisition of BP Exploration & Production Inc.’s (“BP”) 75% operated working interest in the five block deep water Pompano field in Mississippi Canyon, a 51% operated working interest in the adjacent Mississippi Canyon Block 29, a 50% non-operated working interest in the Mica field that ties back to the Pompano platform and a 75% interest in 23 deep water exploration leases located in the vicinity of the Pompano field. The following unaudited summary pro forma combined statement of operations data of Stone for the three and six-month periods ended June 30, 2011 has been prepared to give effect to the acquisition of the deep water assets from BP as if it had occurred on January 1, 2010. The pro forma financial information is not necessarily indicative of the results that might have occurred had the transaction taken place on January 1, 2010 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected in the following pro forma financial information because of normal production declines, changes in commodity prices, future acquisitions and divestitures, future development and exploration activities, and other factors.

	Three Months Ended June  30, 2011 (unaudited)		Six Months Ended June 30, 2011 (unaudited)
	(in millions, except per share amounts)
Revenues	$	279.4	$	515.0
Income from operations		117.2		204.9
Net income		72.1		125.5
Basic earnings per share	$	1.47	$	2.56
Diluted earnings per share	$	1.47	$	2.56

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Asset Retirement Obligations

6 Months Ended

Jun. 30, 2012

Asset Retirement Obligations [Abstract]

Asset Retirement Obligations

Note 5 – Asset Retirement Obligations

The change in our asset retirement obligations during the six months ended June 30, 2012 is set forth below:

	Six Months Ended June  30, 2012
	(in millions)
Asset retirement obligations as of the beginning of the period, including current portion	$	425.8
Liabilities settled		(21.9	)
Liabilities assumed		14.5
Divestment of properties		(7.6	)
Accretion expense		16.5
Asset retirement obligations as of the end of the period, including current portion	$	427.3

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Basic:
Net income	$ 30,547	$ 57,196	$ 81,521	$ 96,988
Net income attributable to participating securities	(742)	(1,192)	(1,982)	(2,022)
Net income attributable to common stock - basic	29,805	56,004	79,539	94,966
Diluted:
Net income	30,547	57,196	81,521	96,988
Net income attributable to participating securities	(742)	(1,191)	(1,980)	(2,021)
Net income attributable to common stock - diluted	$ 29,805	$ 56,005	$ 79,541	$ 94,967
Weighted average shares (denominator):
Weighted average shares - basic	48,303	47,961	48,279	47,930
Diluted effect of stock options	41	45	43	43
Weighted average shares - diluted	48,344	48,006	48,322	47,973
Basic income per common share	$ 0.62	$ 1.17	$ 1.65	$ 1.98
Diluted income per common share	$ 0.62	$ 1.17	$ 1.65	$ 1.98

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Asset Retirement Obligations (Tables)

6 Months Ended

Jun. 30, 2012

Asset Retirement Obligations [Abstract]

Changes in Asset Retirement Obligations

	Six Months Ended June  30, 2012
	(in millions)
Asset retirement obligations as of the beginning of the period, including current portion	$	425.8
Liabilities settled		(21.9	)
Liabilities assumed		14.5
Divestment of properties		(7.6	)
Accretion expense		16.5
Asset retirement obligations as of the end of the period, including current portion	$	427.3

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Guarantor Financial Statements

6 Months Ended

Jun. 30, 2012

Guarantor Financial Statements [Abstract]

Guarantor Financial Statements

Note 9 – Guarantor Financial Statements

Stone Offshore is an unconditional guarantor (the “Guarantor Subsidiary”) of our 2017 Convertible Notes, our 8 ⁵/₈ % Senior Notes due 2017 and our 6 ³/ ₄% Senior Subordinated Notes due 2014. Our remaining subsidiaries (the “Non-Guarantor Subsidiaries”) have not provided guarantees. The following presents unaudited condensed consolidating financial information as of June 30, 2012 and December 31, 2011 and for the three and six-month periods ended June 30, 2012 and 2011 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

JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	192,755		$	30,958		$	136		$	—		$	223,849
Accounts receivable		73,168			218,282			1,578			(144,094	)		148,934
Fair value of hedging contracts		—			61,203			—			—			61,203
Current income tax receivable		24,353			—			—			—			24,353
Deferred taxes *		2,031			5,443			—			—			7,474
Inventory		4,324			283			—			—			4,607
Other current assets		914			—			—			—			914
Total current assets		297,545			316,169			1,714			(144,094	)		471,334
Oil and gas properties, full cost method:
Proved		815,886			6,106,980			5,051			—			6,927,917
Less: accumulated DD&A		(335,378	)		(5,001,323	)		(2,550	)		—			(5,339,251	)
Net proved oil and gas properties		480,508			1,105,657			2,501			—			1,588,666
Unevaluated		290,751			144,633			—			—			435,384
Other property and equipment, net		11,910			—			—			—			11,910
Fair value of hedging contracts		—			41,981			—			—			41,981
Other assets, net		32,387			1,568			—			—			33,955
Investment in subsidiary		893,122			(374	)		—			(892,748	)		—
Total assets	$	2,006,223		$	1,609,634		$	4,215			($1,036,842	)	$	2,583,230
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	263,942		$	23,541		$	—			($144,094	)	$	143,389
Undistributed oil and gas proceeds		25,566			1,682			—			—			27,248
Accrued interest		15,735			—			—			—			15,735
Asset retirement obligations		—			75,493			—			—			75,493
Other current liabilities		8,844			626			—			—			9,470
Total current liabilities		314,087			101,342			—			(144,094	)		271,335
Long-term debt		808,050			—			—			—			808,050
Deferred taxes *		30,278			268,273			—			—			298,551
Asset retirement obligations		7,377			339,821			4,587			—			351,785
Fair value of hedging contracts		—			366			—			—			366
Other long-term liabilities		13,939			6,712			—			—			20,651
Total liabilities		1,173,731			716,514			4,587			(144,094	)		1,750,738
Commitments and contingencies Stockholders’ equity:
Common stock		483			—			—			—			483
Treasury stock		(860	)		—			—			—			(860	)
Additional paid-in capital		1,380,568			1,724,232			1,639			(1,725,871	)		1,380,568
Accumulated earnings (deficit)		(610,704	)		(894,117	)		(2,011	)		896,128			(610,704	)
Accumulated other comprehensive income (loss)		63,005			63,005			—			(63,005	)		63,005
Total stockholders’ equity		832,492			893,120			(372	)		(892,748	)		832,492
Total liabilities and stockholders’ equity	$	2,006,223		$	1,609,634		$	4,215			($1,036,842	)	$	2,583,230

