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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, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ___to ___
  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)
   Name of each exchangeTitle of each class
    
    on which registeredCommon Stock, Par Value $.01 Per Share
    
    New York Stock Exchange
  o þ
 o þ
 þ o
 o
  þ o o o
 o þ




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TABLE OF CONTENTS
 Page No.PART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    8Item 1B.
    
    Unresolved Staff Comments
    
    
    15Item 2.
    
    Properties
    
    
    16Item 3.
    
    Legal Proceedings
    
    
    18Item 4.
    
    Submission of Matters To a Vote of Security Holders
    
    
    20Item 4A.
    
    Executive Officers of the Registrant
    
    
    20PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    21Item 6.
    
    Selected Financial Data
    
    
    23Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 8.
    
    Financial Statements and Supplementary Data
    
    
    35Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    36Item 9A.
    
    Controls and Procedures
    
    
    36Item 9B.
    
    Other Information
    
    
    38PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    38Item 11.
    
    Executive Compensation
    
    
    38Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    38Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    38Item 14.
    
    Principal Accounting Fees and Services
    
    
    38PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    39Index to Financial Statements
    
    
    F-1Glossary of Certain Industry Terms
    
    
    G-1EX-10.8EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1
  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 7 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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Bohai Bay, China
  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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Environmental Regulation
     Massachusetts, et al. v. EPA Massachusetts Massachusetts
  6




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Employees
  Available Information
  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;
    
    estimates of future income taxes; and
    
    our business strategy and other plans and objectives for future operations.
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
    
    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 the current 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;
    
    inflation;
    
    lack of availability 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 and other regulatory
legislation;
    
    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.
    
 ITEM 1A. RISK FACTORS
  Oil and natural gas prices are volatile. Recent declines in commodity prices have adversely
affected, and in the future will adversely affect, our financial condition and results of
operations, cash flows, access to the capital markets, and ability to grow.
 Lower oil and gas prices and other factors have resulted and in
the future may result, in ceiling
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test write-downs and other impairments of our asset carrying
values.
   
    
    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 and foreign 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.
   9




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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.
  The continuing financial crisis may impact our business and financial condition. We may not be able
to obtain funding in the capital markets on terms we find acceptable, or obtain funding under our
current bank credit facility because of the deterioration of the capital and credit markets and our
borrowing base.
     10




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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.
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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.
  12




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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.
 .
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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.
  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.
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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)
 We may have risks from global warming.
 th
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  15




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ITEM 2. PROPERTIES
  Oil and Natural Gas Reserves
   PercentProved
    
    Proved
    
    Total
    
    ProvedDeveloped
    
    Undeveloped
    
    Proved
    
    DevelopedOil (MBbls)
    
    
    28,410
    
    
    
    8,154
    
    
    
    36,564
    
    
    
    78
    %Natural gas (MMcf)
    
    
    227,857
    
    
    
    71,697
    
    
    
    299,554
    
    
    
    76
    %Total oil and natural gas (MMcfe)
    
    
    398,317
    
    
    
    120,618
    
    
    
    518,935
    
    
    
    77
    %
  December 31, 20082008
    
    Estimated Proved
    
    Nature ofField Name
    
    Location
    
    Production
    
    Reserves
    
    InterestMississippi Canyon Block 109
    
    GOM Shelf
    
    7.9 Bcfe
    
    74.5 Bcfe
    
    WorkingShip Shoal Block 113
    
    GOM Shelf
    
    0.7 Bcfe
    
    60.0 Bcfe
    
    WorkingEwing Bank Block 305
    
    GOM Shelf
    
    9.5 Bcfe
    
    54.9 Bcfe
    
    WorkingSouth Pelto Block 22
    
    GOM Shelf
    
    2.6 Bcfe
    
    27.8 Bcfe
    
    WorkingMain Pass Block 288
    
    GOM Shelf
    
    3.8 Bcfe
    
    23.3 Bcfe
    
    Working
 .
 i.e.
 16




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Acquisition, Production and Drilling Activity
 Acquisition and Development Costs.
 Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands)Acquisition costs, net of sales of unevaluated properties
    
    $
    1,830,468
    
    
    $
    18,730
    
    
    $
    228,108Development costs (1)
    
    
    59,586
    
    
    
    154,507
    
    
    
    370,201Exploratory costs
    
    
    146,529
    
    
    
    10,966
    
    
    
    160,371Sale of Rocky Mountain Region properties
    
    
    
    
    
    
    (1,363,939
    )
    
    
    Subtotal
    
    
    2,036,583
    
    
    
    (1,179,736
    )
    
    
    758,680Capitalized salaries, general and administrative costs and
interest, net of fees and reimbursements
    
    
    45,757
    
    
    
    36,178
    
    
    
    41,543Total additions (reductions) to oil and gas properties, net
    
    $
    2,082,340
    
    
    
