##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 or
 o
    
    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
  State or other jurisdiction of incorporation or organization: Delaware
    
    I.R.S. Employer Identification No. 72-1235413
 625 E. Kaliste Saloom Road 
Lafayette, Louisiana
(Address of principal executive offices)
    
    70508
(Zip Code)
   Title of each class
    
    Name of each exchange
on which registeredCommon Stock, Par Value $.01 Per Share
    
    New York Stock Exchange
  þ o
 o þ
 þ o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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TABLE OF CONTENTS
 Page No.PART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    9Item 1B. Unresolved Staff Comments
    
    
    18Item 2. Properties
    
    
    18Item 3. Legal Proceedings
    
    
    23Item 4. (Removed and Reserved)
    
    
    23PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    24Item 6. Selected Financial Data
    
    
    26Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    27Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 8. Financial Statements and Supplementary Data
    
    
    39Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    39Item 9A. Controls and Procedures
    
    
    39Item 9B. Other Information
    
    
    41PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    41Item 11. Executive Compensation
    
    
    42Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    42Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    42Item 14. Principal Accounting Fees and Services
    
    
    42PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    43Index to Financial Statements
    
    
    F-1Glossary of Certain Industry Terms
    
    
    G-1EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-99.1
  2




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PART I
 This section highlights information that is discussed in more detail in the remainder of the
document. Throughout this document we make statements that are classified as forward-looking.
Please refer to the Forward-Looking Statements section beginning on page 8 of this document for
an explanation of these types of statements. We use the terms Stone, Stone Energy, company,
we, us and our to refer to Stone Energy Corporation and its consolidated subsidiaries.
Certain terms relating to the oil and gas industry are defined in Glossary of Certain Industry
Terms, which begins on page G-1 of this Form 10-K .
 
 ITEM 1. BUSINESS
 The Company
  Strategy and Operational Overview
  Gulf of Mexico  Conventional Shelf (Including Onshore Louisiana)
  Gulf of Mexico  Deep Water/ Deep Shelf
   Appalachia
  Rocky Mountain Region
  3




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##### Table of Contents



Oil and Gas Marketing
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk  Commodity
Price Risk.
 Competition and Markets
 Item 1A. Risk Factors  Competition within our
industry may adversely affect our operations.
  Regulation
    4




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Natural Gas.
   Oil.
   5




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Miscellaneous
 Environmental Regulation
   Oil Pollution Act.
 Climate Change.
  6




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Hydraulic fracturing.
   Employees
  Available Information
  7




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Forward-Looking Statements
   
    
    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.
  
    
    consequences of the Deepwater Horizon oil spill and resulting stringent regulatory
requirements;
    
    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 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;
    
    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 this Form 10-K.
  8




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ITEM 1A. RISK FACTORS
  BPs Deepwater Horizon explosion and ensuing oil spill could have broad adverse consequences
affecting our operations in the Gulf of Mexico, some of which may be unforeseeable.
   New regulatory requirements and permitting procedures recently imposed by the Bureau of Ocean
Energy Management, Regulation and Enforcement could significantly delay our ability to obtain
permits to drill new wells in offshore waters
  
    
    The Environmental NTL, which imposes new and more stringent requirements for
documenting the environmental impacts potentially associated with the drilling of a
new offshore well and significantly increases oil spill response requirements.
    
    The Compliance and Review NTL, which imposes requirements for operators to secure
independent reviews of well design, construction and flow intervention processes,
and also requires certifications of compliance from senior corporate officers.
    
    The Drilling Safety Rule, which prescribes tighter cementing and casing
practices, imposes standards for the use of drilling fluids to maintain well bore
integrity, and stiffens oversight requirements relating to blowout preventers and
their components, including shear and pipe rams.
    
    The Workplace Safety Rule, which requires operators to have a comprehensive
safety and environmental management system in order to reduce human and
organizational errors as root causes of work-related accidents and offshore spills.
  9




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Oil and natural gas prices are volatile. Declines in commodity prices have adversely affected, and
in the future may adversely affect, our financial condition and results of operations, cash flows,
access to the capital markets, and ability to grow.
   
    
    changes in the supply of and demand for oil and natural gas;
    
    market uncertainty;
    
    the level of consumer product demands;
    
    hurricanes and other weather conditions;
    
    domestic governmental regulations and taxes;
    
    the price and availability of alternative fuels;
    
    political and economic conditions in oil producing countries, particularly those in
the Middle East, Russia, South America and Africa;
    
    actions by the Organization of Petroleum Exporting Countries (OPEC);
    
    the foreign supply of oil and natural gas;
    
    the price of oil and gas imports; and
    
    overall domestic and foreign economic conditions.
  We may not be able to replace production with new reserves.
   Our actual recovery of reserves may substantially differ from our proved reserve estimates.
   10




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We require substantial capital expenditures to conduct our operations and replace our
production, and we may be unable to obtain needed financing on satisfactory terms necessary
to fund our planned capital expenditures.
  Our estimates of future asset retirement obligations may vary significantly from period to period
and are especially significant because our operations are almost exclusively in the Gulf of Mexico.
   11




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A financial crisis may impact our business and financial condition. A financial crisis may
adversely impact our ability to obtain funding under our current bank credit facility or in the
capital markets.
  Our debt level and the covenants in the current and any future agreements governing our debt could
negatively impact our financial condition, results of operations and business prospects.
  
    
    incurring additional debt;
    
    paying dividends on stock, redeeming stock or redeeming subordinated debt;
    
    making investments;
    
    creating liens on our assets;
    
    selling assets;
    
    guaranteeing other indebtedness;
    
    entering into agreements that restrict dividends from our subsidiary to us;
    
    merging, consolidating or transferring all or substantially all of our assets; and
    
    entering into transactions with affiliates.
  
    
    making it more difficult for us to satisfy our obligations under the indentures or
other debt and increasing the risk that we may default on our debt obligations;
    
    requiring us to dedicate a substantial portion of our cash flow from operating
activities to required payments on debt, thereby reducing the availability of cash flow
for working capital, capital expenditures and other general business activities;
    
    limiting our ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions and other general business activities;
    
    limiting our flexibility in planning for, or reacting to, changes in our business and
the industry in which we operate;
    
    detracting from our ability to successfully withstand a downturn in our business or
the economy generally;
    
    placing us at a competitive disadvantage against other less leveraged competitors; and
    
    making us vulnerable to increases in interest rates, because debt under our credit
facility is at variable rates.
   12




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We have experienced significant shut-ins and losses of production due to the effects of hurricanes
in the Gulf of Mexico
  The marketability of our production depends mostly upon the availability, proximity and capacity of
oil and natural gas gathering systems, pipelines and processing facilities.
  We may not receive payment for a portion of our future production.
  Lower oil and gas prices and other factors have resulted, and in the future may result,
in ceiling test write-downs and other impairments of our asset carrying values.
  There are uncertainties in successfully integrating our acquisitions.
  13




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Part of our strategy includes drilling in new or emerging plays. As a result, our drilling
in these areas is subject to greater risk and uncertainty.
  Our operations are subject to numerous risks of oil and gas drilling and production activities.
  
    
    unexpected drilling conditions;
    
    pressure or irregularities in formations;
    
    equipment failures or accidents;
    
    hurricanes and other weather conditions;
    
    shortages in experienced labor; and
    
    shortages or delays in the delivery of equipment.
  Our industry experiences numerous operating risks.
    We may not be insured against all of the operating risks to which our business in exposed.
  14




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Terrorist attacks aimed at our facilities could adversely affect our business.
  Competition within our industry may adversely affect our operations.
  Our oil and gas operations are subject to various U.S. federal, state and local governmental
regulations that materially affect our operations.
  15




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The loss of key personnel could adversely affect our ability to operate.
  Hedging transactions may limit our potential gains or become ineffective.
  
    
    our production is less than expected or is shut-in for extended periods due to
hurricanes or other factors;
    
    there is a widening of price differentials between delivery points for our production
and the delivery point assumed in the hedge arrangement;
    
    the counterparties to our futures contracts fail to perform the contracts;
    
    a sudden, unexpected event materially impacts oil or natural gas prices; or
    
    we are unable to market our production in a manner contemplated when entering into the
hedge contract.
  Our Certificate of Incorporation and Bylaws have provisions that discourage corporate takeovers and
could prevent stockholders from realizing a premium on their investment.
  Resolution of litigation could materially affect our financial position and results of operations.
 ( Item 3. Legal Proceedings)
 Certain U.S. federal income tax deductions currently available with respect to oil and gas
exploration and development may be eliminated as a result of future legislation.
  16




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Climate change legislation or regulations restricting emissions of greenhouse gases could result
in increased operating costs and reduced demand for the crude oil and natural gas that we produce.
    The recent adoption of derivatives legislation by the United States Congress could have an adverse
effect on our ability to use derivative instruments to reduce the effect of commodity price,
interest rate and other risks associated with our business.
  17




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Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could
make it more difficult or costly for us to perform fracturing of producing formations and could
have an adverse effect on our ability to produce oil and gas from new wells.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  Oil and Natural Gas Reserves
   18




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Summary of Oil and Gas Reserves as of December 31, 2010
Based on Average Fiscal-Year Prices
 Oil andOil
    
    
    Natural Gas
    
    
    Natural Gas(MBbls)
    
    
    (MMcf)
    
    
    (MMcfe)Reserves Category:PROVEDDeveloped
    
    
    25,000
    
    
    
    174,876
    
    
    
    324,876Undeveloped
    
    
    8,203
    
    
    
    99,829
    
    
    
    149,047TOTAL PROVED
    
    
    33,203
    
    
    
    274,705
    
    
    
    473,923
  Future DevelopmentOil and Natural Gas
    
    
    Costs(MMcfe)
    
    
    ($ in thousands)PUDs beginning of year
    
    
    91,982
    
    
    $
    254,299Revisions of previous estimates
    
    
    (4,302
    )
    
    
    (8,970
    )Conversions to proved developed reserves
    
    
    
    
    
    
    Additional PUDs added
    
    
    61,367
    
    
    
    121,155PUDs end of year
    
    
    149,047
    
    
    $
    366,484
   December 31, 20102010
    
    Estimated ProvedProduction
    
    Reserves
    
    Nature ofField Name
    
    Location
    
    (MMcfe)
    
    (MMcfe)
    
    InterestMississippi Canyon Block 109
    
    GOM Shelf
    
    
    10,019
    
    
    
    87,038
    
    
    WorkingShip Shoal Block 113
    
    GOM Shelf
    
    
    5,782
    
    
    
    59,399
    
    
    WorkingEwing Bank Block 305
    
    GOM Shelf
    
    
    6,176
    
    
    
    27,796
    
    
    WorkingMary
    
    Appalachia
    
    
    23
    
    
    
    26,092
    
    
    WorkingMain Pass Block 288
    
    GOM Shelf
    
    
    3,374
    
    
    
    20,308
    
    
    WorkingSouth Pelto Block 22
    
    GOM Shelf
    
    
    3,802
    
    
    
    19,483
    
    
    Working
 19




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i.e.
 Acquisition, Production and Drilling Activity
 Acquisition and Development Costs.
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(In thousands)Acquisition costs, net of sales of unevaluated properties
    
    $
    127,069
    
    
    $
    9,072
    
    
    $
    1,830,468Development costs (1)
    
    
    241,387
    
    
    
    199,375
    
    
    
    78,359Exploratory costs
    
    
    42,205
    
    
    
    78,582
    
    
    
    146,529Subtotal
    
    
    410,661
    
    
    
    287,029
    
    
    
    2,055,356Capitalized salaries, general and administrative costs
and interest, net of fees and reimbursements
    
    
    51,016
    
    
    
    44,282
    
    
    
    45,757Total additions to oil and gas properties, net
    
    $
    461,677
    
    
    $
    331,311
    
    
    $
    2,101,113
 
 (1)
    
    Includes asset retirement costs of $56,444, $78,387 and ($77,573) for the years
ended December 31, 2010, 2009
and 2008, respectively. Production Volumes, Sales Price and Cost Data.
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Production:Oil (MBbls)
    
    
    5,714
    
    
    
    6,207
    
    
    
    4,916Natural gas (MMcf)
    
    
    41,937
    
    
    
    41,335
    
    
    
    34,409Oil and natural gas (MMcfe)
    
    
    76,221
    
    
    
    78,577
    
    
    
    63,903Average sales prices:(1)Oil (per Bbl)
    
    $
    73.14
    
    
    $
    70.72
    
    
    $
    93.79Natural gas (per Mcf)
    
    
    5.56
    
    
    
    6.59
    
    
    
    9.78Oil and natural gas (per Mcfe)
    
    
    8.54
    
    
    
    9.05
    
    
    
    12.48Expenses (per Mcfe):Lease operating expenses (2)
    
    $
    2.00
    
    
    $
    2.00
    
    
    $
    2.68
 
 (1)
    
    Includes the settlement of effective hedging contracts.(2)
    
    Includes oil and gas operating costs and major maintenance
expense and excludes production and ad valorem taxes. 20




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Production Volumes, Sales Price and Cost Data for Individually Significant Fields.
 Year Ended December 31,Mississippi Canyon Block 109
    
    2010
    
    
    2009
    
    
    2008Production:Oil (MBbls)
    
    
    1,389
    
    
    
    861
    
    
    
    1,035Natural gas (MMcf)
    
    
    1,686
    
    
    
    1,092
    
    
    
    1,700Oil and natural gas (MMcfe)
    
    
    10,019
    
    
    
    6,256
    
    
    
    7,913Average sales prices:(1)Oil (per Bbl)
    
    $
    77.29
    
    
    $
    66.68
    
    
    $
    107.96Natural gas (per Mcf)
    
    
    4.89
    
    
    
    3.81
    
    
    
    9.55Oil and natural gas (per Mcfe)
    
    
    11.54
    
    
    
    9.86
    
    
    
    16.18Expenses (per Mcfe):Lease operating expenses (2)
    
    $
    1.27
    
    
    $
    2.19
    
    
    $
    0.86
 
 (1)
    
    Exclusive of the settlement of effective hedging contracts.(2)
    
    Includes oil and gas operating costs and major maintenance
expense and excludes production and ad valorem taxes. Drilling Activity.
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetExploratory Wells:Productive
    
    
    6.00
    
    
    
    4.10
    
    
    
    12.00
    
    
    
    6.75
    
    
    
    6.00
    
    
    
    3.50Dry
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.00
    
    
    
    3.98Development Wells:Productive
    
    
    20.00
    
    
    
    15.75
    
    
    
    5.00
    
    
    
    4.00
    
    
    
    9.00
    
    
    
    7.18Dry
    
    
    
    
    
    
    
    
    
    
    4.00
    
    
    
    4.00
    
    
    
    1.00
    
    
    
    0.25
  21




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Productive Well and Acreage Data.
 Gross
    
    
    NetProductive Wells:Oil (1):Gulf Coast Basin
    
    
    153
    
    
    
    119Rocky Mountain Region
    
    
    3
    
    
    
    1Appalachia
    
    
    
    
    
    
    156
    
    
    
    120Gas (2):Gulf Coast Basin
    
    
    105
    
    
    
    79Rocky Mountain Region
    
    
    
    
    
    
    Appalachia
    
    
    10
    
    
    
    8115
    
    
    
    87Total
    
    
    271
    
    
    
    207Developed Acres:Gulf Coast Basin
    
    
    440,195
    
    
    
    338,856Rocky Mountain Region
    
    
    1,234
    
    
    
    432Appalachia
    
    
    1,116
    
    
    
    1,116442,545
    
    
    
    340,404Undeveloped Acres (3):Gulf Coast Basin
    
    
    528,656
    
    
    
    377,609Rocky Mountain Region
    
    
    109,030
    
    
    
    91,708Appalachia
    
    
    88,253
    
    
    
    78,599725,939
    
    
    
    547,916Total
    
    
    1,168,484
    
    
    
    888,320
 
 (1)
    
    16 gross wells each have dual completions.(2)
    
    13 gross wells each have dual completions.(3)
    
    Leases covering approximately 7.8% of our undeveloped gross acreage will expire in
2011, 9.4% in 2012, 36.1% in 2013, 5.5% in 2014, 14.7% in 2015, 4.1% in 2016, 1.8% in
2017, 10.3% in 2018, 4.8% in 2019 and 5.5% thereafter. Title to Properties
  22




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ITEM 3. LEGAL PROCEEDINGS
 Franchise Tax Action. th
 Ad Valorem Tax Suit. th
 Lafourche Parish, Louisiana, Landowner Action et al th
  
 ITEM 4. (REMOVED AND RESERVED)
 23




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PART II
 
 ITEM
5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  High
    
    
    Low2009First Quarter
    
    $
    13.73
    
    
    $
    1.55Second Quarter
    
    
    9.85
    
    
    
    3.09Third Quarter
    
    
    18.43
    
    
    
    5.83Fourth Quarter
    
    
    20.51
    
    
    
    13.752010First Quarter
    
    $
    19.76
    
    
    $
    14.12Second Quarter
    
    
    20.63
    
    
    
    11.13Third Quarter
    
    
    15.19
    
    
    
    10.30Fourth Quarter
    
    
    23.31
    
    
    
    14.212011First Quarter (through February 22, 2011)
    
    $
    27.21
    
    
    $
    21.28
  Dividend Restrictions
 3 4 5 8
 Issuer Purchases of Equity Securities
  Maximum Number (orTotal Number of
    
    
    Approximate DollarShares (or Units)
    
    
    Value) of SharesPurchased as Part
    
    
    (or Units) that MayTotal Number of
    
    
    
    
    
    
    of Publicly
    
    
    Yet be PurchasedShares (or Units)
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    per Share (or Unit)
    
    
    Programs
    
    
    ProgramsShare Repurchase Program:October 2010
    

    
    
    
    
    
    
    
    
    
    November 2010
    
    
    
    
    
    
    
    
    
    
    December 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    92,928,632Other:October 2010
    
    
    378
    (a)
    
    $
    14.91
    
    
    
    November 2010
    
    
    
    
    
    
    
    
    
    
    December 2010
    
    
    
    
    
    
    
    
    
    
    378
    
    
    $
    14.91
    
    
    
    
    
    
    
    N/ATotal
    
    
    378
    
    
    $
    14.91
    
    
    
    
 
 (a)
    
    Amounts represent shares withheld from employees upon the vesting of restricted stock
in order to satisfy the required tax withholding obligations. 24




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Equity Compensation Plan Information
  Stock Performance Graph
  1.
    