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

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		696,975			5,946,141			5,052			—			6,648,168
Less: accumulated DD&A		(309,421	)		(4,862,949	)		(2,359	)		—			(5,174,729	)
Net proved oil and gas properties		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 the guarantor subsidiary where related oil and gas properties reside.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	6,813		$	175,368		$	—		$	—		$	182,181
Gas production		5,865			22,281			—			—			28,146
Natural gas liquids production		1,710			8,156			—			—			9,866
Other operational income		762			77			113			—			952
Derivative income, net		—			5,416			—			—			5,416
Total operating revenue		15,150			211,298			113			—			226,561
Operating expenses:
Lease operating expenses		6,318			45,443			(206	)		—			51,555
Transportation, processing and gathering expenses		1,710			3,782			—			—			5,492
Other operational expenses		47			24			—			—			71
Production taxes		507			1,851			—			—			2,358
Depreciation, depletion, amortization		15,071			71,969			93			—			87,133
Accretion expense		137			8,033			85			—			8,255
Salaries, general and administrative		14,190			(1,047	)		—			—			13,143
Incentive compensation expense		2,398			—			—			—			2,398
Total operating expenses		40,378			130,055			(28	)		—			170,405
Income (loss) from operations		(25,228	)		81,243			141			—			56,156
Other (income) expenses:
Interest expense		7,672			12			—			—			7,684
Interest income		(74	)		(5	)		—			—			(79	)
Other income		(4	)		(362	)		—			—			(366	)
(Income) loss from investment in subsidiaries		(52,313	)		(140	)		—			52,453			—
Total other (income) expenses		(44,719	)		(495	)		—			52,453			7,239
Income (loss) before taxes		19,491			81,738			141			(52,453	)		48,917
Provision (benefit) for income taxes:
Current		(665	)		—			—			—			(665	)
Deferred		(10,391	)		29,426			—			—			19,035
Total income taxes		(11,056	)		29,426			—			—			18,370
Net income (loss)	$	30,547		$	52,312		$	141			($52,453	)	$	30,547
Comprehensive income (loss)	$	93,749		$	52,312		$	141			($52,453	)	$	93,749

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	732		$	174,625		$	—		$	—		$	175,357
Gas production		4,303			43,581			—			—			47,884
Natural gas liquids production		—			10,231			—			—			10,231
Other operational income		587			104			173			—			864
Derivative income, net		—			1,398			—			—			1,398
Total operating revenue		5,622			229,939			173			—			235,734
Operating expenses:
Lease operating expenses		390			45,218			—			—			45,608
Transportation, processing and gathering expenses		—			2,728			—			—			2,728
Other operational expenses		93			40			3			—			136
Production taxes		245			1,556			—			—			1,801
Depreciation, depletion, amortization		(24	)		72,426			244			—			72,646
Accretion expense		4			7,622			91			—			7,717
Salaries, general and administrative		10,562			48			—			—			10,610
Incentive compensation expense		2,333			—			—			—			2,333
Total operating expenses		13,603			129,638			338			—			143,579
Income (loss) from operations		(7,981	)		100,301			(165	)		—			92,155
Other (income) expenses:
Interest expense		1,979			1			—			—			1,980
Interest income		(53	)		—			—			—			(53	)
Other income		(13	)		(547	)		(3	)		—			(563	)
Other expense		69			—			—			—			69
Loss on early extinguishment of debt		607			—			—			—			607
(Income) loss from investment in subsidiaries		(63,621	)		162			—			63,459			—
Total other (income) expenses		(61,032	)		(384	)		(3	)		63,459			2,040
Income (loss) before taxes		53,051			100,685			(162	)		(63,459	)		90,115
Provision (benefit) for income taxes:
Current		(9	)		(2,353	)		—			—			(2,362	)
Deferred		(4,136	)		39,417			—			—			35,281
Total income taxes		(4,145	)		37,064			—			—			32,919
Net income (loss)	$	57,196		$	63,621			($162	)		($63,459	)	$	57,196
Comprehensive income (loss)	$	93,308		$	63,621			($162	)		($63,459	)	$	93,308

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	13,047		$	370,892		$	—		$	—		$	383,939
Gas production		11,496			45,507			—			—			57,003
Natural gas liquids production		5,574			17,744			—			—			23,318
Other operational income		1,456			140			246			—			1,842
Derivative income, net		—			4,931			—			—			4,931
Total operating revenue		31,573			439,214			246			—			471,033
Operating expenses:
Lease operating expenses		11,222			84,830			(17	)		—			96,035
Transportation, processing and gathering expenses		4,198			4,951			—			—			9,149
Other operational expenses		89			24			—			—			113
Production taxes		1,670			4,066			—			—			5,736
Depreciation, depletion, amortization		26,548			144,969			191			—			171,708
Accretion expense		285			16,065			171			—			16,521
Salaries, general and administrative		26,844			4			—			—			26,848
Incentive compensation expense		3,840			—			—			—			3,840
Total operating expenses		74,696			254,909			345			—			329,950
Income (loss) from operations		(43,123	)		184,305			(99	)		—			141,083
Other (income) expenses:
Interest expense		13,518			(103	)		—			—			13,415
Interest income		(104	)		(6	)		—			—			(110	)
Other income		(23	)		(763	)		—			—			(786	)
(Income) loss from investment in subsidiaries		(118,450	)		99			—			118,351			—
Total other (income) expenses		(105,059	)		(773	)		—			118,351			12,519
Income (loss) before taxes		61,936			185,078			(99	)		(118,351	)		128,564
Provision (benefit) for income taxes:
Current		569			—			—			—			569
Deferred		(20,154	)		66,628			—			—			46,474
Total income taxes		(19,585	)		66,628			—			—			47,043
Net income (loss)	$	81,521		$	118,450			($99	)		($118,351	)	$	81,521
Comprehensive income (loss)	$	122,658		$	118,450			($99	)		($118,351	)	$	122,658