    ($1,143,558
    )
    
    $
    800,223
 
 (1)
    
    Includes asset retirement costs of ($96,346), $20,171 and $161,048 for the years
ended December 31, 2008, 2007
and 2006, respectively. Productive Well and Acreage Data.
 Gross
    
    NetProductive Wells:Oil (1):Gulf Coast Basin
    
    
    146
    
    
    
    106Rocky Mountain Region
    
    
    
    
    
    
    Bohai Bay, China
    
    
    
    
    
    
    Appalachia
    
    
    
    
    
    
    146
    
    
    
    106Gas (2):Gulf Coast Basin
    
    
    85
    
    
    
    62Rocky Mountain Region
    
    
    
    
    
    
    Bohai Bay, China
    
    
    
    
    
    
    Appalachia
    
    
    2
    
    
    
    187
    
    
    
    63Total
    
    
    233
    
    
    
    169Developed Acres:Gulf Coast Basin
    
    
    87,642
    
    
    
    70,297Rocky Mountain Region
    
    
    40
    
    
    
    14Bohai Bay, China
    
    
    
    
    
    
    Appalachia
    
    
    428
    
    
    
    21488,110
    
    
    
    70,525Undeveloped Acres (3):Gulf Coast Basin
    
    
    988,689
    
    
    
    833,308Rocky Mountain Region
    
    
    144,442
    
    
    
    59,829Bohai Bay, China
    
    
    
    
    
    
    Appalachia
    
    
    32,365
    
    
    
    23,8421,165,496
    
    
    
    916,979Total
    
    
    1,253,606
    
    
    
    987,504
 
 (1)
    
    16 gross wells each have dual completions.(2)
    
    3 gross wells each have dual completions.(3)
    
    Leases covering approximately 10.5% of our undeveloped gross acreage will expire in
2009, 13.8% in 2010, 10.0% in 2011, 3.9% in 2012, 20.8% in 2013, 0.7% in 2014, 2.8% in
2015, 1.8% in 2016, 1.0% in 2017 and 5.4% in 2018. Leases covering the remainder of our
undeveloped gross acreage (29.3%) are held by production. 17




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Drilling Activity.
 Year Ended December 31,2008
    
    2007
    
    2006Gross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetExploratory Wells:Productive
    
    
    6.00
    
    
    
    3.50
    
    
    
    1.00
    
    
    
    1.00
    
    
    
    6.00
    
    
    
    3.49Nonproductive
    
    
    6.00
    
    
    
    3.98
    
    
    
    1.00
    
    
    
    1.00
    
    
    
    13.00
    
    
    
    9.26Development Wells:Productive
    
    
    9.00
    
    
    
    7.18
    
    
    
    19.00
    
    
    
    12.71
    
    
    
    43.00
    
    
    
    22.48Nonproductive
    
    
    1.00
    
    
    
    0.25
    
    
    
    1.00
    
    
    
    0.33
    
    
    
    1.00
    
    
    
    0.51
 Title to Properties
  
 ITEM 3. LEGAL PROCEEDINGS
 th
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th
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
  Name
    
    Age
    
    PositionDavid H. Welch
    
    
    60
    
    
    President, Chief Executive Officer and DirectorKenneth H. Beer
    
    
    51
    
    
    Senior Vice President and Chief Financial OfficerAndrew L. Gates, III
    
    
    61
    
    
    Senior Vice President, General Counsel and SecretaryE. J. Louviere
    
    
    60
    
    
    Senior Vice President  LandJ. Kent Pierret
    
    
    53
    
    
    Senior Vice President, Chief Accounting Officer and TreasurerRichard L. Smith
    
    
    50
    
    
    Senior Vice President  Exploration and Business DevelopmentJerome F. Wenzel, Jr.
    
    
    56
    
    
    Senior Vice President  Operations/ExploitationFlorence M. Ziegler
    
    
    48
    
    
    Vice President  Human Resources and Administration
 David H. Welch
 Kenneth H. Beer
 Andrew L. Gates, III
 E. J. Louviere
 J. Kent Pierret
 Richard L. Smith
 Jerome F. Wenzel, Jr.
 Florence M. Ziegler
 20




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  High
    
    Low2007First Quarter
    
    $
    35.35
    
    
    $
    26.92Second Quarter
    
    
    35.60
    
    
    
    29.03Third Quarter
    
    
    40.43
    
    
    
    27.43Fourth Quarter
    
    
    48.53
    
    
    
    38.592008First Quarter
    
    $
    55.89
    
    
    $
    39.14Second Quarter
    
    
    73.96
    
    
    
    52.20Third Quarter
    
    
    68.14
    
    
    
    37.86Fourth Quarter
    
    
    41.61
    
    
    
    8.472009First Quarter (through February 23, 2009)
    