    $100 was invested in the Companys Common Stock, the S&P 500 Index
and the Peer Groups (as defined below) on December 31, 2005 at
$45.53 per share for the Companys Common Stock and at the closing
price of the stocks comprising the S&P 500 Index and the Peer
Groups, respectively, on such date.2.
    
    Peer Group investment is weighted based upon the market
capitalization of each individual company within the Peer Group at
the beginning of the period.3.
    
    Dividends are reinvested on the ex-dividend dates.
 
 Measurement Period
    
    
    
    
    
    
    
    
    
    
    
    
    
    S&P 500(Fiscal Year Covered)
    
    SGY
    
    2010 Peer Group
    
    2009 Peer Group
    
    Index12/31/06
    
    
    77.64
    
    
    
    99.35
    
    
    
    98.12
    
    
    
    115.7912/31/07
    
    
    103.03
    
    
    
    110.24
    
    
    
    104.95
    
    
    
    122.1612/31/08
    
    
    24.20
    
    
    
    41.00
    
    
    
    39.32
    
    
    
    76.9612/31/09
    
    
    39.64
    
    
    
    68.62
    
    
    
    65.52
    
    
    
    97.3312/31/10
    
    
    48.96
    
    
    
    105.30
    
    
    
    102.21
    
    
    
    111.99
   25




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
 Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations Item 8. Financial Statements and
Supplementary Data. Item 8. Financial Statements and Supplementary Data  Note 2.
 Year Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(In thousands, except per share amounts)Statement of Operations Data:Operating revenue:Oil production
    
    $
    417,948
    
    
    $
    438,942
    
    
    $
    461,050
    
    
    $
    424,205
    
    
    $
    348,979Gas production
    
    
    233,055
    
    
    
    272,353
    
    
    
    336,665
    
    
    
    329,047
    
    
    
    337,321Derivative income, net
    
    
    3,265
    
    
    
    3,061
    
    
    
    3,327
    
    
    
    
    
    
    
    2,688Total operating revenue
    
    
    654,268
    
    
    
    714,356
    
    
    
    801,042
    
    
    
    753,252
    
    
    
    688,988Operating expenses:Lease operating expenses
    
    
    152,326
    
    
    
    156,786
    
    
    
    171,107
    
    
    
    149,702
    
    
    
    159,043Other operational expense
    
    
    5,450
    
    
    
    2,400
    
    
    
    
    
    
    
    
    
    
    
    Production taxes
    
    
    5,808
    
    
    
    7,920
    
    
    
    7,990
    
    
    
    9,945
    
    
    
    13,472Depreciation, depletion and amortization
    
    
    248,201
    
    
    
    259,639
    
    
    
    288,384
    
    
    
    302,739
    
    
    
    320,696Write-down of oil and gas properties
    
    
    
    
    
    
    508,989
    
    
    
    1,324,327
    
    
    
    8,164
    
    
    
    510,013Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    465,985
    
    
    
    
    
    
    
    Accretion expense
    
    
    34,469
    
    
    
    39,306
    
    
    
    17,392
    
    
    
    17,620
    
    
    
    12,391Salaries, general and administrative expenses
    
    
    42,759
    
    
    
    41,367
    
    
    
    43,504
    
    
    
    33,584
    
    
    
    34,266Incentive compensation expense
    
    
    5,888
    
    
    
    6,402
    
    
    
    2,315
    
    
    
    5,117
    
    
    
    4,356Impairment of inventory
    
    
    129
    
    
    
    9,398
    
    
    
    
    
    
    
    
    
    
    
    Derivative expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    666
    
    
    
    Total operating expenses
    
    
    495,030
    
    
    
    1,032,207
    
    
    
    2,321,004
    
    
    
    527,537
    
    
    
    1,054,237Gain on Rocky Mountain Region properties divestiture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,825
    
    
    
    Income (loss) from operations
    
    
    159,238
    
    
    
    (317,851
    )
    
    
    (1,519,962
    )
    
    
    285,540
    
    
    
    (365,249
    )Other (income) expenses:Interest expense
    
    
    12,192
    
    
    
    21,361
    
    
    
    13,243
    
    
    
    32,068
    
    
    
    35,931Interest income
    
    
    (1,464
    )
    
    
    (528
    )
    
    
    (11,250
    )
    
    
    (12,135
    )
    
    
    (2,524
    )Other income, net
    
    
    (6,021
    )
    
    
    (3,854
    )
    
    
    (5,800
    )
    
    
    (5,657
    )
    
    
    (4,657
    )Merger expense reimbursement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51,500
    )Merger expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,029Loss on early extinguishment of debt
    
    
    1,820
    
    
    
    
    
    
    
    
    
    
    
    844
    
    
    
    Total other (income) expenses, net
    
    
    6,527
    
    
    
    16,979
    
    
    
    (3,807
    )
    
    
    15,120
    
    
    
    27,279Net income (loss) before income taxes
    
    
    152,711
    
    
    
    (334,830
    )
    
    
    (1,516,155
    )
    
    
    270,420
    
    
    
    (392,528
    )Income tax provision (benefit)
    
    
    56,282
    
    
    
    (116,559
    )
    
    
    (369,146
    )
    
    
    88,984
    
    
    
    (138,306
    )Net income (loss)
    
    
    96,429
    
    
    
    (218,271
    )
    
    
    (1,147,009
    )
    
    
    181,436
    
    
    
    (254,222
    )Net income (loss) attributable to non-controlling
interest
    
    
    
    
    
    
    27
    
    
    
    (77
    )
    
    
    
    
    
    
    Net income (loss) attributable to Stone Energy Corp.
    
    $
    96,429
    
    
    
    ($218,298
    )
    
    
    ($1,146,932
    )
    
    $
    181,436
    
    
    
    ($254,222
    )Earnings and dividends per common share:Basic earnings (loss) per share
    
    $
    1.99
    
    
    
    ($4.97
    )
    
    
    ($35.89
    )
    
    $
    6.50
    
    
    
    ($9.29
    )Diluted earnings (loss) per share
    
    $
    1.99
    
    
    
    ($4.97
    )
    
    
    ($35.89
    )
    
    $
    6.49
    
    
    
    ($9.29
    )Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash Flow Data:Net cash provided by operating activities
    
    $
    424,794
    
    
    $
    507,787
    
    
    $
    522,478
    
    
    $
    465,158
    
    
    $
    399,035Net cash provided by (used in) investing activities
    
    
    (374,088
    )
    
    
    (316,079
    )
    
    
    (1,357,907
    )
    
    
    344,812
    
    
    
    (660,456
    )Net cash provided by (used in) financing activities
    
    
    (13,043
    )
    
    
    (190,552
    )
    
    
    428,440
    
    
    
    (393,706
    )
    
    
    240,575Balance Sheet Data (at end of period):Working capital
    
    $
    30,382
    
    
    $
    26,137
    
    
    $
    123,339
    
    
    $
    412,445
    
    
    $
    1,845Oil and gas properties, net
    
    
    1,397,809
    
    
    
    1,185,709
    
    
    
    1,628,170
    
    
    
    1,181,312
    
    
    
    1,784,425Total assets
    
    
    1,679,090
    
    
    
    1,454,242
    
    
    
    2,109,852
    
    
    
    1,889,603
    
    
    
    2,128,471Long-term debt, less current potion
    
    
    575,000
    
    
    
    575,000
    
    
    
    825,000
    
    
    
    400,000
    
    
    
    797,000Stone Energy Corporation stockholders equity
    
    
    430,357
    
    
    
    325,659
    
    
    
    577,391
    
    
    
    885,802
    
    
    
    711,640
 26




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Item 1A. Risk Factors Item 8. Financial Statements and Supplementary Data
 Note 1. Item 8.
Financial Statements and Supplementary Data  Note 2.
 Executive Overview
 Item 1. Business 
Strategy and Operational Overview.
 2010 Significant Events.
 Public Offering of Senior Notes  5 8 1 4
 5 8
 Deepwater Horizon Explosion and Oil Spill 
 Appalachian Basin (Marcellus Shale Play)
 2011 Outlook.
  Known Trends and Uncertainties.
 Deepwater Horizon Explosion and Oil Spill Item 1A. Risk Factors
 27




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##### Table of Contents



Asset Retirement Obligations Item
1A. Risk Factors.
 Hurricanes 
 Louisiana Franchise Taxes Item 3. Legal Proceedings.
 Liquidity and Capital Resources
   Item 1. Business  Strategy and Operational Overview.
 Cash Flow and Working Capital.
  28




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##### Table of Contents



1 4 5 8
  Capital Expenditures. .
 Bank Credit Facility. 5 8 5 8
    Senior Notes Offering and Redemption of Senior Subordinated Notes. 5 8 1 4
 5 8
 29




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##### Table of Contents



Share Repurchase Program.
 Hedging. Item 7A. Quantitative and Qualitative Disclosure About Market Risk  Commodity
Price Risk.
 Contractual Obligations and Other Commitments
  Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsContractual Obligations and Commitments:85⁄8% Senior Notes due 2017
    
    $
    375,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    375,00063/4% Senior Subordinated Notes due 2014
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    Interest and commitment fees (1)
    
    
    250,929
    
    
    
    46,607
    
    
    
    91,688
    
    
    
    77,596
    
    
    
    35,038Asset retirement obligations including
accretion
    
    
    639,140
    
    
    
    42,500
    
    
    
    101,666
    
    
    
    145,823
    
    
    
    349,151Rig commitments
    
    
    9,850
    
    
    
    9,850
    
    
    
    
    
    
    
    
    
    
    
    Seismic data commitments (2)
    
    
    3,578
    
    
    
    3,578
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    1,879
    
    
    
    507
    
    
    
    947
    
    
    
    425
    
    
    
    Total Contractual Obligations and Commitments
    
    $
    1,480,376
    
    
    $
    103,042
    
    
    $
    194,301
    
    
    $
    423,844
    
    
    $
    759,189
 
 (1)
    
    Includes interest on senior notes and senior subordinated notes and 0.5% fee on unused commitments under bank credit facility.(2)
    
    Represents pre-commitments for seismic data purchases. Safety Performance
  TRIR
    
    
    TRIRYear Ended December 31,
    
    Performance
    
    
    Goal2010
    
    
    0.51
    
    
    
    0.652009
    
    
    0.18
    
    
    
    0.852008
    
    
    0.44
    
    
    
    0.85
  30




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##### Table of Contents



Results of Operations
 2010 Compared to 2009 Item 2. Properties  Oil and Natural Gas Reserves.
 Year Ended December 31,2010
    
    
    2009
    
    
    Variance
    
    
    % ChangeProduction:Oil (MBbls)
    
    
    5,714
    
    
    
    6,207
    
    
    
    (493
    )
    
    
    (8
    %)Natural gas (MMcf)
    
    
    41,937
    
    
    
    41,335
    
    
    
    602
    
    
    
    1
    %Oil and natural gas (MMcfe)
    
    
    76,221
    
    
    
    78,577
    
    
    
    (2,356
    )
    
    
    (3
    %)Average prices:(1)Oil (per Bbl)
    
    $
    73.14
    
    
    $
    70.72
    
    
    $
    2.42
    
    
    
    3
    %Natural gas (per Mcf)
    
    
    5.56
    
    
    
    6.59
    
    
    
    (1.03
    )
    
    
    (16
    %)Oil and natural gas (per Mcfe)
    
    
    8.54
    
    
    
    9.05
    
    
    
    (0.51
    )
    
    
    (6
    %)Expenses (per Mcfe):Lease operating expenses
    
    $
    2.00
    
    
    $
    2.00
    
    
    $
    
    
    
    
    0
    %Salaries, general and administrative
expenses (2)
    
    
    0.56
    
    
    
    0.53
    
    
    
    0.03
    
    
    
    6
    %DD&A expense on oil and gas properties
    
    
    3.18
    
    
    
    3.23
    
    
    
    (0.05
    )
    
    
    (2
    %)Estimated Proved Reserves at December 31:Oil (MBbls)
    
    
    33,203
    
    
    
    32,336
    
    
    
    867
    
    
    
    3
    %Natural gas (MMcf)
    
    
    274,705
    
    
    
    216,694
    
    
    
    58,011
    
    
    
    27
    %Oil and natural gas (MMcfe)
    
    
    473,923
    
    
    
    410,711
    
    
    
    63,212
    
    
    
    15
    %
 
 (1)
    
    Includes the settlement of effective hedging contracts.(2)
    
    Exclusive of incentive compensation expense.    Production .
 Prices.
  Income .
 Derivative Income/Expense.
 31




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##### Table of Contents



Expenses.
         Asset Retirement Obligations.
 Reserves.
  32




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##### Table of Contents



2009 Compared to 2008 Item 2. Properties  Oil and Natural Gas Reserves.
 Year Ended December 31,2009
    
    
    2008
    
    
    Variance
    
    
    % ChangeProduction:Oil (MBbls)
    
    
    6,207
    
    
    
    4,916
    
    
    
    1,291
    
    
    
    26
    %Natural gas (MMcf)
    
    
    41,335
    
    
    
    34,409
    
    
    
    6,926
    
    
    
    20
    %Oil and natural gas (MMcfe)
    
    
    78,577
    
    
    
    63,903
    
    
    
    14,674
    
    
    
    23
    %Average prices:(1)Oil (per Bbl)
    
    $
    70.72
    
    
    $
    93.79
    
    
    
    ($23.07
    )
    
    
    (25
    %)Natural gas (per Mcf)
    
    
    6.59
    
    
    
    9.78
    
    
    
    (3.19
    )
    
    
    (33
    %)Oil and natural gas (per Mcfe)
    
    
    9.05
    
    
    
    12.48
    
    
    
    (3.43
    )
    
    
    (27
    %)Expenses (per Mcfe):Lease operating expenses
    
    $
    2.00
    
    
    $
    2.68
    
    
    
    ($0.68
    )
    
    
    (25
    %)Salaries, general and administrative
expenses (2)
    
    
    0.53
    
    
    
    0.68
    
    
    
    (0.15
    )
    
    
    (22
    %)DD&A expense on oil and gas properties
    
    
    3.23
    
    
    
    4.45
    
    
    
    (1.22
    )
    
    
    (27
    %)Estimated Proved Reserves at December 31:Oil (MBbls)
    
    
    32,336
    
    
    
    36,564
    
    
    
    (4,228
    )
    
    
    (12
    %)Natural gas (MMcf)
    
    
    216,694
    
    
    
    299,554
    
    
    
    (82,860
    )
    
    
    (28
    %)Oil and natural gas (MMcfe)
    
    
    410,711
    
    
    
    518,935
    
    
    
    (108,224
    )
    
    
    (21
    %)
 
 (1)
    
    Includes the settlement of effective hedging contracts.(2)
    
    Exclusive of incentive compensation expense.     Production .
 Prices.
  33




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##### Table of Contents



Income .
  Derivative Income/Expense.
 Expenses.
        34




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##### Table of Contents



Asset Retirement Obligations.
 Reserves.
  Off-Balance Sheet Arrangements
  Forward-Looking Statements
 Item 1. Business  Forward-Looking Statements Item 1A. Risk
Factors.
 Accounting Matters and Critical Accounting Policies
 Fair Value Measurements.
  Business Combinations and Goodwill.
 Asset Retirement Obligations.
 35




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##### Table of Contents



Full Cost Method.
     Derivative Instruments and Hedging Activities.
 Use of Estimates.
 
    
    remaining proved oil and gas reserve 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;
 36




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##### Table of Contents




    
    insurance recoveries related to hurricanes;
    
    estimates of fair value in business combinations;
    
    goodwill impairment testing and measurement;
    
    current income taxes; and
    
    contingencies.
 Notes to
Consolidated Financial Statements
 Recent Accounting Developments
 Fair Value Measurements and Disclosures.
 37




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Commodity Price Risk.
 .
  Fixed-Price SwapsNatural Gas
    
    
    OilDaily
    
    
    
    
    
    
    DailyVolume
    
    
    Swap
    
    
    Volume
    
    
    Swap(MMBtus/d)
    
    
    Price
    
    
    (Bbls/d)
    
    
    Price2011
    
    
    10,000
    (a)
    
    $
    4.565
    
    
    
    1,000
    
    
    $
    70.052011
    
    
    20,000
    
    
    
    5.200
    
    
    
    1,000
    
    
    
    78.202011
    
    
    10,000
    
    
    
    6.830
    
    
    
    1,000
    
    
    
    80.202011
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    83.002011
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    83.052011
    
    
    
    
    
    
    
    
    
    
    1,000
    (b)
    
    
    85.202011
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    85.252011
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    89.002011
    
    
    
    
    
    
    
    
    
    
    1,000
    (c)
    
    
    97.752012
    
    
    10,000
    
    
    
    5.035
    
    
    
    1,000
    
    
    
    90.302012
    
    
    10,000
    
    
    
    5.040
    
    
    
    1,000
    
    
    
    90.412012
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    90.452012
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    95.502012
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    97.602012
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    100.002013
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    97.15
 
 (a)
    
    February  December(b)
    
    January  June(c)
    
    July  December  Interest Rate Risk. 5 8 3 4
 38




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   
    
    Stones disclosure controls and procedures were effective to ensure that
information required to be disclosed by Stone in the reports it files or submits
under the Securities Exchange Act of 1934 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 ensure that
information required to be disclosed by Stone in the reports that it files or
submits under the Securities Exchange Act of 1934 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 Control Over Financial Reporting
  Managements Report on Internal Control over Financial Reporting
  39




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       /s/ Ernst & Young LLP 
 40




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##### Table of Contents



ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    PositionDavid H. Welch
    
    
    62
    
    
    President, Chief Executive Officer and DirectorKenneth H. Beer
    
    
    53
    
    
    Executive Vice President and Chief Financial OfficerAndrew L. Gates, III
    
    
    63
    
    
    Senior Vice President, General Counsel and SecretaryE. J. Louviere
    
    
    62
    
    
    Senior Vice President  LandJohn R. Pantaleo
    
    
    53
    
    
    Vice President  Gulf of MexicoJ. Kent Pierret
    
    
    55
    
    
    Senior Vice President, Chief Accounting Officer and TreasurerRichard L. Smith
    
    
    52
    
    
    Executive Vice President  Exploration and Business DevelopmentRichard L. Toothman, Jr.
    