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	1,518		$	325,834		$	—		$	—		$	327,352
Gas production		5,583			83,461			—			—			89,044
Natural gas liquids production		—			16,230			—			—			16.230
Other operational income		1,309			85			355			—			1,749
Total operating revenue		8,410			425,610			355			—			434,375
Operating expenses:
Lease operating expenses		746			83,149			—			—			83,895
Transportation, processing and gathering expenses		—			4,548			—			—			4,548
Other operational expenses		93			702			3			—			798
Production taxes		392			3,944			—			—			4,336
Depreciation, depletion, amortization		5,918			133,936			461			—			140,315
Accretion expense		8			15,244			182			—			15,434
Salaries, general and administrative		22,293			50			—			—			22,343
Incentive compensation expense		5,017			—			—			—			5,017
Derivative expense, net		—			782			—			—			782
Total operating expenses		34,467			242,355			646			—			277,468
Income (loss) from operations		(26,057	)		183,255			(291	)		—			156,907
Other (income) expenses:
Interest expense		5,010			81			—			—			5,091
Interest income		(141	)		(6	)		—			—			(147	)
Other income		(13	)		(1,114	)		—			—			(1,127	)
Other expense		192			1			—			—			193
Loss on early extinguishment of debt		607			—			—			—			607
(Income) loss from investment in subsidiaries		(116,944	)		291			—			116,653			—
Total other (income) expenses		(111,289	)		(747	)		—			116,653			4,617
Income (loss) before taxes		85,232			184,002			(291	)		(116,653	)		152,290
Provision (benefit) for income taxes:
Current		(9	)		(2,353	)		—			—			(2,362	)
Deferred		(11,747	)		69,411			—			—			57,664
Total income taxes		(11,756	)		67,058			—			—			55,302
Net income (loss)	$	96,988		$	116,944			($291	)		($116,653	)	$	96,988
Comprehensive income (loss)	$	100,626		$	116,944			($291	)		($116,653	)	$	100,626

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	81,521		$	118,450		($	99	)	($	118,351	)	$	81,521
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		26,548			144,969			191			—			171,708
Accretion expense		285			16,065			171			—			16,521
Deferred income tax provision (benefit)		(20,154	)		66,628			—			—			46,474
Settlement of asset retirement obligations		—			(21,918	)		—			—			(21,918	)
Non-cash stock compensation expense		4,271			—			—			—			4,271
Excess tax benefits		(795	)		—			—			—			(795	)
Non-cash derivative income		—			(2,758	)		—			—			(2,758	)
Non-cash interest expense		5,278			—			—			—			5,278
Change in current income taxes		(3,921	)		—			—			—			(3,921	)
Change in intercompany receivables/payables		142,965			(142,720	)		(245	)		—			—
(Increase) decrease in accounts receivable		(36,705	)		(833	)		21			—			(37,517	)
Increase in other current assets		(124	)		—			—			—			(124	)
Decrease in inventory		36			—			—			—			36
Increase (decrease) in accounts payable		5,238			3,214			(39	)		—			8,413
Decrease in other current liabilities		(12,924	)		(4,380	)		—			—			(17,304	)
Other		(118,152	)		(663	)		(1	)		118,351			(465	)
Net cash provided by (used in) operating activities		73,367			176,054			(1	)		—			249,420
Cash flows from investing activities:
Investment in oil and gas properties		(129,792	)		(146,022	)		1			—			(275,813	)
Proceeds from sale of oil and gas properties, net of expenses		403			—			—			—			403
Sale of fixed assets		149			—			—			—			149
Investment in fixed and other assets		(1,900	)		—			—			—			(1,900	)
Net cash provided by (used in) investing activities		(131,140	)		(146,022	)		1			—			(277,161	)
Cash flows from financing activities:
Proceeds from bank borrowings		25,000			—			—			—			25,000
Repayments of bank borrowings		(70,000	)		—			—			—			(70,000	)
Proceeds from issuance of senior convertible notes		300,000			—			—			—			300,000
Financing costs of senior convertible notes		(8,855	)		—			—			—			(8,855	)
Proceeds from Sold Warrants		40,170			—			—			—			40,170
Payments for Purchased Call Options		(70,830	)		—			—			—			(70,830	)
Excess tax benefits		795			—			—			—			795
Net payments for share based compensation		(3,141	)		—			—			—			(3,141	)
Net cash provided by financing activities		213,139			—			—			—			213,139
Net change in cash and cash equivalents		155,366			30,032			—			—			185,398
Cash and cash equivalents, beginning of period		37,389			926			136			—			38,451
Cash and cash equivalents, end of period	$	192,755		$	30,958		$	136		$	—		$	223,849