    $
    13.73
    
    
    $
    4.77
  Dividend Restrictions
 1 4 3 4
 Issuer Purchases of Equity Securities
  Total Number of
    
    Maximum Number (orShares (or Units)
    
    Approximate Dollar Value)Total Number
    
    Average
    
    Purchased as Part
    
    of Shares (or Units) thatof Shares (or
    
    Price Paid
    
    of Publicly
    
    May Yet be PurchasedUnits)
    
    per Share (or
    
    Announced Plans or
    
    Under the Plans orPeriod
    
    Purchased
    
    Unit)
    
    Programs
    
    ProgramsShare Repurchase Program:October 2008
    
    
    100,000
    
    
    $
    25.39
    (b)
    
    
    100,000November 2008
    
    
    
    
    
    
    
    
    
    
    December 2008
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    25.39
    
    
    
    100,000
    
    
    $
    93,275,821Other:October 2008
    
    
    6,973
    (a)
    
    
    30.87
    
    
    
    November 2008
    
    
    
    
    
    
    
    
    
    
    December 2008
    
    
    63
    (a)
    
    
    15.25
    
    
    
    7,036
    
    
    
    30.73
    
    
    
    
    
    
    
    N/ATotal
    
    
    107,036
    
    
    $
    25.74
    
    
    
    100,000
 
 (a)
    
    Amounts include shares withheld from employees upon the vesting of restricted stock in
order to satisfy the required tax withholding obligations.(b)
    
    This amount represents the weighted average price paid per share and includes a per
share commission for all repurchases. 21




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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 and
the Peer Groups (as defined below) on December 31, 2003 at $42.45
per share for the Companys Common Stock and at the closing price
of the stocks comprising the S&P 500 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 Groups
at the beginning of the period.3.
    
    Dividends are reinvested on the ex-dividend dates.
 
 MeasurementPeriod
    
    
    
    
    
    New
    
    Old(Fiscal Year
    
    
    
    
    
    Peer
    
    PeerCovered)
    
    SGY
    
    Group
    
    Group
    
    S&P 50012/31/04
    
    
    106.22
    
    
    
    142.98
    
    
    
    134.03
    
    
    
    110.8812/31/05
    
    
    107.26
    
    
    
    226.36
    
    
    
    208.26
    
    
    
    116.3312/31/06
    
    
    83.27
    
    
    
    221.11
    
    
    
    212.74
    
    
    
    134.7012/31/07
    
    
    110.51
    
    
    
    240.44
    
    
    
    245.11
    
    
    
    142.1012/31/08
    
    
    25.96
    
    
    
    90.07
    
    
    
    121.38
    
    
    
    89.53
    22




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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.
 Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands, except per share amounts)Statement of Operations Data:Operating revenue:Oil production
    
    $
    461,050
    
    
    $
    424,205
    
    
    $
    348,979
    
    
    $
    244,469
    
    
    $
    214,153Gas production
    
    
    336,665
    
    
    
    329,047
    
    
    
    337,321
    
    
    
    391,771
    
    
    
    330,048Derivative income, net
    
    
    3,327
    
    
    
    
    
    
    
    2,688
    
    
    
    
    
    
    
    Total operating revenue
    
    
    801,042
    
    
    
    753,252
    
    
    
    688,988
    
    
    
    636,240
    
    
    
    544,201Operating expenses:Lease operating expenses
    
    
    171,107
    
    
    
    149,702
    
    
    
    159,043
    
    
    
    114,664
    
    
    
    100,045Production taxes
    
    
    7,990
    
    
    
    9,945
    
    
    
    13,472
    
    
    
    13,179
    
    
    
    7,408Depreciation, depletion and amortization
    
    
    288,384
    
    
    
    302,739
    
    
    
    320,696
    
    
    
    241,426
    
    
    
    210,861Write-down of oil and gas properties
    
    
    1,309,403
    
    
    
    8,164
    
    
    
    510,013
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    465,985
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accretion expense
    
    
    17,392
    
    
    
    17,620
    
    
    
    12,391
    
    
    
    7,159
    
    
    
    5,852Salaries, general and administrative expenses
    
    
    43,504
    
    
    
    33,584
    
    
    
    34,266
    
    
    
    22,705
    
    
    
    14,311Incentive compensation expense
    
    
    2,315
    
    
    
    5,117
    
    
    
    4,356
    
    
    
    1,252
    
    
    
    2,318Derivative expenses, net
    
    
    
    
    
    
    666
    
    
    
    
    
    
    
    3,388
    
    
    
    4,099Total operating expenses
    
    
    2,306,080
    
    
    
    527,537
    
    
    
    1,054,237
    
    
    
    403,773
    
    
    
    344,894Gain on Rocky Mountain Region properties
divestiture
    
    
    
    
    