    
    46
    
    
    Vice President  AppalachiaJerome F. Wenzel, Jr.
    
    
    58
    
    
    Executive Vice President  OperationsFlorence M. Ziegler
    
    
    50
    
    
    Vice President  Human Resources and Administration
 David H. Welch
 Kenneth H. Beer
 Andrew L. Gates, III
 E. J. Louviere
 John R. Pantaleo
 J. Kent Pierret
 Richard L. Smith
 Richard L. Toothman, Jr.
 Jerome F. Wenzel, Jr.
 41




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##### Table of Contents



Florence M. Ziegler
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  42




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) 1. Financial Statements:
  
 2. Financial Statement Schedules:
  3. Exhibits:
 3.1
    
    Certificate of Incorporation of the Registrant, as amended
(incorporated by reference to Exhibit 3.1 to the Registrants
Registration Statement on Form S-1 (Registration No. 33-62362)).3.2
    
    Certificate of Amendment of the Certificate of Incorporation of
Stone Energy Corporation, dated February 1, 2001 (incorporated by
reference to Exhibit 4.1 to the Registrants Current Report on Form
8-K, filed February 7, 2001).3.3
    
    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 on December 15, 2004.)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)).
 43




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##### Table of Contents



10.1
    
    Deferred Compensation and Disability Agreement between TSPC and E.
J. Louviere dated July 16, 1981 (incorporated by reference to
Exhibit 10.10 to the Registrants Annual Report on Form 10-K for
the year ended December 31, 1995 (File No. 001-12074)).10.2
    
    Stone Energy Corporation 2009 Amended and Restated Stock Incentive
Plan (incorporated by reference to Appendix A to the Registrants
Definitive Proxy Statement on Schedule 14A for Stones 2009 Annual
Meeting of Stockholders (File No. 001-12074)).10.3
    
    Stone Energy Corporation Revised (2005) Annual Incentive
Compensation Plan (incorporated by reference to Exhibit 10.11 to
the Registrants Annual Report on Form 10-K for the year ended
December 31, 2004 (File No. 001-12074)).10.4
    
    Stone Energy Corporation Amended and Restated Revised Annual
Incentive Compensation Plan, dated November 14, 2007 (incorporated
by reference to Exhibit 10.10 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 2007 (File No.
001-12074)).10.5
    
    Stone Energy Corporation Deferred Compensation Plan (incorporated
by reference to Exhibit 4.5 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 2004 (File No.
001-12074)).10.6
    
    Adoption Agreement between Fidelity Management Trust Company and
Stone Energy Corporation for the Stone Energy Corporation Deferred
Compensation Plan dated December 1, 2004 (incorporated by reference
to Exhibit 4.6 to the Registrants Annual Report on Form 10-K for
the year ended December 31, 2004 (File No. 001-12074)).10.7
    
    Letter Agreement dated May 19, 2005 between Stone Energy
Corporation and Kenneth H. Beer (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed
May 24, 2005 (File No. 001-12074)).10.8
    
    Letter Agreement dated December 2, 2008 between Stone Energy
Corporation and David H. Welch (incorporated by reference to
Exhibit 10.8 to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2008 (File No. 001-12074)).10.9
    
    Letter Agreement dated June 28, 2007 between Stone Energy
Corporation and Richard L. Smith (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K filed
July 2, 2007 (File No. 001-12074)).10.10
    
    Amendment No.1, dated as of April 28, 2009, to the Second Amended
and Restated Credit Agreement dated as of August 28, 2008, among
Stone Energy Corporation, Stone Energy Offshore, L.L.C. and the
financial institutions named therein (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed
April 30, 2009 (File No. 001-12074)).10.11
    
    Amendment No. 2, dated January 11, 2010, to the Second Amended and
Restated Credit Agreement dated as of August 28, 2008 (incorporated
by reference to Exhibit 4.1 to the Registrants Current Report on
Form 8-K, filed January 12, 2010 (File No. 001-12074)).10.12
    
    Amendment No. 3, dated November 9, 2010, to the Second Amended and
Restated Credit Agreement dated as of August 28, 2008 (incorporated
by reference to Exhibit 4.1 to the Registrants Current Report on
Form 8-K, filed November 12, 2010 (File No. 001-12074)).10.13
    
    Amended and Restated Security Agreement, dated as of August 28,
2008, among Stone Energy Corporation and the other Debtors parties
hereto in favor of Bank of America, N.A., as Administrative Agent
(incorporated by reference to Exhibit 4.5 to the Registrants
Quarterly Report on Form 10-Q for the quarter ended September 30,
2008 (File No. 001-12074)).10.14
    
    Stone Energy Corporation Executive Change of Control and Severance
Plan (as amended and restated effective December 31, 2008)
(incorporated by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K, filed April 8, 2009 (File No.
001-12074)).10.15
    
    Stone Energy Corporation Employee Change of Control Severance Plan
(as amended and restated) dated December 7, 2007 (incorporated by
reference to Exhibit 10.3 to the Registrants Current Report on
Form 8-K, filed December 12, 2007 (File No. 001-12074)).
 44




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##### Table of Contents



10.16
    
    Stone Energy Corporation Executive Change in Control Severance
Policy (as amended and restated) dated December 7, 2007
(incorporated by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K, filed December 12, 2007 (File No.
001-12074)).10.17
    
    Form of Indemnification Agreement between Stone Energy Corporation
and each of its directors and executive officers (incorporated by
reference to Exhibit 10.1 to the Registrants Current Report on
Form 8-K, filed March 27, 2009 (File No. 001-12074)).*21.1
    
    Subsidiaries of the Registrant.*23.1
    
    Consent of Independent Registered Public Accounting Firm.*23.2
    
    Consent of Netherland, Sewell & Associates, Inc.*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.*99.1
    
    Report of Netherland, Sewell & Associates, Inc.
 
 *
    
    Filed herewith.
    
    Identifies management contracts and compensatory plans or arrangements.#
    
    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. 45




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##### Table of Contents



SIGNATURES
  STONE ENERGY CORPORATIONDate:  March 3, 2011
    By:
    /s/ David H. WelchDavid H. WelchPresident and
Chief Executive Officer  Signature
    
    Title
    
    Date/s/ David H. Welch
    
    President, Chief Executive Officer
    
    March 3, 2011David H. Welch
    
    and Director(principal executive officer)/s/ Kenneth H. Beer
    
    Executive Vice President and
    
    March 3, 2011Kenneth H. Beer
    
    Chief Financial Officer
(principal financial officer)/s/ J. Kent Pierret
    
    Senior Vice President, Chief
    
    March 3, 2011J. Kent Pierret
    
    Accounting Officer and Treasurer
(principal accounting officer)/s/ Robert A. Bernhard
    
    Director
    
    March 3, 2011Robert A. Bernhard/s/ George R. Christmas
    
    Director
    
    March 3, 2011George R. Christmas/s/ B.J. Duplantis
    
    Director
    
    March 3, 2011B.J. Duplantis/s/ Peter D. Kinnear
    
    Director
    
    March 3, 2011Peter D. Kinnear/s/ John P. Laborde
    
    Director
    
    March 3, 2011John P. Laborde/s/ Richard A. Pattarozzi
    
    Director
    
    March 3, 2011Richard A. Pattarozzi/s/ Donald E. Powell
    
    Director
    
    March 3, 2011Donald E. Powell/s/ Kay G. Priestly
    
    Director
    
    March 3, 2011Kay G. Priestly
 46




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheet as of December 31, 2010 and 2009
    
    
    F-3Consolidated Statement of Operations for the years ended December 31, 2010, 2009 and 2008
    
    
    F-4Consolidated Statement of Cash Flows for the years ended December 31, 2010, 2009 and 2008
    
    
    F-5Consolidated Statement of Changes in Stockholders Equity
for the years ended December 31, 2010, 2009 and 2008
    
    
    F-6Consolidated Statement of Comprehensive Income
for the years ended December 31, 2010, 2009 and 2008
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      /s/ Ernst & Young LLP 
 F-2




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##### Table of Contents



STONE ENERGY CORPORATION
 
 CONSOLIDATED BALANCE SHEET  (Amounts in thousands of dollars, except per share amounts)
 December 31,2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    106,956
    
    
    $
    69,293Restricted cash
    
    
    5,500
    
    
    
    Accounts receivable
    
    
    88,529
    
    
    
    118,129Fair value of hedging contracts
    
    
    12,955
    
    
    
    16,223Deferred tax asset
    
    
    27,274
    
    
    
    14,571Inventory
    
    
    6,465
    
    
    
    8,717Other current assets
    
    
    768
    
    
    
    814Total current assets
    
    
    248,447
    
    
    
    227,747Oil and gas properties  United States  full cost method of
accounting:Proved, net of accumulated depreciation, depletion and
amortization of $4,804,949 and $4,555,372, respectively
    
    
    984,629
    
    
    
    856,467Unevaluated
    
    
    413,180
    
    
    
    329,242Building and land, net of accumulated depreciation of
$2,033 and $1,840, respectively
    
    
    6,273
    
    
    
    5,723Fair value of hedging contracts
    
    
    
    
    
    
    1,771Fixed assets, net of accumulated depreciation of $20,434 and
$18,591, respectively
    
    
    4,449
    
    
    
    4,084Other assets, net of accumulated depreciation and amortization
of $11,277 and $10,419, respectively
    
    
    22,112
    
    
    
    29,208Total assets
    
    $
    1,679,090
    
    
    $
    1,454,242Liabilities and Stockholders EquityCurrent liabilities:Accounts payable to vendors
    
    $
    103,208
    
    
    $
    66,863Undistributed oil and gas proceeds
    
    
    10,037
    
    
    
    15,280Fair value of hedging contracts
    
    
    32,144
    
    
    
    34,859Asset retirement obligations
    
    
    42,300
    
    
    
    30,515Current income tax payable
    
    
    239
    
    
    
    11,110Other current liabilities
    
    
    30,137
    
    
    
    42,983Total current liabilities
    
    
    218,065
    
    
    
    201,610Long-term debt
    
    
    575,000
    
    
    
    575,000Deferred taxes
    
    
    99,227
    
    
    
    35,756Asset retirement obligations
    
    
    331,620
    
    
    
    290,084Fair value of hedging contracts
    
    
    3,606
    
    
    
    7,721Other long-term liabilities
    
    
    21,215
    
    
    
    18,412Total liabilities
    
    
    1,248,733
    
    
    
    1,128,583Commitments and contingenciesStockholders equity:Common stock, $.01 par value; authorized 100,000,000 shares;
issued 47,764,505 and 47,509,144 shares, respectively
    
    
    478
    
    
    
    475Treasury stock (16,582 shares, respectively, at cost)
    
    
    (860
    )
    
    
    (860
    )Additional paid-in capital
    
    
    1,331,500
    
    
    
    1,324,410Accumulated deficit
    
    
    (886,557
    )
    
    
    (982,986
    )Accumulated other comprehensive loss
    
    
    (14,204
    )
    
    
    (15,380
    )Total stockholders equity
    
    
    430,357
    
    
    
    325,659Total liabilities and stockholders equity
    
    $
    1,679,090
    
    
    $
    1,454,242
  F-3




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##### Table of Contents



STONE ENERGY CORPORATION
 
 CONSOLIDATED STATEMENT OF OPERATIONS  (Amounts in thousands, except per share amounts)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Operating revenue:Oil production
    
    $
    417,948
    
    
    $
    438,942
    
    
    $
    461,050Gas production
    
    
    233,055
    
    
    
    272,353
    
    
    
    336,665Derivative income, net
    
    
    3,265
    
    
    
    3,061
    
    
    
    3,327Total operating revenue
    
    
    654,268
    
    
    
    714,356
    
    
    
    801,042Operating expenses:Lease operating expenses
    
    
    152,326
    
    
    
    156,786
    
    
    
    171,107Other operational expense
    
    
    5,450
    
    
    
    2,400
    
    
    
    Production taxes
    
    
    5,808
    
    
    
    7,920
    
    
    
    7,990Depreciation, depletion and amortization
    
    
    248,201
    
    
    
    259,639
    
    
    
    288,384Write-down of oil and gas properties
    
    
    
    
    
    
    508,989
    
    
    
    1,324,327Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    465,985Accretion expense
    
    
    34,469
    
    
    
    39,306
    
    
    
    17,392Salaries, general and administrative expenses
    
    
    42,759
    
    
    
    41,367
    
    
    
    43,504Incentive compensation expense
    
    
    5,888
    
    
    
    6,402
    
    
    
    2,315Impairment of inventory
    
    
    129
    
    
    
    9,398
    
    
    
    Total operating expenses
    
    
    495,030
    
    
    
    1,032,207
    
    
    
    2,321,004Income (loss) from operations
    
    
    159,238
    
    
    
    (317,851
    )
    
    
    (1,519,962
    )Other (income) expenses:Interest expense
    
    
    12,192
    
    
    
    21,361
    
    
    
    13,243Interest income
    
    
    (1,464
    )
    
    
    (528
    )
    
    
    (11,250
    )Other income
    
    
    (6,663
    )
    
    
    (4,362
    )
    
    
    (5,800
    )Loss on early extinguishment of debt
    
    
    1,820
    
    
    
    
    
    
    
    Other expense
    
    
    642
    
    
    
    508
    
    
    
    Total other (income) expenses
    
    
    6,527
    
    
    
    16,979
    
    
    
    (3,807
    )Net income (loss) before income taxes
    
    
    152,711
    
    
    
    (334,830
    )
    
    
    (1,516,155
    )Provision (benefit) for income taxes:Current
    
    
    5,808
    
    
    
    30,376
    
    
    
    6,998Deferred
    
    
    50,474
    
    
    
    (146,935
    )
    
    
    (376,144
    )Total income taxes
    
    
    56,282
    
    
    
    (116,559
    )
    
    
    (369,146
    )Net income (loss)
    
    
    96,429
    
    
    
    (218,271
    )
    
    
    (1,147,009
    )Less: Net income (loss) attributable to non-controlling interest
    
    
    
    
    
    
    27
    
    
    
    (77
    )Net income (loss) attributable to Stone Energy Corporation
    
    $
    96,429
    
    
    
    ($218,298
    )
    
    
    ($1,146,932
    )Basic earnings (loss) per share attributable to Stone Energy
Corporation stockholders
    
    $
    1.99
    
    
    
    ($4.97
    )
    
    
    ($35.89
    )Diluted earnings (loss) per share attributable to Stone Energy
Corporation stockholders
    
    $
    1.99
    
    
    
    ($4.97
    )
    
    
    ($35.89
    )Average shares outstanding
    
    
    47,681
    
    
    
    43,953
    
    
    
    31,961Average shares outstanding assuming dilution
    
    
    47,706
    
    
    
    43,953
    
    
    
    31,961
  F-4




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##### Table of Contents



STONE ENERGY CORPORATION
 
 CONSOLIDATED STATEMENT OF CASH FLOWS  (Amounts in thousands of dollars)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    96,429
    
    
    
    ($218,271
    )
    
    
    ($1,147,009
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation, depletion and amortization
    
    
    248,201
    
    
    
    259,639
    
    
    
    288,384Write-down of oil and gas properties
    
    
    
    
    
    
    508,989
    
    
    
    1,324,327Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    465,985Impairment of inventory
    
    
    129
    
    
    
    9,398
    
    
    
    Accretion expense
    
    
    34,469
    
    
    
    39,306
    
    
    
    17,392Deferred income tax provision (benefit)
    
    
    50,474
    
    
    
    (146,935
    )
    
    
    (376,144
    )Settlement of asset retirement obligations
    
    
    (36,901
    )
    
    
    (66,780
    )
    
    
    (49,242
    )Non-cash stock compensation expense
    
    
    5,692
    
    
    
    5,944
    
    
    
    8,405Excess tax benefits
    
    
    (299
    )
    
    
    (2
    )
    
    
    (3,045
    )Non-cash derivative (income) expense
    
    
    (324
    )
    
    
    5,142
    
    
    
    (2,592
    )Loss on early extinguishment of debt
    
    
    1,820
    
    
    
    
    
    
    
    Other non-cash expenses
    
    
    1,708
    
    
    
    1,573
    
    
    
    1,687Change in current income taxes
    
    
    (10,871
    )
    
    
    66,185
    
    
    
    (87,110
    )Decrease in accounts receivable
    
    
    49,633
    
    
    
    50,159
    
    
    
    110,689(Increase) decrease in other current assets
    
    
    74
    
    
    
    627
    
    
    
    (866
    )(Increase) decrease in inventory
    
    
    2,123
    
    
    
    17,561
    
    
    
    (33,530
    )Increase (decrease) in accounts payable
    
    
    (773
    )
    
    
    (10,200
    )
    
    
    24,950Decrease in other current liabilities
    
    
    (18,088
    )
    
    
    (14,431
    )
    
    
    (17,780
    )Investment in hedging contracts
    
    
    
    
    
    
    
    
    
    
    (1,914
    )Other
    
    
    1,298
    
    
    
    (117
    )
    
    
    (109
    )Net cash provided by operating activities
    
    
    424,794
    
    
    
    507,787
    
    
    
    522,478Cash flows from investing activities:Acquisition of Bois dArc Energy, Inc., net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (922,714
    )Investment in oil and gas properties
    