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	96,988		$	116,944		($	291	)	($	116,653	)	$	96,988
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		5,918			133,936			461			—			140,315
Accretion expense		8			15,244			182			—			15,434
Deferred income tax provision (benefit)		(11,747	)		69,411			—			—			57,664
Settlement of asset retirement obligations		—			(33,568	)		—			—			(33,568	)
Non-cash stock compensation expense		3,138			—			—			—			3,138
Excess tax benefits		(1,060	)		—			—			—			(1,060	)
Non-cash derivative income		—			(118	)		—			—			(118	)
Loss on early extinguishment of debt		607			—			—			—			607
Non-cash (income) loss from investment in subsidiaries		(116,944	)		291			—			116,653			—
Non-cash interest expense		959			—			—			—			959
Change in current income taxes		(3,893	)		(2,352	)		—			—			(6,245	)
Change in intercompany receivables/payables		149,716			(149,290	)		(426	)		—			—
(Increase) decrease in accounts receivable		(15,198	)		(22,239	)		9			—			(37,428	)
(Increase) decrease in other current assets		(491	)		15			—			—			(476	)
Decrease in inventory		1,149			14			—			—			1,163
Increase in accounts payable		2,494			3,360			—			—			5,854
Increase (decrease) in other current liabilities		(224	)		4,664			—			—			4,440
Other		(21	)		(1,114	)		—			—			(1,135	)
Net cash provided by (used in) operating activities		111,399			135,198			(65	)		—			246,532
Cash flows from investing activities:
Investment in oil and gas properties		(134,792	)		(137,655	)		(4	)		—			(272,451	)
Proceeds from sale of oil and gas properties, net of expenses		5,575			1,117			—			—			6,692
Investment in fixed and other assets		(894	)		—			—			—			(894	)
Net cash used in investing activities		(130,111	)		(136,538	)		(4	)		—			(266,653	)
Cash flows from financing activities:
Deferred financing costs		(4,017	)		—			—			—			(4,017	)
Excess tax benefits		1,060			—			—			—			1,060
Net payments for share based compensation		(1,857	)		—			—			—			(1,857	)
Net cash used in financing activities		(4,814	)		—			—			—			(4,814	)
Net change in cash and cash equivalents		(23,526	)		(1,340	)		(69	)		—			(24,935	)
Cash and cash equivalents, beginning of period		105,115			1,659			182			—			106,956
Cash and cash equivalents, end of period	$	81,589		$	319		$	113		$	—		$	82,021

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Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 7 – Fair Value Measurements

U.S. Generally Accepted Accounting Principles establish a fair value hierarchy that has three levels based on the reliability of the inputs used to determine the fair value. These levels include: Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of June 30, 2012 and December 31, 2011, we held certain financial assets and liabilities that are required to be measured at fair value on a recurring basis, including our commodity derivative instruments and our investments in money market funds. We utilize the services of an independent third party to assist us in valuing our derivative instruments. We used the income approach in determining the fair value of our derivative instruments utilizing a proprietary pricing model. The model accounts for our credit risk and the credit risk of our counterparties in the discount rate applied to estimated future cash inflows and outflows. Our swap contracts are included within the Level 2 fair value hierarchy. For a more detailed description of our derivative instruments see Note 3 – Derivative Instruments and Hedging Activities. We used the market approach in determining the fair value of our investments in money market funds, which are included within the Level 1 fair value hierarchy.

The following tables present our assets and liabilities that are measured at fair value on a recurring basis at June 30, 2012:

	Fair Value Measurements at June 30, 2012
Assets	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Money market funds	$	5.9	$	5.9	$	—	$	—
Hedging contracts		103.2		—		103.2		—
Total	$	109.1	$	5.9	$	103.2	$	—

	Fair Value Measurements at June 30, 2012
Liabilities	Total			Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Hedging contracts	($	0.4	)	$	—		($0.4	)	$	—
Total	($	0.4	)	$	—		($0.4	)	$	—

The following tables present our assets and liabilities that are measured at fair value on a recurring basis at December 31, 2011:

	Fair Value Measurements at December 31, 2011
Assets	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Money market funds	$	5.6		$	5.6	$	—		$	—
Hedging contracts		47.7			—		47.7			—
Total	$	53.3		$	5.6	$	47.7		$	—
	Fair Value Measurements at December 31, 2011
Liabilities	Total			Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Hedging contracts	($	11.9	)	$	—		($11.9	)	$	—
Total	($	11.9	)	$	—		($11.9	)	$	—

The fair value of cash and cash equivalents and our variable rate bank debt approximated book value at June 30, 2012 and December 31, 2011. As of June 30, 2012 and December 31, 2011, the fair value of our $375 million 8 ⁵ /₈% Senior Notes due 2017 was approximately $384.4 million and $386.3 million, respectively. As of June 30, 2012 and December 31, 2011, the fair value of our $200 million 6 ³/ ₄% Senior Subordinated Notes due 2014 was approximately $201.0 million and $199.0 million, respectively. As of June 30, 2012, the fair value of our 2017 Convertible Notes was approximately $277.5 million, of which $226.1 million was attributable to the liability component. The fair value of our outstanding notes was determined based upon quotes obtained from brokers, which represent Level 2 inputs.

We applied fair value concepts in determining the liability component of our 2017 Convertible Notes (see Note 4 – Long-Term Debt) at inception and at June 30, 2012. The significant inputs in these determinations were market rates based on quotes obtained from brokers and represent Level 2 inputs.

We applied fair value concepts in the recording of deep water assets acquired from APC (see Note 6 – Acquisitions). The fair value of proved and unevaluated oil and gas properties was estimated using a market approach. Significant inputs were market value comparisons for similar transactions within an appropriate time period. These inputs were considered Level 3 inputs. Asset retirement obligations were determined in accordance with applicable accounting standards.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 8 – Commitments and Contingencies

We are named as a defendant in certain lawsuits and are a party to certain regulatory proceedings arising in the ordinary course of business. We do not expect that these matters, individually or in the aggregate, will have a material adverse effect on our financial condition.

Franchise Tax Action. We have been served with several petitions filed by the Louisiana Department of Revenue (“LDR”) in Louisiana state court claiming additional franchise taxes due. In addition, we received preliminary assessments from the LDR for additional franchise taxes resulting from audits of Stone and other subsidiaries. These assessments all relate to the LDR’s assertion that sales of crude oil and natural gas from properties located on the OCS, which are transported through the State of Louisiana, should be sourced to the State of Louisiana for purposes of computing the Louisiana franchise tax apportionment ratio. Total asserted claims plus estimated accrued interest amount to approximately $29.0 million. The franchise tax years 2010 and 2011 for Stone remain subject to examination, which potentially exposes us to additional estimated assessments of $1.7 million including accrued interest. We estimate the potential range of loss upon resolution of this matter to be between $0 and $31 million.