    
    59,825
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from operations
    
    
    (1,505,038
    )
    
    
    285,540
    
    
    
    (365,249
    )
    
    
    232,467
    
    
    
    199,307Other (income) expenses:Interest expense
    
    
    13,243
    
    
    
    32,068
    
    
    
    35,931
    
    
    
    23,151
    
    
    
    16,835Interest income
    
    
    (11,250
    )
    
    
    (12,135
    )
    
    
    (2,524
    )
    
    
    (1,095
    )
    
    
    (208
    )Other income, net
    
    
    (5,877
    )
    
    
    (5,657
    )
    
    
    (4,657
    )
    
    
    (2,799
    )
    
    
    (2,269
    )Merger expense reimbursement
    
    
    
    
    
    
    
    
    
    
    (51,500
    )
    
    
    
    
    
    
    Merger expenses
    
    
    
    
    
    
    
    
    
    
    50,029
    
    
    
    
    
    
    
    Early extinguishment of debt
    
    
    
    
    
    
    844
    
    
    
    
    
    
    
    
    
    
    
    845Total other (income) expenses, net
    
    
    (3,884
    )
    
    
    15,120
    
    
    
    27,279
    
    
    
    19,257
    
    
    
    15,203Net income (loss) before income taxes
    
    
    (1,501,154
    )
    
    
    270,420
    
    
    
    (392,528
    )
    
    
    213,210
    
    
    
    184,104Income tax provision (benefit)
    
    
    (363,923
    )
    
    
    88,984
    
    
    
    (138,306
    )
    
    
    76,446
    
    
    
    64,436Net income (loss)
    
    
    ($1,137,231
    )
    
    $
    181,436
    
    
    
    ($254,222
    )
    
    $
    136,764
    
    
    $
    119,668Earnings and dividends per common share:Basic earnings (loss) per share
    
    
    ($35.58
    )
    
    $
    6.57
    
    
    
    ($9.29
    )
    
    $
    5.07
    
    
    $
    4.50Diluted earnings (loss) per share
    
    
    ($35.58
    )
    
    $
    6.54
    
    
    
    ($9.29
    )
    
    $
    5.02
    
    
    $
    4.45Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash Flow Data:Net cash provided by operating activities
    
    $
    522,478
    
    
    $
    465,158
    
    
    $
    399,035
    
    
    $
    461,213
    
    
    $
    369,668Net cash provided by (used in) investing activities
    
    
    (1,357,907
    )
    
    
    344,812
    
    
    
    (660,456
    )
    
    
    (499,932
    )
    
    
    (475,159
    )Net cash provided by (used in) financing activities
    
    
    428,440
    
    
    
    (393,706
    )
    
    
    240,575
    
    
    
    94,170
    
    
    
    112,648Balance Sheet Data (at end of period):Working capital (deficit)
    
    $
    123,339
    
    
    $
    412,445
    
    
    $
    1,845
    
    
    $
    16,506
    
    
    
    ($28,598
    )Oil and gas properties, net
    
    
    1,624,321
    
    
    
    1,181,312
    
    
    
    1,784,425
    
    
    
    1,810,959
    
    
    
    1,517,308Total assets
    
    
    2,106,003
    
    
    
    1,889,603
    
    
    
    2,128,471
    
    
    
    2,140,317
    
    
    
    1,695,664Long-term debt, less current potion
    
    
    825,000
    
    
    
    400,000
    
    
    
    797,000
    
    
    
    563,000
    
    
    
    482,000Stockholders equity
    
    
    587,092
    
    
    
    885,802
    
    
    
    711,640
    
    
    
    944,123
    
    
    
    772,934
 23




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##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Item 8. Financial Statements and Supplementary Data  Note 1.
 Executive Overview
 Item 1. Business 
Strategy and Operational Overview.
 2008 Significant Events.
 
    
    Acquisition On August 28, 2008, we completed the acquisition of Bois dArc Energy,
Inc. (Bois dArc) in a cash and stock transaction totaling approximately $1.7 billion.
Bois dArc was an independent exploration company engaged in the discovery and production
of oil and natural gas in the Gulf of Mexico. The primary factors considered by management
in making the acquisition included the belief that the merger would position the combined
company as one of the largest independent Gulf of Mexico-focused exploration and production
companies, with a solid production base, a strong portfolio for continued development of
proved and probable reserves, and an extensive inventory of exploration opportunities.
Pursuant to the terms and conditions of the agreement and plan of merger, we paid total
merger consideration of approximately $935 million in cash and issued approximately 11.3
million common shares, valued at $63.52 per share. The per share value of the Stone common
 shares issued was calculated as the average of Stones closing share price for the two days
prior to through the two days after the merger announcement date of April 30, 2008. The
cash component of the merger consideration was funded with approximately $510 million of
cash on hand and $425 million of borrowings from our amended and restated bank credit
facility. The revenues and expenses associated with Bois dArc have been included in
Stones consolidated financial statements since August 28, 2008, the date the acquisition
closed.
    