    
    (401,767
    )
    
    
    (320,214
    )
    
    
    (446,771
    )Proceeds from sale of oil and gas properties, net of expenses
    
    
    31,635
    
    
    
    5,553
    
    
    
    13,339Sale of fixed assets
    
    
    
    
    
    
    35
    
    
    
    4Investment in fixed and other assets
    
    
    (2,949
    )
    
    
    (1,412
    )
    
    
    (1,765
    )Acquisition of non-controlling interest in subsidiary
    
    
    (1,007
    )
    
    
    (41
    )
    
    
    Net cash used in investing activities
    
    
    (374,088
    )
    
    
    (316,079
    )
    
    
    (1,357,907
    )Cash flows from financing activities:Proceeds from bank borrowings
    
    
    
    
    
    
    
    
    
    
    425,000Repayments of bank borrowings
    
    
    (175,000
    )
    
    
    (250,000
    )
    
    
    Redemption of senior subordinated notes
    
    
    (200,503
    )
    
    
    
    
    
    
    Proceeds from issuance of senior notes
    
    
    375,000
    
    
    
    
    
    
    
    Proceeds from stock offering, net of expenses
    
    
    
    
    
    
    60,447
    
    
    
    (54
    )Deferred financing costs
    
    
    (11,474
    )
    
    
    (141
    )
    
    
    (8,766
    )Excess tax benefits
    
    
    299
    
    
    
    2
    
    
    
    3,045Purchase of treasury stock
    
    
    
    
    
    
    (347
    )
    
    
    (6,724
    )Net payments for share based compensation
    
    
    (1,365
    )
    
    
    (513
    )
    
    
    15,939Net cash provided by (used in) financing activities
    
    
    (13,043
    )
    
    
    (190,552
    )
    
    
    428,440Net increase (decrease) in cash and cash equivalents
    
    
    37,663
    
    
    
    1,156
    
    
    
    (406,989
    )Cash and cash equivalents, beginning of year
    
    
    69,293
    
    
    
    68,137
    
    
    
    475,126Cash and cash equivalents, end of year
    
    $
    106,956
    
    
    $
    69,293
    
    
    $
    68,137Supplemental disclosures of cash flow information:Cash paid (refunded) during the year for:Interest (net of amount capitalized)
    
    $
    8,760
    
    
    $
    20,623
    
    
    $
    13,001Income taxes
    
    
    26,525
    
    
    
    (35,920
    )
    
    
    94,109
  F-5




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##### Table of Contents



STONE ENERGY CORPORATION
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY  (Amounts in thousands of dollars)
 Stone Energy Corporation StockholdersAccumulated OtherAdditional Paid-In
    
    
    
    
    
    
    Comprehensive
    
    
    Non-controlling
    
    
    Total StockholdersCommon Stock
    
    
    Treasury Stock
    
    
    Capital
    
    
    Retained Earnings
    
    
    Income (Loss)
    
    
    Interest
    
    
    EquityBalance, December 31, 2007
    
    $
    278
    
    
    
    ($1,161
    )
    
    $
    515,055
    
    
    $
    382,365
    
    
    
    ($10,735
    )
    
    $
    
    
    
    $
    885,802Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,146,932
    )
    
    
    
    
    
    
    (77
    )
    
    
    (1,147,009
    )Adjustment for fair value
accounting of derivatives,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,647
    
    
    
    
    
    
    
    95,647Exercise of stock options and
vesting of restricted stock
    
    
    5
    
    
    
    
    
    
    
    15,934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,939Amortization of stock
compensation expense
    
    
    
    
    
    
    
    
    
    
    12,906
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,906Tax benefit from stock option
exercises and restricted
stock vesting
    
    
    
    
    
    
    
    
    
    
    2,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,740Non-controlling interest in
subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164
    
    
    
    164Issuance of common stock
    
    
    113
    
    
    
    
    
    
    
    717,720
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    717,833Cancellation of treasury stock
    
    
    (2
    )
    
    
    
    
    
    
    (6,722
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,724
    )Issuance of treasury stock
    
    
    
    
    
    
    301
    
    
    
    
    
    
    
    (121
    )
    
    
    
    
    
    
    
    
    
    
    180Balance, December 31, 2008
    
    
    394
    
    
    
    (860
    )
    
    
    1,257,633
    
    
    
    (764,688
    )
    
    
    84,912
    
    
    
    87
    
    
    
    577,478Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (218,298
    )
    
    
    
    
    
    
    27
    
    
    
    (218,271
    )Adjustment for fair value
accounting of derivatives,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100,292
    )
    
    
    
    
    
    
    (100,292
    )Acquisition of
non-controlling interest
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    (114
    )
    
    
    (41
    )Exercise of stock options and
vesting of restricted stock
    
    
    
    
    
    
    
    
    
    
    (514
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (514
    )Amortization of stock
compensation expense
    
    
    
    
    
    
    
    
    
    
    8,845
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,845Tax deficit from stock option
exercises and restricted
stock vesting
    
    
    
    
    
    
    
    
    
    
    (1,647
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,647
    )Stock repurchase and
cancellation
    
    
    
    
    
    
    
    
    
    
    (346
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (346
    )Issuance of common stock
    
    
    81
    
    
    
    
    
    
    
    60,366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,447Balance, December 31, 2009
    
    
    475
    
    
    
    (860
    )
    
    
    1,324,410
    
    
    
    (982,986
    )
    
    
    (15,380
    )
    
    
    
    
    
    
    325,659Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,429
    
    
    
    
    
    
    
    
    
    
    
    96,429Adjustment for fair value
accounting of derivatives,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,176
    
    
    
    
    
    
    
    1,176Exercise of stock options and
vesting of restricted stock
    
    
    3
    
    
    
    
    
    
    
    (1,370
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,367
    )Amortization of stock
compensation expense
    
    
    
    
    
    
    
    
    
    
    8,462
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,462Tax deficit from stock option
exercises and restricted
stock vesting
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )Balance, December 31, 2010
    
    $
    478
    
    
    
    ($860
    )
    
    $
    1,331,500
    
    
    
    ($886,557
    )
    
    
    ($14,204
    )
    
    $
    
    
    
    $
    430,357
  F-6




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##### Table of Contents



STONE ENERGY CORPORATION
 
 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Amounts in thousands of dollars)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Net income (loss) attributable to Stone Energy
Corporation
    
    $
    96,429
    
    
    
    ($218,298
    )
    
    
    ($1,146,932
    )Other comprehensive income (loss) net of tax effect:Adjustment for fair value accounting of derivatives
    
    
    1,176
    
    
    
    (100,292
    )
    
    
    95,647Comprehensive income (loss) attributable to Stone
Energy Corporation
    
    $
    97,605
    
    
    
    ($318,590
    )
    
    
    ($1,051,285
    )
  F-7




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##### Table of Contents



STONE ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of dollars, except per share and price amounts)
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
   Basis of Presentation:
  Use of Estimates:
  Fair Value Measurements:
  Cash and Cash Equivalents:
  Restricted Cash:
  Oil and Gas Properties:
  F-8




---



##### Table of Contents



Note 7  Investment in Oil and Gas
Properties
  Asset Retirement Obligations:
  Building and Land:
  Inventory:
  Earnings Per Common Share:
  F-9




---



##### Table of Contents



Business Combinations and Goodwill:
  Production Revenue:
  Income Taxes:
  Derivative Instruments and Hedging Activities:
  Stock-Based Compensation:
  Recent Accounting Developments:
 Fair Value Measurements and Disclosures.
 F-10




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##### Table of Contents



NOTE 2  PRIOR PERIOD CORRECTION OF IMMATERIAL ERRORS:
  Year Ended December 31, 2009
    
    
    Year Ended December 31, 2008As Reported
    
    
    Adjustment
    
    
    As Adjusted
    
    
    As Reported
    
    
    Adjustment
    
    
    As AdjustedConsolidated Statement of Operations:Write-down of oil and gas properties
    
    $
    505,140
    
    
    $
    3,849
    
    
    $
    508,989
    
    
    $
    1,309,403
    
    
    $
    14,924
    
    
    $
    1,324,327Accretion expense
    
    
    33,016
    
    
    
    6,290
    
    
    
    39,306
    
    
    
    17,392
    
    
    
    
    
    
    
    17,392Total operating expenses
    
    
    1,022,068
    
    
    
    10,139
    
    
    
    1,032,207
    
    
    
    2,306,080
    
    
    
    14,924
    
    
    
    2,321,004Income (loss) from operations
    
    
    (307,712
    )
    
    
    (10,139
    )
    
    
    (317,851
    )
    
    
    (1,505,038
    )
    
    
    (14,924
    )
    
    
    (1,519,962
    )Net income (loss) before income taxes
    
    
    (324,691
    )
    
    
    (10,139
    )
    
    
    (334,830
    )
    
    
    (1,501,231
    )
    
    
    (14,924
    )
    
    
    (1,516,155
    )Provision (benefit) for deferred
income taxes
    
    
    (143,386
    )
    
    
    (3,549
    )
    
    
    (146,935
    )
    
    
    (370,921
    )
    
    
    (5,223
    )
    
    
    (376,144
    )Total income taxes
    
    
    (113,010
    )
    
    
    (3,549
    )
    
    
    (116,559
    )
    
    
    (363,923
    )
    
    
    (5,223
    )
    
    
    (369,146
    )Net income (loss)
    
    
    (211,681
    )
    
    
    (6,590
    )
    
    
    (218,271
    )
    
    
    (1,137,308
    )
    
    
    (9,701
    )
    
    
    (1,147,009
    )Net income (loss) attributable to
Stone Energy Corporation
    
    
    (211,708
    )
    
    
    (6,590
    )
    
    
    (218,298
    )
    
    
    (1,137,231
    )
    
    
    (9,701
    )
    
    
    (1,146,932
    )Basic earnings (loss) per share
attributable to Stone Energy
Corporation stockholders
    
    
    ($4.82
    )
    
    
    ($0.15
    )
    
    
    ($4.97
    )
    
    
    ($35.58
    )
    
    
    ($0.31
    )
    
    
    ($35.89
    )Diluted earnings (loss) per share
attributable to Stone Energy
Corporation stockholders
    
    
    ($4.82
    )
    
    
    ($0.15
    )
    
    
    ($4.97
    )
    
    
    ($35.58
    )
    
    
    ($0.31
    )
    
    
    ($35.89
    )Consolidated Statement of Cash Flows:Net income (loss)
    
    
    (211,681
    )
    
    
    (6,590
    )
    
    
    (218,271
    )
    
    
    (1,137,308
    )
    
    
    (9,701
    )
    
    
    (1,147,009
    )Write-down of oil and gas properties
    
    
    505,140
    
    
    
    3,849
    
    
    
    508,989
    
    
    
    1,309,403
    
    
    
    14,924
    
    
    
    1,324,327Accretion expense
    
    
    33,016
    
    
    
    6,290
    
    
    
    39,306
    
    
    
    17,392
    
    
    
    
    
    
    
    17,392Deferred income tax benefit
    
    
    (143,386
    )
    
    
    (3,549
    )
    
    
    (146,935
    )
    
    
    (370,921
    )
    
    
    (5,223
    )
    
    
    (376,144
    )Consolidated Statement of
Comprehensive Income:Net income (loss) attributable to
Stone Energy Corporation
    
    
    (211,708
    )
    
    
    (6,590
    )
    
    
    (218,298
    )
    
    
    (1,137,231
    )
    
    
    (9,701
    )
    
    
    (1,146,932
    )Comprehensive income (loss)
attributable to Stone Energy
Corporation
    
    
    (312,000
    )
    
    
    (6,590
    )
    
    
    (318,590
    )
    
    
    (1,041,584
    )
    
    
    (9,701
    )
    
    
    (1,051,285
    )
 December 31, 2009As Reported
    
    
    Adjustment
    
    
    As AdjustedConsolidated Balance Sheet:Asset retirement obligations, long-term
    
    $
    265,021
    
    
    $
    25,063
    
    
    $
    290,084Deferred taxes, long-term
    
    
    44,528
    
    
    
    (8,772
    )
    
    
    35,756Total liabilities
    
    
    1,112,292
    
    
    
    16,291
    
    
    
    1,128,583Accumulated deficit
    
    
    (966,695
    )
    
    
    (16,291
    )
    
    
    (982,986
    )Total stockholders equity
    
    
    341,950
    
    
    
    (16,291
    )
    
    
    325,659
 F-11




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##### Table of Contents



NOTE 3  EARNINGS PER SHARE:
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Income (numerator):Net income (loss) attributable to Stone Energy Corporation
    
    $
    96,429
    
    
    
    ($218,298
    )
    
    
    ($1,146,932
    )Net income attributable to participating securities
    
    
    (1,559
    )
    
    
    
    
    
    
    Net income (loss) attributable to common stock  basic and
diluted
    
    $
    94,870
    
    
    
    ($218,298
    )
    
    
    ($1,146,932
    )Weighted average shares (denominator):Weighted average shares  basic
    
    
    47,681
    
    
    
    43,953
    
    
    
    31,961Diluted effect of stock options and unvested restricted stock
    
    
    25
    
    
    
    
    
    
    
    Weighted average shares  diluted
    
    
    47,706
    
    
    
    43,953
    
    
    
    31,961Basic income (loss) per common share
    
    $
    1.99
    
    
    
    ($4.97
    )
    
    
    ($35.89
    )Diluted income (loss) per common share
    
    $
    1.99
    
    
    
    ($4.97
    )
    
    
    ($35.89
    )
  Note 6  Acquisitions and Divestitures
 NOTE 4  ACCOUNTS RECEIVABLE:
  As of December 31,2010
    
    
    2009Accounts Receivable:Other co-venturers
    
    $
    6,769
    
    
    $
    6,831Trade
    
    
    75,653
    
    
    
    77,948Insurance receivable on hurricane claims
    
    
    1,718
    
    
    
    28,629Unbilled accounts receivable
    
    
    4,352
    
    
    
    4,685Other
    
    
    37
    
    
    
    36$
    88,529
    
    
    $
    118,129
  F-12




---



##### Table of Contents



NOTE 5  CONCENTRATIONS:
 Sales to Major Customers
  December 31,2010
    
    
    2009
    
    
    2008Chevron U.S.A., Inc.
    
    
    (a
    )
    
    
    (a
    )
    
    
    18
    %Conoco, Inc.
    
    
    26
    %
    
    
    27
    %
    
    
    29
    %Hess Corporation
    
    
    11
    %
    
    
    11
    %
    
    
    (a
    )Sequent Energy Management LP
    
    
    10
    %
    
    
    13
    %
    
    
    (a
    )Shell Trading (US) Company
    
    
    40
    %
    
    
    34
    %
    
    
    16
    %
 
    Production and Reserve Volumes
  Cash and Cash Equivalents
  NOTE 6  ACQUISITIONS AND DIVESTITURES:
 Acquisitions
    F-13




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##### Table of Contents



Fair value of Bois dArcs net assets:Net working capital, including cash of $15,333
    
    $
    27,865Proved oil and gas properties
    
    
    1,339,117Unevaluated oil and gas properties
    
    
    422,183Fixed and other assets
    
    
    333Goodwill
    
    
    465,985Deferred tax liability
    
    
    (467,872
    )Dismantlement reserve
    
    
    (4,239
    )Asset retirement obligations
    
    
    (127,380
    )Total fair value of net assets
    
    $
    1,655,992
  Consideration paid for Bois dArcs net assets:Cash consideration paid
    
    $
    935,425Stone common stock issued
    
    
    717,887Aggregate purchase consideration issued to Bois dArc
stockholders
    
    
    1,653,312Plus:Direct merger costs (1)
    
    
    2,680Total purchase price
    
    $
    1,655,992
 
 (1)
    
    Direct merger costs include legal and accounting fees, printing
fees, investment banking expenses and other merger-related costs.  Divestitures
  F-14




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##### Table of Contents



NOTE 7  INVESTMENT IN OIL AND GAS PROPERTIES:
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Oil and gas properties  United States, proved and unevaluated:Balance, beginning of year
    
    $
    5,741,081
    
    
    $
    5,409,770
    
    
    $
    3,310,074Costs incurred during the year (capitalized):Acquisition costs, net of sales of unevaluated properties
    
    
    127,069
    
    
    
    9,072
    
    
    
    1,830,468Exploratory costs
    
    
    42,205
    
    
    
    78,582
    
    
    
    146,303Development costs (1)
    
    
    241,387
    
    
    
    199,375
    
    
    
    78,359Salaries, general and administrative costs
    
    
    20,521
    
    
    
    19,107
    
    
    
    19,507Interest
    
    
    30,783
    
    
    
    25,573
    
    
    
    25,195Less: overhead reimbursements
    
    
    (288
    )
    
    
    (398
    )
    
    
    (136
    )Total costs incurred during the year, net of divestitures
    
    
    461,677
    
    
    
    331,311
    
    
    
    2,099,696Balance, end of year
    
    $
    6,202,758
    
    
    $
    5,741,081
    
    
    $
    5,409,770Accumulated depreciation, depletion and amortization (DD&A):Balance, beginning of year
    
    
    ($4,555,372
    )
    
    
    ($3,781,600
    )
    
    
    ($2,158,327
    )Provision for DD&A
    
    
    (242,745
    )
    
    
    (253,790
    )
    
    
    (284,672
    )Write-down of oil and gas properties
    
    
    
    
    
    
    (508,989
    )
    
    
    (1,293,345
    )Sale of proved properties
    
    
    (6,832
    )
    
    
    (10,993
    )
    
    
    (45,256
    )Balance, end of year
    
    
    ($4,804,949
    )
    
    
    ($4,555,372
    )
    
    
    ($3,781,600
    )Net capitalized costs  United States (proved and unevaluated)
    
    $
    1,397,809
    
    
    $
    1,185,709
    
    
    $
    1,628,170DD&A per Mcfe
    
    $
    3.18
    
    
    $
    3.23
    
    
    $
    4.45(1)     Includes asset retirement costs of $56,444, $78,387
and ($77,573), respectively.Costs incurred during the year (expensed):Lease operating expenses
    