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings per share basic and diluted

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(in thousands, except per share data)
Income (numerator):
Basic:
Net income	$	30,547		$	57,196		$	81,521		$	96,988
Net income attributable to participating securities		(742	)		(1,192	)		(1,982	)		(2,022	)
Net income attributable to common stock - basic	$	29,805		$	56,004		$	79,539		$	94,966
Diluted:
Net income	$	30,547		$	57,196		$	81,521		$	96,988
Net income attributable to participating securities		(742	)		(1,191	)		(1,980	)		(2,021	)
Net income attributable to common stock - diluted	$	29,805		$	56,005		$	79,541		$	94,967
Weighted average shares (denominator):
Weighted average shares - basic		48,303			47,961			48,279			47,930
Diluted effect of stock options		41			45			43			43
Weighted average shares - diluted		48,344			48,006			48,322			47,973
Basic income per common share	$	0.62		$	1.17		$	1.65		$	1.98
Diluted income per common share	$	0.62		$	1.17		$	1.65		$	1.98

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Fair Value Measurements (Details) (Recurring [Member], USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets, Fair Value Disclosure [Abstract]
Assets, Fair Value, Total	$ 109.1	$ 53.3
Liabilities, Fair Value Disclosure [Abstract]
Liabilities, Fair Value, Total	(0.4)	(11.9)
Hedging contracts [Member]
Assets, Fair Value Disclosure [Abstract]
Derivative Assets, Fair Value	103.2	47.7
Liabilities, Fair Value Disclosure [Abstract]
Derivative Liabilities, Fair Value	(0.4)	(11.9)
Money market funds [Member]
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents, Fair Value	5.9	5.6
Quoted Prices In Active Markets for Identical Assets [Member]
Assets, Fair Value Disclosure [Abstract]
Assets, Fair Value, Total	5.9	5.6
Liabilities, Fair Value Disclosure [Abstract]
Liabilities, Fair Value, Total
Quoted Prices In Active Markets for Identical Assets [Member] | Hedging contracts [Member]
Assets, Fair Value Disclosure [Abstract]
Derivative Assets, Fair Value
Liabilities, Fair Value Disclosure [Abstract]
Derivative Liabilities, Fair Value
Quoted Prices In Active Markets for Identical Assets [Member] | Money market funds [Member]
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents, Fair Value	5.9	5.6
Significant Other Observable Inputs [Member]
Assets, Fair Value Disclosure [Abstract]
Assets, Fair Value, Total	103.2	47.7
Liabilities, Fair Value Disclosure [Abstract]
Liabilities, Fair Value, Total	(0.4)	(11.9)
Significant Other Observable Inputs [Member] | Hedging contracts [Member]
Assets, Fair Value Disclosure [Abstract]
Derivative Assets, Fair Value	103.2	47.7
Liabilities, Fair Value Disclosure [Abstract]
Derivative Liabilities, Fair Value	(0.4)	(11.9)
Significant Other Observable Inputs [Member] | Money market funds [Member]
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents, Fair Value
Significant Unobservable Inputs [Member]
Assets, Fair Value Disclosure [Abstract]
Assets, Fair Value, Total
Liabilities, Fair Value Disclosure [Abstract]
Liabilities, Fair Value, Total
Significant Unobservable Inputs [Member] | Hedging contracts [Member]
Assets, Fair Value Disclosure [Abstract]
Derivative Assets, Fair Value
Liabilities, Fair Value Disclosure [Abstract]
Derivative Liabilities, Fair Value
Significant Unobservable Inputs [Member] | Money market funds [Member]
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents, Fair Value

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Assets and Liabilities

	Fair Value Measurements at June 30, 2012
Assets	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Money market funds	$	5.9	$	5.9	$	—	$	—
Hedging contracts		103.2		—		103.2		—
Total	$	109.1	$	5.9	$	103.2	$	—

	Fair Value Measurements at June 30, 2012
Liabilities	Total			Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Hedging contracts	($	0.4	)	$	—		($0.4	)	$	—
Total	($	0.4	)	$	—		($0.4	)	$	—

	Fair Value Measurements at December 31, 2011
Assets	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Money market funds	$	5.6		$	5.6	$	—		$	—
Hedging contracts		47.7			—		47.7			—
Total	$	53.3		$	5.6	$	47.7		$	—
	Fair Value Measurements at December 31, 2011
Liabilities	Total			Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Hedging contracts	($	11.9	)	$	—		($11.9	)	$	—
Total	($	11.9	)	$	—		($11.9	)	$	—

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Derivative Instruments and Hedging Activities (Details 1) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Effect of Derivative Instruments on the Statement of Operations
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net, Total		$ 20.8	$ 23.7	$ 2.1
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net, Total	38.1
Cash Flow Hedging [Member]
Effect of Derivative Instruments on the Statement of Operations
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net, Total	63.2	36.1	41.1	3.6
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net, Total	9.4	(10.5)	8.4	(14.4)
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net, Total	5.4	1.4	4.9	(0.8)
Cash Flow Hedging [Member] | Commodity contracts [Member]
Effect of Derivative Instruments on the Statement of Operations
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net, Total	63.2	36.1	41.1	3.6
Operating revenue - oil/gas production [Member] | Cash Flow Hedging [Member]
Effect of Derivative Instruments on the Statement of Operations
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net, Total	9.4	(10.5)	8.4	(14.4)
Derivative income, net [Member] | Cash Flow Hedging [Member]
Effect of Derivative Instruments on the Statement of Operations
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net, Total	$ 5.4	$ 1.4	$ 4.9	$ (0.8)

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Condensed Consolidated Statement of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Condensed Consolidated Statement of Comprehensive Income [Abstract]
Net income	$ 30,547	$ 57,196	$ 81,521	$ 96,988
Other comprehensive income, net of tax effect:
Adjustment for fair value accounting of derivatives	63,202	36,112	41,137	3,638
Comprehensive income	$ 93,749	$ 93,308	$ 122,658	$ 100,626

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Long-Term Debt

6 Months Ended

Jun. 30, 2012

Long-Term Debt [Abstract]

Long-Term Debt

Note 4 – Long-Term Debt

Long-term debt consisted of the following at:

	June 30, 2012		December 31, 2011
	(in millions)
6 3/ 4% Senior Subordinated Notes due 2014	$	200.0	$	200.0
8 5/ 8% Senior Notes due 2017		375.0		375.0
1 3/ 4% Senior Convertible Notes due 2017		233.1		—
Bank debt		—		45.0
Total long-term debt	$	808.1	$	620.0

Bank Debt

On April 26, 2011, we entered into an amended and restated revolving credit facility with commitments totaling $700 million (subject to borrowing base limitations) through a syndicated bank group, replacing our previous facility. The bank credit facility matures on September 15, 2014. However, if the 6 ³/ ₄% Senior Subordinated Notes due 2014 issued under our 2004 indenture are retired on or before April 15, 2014, the bank credit facility then matures on April 26, 2015. Our borrowing base under our bank credit facility is currently $400 million. As of June 30 and August 2, 2012, we had no outstanding borrowings under our bank credit facility and letters of credit totaling $27.1 million had been issued pursuant to the bank credit facility, leaving $372.9 million of availability under the facility. Our bank credit facility is guaranteed by our only material subsidiary, Stone Energy Offshore, L.L.C. (“Stone Offshore”).