    Amended Credit Facility In connection with the acquisition of Bois dArc on August
28, 2008, we entered into an amended and restated bank credit facility of $700 million,
maturing on July 1, 2011, through a syndicated bank group. The new facility currently has
a borrowing base of $625 million. See Liquidity and Capital Resources  Bank Credit
Facilitybelow for additional information regarding the amended and restated credit
facility.
    
    Hurricanes Hurricanes Gustav and Ike caused significant disruption in our operations
for the third and fourth quarters of 2008 resulting in production deferrals approximating
18.1 Bcfe and significant damage to our offshore facilities. We estimate the incremental
uninsured plug and abandonment cost resulting from the hurricanes could exceed $75 million,
allocated over several years.
    
    Declining Commodity Prices During the fourth quarter of 2008, we experienced a
significant decline in oil and natural gas prices which resulted in a ceiling test
write-down of $1.3 billion and goodwill impairment of $466.0 million.
 2009 Outlook.
  24




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##### Table of Contents



Known Trends and Uncertainties.
 Credit Crisis 
 Declining Commodity Prices 
 Bank Credit Facility Borrowing Base Redetermination
 Gulf Coast Basin Reserve Replacement
 Louisiana Franchise Taxes Item 3. Legal Proceedings.
 Hurricanes 
 Asset Retirement Obligations and Accretion 
 Regulatory Inquiries and Stockholder Lawsuits  Item 3. Legal Proceedings.
 25




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flow and Working Capital.
   Bank Credit
Facility.
  Known Trends and
Uncertainties  Bank Credit Facility .
 Item 1. Business  Strategy and Operational Overview.
 Bank Credit Facility.
  26




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##### Table of Contents



Item 1A. Risk Factors  The continuing financial crisis may
impact our business and financial condition. We may not be able to obtain funding in the capital
markets on terms we find acceptable, or obtain funding under our current bank credit facility
because of the deterioration of the capital and credit markets and our borrowing base.
   Share Repurchase Program.
 Hedging. Item 7A. Quantitative and Qualitative Disclosure About Market Risk  Commodity
Price Risk.
 Contractual Obligations and Other Commitments
  Lessthan
    
    
    
    
    
    
    4-5
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    Years
    
    
    5 YearsContractual Obligations and Commitments:81/4% Senior Subordinated Notes due 2011
    
    $
    200,000
    
    
    $
    
    
    
    $
    200,000
    
    
    $
    
    
    
    $
    63/4% Senior Subordinated Notes due 2014
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Bank credit facility (1)
    
    
    425,000
    
    
    
    
    
    
    
    425,000
    
    
    
    
    
    
    
    Interest and commitment fees (2)
    
    
    171,653
    
    
    
    47,015
    
    
    
    84,730
    
    
    
    27,000
    
    
    
    12,908Asset
retirement obligations including accretion
    
    
    702,746
    
    
    
    70,709
    
    
    
    53,616
    
    
    
    113,934
    
    
    
    464,487Rig commitments
    
    
    28,525
    
    
    
    28,525
    
    
    
    
    
    
    
    
    
    
    
    Long-lead items (3)
    
    
    8,200
    
    
    
    8,200
    
    
    
    
    
    
    
    
    
    
    
    Seismic data commitments (4)
    
    
    5,162
    
    
    
    5,162
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    2,117
    
    
    
    793
    
    
    
    1,184
    
    
    
    140
    
    
    
    Total Contractual Obligations and Commitments
    
    $
    1,743,403
    
    
    $
    160,404
    
    
    $
    764,530
    
    
    $
    141,074
    
    
    $
    677,395
 
 (1)
    
    The bank credit facility matures on July 1, 2011. See Liquidity and Capital Resources  Bank Credit Facilityabove.(2)
    
    Assumes 3.8% interest rate on the bank credit facility and 0.5% fee on unused commitments. See Liquidity and Capital Resources
 Bank Credit Facilityabove.(3)
    
    Represents commitment to purchase tubulars for 2009 drilling program.(4)
    
    Represents pre-commitments for seismic data purchases. 27




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##### Table of Contents



Results of Operations
 2008 Compared to 2007 Item 2. Properties  Oil and Natural Gas Reserves.
 Year Ended December 31,2008
    
    2007
    
    Variance
    
    % ChangeProduction:Oil (MBbls)
    
    
    4,916
    
    
    
    6,088
    
    
    
    (1,172
    )
    
    
    (19
    %)Natural gas (MMcf)
    
    
    34,409
    
    
    
    45,088
    
    
    
    (10,679
    )
    
    
    (24
    %)Oil and natural gas (MMcfe)
    