    $
    152,326
    
    
    $
    156,786
    
    
    $
    171,107Production taxes
    
    
    5,808
    
    
    
    7,920
    
    
    
    7,990Accretion expense
    
    
    34,469
    
    
    
    39,306
    
    
    
    17,392Expensed costs  United States
    
    $
    192,603
    
    
    $
    204,012
    
    
    $
    196,489
   Unevaluated oil and gas properties United States
    
    2010
    
    
    2009
    
    
    2008Net costs incurred (evaluated) during year:Acquisition costs
    
    $
    42,664
    
    
    
    ($203,776
    )
    
    $
    308,325Exploration costs
    
    
    10,491
    
    
    
    15,337
    
    
    
    24,531Capitalized interest
    
    
    30,783
    
    
    
    23,943
    
    
    
    10,314$
    83,938
    
    
    
    ($164,496
    )
    
    $
    343,170
 F-15




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##### Table of Contents



Year EndedDecember 31,2008Oil and gas properties  China:Balance, beginning of year
    
    $
    37,729Costs incurred during the year (capitalized):Exploratory costs
    
    
    226Salaries, general and administrative costs
    
    
    31Interest
    
    
    1,160Total costs incurred during the year
    
    
    1,417Balance, end of year (fully evaluated)
    
    $
    39,146Accumulated depreciation, depletion and amortization (DD&A):Balance, beginning of year
    
    $
    (8,164
    )Write-down of oil and gas properties
    
    
    (30,982
    )Balance, end of year
    
    $
    (39,146
    )Net capitalized costs  China
    
    $
    
  Net Costs Incurred During theYear Ended December 31,Balance as of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2007December 31, 2010
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    and priorAcquisition costs
    
    $
    234,680
    
    
    $
    110,301
    
    
    $
    4,445
    
    
    $
    112,658
    
    
    $
    7,276Exploration costs
    
    
    131,467
    
    
    
    31,405
    
    
    
    39,063
    
    
    
    25,543
    
    
    
    35,456Capitalized interest
    
    
    47,033
    
    
    
    25,396
    
    
    
    16,497
    
    
    
    4,260
    
    
    
    880Total unevaluated costs
    
    $
    413,180
    
    
    $
    167,102
    
    
    $
    60,005
    
    
    $
    142,461
    
    
    $
    43,612
  NOTE 8  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
   F-16




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##### Table of Contents



.
     Fair Value of Derivative Instruments at December 31, 2010Asset Derivatives
    
    
    Liability DerivativesDescription
    
    Balance Sheet Location
    
    Fair Value
    
    
    Balance Sheet Location
    
    Fair ValueCommodity contracts
    
    Current assets:  Fair value of hedging contracts
    
    $
    12,955
    
    
    Current liabilities: Fair value of hedging contracts
    
    
    ($32,144
    )Long-term assets: Fair value of hedging contracts
    
    
    
    
    
    Long-term liabilities:  Fair value of hedging contracts
    
    
    (3,606
    )$
    12,955
    
    
    
    
    
    
    
    ($35,750
    )Fair Value of Derivative Instruments at December 31, 2009Asset Derivatives
    
    
    Liability DerivativesDescription
    
    Balance Sheet Location
    
    Fair Value
    
    
    Balance Sheet Location
    
    Fair ValueCommodity contracts
    
    Current assets:  Fair value of hedging contracts
    
    $
    16,223
    
    
    Current liabilities: Fair value of hedging  contracts
    
    
    ($34,859
    )Long-term assets:  Fair value of hedging  contracts
    
    
    1,771
    
    
    Long-term liabilities:  Fair value of hedging contracts
    
    
    (7,721
    )$
    17,994
    
    
    
    
    
    
    
    ($42,580
    )
 F-17




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##### Table of Contents



The Effect of Derivative Instruments on the Statement of Operations for the Years Ended December 31, 2010, 2009 and 2008Amount of GainDerivatives in
    
    (Loss) Recognized
    
    
    Gain (Loss) Reclassified fromCash Flow Hedging
    
    in OCI on
    
    
    Accumulated OCI into Income
    
    
    Gain (Loss) Recognized in Income onRelationships
    
    Derivative (a)
    
    
    (Effective Portion) (b)
    
    
    Derivative (Ineffective Portion)2010
    
    
    Location

    
    2010
    
    
    Location

    
    2010Commodity contracts
    
    $
    1,176
    
    
    Operating revenue - oil/gas production
    
    $
    9,631
    
    
    Derivative income,  net
    
    $
    3,265Total
    
    $
    1,176
    
    
    
    
    
    
    $
    9,631
    
    
    
    
    
    
    $
    3,2652009
    
    
    
    
    
    
    
    2009
    
    
    
    
    
    
    
    2009Commodity contracts
    
    
    ($100,292
    )
    
    Operating revenue -  oil/gas production
    
    $
    163,176
    
    
    Derivative income, net
    
    $
    3,061Total
    
    
    ($100,292
    )
    
    
    
    
    
    $
    163,176
    
    
    
    
    
    
    $
    3,0612008
    
    
    

    
    
    
    

    2008
    
    
    

    
    
    
    
    2008Commodity contracts
    
    $
    95,647
    
    
    Operating revenue - oil/gas production
    
    
    ($19,162
    )
    
    Derivative income, net
    
    $
    3,327Total
    
    $
    95,647
    
    
    
    
    
    
    
    ($19,162
    )
    
    
    
    
    
    $
    3,327
 
 (a)
    
    Net of related tax effect.(b)
    
    For the year ended December 31, 2010, effective hedging contracts decreased oil
revenue by $29,047 and increased gas revenue by $38,678. For the year ended December 31,
2009, effective hedging contracts increased oil revenue by $61,747 and increased gas
revenue by $101,429. For the year ended December 31, 2008, effective hedging contracts
decreased oil revenue by $34,435 and increased gas revenue by $15,273.    Fixed-Price SwapsNatural Gas
    
    OilDaily
    
    
    
    
    
    DailyVolume
    
    Swap
    
    Volume
    
    Swap(MMBtus/d)
    
    Price
    
    (Bbls/d)
    
    Price2011
    
    
    10,000
    (a)
    
    $
    4.565
    
    
    
    1,000
    
    
    $
    70.052011
    
    
    20,000
    
    
    
    5.200
    
    
    
    1,000
    
    
    
    78.202011
    
    
    10,000
    
    
    
    6.830
    
    
    
    1,000
    
    
    
    80.202011
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    83.002011
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    83.052011
    
    
    
    
    
    
    
    
    
    
    1,000
    (b)
    
    
    85.202011
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    85.252011
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    89.002011
    
    
    
    
    
    
    
    
    
    
    1,000
    (c)
    
    
    97.752012
    
    
    10,000
    
    
    
    5.035
    
    
    
    1,000
    
    
    
    90.302012
    
    
    10,000
    
    
    
    5.040
    
    
    
    1,000
    
    
    
    90.412012
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    90.452012
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    95.502012
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    97.602012
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    100.002013
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    97.15
 
 (a)
    
    February  December(b)
    
    January  June(c)
    
    July  December F-18




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##### Table of Contents



NOTE 9  FAIR VALUE MEASUREMENTS:
  Note 8  Derivative
Instruments and Hedging Activities
  Fair Value Measurements at December 31, 2010Quoted Pricesin Active Marketsfor Identical
    
    
    Significant Other
    
    
    SignificantAssets
    
    
    Observable Inputs
    
    
    Unobservable InputsAssets
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Money market funds
    
    $
    7,306
    
    
    $
    7,306
    
    
    $
    
    
    
    $
    Hedging contracts
    
    
    12,955
    
    
    
    
    
    
    
    12,955
    
    
    
    Total
    
    $
    20,261
    
    
    $
    7,306
    
    
    $
    12,955
    
    
    $
    
 Fair Value Measurements at December 31, 2010Quoted Pricesin Active Marketsfor Identical
    
    
    Significant Other
    
    
    SignificantLiabilities
    
    
    Observable Inputs
    
    
    Unobservable InputsLiabilities
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Hedging contracts
    
    
    ($35,750
    )
    
    $
    
    
    
    
    ($35,750
    )
    
    $
    Total
    
    
    ($35,750
    )
    
    $
    
    
    
    
    ($35,750
    )
    
    $
    
 5 8 1 4 5 8 1 4 3 4
 Note 6  Acquisitions and Divestitures
 F-19




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##### Table of Contents



NOTE 10  ASSET RETIREMENT OBLIGATIONS:
   Year Ended December 31,2010
    
    
    2009
    
    
    2008Asset retirement obligations as of
the beginning of the year, including
current portion
    
    $
    320,599
    
    
    $
    275,628
    
    
    $
    289,790Liabilities incurred
    
    
    1,528
    
    
    
    3,035
    
    
    
    2,779Liabilities settled
    
    
    (36,392
    )
    
    
    (67,858
    )
    
    
    (60,642
    )Liabilities assumed
    
    
    
    
    
    
    
    
    
    
    128,023Divestment of properties
    
    
    (692
    )
    
    
    (5,941
    )
    
    
    (32,890
    )Accretion expense
    
    
    34,469
    
    
    
    39,306
    
    
    
    17,392Revision of estimates
    
    
    54,408
    
    
    
    76,429
    
    
    
    (68,824
    )Asset retirement obligations as of
the end of the year, including
current portion
    
    $
    373,920
    
    
    $
    320,599
    
    
    $
    275,628
    NOTE 11  INCOME TAXES:
  As of December 31,2010
    
    
    2009Tax effect
of temporary differences:Oil and gas properties  full cost
    
    
    ($224,624
    )
    
    
    ($137,797
    )Hurricane insurance receivable
    
    
    
    
    
    
    (16,316
    )Asset retirement obligations
    
    
    134,611
    
    
    
    112,210Stock compensation
    
    
    4,932
    
    
    
    4,296Hedges
    
    
    8,205
    
    
    
    8,605Other
    
    
    4,923
    
    
    
    7,817($71,953
    )
    
    
    ($21,185
    )
  F-20




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##### Table of Contents



Year Ended December 31,2010
    
    
    2009
    
    
    2008Income tax expense computed at the statutory federal income tax rate
    
    
    35.0
    %
    
    
    (35.0
    %)
    
    
    (35.0
    %)Domestic production activities deduction
    
    
    (0.6
    )
    
    
    
    
    
    
    State taxes and other
    
    
    2.6
    
    
    
    0.2
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    10.9Statutory depletion
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )Effective income tax rate
    
    
    36.9
    %
    
    
    (34.8
    %)
    
    
    (24.2
    %)
    Total unrecognized tax benefits as of December 31, 2009
    
    $
    25,711Increases (decreases) in unrecognized tax benefits as a result of:Tax positions taken during a prior period
    
    
    425Tax positions taken during the current period
    
    
    Settlements with taxing authorities
    
    
    (24,533
    )Lapse of applicable statute of limitations
    
    
    (1,178
    )Total unrecognized tax benefits as of December 31, 2010
    
    $
    425
    NOTE 12  LONG-TERM DEBT:
  As of December 31,2010
    
    
    200981/4% Senior Subordinated Notes due 2011
    
    $
    
    
    
    $
    200,00063/4% Senior Subordinated Notes due 2014
    
    
    200,000
    
    
    
    200,00085/8% Senior Notes due 2017
    
    
    375,000
    
    
    
    Bank debt
    
    
    
    
    
    
    175,000Total long-term debt
    
    $
    575,000
    
    
    $
    575,000
 Bank Debt
 5 8 5 8
 F-21




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##### Table of Contents



Senior Notes
 5 8
 Senior Subordinated Notes
 3 4
 F-22




---



##### Table of Contents



1 4
 Deferred Financing Cost and Interest Cost
   NOTE 13  INVENTORY IMPAIRMENT:
  NOTE 14  STOCK-BASED COMPENSATION:
    F-23




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##### Table of Contents



Stock Options.
 Year Ended December 31,2009
    
    2008(Amounts in table representactual values except whereindicated otherwise)Stock options granted
    
    
    64,474
    
    
    
    40,000Fair value of stock options granted ($ in
thousands)
    
    $
    321
    
    
    $
    980Weighted average grant date fair value
    
    $
    4.98
    
    
    $
    24.51Assumptions:Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    44.66
    %
    
    
    37.70
    %Risk-free rate
    
    
    2.39
    %
    
    
    3.65
    %Expected option life
    
    10.0 years
    
    10.0 yearsForfeiture rate
    
    
    0.00
    %
    
    
    0.00
    %
   AggregateNumber
    
    
    Wgtd. Avg.
    
    
    
    
    
    Intrinsicof
    
    
    Exercise
    
    
    Wgtd. Avg.
    
    
    ValueOptions
    
    
    Price
    
    
    Term
    
    
    (in thousands)Options outstanding, beginning of period
    
    
    495,283
    
    
    $
    39.61Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (6,190
    )
    
    
    40.85Expired
    
    
    (4,399
    )
    
    
    57.76Options outstanding, end of period
    
    
    484,694
    
    
    
    39.43
    
    
    3.8 years
    
    $
    880Options exercisable, end of period
    
    
    396,115
    
    
    
    43.21
    
    
    3.4 years
    
    
    176Options unvested, end of period
    
    
    88,579
    
    
    
    22.50
    
    
    6.9 years
    
    
    704
   AggregateNumber
    
    
    Wgtd. Avg.
    
    
    
    
    
    Intrinsicof
    
    
    Exercise
    
    
    Wgtd. Avg.
    
    
    ValueOptions
    
    
    Price
    
    
    Term
    
    
    (in thousands)Options outstanding, beginning of period
    
    
    510,779
    
    
    $
    45.21Granted
    
    
    64,474
    
    
    
    8.64Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (14,470
    )
    
    
    33.59Expired
    
    
    (65,500
    )
    
    
    54.15Options outstanding, end of period
    
    
    495,283
    
    
    
    39.61
    
    
    4.7  years
    
    $
    607Options exercisable, end of period
    
    
    363,709
    
    
    
    44.40
    
    
    4.1  years
    
    
    Options unvested, end of period
    
    
    131,574
    
    
    
    26.37
    
    
    7.3  years
    
    
    607
 F-24




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##### Table of Contents



AggregateNumber
    
    
    Wgtd. Avg.
    
    
    
    
    
    
    Intrinsicof
    
    
    Exercise
    
    
    Wgtd. Avg.
    
    
    ValueOptions
    
    
    Price
    
    
    Term
    
    
    (in thousands)Options outstanding, beginning of period
    
    
    931,589
    
    
    $
    43.72Granted
    
    
    40,000
    
    
    
    44.67Exercised
    
    
    (447,330
    )
    
    
    41.84
    
    
    
    
    
    
    $
    9,514Forfeited
    
    
    (13,480
    )
    
    
    54.74Expired
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    510,779
    
    
    
    45.21
    
    
    5.0 years
    
    
    Options exercisable, end of period
    
    
    382,679
    
    
    
    45.34
    
    
    4.3 years
    
    
    Options unvested, end of period
    
    
    128,100
    
    
    
    44.83
    
    
    7.2 years
    
    
    
 Restricted Stock.
  2010
    
    
    2009
    
    
    2008Number of
    
    
    Wgtd. Avg.
    
    
    Number of
    
    
    Wgtd. Avg.
    
    
    Number of
    
    
    Wgtd. Avg.Restricted
    
    
    Fair Value
    
    
    Restricted
    
    
    Fair Value
    
    
    Restricted
    
    
    Fair ValueShares
    
    
    Per Share
    
    
    Shares
    
    
    Per Share
    
    
    Shares
    
    
    Per ShareRestricted stock outstanding,
beginning of period
    
    
    751,437
    
    
    $
    20.68
    
    
    
    408,383
    
    
    $
    43.31
    
    
    
    311,486
    
    
    $
    39.86Issuances
    
    
    395,869
    
    
    
    15.79
    
    
    
    538,635
    
    
    
    10.83
    
    
    
    278,646
    
    
    
    47.92Lapse of restrictions
    
    
    (343,657
    )
    
    
    23.09
    
    
    
    (177,123
    )
    
    
    41.73
    
    
    
    (167,818
    )
    
    
    44.62Forfeitures
    
    
    (20,043
    )
    
    
    18.07
    
    
    
    (18,458
    )
    
    
    26.74
    
    
    
    (13,931
    )
    
    
    44.99Restricted stock outstanding,
end of period
    
    
    783,606
    
    
    $
    17.24
    
    
    
    751,437
    
    
    $
    20.68
    
    
    
    408,383
    
    
    $
    43.31
   NOTE 15  SHARE REPURCHASE PROGRAM:
  F-25




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##### Table of Contents



NOTE 16  COMMITMENTS AND CONTINGENCIES:
 Lease Commitments
  2012
    
    $
    5072013
    
    
    5382014
    
    
    4092015
    
    
    425
  Other Commitments
    Litigation
  Franchise Tax Action
 Ad Valorem Tax Suit.
 F-26




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##### Table of Contents



th
 Lafourche Parish, Louisiana, Landowner Action et al th
 NOTE 17  EMPLOYEE BENEFIT PLANS:
   i.
    
    The Amended and Restated Revised Annual Incentive Compensation Plan, which was adopted in
November 2007, provides for annual cash incentive bonuses that are tied to the achievement
of certain strategic objectives as defined by our board of directors on an annual basis.
Stone incurred expenses of $5,888, $6,402, and $2,315, net of amounts capitalized, for each
of the years ended December 31, 2010, 2009 and 2008, respectively, related to incentive
compensation bonuses to be paid under the revised plan.ii.
    