The borrowing base under our bank credit facility is redetermined semi-annually, in May and November, by the lenders taking into consideration the estimated value of our oil and gas properties and those of our direct and indirect material subsidiaries in accordance with the lenders’ customary practices for oil and gas loans. In addition, we and the lenders each have discretion at any time, but not more than two additional times in any calendar year, to have the borrowing base redetermined. Our bank credit facility is collateralized by substantially all of Stone’s and Stone Offshore’s assets. Stone and Stone Offshore are required to mortgage, and grant a security interest in, their oil and gas reserves representing at least 80% of the discounted present value of the future net cash flows from their oil and gas reserves reviewed in determining the borrowing base. At our option, loans under our bank credit facility will bear interest at a rate based on the London Interbank Offered Rate (“Libor”) plus an applicable margin, or a rate based on the prime rate or Federal funds rate plus an applicable margin. Our bank credit facility provides for optional and mandatory prepayments, affirmative and negative covenants, and interest coverage ratio and leverage ratio maintenance covenants. We were in compliance with all covenants as of June 30, 2012.

Senior Convertible Notes

On March 6, 2012, we issued in a private offering $300 million in aggregate principal amount of 1 ³/ ₄% Senior Convertible Notes due 2017 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2017 Convertible Notes are fully and unconditionally guaranteed on a senior unsecured basis by Stone Offshore and by certain future restricted subsidiaries of Stone. The net proceeds from the sale of the 2017 Convertible Notes were approximately $291.1 million, after deducting fees and expenses. The 2017 Convertible Notes rank equally in right of payment with all of our existing and future senior unsecured indebtedness. The 2017 Convertible Notes are effectively subordinated to our secured indebtedness to the extent of the value of the related collateral. The 2017 Convertible Notes bear interest at a rate of 1.75% per year, payable on March 1 and September 1 of each year, beginning on September 1, 2012. The 2017 Convertible Notes mature on March 1, 2017, unless earlier converted or repurchased. We may not redeem the 2017 Convertible Notes at our option prior to the maturity date.

The 2017 Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, based on an initial conversion rate of 23.4449 shares of our common stock per $1,000 principal amount of 2017 Convertible Notes, which corresponds to an initial conversion price of approximately $42.65 per share of our common stock. On June 29, 2012, our closing share price was $25.34. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the indenture related to the 2017 Convertible Notes.

The 2017 Convertible Notes may be converted by the holder, in multiples of $1,000 principal amount, only under the following circumstances:

• prior to December 1, 2016, on any date during any calendar quarter beginning after June 30, 2012 (and only during such calendar quarter) if the closing sale price of our common stock was more than 130% of the then current conversion price for at least 20 trading days in the period of the 30 consecutive trading days ending on the last trading day of the previous calendar quarter;

• prior to December 1, 2016, if we distribute to all or substantially all holders of our common stock rights, options or warrants entitling them to purchase, for a period of 45 calendar days or less from the declaration date for such distribution, shares of our common stock at a price per share less than the average closing sale price of our common stock for the ten consecutive trading days immediately preceding, but excluding, the declaration date for such distribution;

• prior to December 1, 2016, if we distribute to all or substantially all holders of our common stock cash, other assets, securities or rights to purchase our securities, which distribution has a per share value exceeding 10% of the closing sale price of our common stock on the trading day immediately preceding the declaration date for such distribution, or if we engage in certain corporate transactions described in the indenture related to the 2017 Convertible Notes;

• prior to December 1, 2016, during the five consecutive business-day period following any five consecutive trading-day period in which the trading price per $1,000 principal amount of 2017 Convertible Notes for each trading day during such five trading-day period was less than 98% of the closing sale price of our common stock for each trading day during such five trading-day period multiplied by the then current conversion rate; or

• on or after December 1, 2016, and prior to the close of business on the second scheduled trading day immediately preceding the maturity date of the 2017 Convertible Notes, which is March 1, 2017, without regard to the foregoing conditions.

Upon conversion, we will be obligated to pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. If we satisfy our conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of our common stock, the amount of cash and shares of common stock, if any, due upon conversion will be based on a daily conversion value (as described in the indenture related to the 2017 Convertible Notes) calculated on a proportionate basis for each trading day in a 25 consecutive trading-day conversion period (as described in the indenture related to the 2017 Convertible Notes). Upon any conversion, subject to certain exceptions, holders of the 2017 Convertible Notes will not receive any cash payment representing accrued and unpaid interest. Instead, interest will be deemed to be paid by the cash, shares of our common stock or a combination of cash and shares of our common stock paid or delivered, as the case may be, upon conversion of a 2017 Convertible Note.

If we undergo a fundamental change (as defined in the indenture related to the 2017 Convertible Notes) prior to maturity, holders of the 2017 Convertible Notes will have the right, at their option, to require us to repurchase for cash some or all of their 2017 Convertible Notes at a repurchase price equal to 100% of the principal amount of the 2017 Convertible Notes being repurchased, plus accrued and unpaid interest (including additional interest, if any) to, but excluding, the fundamental change repurchase date.

If holders elect to convert the 2017 Convertible Notes in connection with certain fundamental change transactions described in the indenture, we will increase the conversion rate by a number of additional shares determined by reference to the provisions contained in the indenture based on the effective date of, and the price paid (or deemed paid) per share of our common stock in, such make-whole fundamental change. If holders of our common stock receive only cash in connection with certain make-whole fundamental changes, the price paid (or deemed paid) per share will be the cash amount paid per share. Otherwise, the price paid (or deemed paid) per share will be equal to the average of the closing sale prices of our common stock on the five trading days prior to, but excluding, the effective date of such make-whole fundamental change.