    
    63,903
    
    
    
    81,617
    
    
    
    (17,714
    )
    
    
    (22
    %)Average prices:(1)Oil (per Bbl)
    
    $
    93.79
    
    
    $
    69.68
    
    
    $
    24.11
    
    
    
    35
    %Natural gas (per Mcf)
    
    
    9.78
    
    
    
    7.30
    
    
    
    2.48
    
    
    
    34
    %Oil and natural gas (per Mcfe)
    
    
    12.48
    
    
    
    9.23
    
    
    
    3.25
    
    
    
    35
    %Expenses (per Mcfe):Lease operating expenses
    
    $
    2.68
    
    
    $
    1.83
    
    
    $
    0.85
    
    
    
    46
    %Salaries,
general and administrative expenses (2)
    
    
    0.68
    
    
    
    0.41
    
    
    
    0.27
    
    
    
    66
    %DD&A expense on oil and gas properties
    
    
    4.45
    
    
    
    3.67
    
    
    
    0.78
    
    
    
    21
    %Estimated Proved Reserves at December 31:Oil (MBbls)
    
    
    36,564
    
    
    
    31,586
    
    
    
    4,978
    
    
    
    16
    %Natural gas (MMcf)
    
    
    299,554
    
    
    
    213,083
    
    
    
    86,471
    
    
    
    41
    %Oil and natural gas (MMcfe)
    
    
    518,935
    
    
    
    402,598
    
    
    
    116,337
    
    
    
    29
    %
 
 (1)
    
    Includes the settlement of effective hedging contracts.(2)
    
    Exclusive of incentive compensation expense.      Production .
 28




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##### Table of Contents



Prices.
  Income .
 Derivative Income/Expense.
 Expenses.
      29




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##### Table of Contents



Asset Retirement Obligations.
 Reserves.
  2007 Compared to 2006 Item 2. Properties  Oil and Natural Gas Reserves.
 Year Ended December 31,2007
    
    2006
    
    Variance
    
    % ChangeProduction:Oil (MBbls)
    
    
    6,088
    
    
    
    5,593
    
    
    
    495
    
    
    
    9
    %Natural gas (MMcf)
    
    
    45,088
    
    
    
    43,508
    
    
    
    1,580
    
    
    
    4
    %Oil and natural gas (MMcfe)
    
    
    81,617
    
    
    
    77,066
    
    
    
    4,551
    
    
    
    6
    %Average prices:(1)Oil (per Bbl)
    
    $
    69.68
    
    
    $
    62.40
    
    
    $
    7.28
    
    
    
    12
    %Natural gas (per Mcf)
    
    
    7.30
    
    
    
    7.75
    
    
    
    (0.45
    )
    
    
    (6
    %)Oil and natural gas (per Mcfe)
    
    
    9.23
    
    
    
    8.91
    
    
    
    0.32
    
    
    
    4
    %Expenses (per Mcfe):Lease operating expenses
    
    $
    1.83
    
    
    $
    2.06
    
    
    
    ($0.23
    )
    
    
    (11
    %)Salaries, general and administrative
expenses (2)
    
    
    0.41
    
    
    
    0.44
    
    
    
    (0.03
    )
    
    
    (7
    %)DD&A expense on oil and gas properties
    
    
    3.67
    
    
    
    4.11
    
    
    
    (0.44
    )
    
    
    (11
    %)Estimated Proved Reserves at December 31:Oil (MBbls)
    
    
    31,586
    
    
    
    41,360
    
    
    
    (9,774
    )
    
    
    (24
    %)Natural gas (MMcf)
    
    
    213,083
    
    
    
    342,782
    
    
    
    (129,699
    )
    
    
    (38
    %)Oil and natural gas (MMcfe)
    
    
    402,598
    
    
    
    590,942
    
    
    
    (188,344
    )
    
    
    (32
    %)
 
 (1)
    
    Includes the settlement of effective hedging contracts.(2)
    
    Exclusive of incentive compensation expense.     30




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##### Table of Contents



Production .
 Prices.
  Income .
  Derivative Income/Expense.
 Expenses.
  31




---



##### Table of Contents



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.
   32




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##### Table of Contents



Business Combinations and Goodwill.
 Asset Retirement Obligations.
 Full Cost Method.
     Derivative Instruments and Hedging Activities.
 33




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##### Table of Contents



Use of Estimates.
 
    
    remaining proved oil and gas reserves volumes and the timing of their production;
    
    estimated costs to develop and produce proved oil and gas reserves;
    
    accruals of exploration costs, development costs, operating costs and production
revenue;
    
    timing and future costs to abandon our oil and gas properties;
    
    the effectiveness and estimated fair value of derivative positions;
    
    classification of unevaluated property costs;
    
    capitalized general and administrative costs and interest;
    
    insurance recoveries related to hurricanes;
    