    At the 2009 Annual Meeting of Stockholders, the stockholders approved the 2009 Amended
and Restated Stock Incentive Plan (the 2009 Plan). The 2009 Plan is an amendment and
restatement of the companys 2004 Amended and Restated Stock Incentive Plan (the 2004
Plan) and it supersedes and replaces in its entirety the 2004 Plan. The 2009 Plan provides
for the granting of incentive stock options and restricted stock awards or any combination
as is best suited to the circumstances of the particular employee or nonemployee director.
The number of shares subject to the 2009 Plan was increased by 1,500,000 shares from the
4,225,000 shares of common stock to be reserved for issuance pursuant to the 2004 plan. The
2009 Plan eliminates the automatic grant of stock options or restricted stock awards to
Nonemployee Directors that was provided for in the 2004 Plan so that awards under the 2009
Plan are entirely at the discretion of the Board of Directors. Under the 2009 Plan, we may
grant both incentive stock options qualifying under Section 422 of the Internal Revenue Code
and options that are not qualified as incentive stock options to all employees and
directors. All such options must have an exercise price of not less than the fair market
value of the common stock on the date of grant and may not be re-priced without stockholder
approval. Stock options to all employees vest ratably over a five-year service-vesting
period and expire ten years subsequent to award. Stock options issued to non-employee
directors vest ratably over a three-year service-vesting period and expire ten years
subsequent to award. In addition, the 2009 Plan provides that shares available under the
2009 Plan may be granted as restricted stock. Restricted stock grants typically vest in two
or more years at the discretion of the Compensation Committee of the board of directors. At
December 31, 2010, we had approximately 1,018,518 additional shares available for issuance
pursuant to the Plan.iii.
    
    The Stone Energy 401(k) Profit Sharing Plan provides eligible employees with the option
to defer receipt of a portion of their compensation and we may, at our discretion, match a
portion or all of the employees deferral. The amounts held under the plan are invested in
various investment funds maintained by a third party in accordance with the directions of
each employee. An employee is 20% vested in matching contributions (if any) for each year
of service and is fully vested upon five years of service. For the years ended December 31,
2010, 2009 and 2008, Stone contributed $1,301, $1,161 and $1,119, respectively, to the plan.
 F-27




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##### Table of Contents



iv.
    
    The Stone Energy Corporation Deferred Compensation Plan provides eligible executives with
the option to defer up to 100% of their compensation for a calendar year and we may, at our
discretion, match a portion or all of the participants deferral based upon a percentage
determined by the board of directors. To date there have been no matching contributions
made by Stone. The amounts held under the plan are invested in various investment funds
maintained by a third party in accordance with the direction of each participant. At
December 31, 2010 and 2009, plan assets of $6,314 and $5,149, respectively, were included in
other assets. An equal amount of plan liabilities were included in other long-term
liabilities.v.
    
    On April 7, 2009, we amended and restated our Executive Change of Control and Severance
Plan effective as of December 31, 2008 (as so amended and restated, the Executive Plan).
The amended and restated Executive Plan also replaced and superseded our Executive Change in
Control and Severance Policy that was maintained for certain designated executives
(specifically, the CEO and CFO). The Executive Plan will provide the companys officers
that are terminated in the event of a change of control and upon certain other terminations
of employment with change of control and severance benefits as defined in the Executive
Plan. Executives who are terminated within the scope of the Executive Plan will be
entitled to certain payments and benefits including the following: a base salary up to the
date of termination; in the case of the CEO and CFO, a lump sum severance payment of 2.99
times the sum of his annual pay and any target bonus at the one hundred percent level; a
lump sum amount representing a pro rata share of the bonus opportunity up to the date of
termination at the then projected rate of payout; in the case of officers other than the CEO
and CFO and an involuntary termination occurring outside a change of control period, a lump
sum severance payment in an amount equal to the executives annual base salary; in the case
of officers other than the CEO and CFO and an involuntary termination occurring during a
change of control period, a lump sum severance payment in an amount equal to 2.99 times the
executives annual base salary; continued health plan coverage for six months and
outplacement services. In the case of the CEO and CFO, if the payments would be excess
parachute payments, they will be reduced as necessary to avoid the 20% excise tax under
Section 4999 of the Internal Revenue Code (the Code) but only if the executive is in a
better net after-tax position after such reduction. Also, if a payment would be to a key
employee for purposes of Section 409A of the Code, payment will be delayed until six months
after his termination if required to comply with Section 409A. Benefits paid upon a change
of control, without regard to whether there is a termination of employment, include the
following: lapse of restrictions on restricted stock, accelerated vesting and cash-out of
all in-the-money stock options, a 401(k) plan employer matching contribution at the rate of
50%, and a pro-rated portion of the projected bonus, if any, for the year of change of
control.On December 7, 2007, our board of directors approved and adopted the Stone Energy
Corporation Employee Change of Control Severance Plan (Employee Severance Plan), as
amended and restated to comply with the final regulations under Section 409A of the Internal
Revenue Code and to provide that said plan will remain in force and effect unless and until
terminated by the board. The Employee Severance Plan amended and restated the companys
previous Employee Change of Control Severance Plan dated November 16, 2006. The Employee
Severance Plan covers all full-time employees other than officers. Severance is triggered
by an involuntary termination of employment on and during the 6 month period following a
change of control, including a resignation by the employee relating to a change in duties.
Employees who are terminated within the scope of the Employee Severance Plan will be
entitled to certain payments and benefits including the following: a lump sum equal to (1)
his weekly pay times his full years of service, plus (2) one weeks pay for each full
$10,000 of annual pay, but the sum of (1) and (2) cannot be less than 12 weeks of pay or
greater than 52 weeks of pay; continued health plan coverage for six months; and a pro-rated
portion of the employees targeted bonus for the year. Benefits paid upon a change of
control, without regard to whether there is a termination of employment, include the
following: lapse of restrictions on restricted stock, accelerated vesting and cash-out of
all in-the-money stock options, a 401(k) plan employer matching contribution at the rate of
50%, and a lump sum cash payment equal to the product of (i) the
number of restricted shares of company stock that the employee would have received under the companys stock
plan but did not receive for the time-vested portion of his long-term stock incentive award,
if any, for the calendar year in which the change of control occurs times (ii) the price per
share of the companys common stock utilized in effecting the change of control, provided
that such amount shall be prorated by multiplying such amount by the number of full months
that have elapsed from January 1 of that calendar year to the effective date of the change
of control and then dividing the result by twelve (12).
 F-28




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##### Table of Contents



NOTE 18  OIL AND GAS RESERVE INFORMATION  UNAUDITED:
    Oil andOil
    
    
    Natural Gas
    
    
    Natural Gas(MBbls)
    
    
    (MMcf)
    
    
    (MMcfe)Estimated proved reserves as of December 31, 2007
    
    
    31,586
    
    
    
    213,083
    
    
    
    402,598Revisions of previous estimates
    
    
    (4,416
    )
    
    
    (37,509
    )
    
    
    (64,007
    )Extensions, discoveries and other additions
    
    
    625
    
    
    
    6,246
    
    
    
    9,996Purchase of producing properties
    
    
    14,680
    
    
    
    164,408
    
    
    
    252,489Sale of reserves
    
    
    (995
    )
    
    
    (12,265
    )
    
    
    (18,238
    )Production
    
    
    (4,916
    )
    
    
    (34,409
    )
    
    
    (63,903
    )Estimated proved reserves as of December 31, 2008
    
    
    36,564
    
    
    
    299,554
    
    
    
    518,935Revisions of previous estimates
    
    
    1,964
    
    
    
    (53,423
    )
    
    
    (41,636
    )Extensions, discoveries and other additions
    
    
    417
    
    
    
    12,198
    
    
    
    14,703Sale of reserves
    
    
    (402
    )
    
    
    (300
    )
    
    
    (2,714
    )Production
    
    
    (6,207
    )
    
    
    (41,335
    )
    
    
    (78,577
    )Estimated proved reserves as of December 31, 2009
    
    
    32,336
    
    
    
    216,694
    
    
    
    410,711Revisions of previous estimates
    
    
    3,299
    
    
    
    13,439
    
    
    
    33,231Extensions, discoveries and other additions
    
    
    2,668
    
    
    
    82,846
    
    
    
    98,854Purchase of producing properties
    
    
    637
    
    
    
    3,816
    
    
    
    7,637Sale of reserves
    
    
    (23
    )
    
    
    (153
    )
    
    
    (289
    )Production
    
    
    (5,714
    )
    
    
    (41,937
    )
    
    
    (76,221
    )Estimated proved reserves as of December 31, 2010
    
    
    33,203
    
    
    
    274,705
    
    
    
    473,923Estimated proved developed reserves:as of December 31, 2008
    
    
    28,410
    
    
    
    227,857
    
    
    
    398,317as of December 31, 2009
    
    
    24,380
    
    
    
    172,452
    
    
    
    318,729as of December 31, 2010
    
    
    25,000
    
    
    
    174,876
    
    
    
    324,876
  Year Ended December 31, 2010.
 F-29




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##### Table of Contents



Year Ended December 31, 2009.
 Year Ended December 31, 2008.
  Standardized Measure Year Ended December 31,2010
    
    
    2009
    
    
    2008Future cash inflows
    
    $
    3,803,004
    
    
    $
    2,663,285
    
    
    $
    3,210,283Future production costs
    
    
    (1,191,718
    )
    
    
    (950,434
    )
    
    
    (1,131,548
    )Future development costs
    
    
    (907,956
    )
    
    
    (912,500
    )
    
    
    (1,153,950
    )Future income taxes
    
    
    (330,651
    )
    
    
    (38,845
    )
    
    
    (8,989
    )Future net cash flows
    
    
    1,372,679
    
    
    
    761,506
    
    
    
    915,79610% annual discount
    
    
    (415,050
    )
    
    
    (146,519
    )
    
    
    (122,692
    )Standardized measure of discounted future net cash flows
    
    $
    957,629
    
    
    $
    614,987
    
    
    $
    793,104
 Changes in Standardized MeasureYear Ended December 31,2010
    
    
    2009
    
    
    2008Standardized measure at beginning of year
    
    $
    614,987
    
    
    $
    793,104
    
    
    $
    1,521,589Sales and transfers of oil and gas produced, net of
production costs
    
    
    (487,418
    )
    
    
    (546,737
    )
    
    
    (618,618
    )Changes in price, net of future production costs
    
    
    485,272
    
    
    
    284,504
    
    
    
    (2,209,114
    )Extensions and discoveries, net of future production
and development costs
    
    
    270,629
    
    
    
    21,249
    
    
    
    37,201Changes in estimated future development costs, net of
development costs incurred during the period
    
    
    119,986
    
    
    
    183,058
    
    
    
    98,029Revisions of quantity estimates
    
    
    147,509
    
    
    
    (150,609
    )
    
    
    (220,387
    )Accretion of discount
    
    
    64,836
    
    
    
    79,904
    
    
    
    203,715Net change in income taxes
    
    
    (196,219
    )
    
    
    (27,436
    )
    
    
    509,621Purchases of reserves in-place
    
    
    21,264
    
    
    
    
    
    
    
    1,514,487Sales of reserves in-place
    
    
    1,424
    
    
    
    3,152
    
    
    
    (45,822
    )Changes in production rates due to timing and other
    
    
    (84,641
    )
    
    
    (25,202
    )
    
    
    2,403Net increase (decrease) in standardized measure
    
    
    342,642
    
    
    
    (178,117
    )
    
    
    (728,485
    )Standardized measure at end of year
    
    $
    957,629
    
    
    $
    614,987
    
    
    $
    793,104
 F-30




---



##### Table of Contents



NOTE 19  SUMMARIZED QUARTERLY FINANCIAL INFORMATION  UNAUDITED:
 First Qtr.
    
    Second Qtr.As
    
    Adjust-
    
    
    
    
    
    
    
    
    
    Adjust-
    
    AsReported
    
    ment
    
    As Adjusted
    
    As Reported
    
    ment
    
    Adjusted2010 (a)Operating revenue
    
    $
    164,979
    
    
    $
    
    
    
    $
    164,979
    
    
    $
    166,207
    
    
    $
    
    
    
    $
    166,207Income from operations
    
    
    45,992
    
    
    
    (1,856
    )
    
    
    44,136
    
    
    
    44,532
    
    
    
    (1,856
    )
    
    
    42,676Net income attributable to Stone Energy
    
    
    26,624
    
    
    
    (1,206
    )
    
    
    25,418
    
    
    
    29,079
    
    
    
    (1,207
    )
    
    
    27,872Basic earnings per share attributable to Stone Energy Corporation stockholders
    
    $
    0.55
    
    
    
    ($0.03
    )
    
    $
    0.52
    
    
    $
    0.60
    
    
    
    ($0.03
    )
    
    $
    0.57Diluted earnings per share attributable to Stone Energy Corporation stockholders
    
    $
    0.55
    
    
    
    ($0.03
    )
    
    $
    0.52
    
    
    $
    0.60
    
    
    
    ($0.03
    )
    
    $
    0.57
 Third Qtr.
    
    Fourth Qtr.As
    
    Adjust-Reported
    
    ment
    
    As Adjusted
    
    As Reported2010 (a)Operating revenue
    
    $
    153,615
    
    
    $
    
    
    
    $
    153,615
    
    
    $
    170,020Income from operations
    
    
    34,608
    
    
    
    (1,855
    )
    
    
    32,753
    
    
    
    39,673Net income attributable to Stone Energy
    
    
    20,281
    
    
    
    (899
    )
    
    
    19,382
    
    
    
    23,757Basic earnings per share attributable to Stone Energy Corporation stockholders
    
    $
    0.42
    
    
    
    ($0.02
    )
    
    $
    0.40
    
    
    $
    0.49Diluted earnings per share attributable to Stone Energy Corporation stockholders
    
    $
    0.42
    
    
    
    ($0.02
    )
    
    $
    0.40
    
    
    $
    0.49
 First Qtr.
    
    Second Qtr.As
    
    Adjust-
    
    
    
    
    
    
    
    
    
    Adjust-Reported
    
    ment
    
    As Adjusted
    
    As Reported
    
    ment
    
    As Adjusted2009 (a)Operating revenue
    
    $
    142,943
    
    
    $
    
    
    
    $
    142,943
    
    
    $
    170,312
    
    
    $
    
    
    
    $
    170,312Income (loss) from operations
    
    
    (343,368
    )
    
    
    (5,421
    )
    
    
    (348,789
    ) (b)
    
    
    45,679
    
    
    
    (1,573
    )
    
    
    44,106Net inc.(loss) attributable to Stone Energy
    
    
    (225,866
    )
    
    
    (3,523
    )
    
    
    (229,389
    ) (b)
    
    
    27,168
    
    
    
    (1,022
    )
    
    
    26,146Basic earnings (loss) per share attributable to Stone Energy Corporation stockholders
    
    
    ($5.73
    )
    
    
    ($0.08
    )
    
    
    ($5.81
    )
    
    $
    0.65
    
    
    
    ($0.03
    )
    
    $
    0.62Diluted earnings (loss) per share attributable to Stone Energy Corporation stockholders
    
    
    ($5.73
    )
    
    
    ($0.08
    )
    
    
    ($5.81
    )
    
    $
    0.65
    
    
    
    ($0.03
    )
    
    $
    0.62
 Third Qtr.
    
    Fourth Qtr.As
    
    Adjust-
    
    
    
    
    
    
    
    
    
    Adjust-Reported
    
    ment
    
    As Adjusted
    
    As Reported
    
    ment
    
    As Adjusted2009 (a)Operating revenue
    
    $
    202,719
    
    
    $
    
    
    
    $
    202,719
    
    
    $
    199,260
    
    
    $
    
    
    
    $
    199,260Income (loss) from operations
    
    
    82,886
    
    
    
    (1,572
    )
    
    
    81,314
    
    
    
    (92,909
    )
    
    
    (1,573
    )
    
    
    (94,482
    ) (c)Net inc.(loss) attributable to Stone Energy
    
    
    51,053
    
    
    
    (1,022
    )
    
    
    50,031
    
    
    
    (64,063
    )
    
    
    (1,023
    )
    
    
    (65,086
    ) (c)Basic earnings (loss) per share attributable to Stone Energy Corporation stockholders
    
    $
    1.06
    
    
    
    ($0.02
    )
    
    $
    1.04
    
    
    
    ($1.35
    )
    
    
    ($0.02
    )
    
    
    ($1.37
    )Diluted earnings (loss) per share attributable to Stone Energy Corporation stockholders
    
    $
    1.06
    
    
    
    ($0.02
    )
    
    $
    1.04
    
    
    
    ($1.35
    )
    
    
    ($0.02
    )
    
    
    ($1.37
    )
 
 (a)
    
    Certain amounts for the first through third quarters of 2010 and for each quarter of 2009
have been corrected from amounts originally presented. See Note 2  Prior Period Correction
of Immaterial Errors.(b)
    
    Includes a ceiling test write-down of $343,932 before taxes ($223,556 after taxes).(c)
    
    Includes a ceiling test write-down of $165,057 before taxes ($107,287 after taxes). F-31




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##### Table of Contents



NOTE 20  GUARANTOR FINANCIAL STATEMENTS:
 3 4 5 8 Note 12  Long-Term Debt
 CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)
DECEMBER 31, 2010
(In thousands of dollars)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    105,115
    
    
    $
    1,659
    
    
    $
    182
    
    
    $
    
    
    
    $
    106,956Restricted cash
    
    
    5,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,500Accounts receivable
    
    
    26,760
    
    
    
    61,560
    
    
    
    902
    
    
    
    (693
    )
    
    
    88,529Fair value of hedging contracts
    
    
    12,955
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,955Deferred tax asset
    
    
    27,274
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,274Inventory
    
    
    6,168
    
    
    
    297
    
    
    
    
    
    
    
    
    
    
    
    6,465Other current assets
    
    
    753
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    768Total current assets
    
    
    184,525
    
    
    
    63,531
    
    
    
    1,084
    
    
    
    (693
    )
    
    
    248,447Oil and gas properties  United States
Proved, net
    
    
    260,434
    
    
    
    720,309
    
    
    
    3,886
    
    
    
    
    
    
    
    984,629Unevaluated
    
    
    337,725
    
    
    
    75,455
    
    
    
    
    
    
    
    
    
    
    
