Stock prices for Lafayette-based Stone Energy are up roughly 19% this morning, a day after the company terminated a long-term deepwater rig in the Gulf Mexico while entering into an interim agreement to produce natural gas at an Appalachian field.
The Advertiser reports the decision to terminate the rig is a favorable contract move because the company is no longer responsible for the expensive obligation.
“We are very pleased to reach an agreement with both Ensco and Williams on these two important contracts,” David Welch, Stone’s chairman, president and CEO, says in an issued statement. “The termination of the Ensco contract eliminates a long-term obligation, which provides Stone with additional financial flexibility.”
Welch adds: “The interim contract with Williams allows us to resume profitable production and positive cash flow at our Mary field in West Virginia.”
The Advertiser reports that Stone Energy’s stock prices soared as a result of the contract moves, rising from a price of $10.26 at the market’s opening Thursday to a closing price of $12.06.
The ENSCO agreement involved a consideration of $20 million, $5 million of which was a deposit. The contract for ENSCO was to expire in a year, with ENSCO charging a day rate of $341,000. At 9:30 a.m. this morning, the company stock price was $14.06.
Through the second contract, with Williams, Stone will resume production at an Appalachia site, which is now about 45 million cubic feet of natural gas per day, will grow to 60 MMcfe in July and to 100 MMcfe in August.
The company is engaged in the acquisition, exploration, development and production of energy in the Gulf of Mexico and Appalachia.