    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
 Non-controlling Interests & Business Combinations.
 Derivative Instruments and Hedging Activities.
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Commodity Price Risk
   34




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##### Table of Contents



Zero-Premium CollarsNatural Gas
    
    OilDaily
    
    
    
    
    
    
    
    
    
    DailyVolume
    
    Floor
    
    Ceiling
    
    Volume
    
    Floor
    
    Ceiling(MMBtus/d)
    
    Price
    
    Price
    
    (Bbls/d)
    
    Price
    
    Price2009
    
    
    20,000
    
    
    $
    8.00
    
    
    $
    14.30
    
    
    
    3,000
    
    
    $
    80.00
    
    
    $
    135.002009
    
    
    20,000
    
    
    
    9.00
    
    
    
    14.63
 Fixed-Price SwapsNatural Gas
    
    OilDaily
    
    
    
    
    
    DailyVolume
    
    Swap
    
    Volume
    
    Swap(MMBtus/d)
    
    Price
    
    (Bbls/d)
    
    Price2009
    
    
    20,000
    
    
    $
    10.15
    
    
    
    2,000
    
    
    $
    107.902010
    
    
    20,000
    
    
    
    6.97
    
    
    
    2,000
    
    
    
    63.002010
    
    
    30,000
    
    
    
    6.50
  Interest Rate Risk
 1 4 3 4
 
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  35




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##### Table of Contents



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 chief executive officer and chief 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
  36




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       /s/Ernst & Young LLP
 
 37




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##### Table of Contents



ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Item 4A. Executive Officers of the Registrant
  
 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
  38




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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:
 2.1
    
    Agreement and Plan of Merger, by and among Stone Energy Corporation, Stone Energy Offshore,
L.L.C. and Bois dArc Energy, Inc., dated as of April 30, 2008 (incorporated by reference
to Exhibit 2.1 to the Registrants Current Report on Form 8-K dated April 30, 2008 (File
No. 001-12074)).2.2
    
    Stockholder Agreement, by and among Stone Energy Corporation and Comstock Resources, Inc.,
dated as of April 30, 2008 (incorporated by reference to Exhibit 2.2 to the Registrants
Current Report on Form 8-K dated April 30, 2008 (File No. 001-12074)).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 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 dated May 15, 2008
(File No. 001-12074)).4.1
    
    Indenture between Stone Energy Corporation and JPMorgan Chase Bank dated December 10, 2001
(incorporated by reference to Exhibit 4.4 to the Registrants Registration Statement on
Form S-4 (Registration No. 333-81380)).4.2
    
    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.)4.3
    
    First Supplemental Indenture, dated August 28, 2008, to the Indenture between Stone Energy
Corporation and JPMorgan Chase Bank dated December 10, 2001 (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on Form 8-K dated August 27, 2008 (File No.
001-12074)).4.4
    
    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 dated August 27, 2008 (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)).
 39




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##### Table of Contents



10.2
    
    Stone Energy Corporation 2004 Amended and Restated Stock Incentive Plan (incorporated by
reference to the Registrants Registration Statement on Form S-8 (Registration No.
333-107440)).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.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
dated June 28, 2007 (File No. 001-12074)).10.10
    
    $700,000,000 Second Amended and Restated Credit Agreement between Stone Energy Corporation
and the financial institutions named therein, dated August 28, 2008 (incorporated by
reference to Exhibit 4.4 to the Registrants Quarterly Report on Form 10-Q for the quarter
ended September 30, 2008 (File No. 001-12074)).10.11
    
    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)). 10.12
    
    Stone Energy Corporation Executive Change of Control and Severance Plan (as amended and
restated) dated December 7, 2007 (incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on Form 8-K, filed December 12, 2007 (File No. 001-12074)). 10.13
    
    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)). 10.14
    
    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)).*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.
 40




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##### Table of Contents



*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.
 
 *
    
    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. 41




---



##### Table of Contents



SIGNATURES
  STONE ENERGY CORPORATIONDate: February 26, 2009
    By:
    /s/ David H. WelchDavid H. WelchPresident and
Chief Executive Officer  Signature
    
    Title
    
    Date/s/ David H. Welch
    
    President, Chief Executive Officer
    
    February 26, 2009David H. Welch
    
    and Director(principal executive officer)/s/ Kenneth H. Beer
    
    Senior Vice President and
    
    February 26, 2009Kenneth H. Beer
    
    Chief Financial Officer(principal financial officer)/s/ J. Kent Pierret
    
    Senior Vice President, Chief
    
    February 26, 2009J. Kent Pierret
    
    Accounting Officer and Treasurer(principal accounting officer)/s/ Robert A. Bernhard
    