    413,180Building and land, net
    
    
    6,273
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,273Fixed assets, net
    
    
    4,449
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,449Other assets, net
    
    
    22,112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,112Investment in subsidiary
    
    
    427,273
    
    
    
    1,561
    
    
    
    
    
    
    
    (428,834
    )
    
    
    Total assets
    
    $
    1,242,791
    
    
    $
    860,856
    
    
    $
    4,970
    
    
    
    ($429,527
    )
    
    $
    1,679,090Liabilities and Stockholders EquityCurrent liabilities:Accounts payable to vendors
    
    $
    60,019
    
    
    $
    43,881
    
    
    $
    
    
    
    
    ($692
    )
    
    $
    103,208Undistributed oil and gas proceeds
    
    
    9,491
    
    
    
    546
    
    
    
    
    
    
    
    
    
    
    
    10,037Fair value of hedging contracts
    
    
    32,144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,144Asset retirement obligations
    
    
    
    
    
    
    42,300
    
    
    
    
    
    
    
    
    
    
    
    42,300Current income taxes payable
    
    
    239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239Other current liabilities
    
    
    30,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,137Total current liabilities
    
    
    132,030
    
    
    
    86,727
    
    
    
    
    
    
    
    (692
    )
    
    
    218,065Long-term debt
    
    
    575,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    575,000Deferred taxes *
    
    
    (41,804
    )
    
    
    141,031
    
    
    
    
    
    
    
    
    
    
    
    99,227Asset retirement obligations
    
    
    129,100
    
    
    
    198,105
    
    
    
    4,415
    
    
    
    
    
    
    
    331,620Fair value of hedging contracts
    
    
    3,606
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,606Other long-term liabilities
    
    
    14,502
    
    
    
    6,713
    
    
    
    
    
    
    
    
    
    
    
    21,215Total liabilities
    
    
    812,434
    
    
    
    432,576
    
    
    
    4,415
    
    
    
    (692
    )
    
    
    1,248,733Commitments and contingenciesStockholders equity:Common stock
    
    
    478
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478Treasury stock
    
    
    (860
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (860
    )Additional paid-in capital
    
    
    1,331,500
    
    
    
    1,673,598
    
    
    
    1,640
    
    
    
    (1,675,238
    )
    
    
    1,331,500Accumulated earnings (deficit)
    
    
    (886,557
    )
    
    
    (1,245,318
    )
    
    
    (1,085
    )
    
    
    1,246,403
    
    
    
    (886,557
    )Accumulated
other comprehensive loss
    
    
    (14,204
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,204
    )Total stockholders equity
    
    
    430,357
    
    
    
    428,280
    
    
    
    555
    
    
    
    (428,835
    )
    
    
    430,357Total liabilities and stockholders equity
    
    $
    1,242,791
    
    
    $
    860,856
    
    
    $
    4,970
    
    
    
    ($429,527
    )
    
    $
    1,679,090
 
 *
    
    Deferred income taxes have been allocated to guarantor subsidiary where related oil and gas
properties reside. F-32




---



##### Table of Contents



CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)
DECEMBER 31, 2009
(In thousands of dollars)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    64,830
    
    
    $
    3,963
    
    
    $
    500
    
    
    $
    
    
    
    $
    69,293Accounts receivable
    
    
    53,396
    
    
    
    169,053
    
    
    
    144
    
    
    
    (104,464
    )
    
    
    118,129Fair value of hedging contracts
    
    
    16,223
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,223Deferred tax asset
    
    
    14,571
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,571Inventory
    
    
    8,145
    
    
    
    572
    
    
    
    
    
    
    
    
    
    
    
    8,717Other current assets
    
    
    771
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    814Total current assets
    
    
    157,936
    
    
    
    173,631
    
    
    
    644
    
    
    
    (104,464
    )
    
    
    227,747Oil and gas properties  United States
Proved, net
    
    
    76,066
    
    
    
    774,980
    
    
    
    5,421
    
    
    
    
    
    
    
    856,467Unevaluated
    
    
    226,289
    
    
    
    102,953
    
    
    
    
    
    
    
    
    
    
    
    329,242Building and land, net
    
    
    5,723
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,723Fair value of hedging contracts
    
    
    1,771
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,771Fixed assets, net
    
    
    4,084
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,084Other assets, net
    
    
    29,208
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,208Investment in subsidiary
    
    
    739,834
    
    
    
    890
    
    
    
    
    
    
    
    (740,724
    )
    
    
    Total assets
    
    $
    1,240,911
    
    
    $
    1,052,454
    
    
    $
    6,065
    
    
    
    ($845,188
    )
    
    $
    1,454,242Liabilities and Stockholders EquityCurrent liabilities:Accounts payable to vendors
    
    $
    135,518
    
    
    $
    35,247
    
    
    $
    562
    
    
    
    ($104,464
    )
    
    $
    66,863Undistributed oil and gas proceeds
    
    
    14,828
    
    
    
    452
    
    
    
    
    
    
    
    
    
    
    
    15,280Fair value of hedging contracts
    
    
    34,859
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,859Asset retirement obligations
    
    
    9,597
    
    
    
    20,918
    
    
    
    
    
    
    
    
    
    
    
    30,515Current income tax payable
    
    
    11,110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,110Other current liabilities
    
    
    42,223
    
    
    
    760
    
    
    
    
    
    
    
    
    
    
    
    42,983Total current liabilities
    
    
    248,135
    
    
    
    57,377
    
    
    
    562
    
    
    
    (104,464
    )
    
    
    201,610Long-term debt
    
    
    575,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    575,000Deferred taxes *
    
    
    (26,231
    )
    
    
    61,987
    
    
    
    
    
    
    
    
    
    
    
    35,756Asset retirement obligations
    
    
    98,927
    
    
    
    186,545
    
    
    
    4,612
    
    
    
    
    
    
    
    290,084Fair value of hedging contracts
    
    
    7,721
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,721Other long-term liabilities
    
    
    11,700
    
    
    
    6,712
    
    
    
    
    
    
    
    
    
    
    
    18,412Total liabilities
    
    
    915,252
    
    
    
    312,621
    
    
    
    5,174
    
    
    
    (104,464
    )
    
    
    1,128,583Commitments and contingenciesStockholders equity:Common stock
    
    
    475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    475Treasury stock
    
    
    (860
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (860
    )Additional paid-in capital
    
    
    1,324,410
    
    
    
    2,125,517
    
    
    
    1,639
    
    
    
    (2,127,156
    )
    
    
    1,324,410Accumulated earnings (deficit)
    
    
    (982,986
    )
    
    
    (1,385,684
    )
    
    
    (748
    )
    
    
    1,386,432
    
    
    
    (982,986
    )Accumulated other comprehensive loss
    
    
    (15,380
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,380
    )Total stockholders equity
    
    
    325,659
    
    
    
    739,833
    
    
    
    891
    
    
    
    (740,724
    )
    
    
    325,659Total liabilities and stockholders equity
    
    $
    1,240,911
    
    
    $
    1,052,454
    
    
    $
    6,065
    
    
    
    ($845,188
    )
    
    $
    1,454,242
 
 *
    
    Deferred income taxes have been allocated to guarantor subsidiary where related oil and gas
properties reside. F-33




---



##### Table of Contents



CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 2010
(In thousands of dollars)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating revenue:Oil production
    
    $
    51,357
    
    
    $
    366,591
    
    
    $
    
    
    
    $
    
    
    
    $
    417,948Gas production
    
    
    61,137
    
    
    
    171,918
    
    
    
    
    
    
    
    
    
    
    
    233,055Derivative income, net
    
    
    3,265
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,265Total operating revenue
    
    
    115,759
    
    
    
    538,509
    
    
    
    
    
    
    
    
    
    
    
    654,268Operating expenses:Lease operating expenses
    
    
    64,868
    
    
    
    87,458
    
    
    
    
    
    
    
    
    
    
    
    152,326Other operational expense
    
    
    1,968
    
    
    
    3,482
    
    
    
    
    
    
    
    
    
    
    
    5,450Production taxes
    
    
    3,631
    
    
    
    2,177
    
    
    
    
    
    
    
    
    
    
    
    5,808Depreciation, depletion, amortization
    
    
    40,351
    
    
    
    206,856
    
    
    
    994
    
    
    
    
    
    
    
    248,201Accretion expense
    
    
    14,503
    
    
    
    19,524
    
    
    
    442
    
    
    
    
    
    
    
    34,469Salaries, general and administrative
    
    
    42,741
    
    
    
    17
    
    
    
    1
    
    
    
    
    
    
    
    42,759Incentive compensation expense
    
    
    5,888
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,888Impairment of inventory
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129Total operating expenses
    
    
    174,079
    
    
    
    319,514
    
    
    
    1,437
    
    
    
    
    
    
    
    495,030Income (loss) from operations
    
    
    (58,320
    )
    
    
    218,995
    
    
    
    (1,437
    )
    
    
    
    
    
    
    159,238Other (income) expenses:Interest expense
    
    
    12,192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,192Interest income
    
    
    (1,439
    )
    
    
    (25
    )
    
    
    
    
    
    
    
    
    
    
    (1,464
    )Other (income) expense, net
    
    
    (4,283
    )
    
    
    (638
    )
    
    
    (1,100
    )
    
    
    
    
    
    
    (6,021
    )Loss on early extinguishment of debt
    
    
    1,820
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,820(Income) loss from investment in subsidiary
    
    
    (140,366
    )
    
    
    337
    
    
    
    
    
    
    
    140,029
    
    
    
    Total other (income) expenses
    
    
    (132,076
    )
    
    
    (326
    )
    
    
    (1,100
    )
    
    
    140,029
    
    
    
    6,527Income (loss) before taxes
    
    
    73,756
    
    
    
    219,321
    
    
    
    (337
    )
    
    
    (140,029
    )
    
    
    152,711Provision (benefit) for income taxes:Current
    
    
    5,896
    
    
    
    (88
    )
    
    
    
    
    
    
    
    
    
    
    5,808Deferred
    
    
    (28,569
    )
    
    
    79,043
    
    
    
    
    
    
    
    
    
    
    
    50,474Total income taxes
    
    
    (22,673
    )
    
    
    78,955
    
    
    
    
    
    
    
    
    
    
    
    56,282Net income (loss)
    
    $
    96,429
    
    
    $
    140,366
    
    
    
    ($337
    )
    
    
    ($140,029
    )
    
    $
    96,429
 F-34




---



##### Table of Contents



CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 2009
(In thousands of dollars)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating revenue:Oil production
    
    $
    136,513
    
    
    $
    302,429
    
    
    $
    
    
    
    $
    
    
    
    $
    438,942Gas production
    
    
    123,511
    
    
    
    148,842
    
    
    
    
    
    
    
    
    
    
    
    272,353Derivative income, net
    
    
    3,061
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,061Total operating revenue
    
    
    263,085
    
    
    
    451,271
    
    
    
    
    
    
    
    
    
    
    
    714,356Operating expenses:Lease operating expenses
    
    
    36,563
    
    
    
    120,223
    
    
    
    
    
    
    
    
    
    
    
    156,786Other operational expense
    
    
    2,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,400Production taxes
    
    
    6,022
    
    
    
    1,898
    
    
    
    
    
    
    
    
    
    
    
    7,920Depreciation, depletion, amortization
    
    
    47,695
    
    
    
    211,465
    
    
    
    479
    
    
    
    
    
    
    
    259,639Write-down of oil and gas properties
    
    
    3,849
    
    
    
    505,140
    
    
    
    
    
    
    
    
    
    
    
    508,989Accretion expense
    
    
    16,058
    
    
    
    23,203
    
    
    
    45
    
    
    
    
    
    
    
    39,306Salaries, general and administrative
    
    
    41,178
    
    
    
    184
    
    
    
    5
    
    
    
    
    
    
    
    41,367Incentive compensation expense
    
    
    6,402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,402Impairment of inventory
    
    
    8,342
    
    
    
    1,056
    
    
    
    
    
    
    
    
    
    
    
    9,398Total operating expenses
    
    
    168,509
    
    
    
    863,169
    
    
    
    529
    
    
    
    
    
    
    
    1,032,207Income (loss) from operations
    
    
    94,576
    
    
    
    (411,898
    )
    
    
    (529
    )
    
    
    
    
    
    
    (317,851
    )Other (income) expenses:Interest expense
    
    
    21,183
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    21,361Interest income
    
    
    (515
    )
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    (528
    )Other (income) expense, net
    
    
    (3,524
    )
    
    
    223
    
    
    
    (553
    )
    
    
    
    
    
    
    (3,854
    )(Income) loss from investment in subsidiary
    
    
    268,011
    
    
    
    3
    
    
    
    
    
    
    
    (268,014
    )
    
    
    Total other (income) expenses
    
    
    285,155
    
    
    
    391
    
    
    
    (553
    )
    
    
    (268,014
    )
    
    
    16,979Income (loss) before taxes
    
    
    (190,579
    )
    
    
    (412,289
    )
    
    
    24
    
    
    
    268,014
    
    
    
    (334,830
    )Provision (benefit) for income taxes:Current
    
    
    30,376
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,376Deferred
    
    
    (2,657
    )
    
    
    (144,278
    )
    
    
    
    
    
    
    
    
    
    
    (146,935
    )Total income taxes
    
    
    27,719
    
    
    
    (144,278
    )
    
    
    
    
    
    
    
    
    
    
    (116,559
    )Net income (loss)
    
    
    (218,298
    )
    
    
    (268,011
    )
    
    
    24
    
    
    
    268,014
    
    
    
    (218,271
    )Less: net income attributable to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    27Net income (loss) attributable to Stone Energy Corporation
    
    
    ($218,298
    )
    
    
    ($268,011
    )
    
    $
    24
    
    
    $
    267,987
    
    
    
    ($218,298
    )
 F-35




---



##### Table of Contents



CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 2008
(In thousands of dollars)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating revenue:Oil production
    
    $
    444,825
    
    
    $
    16,225
    
    
    $
    
    
    
    $
    
    
    
    $
    461,050Gas production
    
    
    305,637
    
    
    
    31,028
    
    
    
    
    
    
    
    
    
    
    
    336,665Derivative income, net
    
    
    3,327
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,327Total operating revenue
    
    
    753,789
    
    
    
    47,253
    
    
    
    
    
    
    
    
    
    
    
    801,042Operating expenses:Lease operating expenses
    
    
    142,513
    
    
    
    28,594
    
    
    
    
    
    
    
    
    
    
    
    171,107Production taxes
    
    
    7,722
    
    
    
    268
    
    
    
    
    
    
    
    
    
    
    
    7,990Depreciation, depletion, amortization
    
    
    252,021
    
    
    
    36,310
    
    
    
    53
    
    
    
    
    
    
    
    288,384Write-down of oil and gas properties
    
    
    342,815
    
    
    
    981,512
    
    
    
    
    
    
    
    
    
    
    
    1,324,327Goodwill impairment
    
    
    
    
    
    
    465,985
    
    
    
    
    
    
    
    
    
    
    
    465,985Accretion expense
    
    
    15,886
    
    
    
    1,492
    
    
    
    14
    
    
    
    
    
    
    
    17,392Salaries, general and administrative
    
    
    42,948
    
    
    
    555
    
    
    
    1
    
    
    
    
    
    
    
    43,504Incentive compensation expense
    
    
    2,315
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,315Total operating expenses
    
    
    806,220
    
    
    
    1,514,716
    
    
    
    68
    
    
    
    
    
    
    
    2,321,004Income (loss) from operations
    
    
    (52,431
    )
    
    
    (1,467,463
    )
    
    
    (68
    )
    
    
    
    
    
    
    (1,519,962
    )Other (income) expenses:Interest expense
    
    
    13,212
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    13,243Interest income
    
    
    (11,223
    )
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    (11,250
    )Other (income) expense, net
    
    
    (6,551
    )
    
    
    46
    
    
    
    705
    
    
    
    
    
    
    
    (5,800
    )(Income) loss from investment in
subsidiary
    
    
    1,117,673
    
    
    
    695
    
    
    
    
    
    
    
    (1,118,368
    )
    
    
    Total other (income) expenses
    
    
    1,113,111
    
    
    
    745
    
    
    
    705
    
    
    
    (1,118,368
    )
    
    
    (3,807
    )Income (loss) before taxes
    
    
    (1,165,542
    )
    
    
    (1,468,208
    )
    
    
    (773
    )
    
    
    1,118,368
    
    
    
    (1,516,155
    )Provision (benefit) for income taxes:Current
    
    
    6,998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,998Deferred
    
    
    (25,609
    )
    
    
    (350,535
    )
    
    
    
    
    
    
    
    
    
    
    (376,144
    )Total income taxes
    
    
    (18,611
    )
    
    
    (350,535
    )
    
    
    
    
    
    
    
    
    
    
    (369,146
    )Net income (loss)
    
    
    (1,146,931
    )
    
    
    (1,117,673
    )
    
    
    (773
    )
    
    
    1,118,368
    
    
    
    (1,147,009
    )Less: net loss attributable to
non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    (77
    )Net income (loss) attributable to
Stone Energy Corporation
    
    $
    (1,146,931
    )
    
    $
    (1,117,673
    )
    
    $
    (773
    )
    
    $
    1,118,445
    
    
    $
    (1,146,932
    )
 F-36




---



##### Table of Contents



CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
YEAR ENDED DECEMBER 31, 2010
(In thousands of dollars)
 Non-GuarantorParent
    
    
    Guarantor Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    96,429
    
    
    $
    140,366
    
    
    $
    (337
    )
    
    $
    (140,029
    )
    
    $
    96,429Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    40,351
    
    
    
    206,856
    
    
    
    994
    
    
    
    
    
    
    
    248,201Impairment of inventory
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129Accretion expense
    
    
    14,503
    
    
    
    19,524
    
    
    
    442
    
    
    
    
    
    
    
    34,469Deferred income tax provision (benefit)
    
    
    (28,569
    )
    
    
    79,043
    
    
    
    
    
    
    
    
    
    
    