In connection with the sale of the 2017 Convertible Notes, we entered into convertible note hedge transactions with respect to our common stock (the “Purchased Call Options”) with Barclays Capital Inc., acting as agent for Barclays Bank PLC, and Bank of America, N.A. (the “Dealers”). We paid an aggregate amount of approximately $70.8 million to the Dealers for the Purchased Call Options. The Purchased Call Options cover, subject to customary anti-dilution adjustments, approximately 7,033,470 shares of our common stock at a strike price that corresponds to the initial conversion price of the 2017 Convertible Notes, also subject to adjustment, and are exercisable upon conversion of the 2017 Convertible Notes.

We also entered into separate warrant transactions whereby, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, we sold to the Dealers warrants to acquire, subject to customary anti-dilution adjustments, approximately 7,033,470 shares of our common stock (the “Sold Warrants”) at a strike price of $55.91 per share of common stock. We received aggregate proceeds of approximately $40.1 million from the sale of the Sold Warrants to the Dealers. If, upon expiration of the Sold Warrants, the price per share of our common stock, as measured under the Sold Warrants, is greater than the strike price of the Sold Warrants, we will be required to issue, without further consideration, under each Sold Warrant a number of shares of our common stock with a value equal to the amount of such difference.

The Purchased Call Options and Sold Warrants are separate contracts entered into by Stone and each of the Dealers, are not part of the terms of the 2017 Convertible Notes and will not affect the holders’ rights under the 2017 Convertible Notes. The Purchased Call Options are expected generally to reduce the potential dilution upon conversion of the 2017 Convertible Notes in the event that the market value per share of our common stock at the time of exercise is greater than the strike price of the Purchased Call Options. The Sold Warrants could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the applicable strike price of the Sold Warrants.

The estimated liability and equity components of this offering were recorded in accordance with Accounting Standards Codification (“ASC”) 470-20. The initial carrying amount of the liability component of $229.2 million was determined by measuring the fair value of a similar liability that does not have an associated equity component. The carrying amount of the equity component of $70.8 million was determined by deducting the fair value of the liability component from the initial proceeds from the 2017 Convertible Notes. Transaction costs of approximately $8.9 were allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance and equity issuance costs, respectively. The cost of the convertible note hedge of $70.8 million and proceeds from the warrant transaction of $40.1 million were recorded as adjustments to equity. A summary of the entries to record the proceeds from the 2017 Convertible Notes, the cost of the Purchased Call Options and the proceeds from the Sold Warrants is as follows (in millions):

Cash	$	260.5
Other assets (deferred financing costs)		6.8
Long-term debt		(229.2	)
Additional paid-in capital		(38.1	)

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Derivative Instruments and Hedging Activities (Details 2)	Aug. 02, 2012
2012 Hedging Position One [Member] | Natural Gas [Member]
Hedging Positions
Daily Volume	10,000
Swap Price	5.035
2012 Hedging Position One [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	90.30
2012 Hedging Position Two [Member] | Natural Gas [Member]
Hedging Positions
Daily Volume	10,000
Swap Price	5.040
2012 Hedging Position Two [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	90.41
2012 Hedging Position Three [Member] | Natural Gas [Member]
Hedging Positions
Daily Volume	10,000
Swap Price	5.050
2012 Hedging Position Three [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	90.45
2012 Hedging Position Four [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	95.50
2012 Hedging Position Five [Member] | Oil [Member]
Hedging Positions
Daily Volume	2,000
Swap Price	97.60
2012 Hedging Position Six [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	98.15
2012 Hedging Position Seven [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	100.00
2012 Hedging Position Eight [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	101.55
2012 Hedging Position Nine [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	104.25
2012 Hedging Position Ten [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	111.02
2013 Hedging Position One [Member] | Natural Gas [Member]
Hedging Positions
Daily Volume	10,000
Swap Price	5.270
2013 Hedging Position One [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	92.80
2013 Hedging Position Two [Member] | Natural Gas [Member]
Hedging Positions
Daily Volume	10,000
Swap Price	5.320
2013 Hedging Position Two [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	94.45
2013 Hedging Position Three [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	94.60
2013 Hedging Position Four [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	97.15
2013 Hedging Position Five [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	101.53
2013 Hedging Position Six [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	103.00
2013 Hedging Position Seven [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	103.15
2013 Hedging Position Eight [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	104.25
2013 Hedging Position Nine [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	104.47
2013 Hedging Position Ten [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	104.50
2013 Hedging Position Eleven [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	107.30
2014 Hedging Position One [Member] | Natural Gas [Member]
Hedging Positions
Daily Volume	10,000
Swap Price	4.000
2014 Hedging Position One [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	90.06
2014 Hedging Position Two [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	98.00
2014 Hedging Position Three [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	98.30
2014 Hedging Position Four [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	99.65
2014 Hedging Position Five [Member] | Oil [Member]
Hedging Positions
Daily Volume	1,000
Swap Price	103.30
2015 Hedging Position One [Member] | Natural Gas [Member]
Hedging Positions
Daily Volume	10,000
Swap Price	4.005

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Guarantor Financial Statements (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Operating revenue:
Oil production	$ 182,181	$ 175,357	$ 383,939	$ 327,352
Gas production	28,146	47,884	57,003	89,044
Natural gas liquids production	9,866	10,231	23,318	16,230
Other operational income	952	864	1,842	1,749
Derivative income, net	5,416	1,398	4,931
Total operating revenue	226,561	235,734	471,033	434,375
Operating expenses:
Lease operating expenses	51,555	45,608	96,035	83,895
Transportation, processing and gathering expenses	5,492	2,728	9,149	4,548
Other operational expense	71	136	113	798
Production taxes	2,358	1,801	5,736	4,336
Depreciation, depletion, amortization	87,133	72,646	171,708	140,315
Accretion expense	8,255	7,717	16,521	15,434
Salaries, general and administrative	13,143	10,610	26,848	22,343
Incentive compensation expense	2,398	2,333	3,840	5,017
Derivative expense, net				782
Total operating expenses	170,405	143,579	329,950	277,468
Income from operations	56,156	92,155	141,083	156,907
Other (income) expenses:
Interest expense	7,684	1,980	13,415	5,091
Interest income	(79)	(53)	(110)	(147)
Other income	(366)	(563)	(786)	(1,127)
Other expense		69		193
Loss on early extinguishment of debt		607		607
Total other expenses	7,239	2,040	12,519	4,617
Net income before income taxes	48,917	90,115	128,564	152,290
Provision (benefit) for income taxes:
Current	(665)	(2,362)	569	(2,362)
Deferred	19,035	35,281	46,474	57,664
Total income taxes	18,370	32,919	47,043	55,302
Net income	30,547	57,196	81,521	96,988
Comprehensive income (loss)	93,749	93,308	122,658	100,626
Parent [Member]
Operating revenue:
Oil production	6,813	732	13,047	1,518
Gas production	5,865	4,303	11,496	5,583
Natural gas liquids production	1,710		5,574
Other operational income	762	587	1,456	1,309
Total operating revenue	15,150	5,622	31,573	8,410
Operating expenses:
Lease operating expenses	6,318	390	11,222	746
Transportation, processing and gathering expenses	1,710		4,198
Other operational expense	47	93	89	93
Production taxes	507	245	1,670	392
Depreciation, depletion, amortization	15,071	(24)	26,548	5,918
Accretion expense	137	4	285	8
Salaries, general and administrative	14,190	10,562	26,844	22,293
Incentive compensation expense	2,398	2,333	3,840	5,017
Total operating expenses	40,378	13,603	74,696	34,467
Income from operations	(25,228)	(7,981)	(43,123)	(26,057)
Other (income) expenses:
Interest expense	7,672	1,979	13,518	5,010
Interest income	(74)	(53)	(104)	(141)
Other income	(4)	(13)	(23)	(13)
Other expense		69		192
Loss on early extinguishment of debt		607		607
(Income) loss from investment in subsidiaries	(52,313)	(63,621)	(118,450)	(116,944)
Total other expenses	(44,719)	(61,032)	(105,059)	(111,289)
Net income before income taxes	19,491	53,051	61,936	85,232
Provision (benefit) for income taxes:
Current	(665)	(9)	569	(9)
Deferred	(10,391)	(4,136)	(20,154)	(11,747)
Total income taxes	(11,056)	(4,145)	(19,585)	(11,756)
Net income	30,547	57,196	81,521	96,988
Comprehensive income (loss)	93,749	93,308	122,658	100,626
Guarantor Subsidiary [Member]
Operating revenue:
Oil production	175,368	174,625	370,892	325,834
Gas production	22,281	43,581	45,507	83,461
Natural gas liquids production	8,156	10,231	17,744	16,230
Other operational income	77	104	140	85
Derivative income, net	5,416	1,398	4,931
Total operating revenue	211,298	229,939	439,214	425,610
Operating expenses:
Lease operating expenses	45,443	45,218	84,830	83,149
Transportation, processing and gathering expenses	3,782	2,728	4,951	4,548
Other operational expense	24	40	24	702
Production taxes	1,851	1,556	4,066	3,944
Depreciation, depletion, amortization	71,969	72,426	144,969	133,936
Accretion expense	8,033	7,622	16,065	15,244
Salaries, general and administrative	(1,047)	48	4	50
Derivative expense, net				782
Total operating expenses	130,055	129,638	254,909	242,355
Income from operations	81,243	100,301	184,305	183,255
Other (income) expenses:
Interest expense	12	1	(103)	81
Interest income	(5)		(6)	(6)
Other income	(362)	(547)	(763)	(1,114)
Other expense				1
(Income) loss from investment in subsidiaries	(140)	162	99	291
Total other expenses	(495)	(384)	(773)	(747)
Net income before income taxes	81,738	100,685	185,078	184,002
Provision (benefit) for income taxes:
Current		(2,353)		(2,353)
Deferred	29,426	39,417	66,628	69,411
Total income taxes	29,426	37,064	66,628	67,058
Net income	52,312	63,621	118,450	116,944
Comprehensive income (loss)	52,312	63,621	118,450	116,944
Non-Guarantor Subsidiaries [Member]
Operating revenue:
Other operational income	113	173	246	355
Total operating revenue	113	173	246	355
Operating expenses:
Lease operating expenses	(206)		(17)
Other operational expense		3		3
Depreciation, depletion, amortization	93	244	191	461
Accretion expense	85	91	171	182
Total operating expenses	(28)	338	345	646
Income from operations	141	(165)	(99)	(291)
Other (income) expenses:
Other income		(3)
Total other expenses		(3)
Net income before income taxes	141	(162)	(99)	(291)
Provision (benefit) for income taxes:
Net income	141	(162)	(99)	(291)
Comprehensive income (loss)	141	(162)	(99)	(291)
Eliminations [Member]
Other (income) expenses:
(Income) loss from investment in subsidiaries	52,453	63,459	118,351	116,653
Total other expenses	52,453	63,459	118,351	116,653
Net income before income taxes	(52,453)	(63,459)	(118,351)	(116,653)
Provision (benefit) for income taxes:
Net income	(52,453)	(63,459)	(118,351)	(116,653)
Comprehensive income (loss)	$ (52,453)	$ (63,459)	$ (118,351)	$ (116,653)

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2012

Acquisitions [Abstract]

Allocation of the recorded value of net assets acquired in the transaction

	(in millions)
Proved oil and gas properties	$	39.2
Unevaluated oil and gas properties		1.6
Asset retirement obligations		(14.4	)
Total fair value of net assets	$	26.4

Pro forma combined statement of operations data

	Three Months Ended June  30, 2011 (unaudited)		Six Months Ended June 30, 2011 (unaudited)
	(in millions, except per share amounts)
Revenues	$	279.4	$	515.0
Income from operations		117.2		204.9
Net income		72.1		125.5
Basic earnings per share	$	1.47	$	2.56
Diluted earnings per share	$	1.47	$	2.56