    50,474Settlement of asset retirement obligations
    
    
    (6,461
    )
    
    
    (30,440
    )
    
    
    
    
    
    
    
    
    
    
    (36,901
    )Non-cash stock compensation expense
    
    
    5,692
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,692Excess tax benefits
    
    
    (299
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299
    )Non-cash derivative income
    
    
    (324
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (324
    )Loss on early extinguishment of debt
    
    
    1,820
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,820Non-cash (income) loss from investment in
subsidiary
    
    
    (140,366
    )
    
    
    337
    
    
    
    
    
    
    
    140,029
    
    
    
    Other non-cash expenses
    
    
    1,708
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,708Change in current income taxes
    
    
    (10,783
    )
    
    
    (88
    )
    
    
    
    
    
    
    
    
    
    
    (10,871
    )Change in intercompany receivable/payables
    
    
    349,118
    
    
    
    (347,941
    )
    
    
    (1,177
    )
    
    
    
    
    
    
    (Increase) decrease in accounts receivable
    
    
    (11,556
    )
    
    
    61,254
    
    
    
    (65
    )
    
    
    
    
    
    
    49,633Decrease in other current assets
    
    
    18
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    74Decrease in inventory
    
    
    1,848
    
    
    
    275
    
    
    
    
    
    
    
    
    
    
    
    2,123Increase (decrease) in accounts payable
    
    
    (1,045
    )
    
    
    272
    
    
    
    
    
    
    
    
    
    
    
    (773
    )Decrease in other current liabilities
    
    
    (17,423
    )
    
    
    (665
    )
    
    
    
    
    
    
    
    
    
    
    (18,088
    )Other expenses
    
    
    1,230
    
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    1,298Net cash provided by (used in) operating
activities
    
    
    296,020
    
    
    
    128,917
    
    
    
    (143
    )
    
    
    
    
    
    
    424,794Cash flows from investing activities:Investment in oil and gas properties
    
    
    (265,198
    )
    
    
    (136,394
    )
    
    
    (175
    )
    
    
    
    
    
    
    (401,767
    )Proceeds from sale of oil and gas properties,
net of expenses
    
    
    25,455
    
    
    
    6,180
    
    
    
    
    
    
    
    
    
    
    
    31,635Acquisition of non-controlling interest
    
    
    
    
    
    
    (1,007
    )
    
    
    
    
    
    
    
    
    
    
    (1,007
    )Investment in fixed and other assets
    
    
    (2,949
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,949
    )Net cash used in investing activities
    
    
    (242,692
    )
    
    
    (131,221
    )
    
    
    (175
    )
    
    
    
    
    
    
    (374,088
    )Cash flows from financing activities:Repayment of bank borrowings
    
    
    (175,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (175,000
    )Redemption of senior subordinated notes
    
    
    (200,503
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200,503
    )Proceeds from issuance of senior notes
    
    
    375,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375,000Deferred financing costs
    
    
    (11,474
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,474
    )Excess tax benefits
    
    
    299
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    299Net payments for share based compensation
    
    
    (1,365
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,365
    )Net cash used in financing activities
    
    
    (13,043
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,043
    )Net increase (decrease) in cash and cash
equivalents
    
    
    40,285
    
    
    
    (2,304
    )
    
    
    (318
    )
    
    
    
    
    
    
    37,663Cash and cash equivalents, beginning of period
    
    
    64,830
    
    
    
    3,963
    
    
    
    500
    
    
    
    
    
    
    
    69,293Cash and cash equivalents, end of period
    
    $
    105,115
    
    
    $
    1,659
    
    
    $
    182
    
    
    $
    
    
    
    $
    106,956
 F-37




---



##### Table of Contents



CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
YEAR ENDED DECEMBER 31, 2009
(In thousands of dollars)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (218,298
    )
    
    $
    (268,011
    )
    
    $
    24
    
    
    $
    268,014
    
    
    $
    (218,271
    )Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:Depreciation, depletion and amortization
    
    
    47,695
    
    
    
    211,465
    
    
    
    479
    
    
    
    
    
    
    
    259,639Write-down of oil and gas properties
    
    
    3,849
    
    
    
    505,140
    
    
    
    
    
    
    
    
    
    
    
    508,989Impairment of inventory
    
    
    8,342
    
    
    
    1,056
    
    
    
    
    
    
    
    
    
    
    
    9,398Accretion expense
    
    
    16,058
    
    
    
    23,203
    
    
    
    45
    
    
    
    
    
    
    
    39,306Deferred income tax benefit
    
    
    (2,657
    )
    
    
    (144,278
    )
    
    
    
    
    
    
    
    
    
    
    (146,935
    )Settlement of asset retirement obligations
    
    
    (9,364
    )
    
    
    (57,416
    )
    
    
    
    
    
    
    
    
    
    
    (66,780
    )Non-cash stock compensation expense
    
    
    5,944
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,944Excess tax benefits
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )Non-cash derivative expense
    
    
    5,142
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,142Non-cash (income) loss from investment in
subsidiary
    
    
    268,011
    
    
    
    3
    
    
    
    
    
    
    
    (268,014
    )
    
    
    Other non-cash expenses
    
    
    1,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,573Change in current income taxes
    
    
    64,481
    
    
    
    1,704
    
    
    
    
    
    
    
    
    
    
    
    66,185(Increase) decrease in accounts receivable
    
    
    177,984
    
    
    
    (127,809
    )
    
    
    440
    
    
    
    (456
    )
    
    
    50,159Decrease in other current assets
    
    
    585
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    627Decrease in inventory
    
    
    16,478
    
    
    
    1,083
    
    
    
    
    
    
    
    
    
    
    
    17,561Decrease in accounts payable
    
    
    (5,652
    )
    
    
    (3,787
    )
    
    
    (761
    )
    
    
    
    
    
    
    (10,200
    )Increase (decrease) in other current
liabilities
    
    
    (19,448
    )
    
    
    5,017
    
    
    
    
    
    
    
    
    
    
    
    (14,431
    )Other expenses
    
    
    739
    
    
    
    (856
    )
    
    
    
    
    
    
    
    
    
    
    (117
    )Net cash provided by (used in) operating
activities
    
    
    361,460
    
    
    
    146,556
    
    
    
    227
    
    
    
    (456
    )
    
    
    507,787Cash flows from investing activities:Investment in oil and gas properties
    
    
    (177,341
    )
    
    
    (143,405
    )
    
    
    76
    
    
    
    456
    
    
    
    (320,214
    )Proceeds from sale of oil and gas
properties, net of expenses
    
    
    5,553
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,553Sale of fixed assets
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    35Investment in fixed and other assets
    
    
    (1,412
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,412
    )Acquisition of non-controlling interest
in subsidiary
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    (41
    )Net cash provided by (used in) investing
activities
    
    
    (173,200
    )
    
    
    (143,411
    )
    
    
    76
    
    
    
    456
    
    
    
    (316,079
    )Cash flows from financing activities:Repayments of bank borrowings
    
    
    (250,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (250,000
    )Proceeds from stock offering
    
    
    60,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,447Deferred financing costs
    
    
    (141
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141
    )Excess tax benefits
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Purchase of treasury stock
    
    
    (347
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (347
    )Net payments for share based compensation
    
    
    (513
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (513
    )Net cash used in financing activities
    
    
    (190,552
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (190,552
    )Net increase (decrease) in cash and cash
equivalents
    
    
    (2,292
    )
    
    
    3,145
    
    
    
    303
    
    
    
    
    
    
    
    1,156Cash and cash equivalents, beginning of
period
    
    
    67,122
    
    
    
    818
    
    
    
    197
    
    
    
    
    
    
    
    68,137Cash and cash equivalents, end of period
    
    $
    64,830
    
    
    $
    3,963
    
    
    $
    500
    
    
    $
    
    
    
    $
    69,293
 F-38




---



##### Table of Contents



CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
YEAR ENDED DECEMBER 31, 2008
(In thousands of dollars)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (1,146,931
    )
    
    $
    (1,117,673
    )
    
    $
    (773
    )
    
    $
    1,118,368
    
    
    $
    (1,147,009
    )Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:Depreciation, depletion and amortization
    
    
    252,021
    
    
    
    36,310
    
    
    
    53
    
    
    
    
    
    
    
    288,384Write-down of oil and gas properties
    
    
    342,815
    
    
    
    981,512
    
    
    
    
    
    
    
    
    
    
    
    1,324,327Goodwill impairment
    
    
    
    
    
    
    465,985
    
    
    
    
    
    
    
    
    
    
    
    465,985Accretion expense
    
    
    15,886
    
    
    
    1,492
    
    
    
    14
    
    
    
    
    
    
    
    17,392Deferred income tax benefit
    
    
    (25,609
    )
    
    
    (350,535
    )
    
    
    
    
    
    
    
    
    
    
    (376,144
    )Settlement of asset retirement obligations
    
    
    (47,617
    )
    
    
    (1,625
    )
    
    
    
    
    
    
    
    
    
    
    (49,242
    )Non-cash stock compensation expense
    
    
    8,405
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,405Excess tax benefits
    
    
    (3,045
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,045
    )Non-cash derivative expense
    
    
    (2,592
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,592
    )Non-cash (income) loss from investment in
subsidiary
    
    
    1,117,673
    
    
    
    695
    
    
    
    
    
    
    
    (1,118,368
    )
    
    
    Other non-cash expenses
    
    
    1,687
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,687Change in current income taxes
    
    
    (87,110
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (87,110
    )Decrease in accounts receivable
    
    
    70,982
    
    
    
    39,182
    
    
    
    69
    
    
    
    456
    
    
    
    110,689Increase in other current assets
    
    
    (824
    )
    
    
    (42
    )
    
    
    
    
    
    
    
    
    
    
    (866
    )Increase in inventory
    
    
    (32,965
    )
    
    
    (565
    )
    
    
    
    
    
    
    
    
    
    
    (33,530
    )Increase in accounts payable
    
    
    12,717
    
    
    
    11,455
    
    
    
    778
    
    
    
    
    
    
    
    24,950Decrease in other current liabilities
    
    
    (299
    )
    
    
    (17,481
    )
    
    
    
    
    
    
    
    
    
    
    (17,780
    )Investment in hedging contracts
    
    
    (1,914
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,914
    )Other expenses
    
    
    3,725
    
    
    
    (3,833
    )
    
    
    (1
    )
    
    
    
    
    
    
    (109
    )Net cash provided by operating activities
    
    
    477,005
    
    
    
    44,877
    
    
    
    140
    
    
    
    456
    
    
    
    522,478Cash flows from investing activities:Acquisition of Bois dArc Energy, Inc.
    
    
    (929,542
    )
    
    
    6,771
    
    
    
    57
    
    
    
    
    
    
    
    (922,714
    )Investment in oil and gas properties
    
    
    (395,848
    )
    
    
    (50,467
    )
    
    
    
    
    
    
    (456
    )
    
    
    (446,771
    )Proceeds from sale of oil and gas
properties, net of expenses
    
    
    13,339
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,339Sale of fixed assets
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Investment in fixed and other assets
    
    
    (1,402
    )
    
    
    (363
    )
    
    
    
    
    
    
    
    
    
    
    (1,765
    )Net cash provided by (used in) investing
activities
    
    
    (1,313,449
    )
    
    
    (44,059
    )
    
    
    57
    
    
    
    (456
    )
    
    
    (1,357,907
    )Cash flows from financing activities:Proceeds from bank borrowings
    
    
    425,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    425,000Deferred financing costs
    
    
    (8,766
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,766
    )Excess tax benefits
    
    
    3,045
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,045Expenses for stock offering
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )Purchase of treasury stock
    
    
    (6,724
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,724
    )Net payments for share based compensation
    
    
    15,939
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,939Net cash provided by financing activities
    
    
    428,440
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    428,440Net increase (decrease) in cash and cash
equivalents
    
    
    (408,004
    )
    
    
    818
    
    
    
    197
    
    
    
    
    
    
    
    (406,989
    )Cash and cash equivalents, beginning of
period
    
    
    475,126
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    475,126Cash and cash equivalents, end of period
    
    $
    67,122
    
    
    $
    818
    
    
    $
    197
    
    
    $
    
    
    
    $
    68,137
 F-39




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##### Table of Contents



GLOSSARY OF CERTAIN INDUSTRY TERMS
  Bcf
 Bcfe.
 Bbl
 Btu.
 Development well
 Exploratory well
 Field. structural feature stratigraphic condition
 Gross acreage or gross wells
 LIBOR
 Liquidity.
 MBbls
 Mcf
 Mcfe
 MMBbls
 MMBtu.
 MMcf
 MMcfe
 Net acres or net wells
 Overriding royalty interest
 G-1




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##### Table of Contents



Pari Passu
 Primary term lease.
 Productive well
 Proved developed reserves
 Proved oil and gas reserves
 Proved undeveloped reserves
 Standardized measure of discounted future net cash flows.
 Undeveloped acreage
 Working interest
 G-2




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of the Registrant, as amended
(incorporated by reference to Exhibit 3.1 to the
Registrants Registration Statement on Form S-1
(Registration No. 33-62362)).3.2
    
    Certificate of Amendment of the Certificate of
Incorporation of Stone Energy Corporation, dated February
1, 2001 (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on Form 8-K, filed February 7,
2001).3.3
    
    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 on
December 15, 2004.)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)).10.1
    
    Deferred Compensation and Disability Agreement between TSPC
and E. J. Louviere dated July 16, 1981 (incorporated by
reference to Exhibit 10.10 to the Registrants Annual
Report on Form 10-K for the year ended December 31, 1995
(File No. 001-12074)).10.2
    
    Stone Energy Corporation 2009 Amended and Restated Stock
Incentive Plan (incorporated by reference to Appendix A to
the Registrants Definitive Proxy Statement on Schedule 14A
for Stones 2009 Annual Meeting of Stockholders (File No.
001-12074)).10.3
    
    Stone Energy Corporation Revised (2005) Annual Incentive
Compensation Plan (incorporated by reference to Exhibit
10.11 to the Registrants Annual Report on Form 10-K for
the year ended December 31, 2004 (File No. 001-12074)).10.4
    
    Stone Energy Corporation Amended and Restated Revised
Annual Incentive Compensation Plan, dated November 14, 2007
(incorporated by reference to Exhibit 10.10 to the
Registrants Annual Report on Form 10-K for the year ended
December 31, 2007 (File No. 001-12074)).10.5
    
    Stone Energy Corporation Deferred Compensation Plan
(incorporated by reference to Exhibit 4.5 to the
Registrants Annual Report on Form 10-K for the year ended
December 31, 2004 (File No. 001-12074)).




---



##### Table of Contents



ExhibitNumber
    
    Description10.6
    
    Adoption Agreement between Fidelity Management Trust
Company and Stone Energy Corporation for the Stone Energy
Corporation Deferred Compensation Plan dated December 1,
2004 (incorporated by reference to Exhibit 4.6 to the
Registrants Annual Report on Form 10-K for the year ended
December 31, 2004 (File No. 001-12074)).10.7
    
    Letter Agreement dated May 19, 2005 between Stone Energy
Corporation and Kenneth H. Beer (incorporated by reference
to Exhibit 10.1 to the Registrants Current Report on Form
8-K, filed May 24, 2005 (File No. 001-12074)).10.8
    
    Letter Agreement dated December 2, 2008 between Stone
Energy Corporation and David H. Welch (incorporated by
reference to Exhibit 10.8 to the Registrants Annual Report
on Form 10-K for the year ended December 31, 2008 (File No.
001-12074)).10.9
    
    Letter Agreement dated June 28, 2007 between Stone Energy
Corporation and Richard L. Smith (incorporated by reference
to Exhibit 10.1 to the Registrants Current Report on Form
8-K filed July 2, 2007 (File No. 001-12074)).10.10
    
    Amendment No.1, dated as of April 28, 2009, to the Second
Amended and Restated Credit Agreement dated as of August
28, 2008, among Stone Energy Corporation, Stone Energy
Offshore, L.L.C. and the financial institutions named
therein (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, filed April 30,
2009 (File No. 001-12074)).10.11
    
    Amendment No. 2, dated January 11, 2010, to the Second
Amended and Restated Credit Agreement dated as of August
28, 2008 (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on Form 8-K, filed January 12,
2010 (File No. 001-12074)).10.12
    
    Amendment No. 3, dated November 9, 2010, to the Second
Amended and Restated Credit Agreement dated as of August
28, 2008 (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on Form 8-K, filed November 12,
2010 (File No. 001-12074)).10.13
    
    Amended and Restated Security Agreement, dated as of August
28, 2008, among Stone Energy Corporation and the other
Debtors parties hereto in favor of Bank of America, N.A.,
as Administrative Agent (incorporated by reference to
Exhibit 4.5 to the Registrants Quarterly Report on Form
10-Q for the quarter ended September 30, 2008 (File No.
001-12074)).10.14
    
    Stone Energy Corporation Executive Change of Control and
Severance Plan (as amended and restated effective December
31, 2008) (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, filed April 8,
2009 (File No. 001-12074)).10.15
    
    Stone Energy Corporation Employee Change of Control
Severance Plan (as amended and restated) dated December 7,
2007 (incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on Form 8-K, filed December 12,
2007 (File No. 001-12074)).10.16
    
    Stone Energy Corporation Executive Change in Control
Severance Policy (as amended and restated) dated December
7, 2007 (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, filed December 12,
2007 (File No. 001-12074)).10.17
    
    Form of Indemnification Agreement between Stone Energy
Corporation and each of its directors and executive
officers (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, filed March 27,
2009 (File No. 001-12074)).*21.1
    
    Subsidiaries of the Registrant.*23.1
    
    Consent of Independent Registered Public Accounting Firm.*23.2
    
    Consent of Netherland, Sewell & Associates, Inc.




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##### Table of Contents



ExhibitNumber
    
    Description*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.*99.1
    
    Report of Netherland, Sewell & Associates, Inc.
 
 *
    
    Filed herewith.
    
    Identifies management contracts and compensatory plans or arrangements.#
    
    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.