    Director
    
    February 26, 2009Robert A. Bernhard/s/ George R. Christmas
    
    Director
    
    February 26, 2009George R. Christmas/s/ B.J. Duplantis
    
    Director
    
    February 26, 2009B.J. Duplantis/s/ Peter D. Kinnear
    
    Director
    
    February 26, 2009Peter D. Kinnear/s/ John P. Laborde
    
    Director
    
    February 26, 2009John P. Laborde/s/ Richard A. Pattarozzi
    
    Director
    
    February 26, 2009Richard A. Pattarozzi/s/ Donald E. Powell
    
    Director
    
    February 26, 2009Donald E. Powell/s/ Kay G. Priestly
    
    Director
    
    February 26, 2009Kay G. Priestly/s/ David R. Voelker
    
    Director
    
    February 26, 2009David R. Voelker
 42




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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, 2008 and 2007
    
    
    F-3Consolidated Statement of Operations for the years ended December 31, 2008, 2007 and 2006
    
    
    F-4Consolidated Statement of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    F-5Consolidated Statement of Changes in Stockholders Equity for the years ended December 31, 2008, 2007 and 2006
    
    
    F-6Consolidated Statement of Comprehensive Income for the years ended December 31, 2008, 2007 and 2006
    
    
    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,Assets
    
    2008
    
    
    2007Current assets:Cash and cash equivalents
    
    $
    68,137
    
    
    $
    475,126Accounts receivable
    
    
    151,641
    
    
    
    186,853Fair value of hedging contracts
    
    
    136,072
    
    
    
    2,163Deferred tax asset
    
    
    
    
    
    
    9,039Current income tax receivable
    
    
    31,183
    
    
    
    Inventory
    
    
    35,675
    
    
    
    Other current assets
    
    
    1,413
    
    
    
    521Total current assets
    
    
    424,121
    
    
    
    673,702Oil and gas properties  United States  full cost method of
accounting:Proved, net of accumulated depreciation, depletion and
amortization of $3,766,676 and $2,158,327, respectively
    
    
    1,130,583
    
    
    
    1,001,179Unevaluated
    
    
    493,738
    
    
    
    150,568Oil and gas properties  China  full cost method of accounting:Unevaluated, net of accumulated depreciation, depletion and
amortization of $0 and $8,164, respectively
    
    
    
    
    
    
    29,565Building and land, net of accumulated depreciation of
$1,666 and $1,497, respectively
    
    
    5,615
    
    
    
    5,667Fixed assets, net of accumulated depreciation of $16,742 and
$14,575, respectively
    
    
    5,326
    
    
    
    5,584Other assets, net of accumulated depreciation and amortization
of $5,891 and $3,802, respectively
    
    
    46,620
    
    
    
    23,338Goodwill
    
    
    
    
    
    
    Total assets
    
    $
    2,106,003
    
    
    $
    1,889,603Liabilities and Stockholders EquityCurrent liabilities:Accounts payable to vendors
    
    $
    144,016
    
    
    $
    88,801Undistributed oil and gas proceeds
    
    
    37,882
    
    
    
    37,743Fair value of hedging contracts
    
    
    
    
    
    
    18,968Deferred taxes
    
    
    32,416
    
    
    
    Asset retirement obligations
    
    
    70,709
    
    
    
    44,180Current income taxes payable
    
    
    
    
    
    
    57,631Other current liabilities
    
    
    15,759
    
    
    
    13,934Total current liabilities
    
    
    300,782
    
    
    
    261,257Long-term debt
    
    
    825,000
    
    
    
    400,000Deferred taxes
    
    
    193,924
    
    
    
    89,665Asset retirement obligations
    
    
    186,146
    
    
    
    245,610Fair value of hedging contracts
    
    
    1,221
    
    
    
    Other long-term liabilities
    
    
    11,751
    
    
    
    7,269Total liabilities
    
    
    1,518,824
    
    
    
    1,003,801Minority interest
    
    
    87
    
    
    
    Commitments and contingenciesStockholders equity:Common stock, $.01 par value; authorized 100,000,000 shares;
issued 39,430,637 and 27,767,631 shares, respectively
    
    
    394
    
    
    
    278Treasury stock (16,582 and 22,382 shares, respectively, at cost)
    
    
    (860
    )
    
    
    (1,161
    )Additional paid-in capital
    
    
    1,257,633
    
    
    
    515,055Retained earnings (deficit)
    
    
    (754,987
    )
    
    
    382,365Accumulated other comprehensive income (loss)
    
    
    84,912
    
    
    
    (10,735
    )Total stockholders equity
    
    
    587,092
    
    
    
    885,802Total liabilities and stockholders equity
    
    $
    2,106,003
    
    
    $
    1,889,603
  F-3




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##### Table of Contents



STONE ENERGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands of dollars, except per share amounts)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Operating revenue:Oil production
    
    $
    461,050
    
    
    $
    424,205
    
    
    $
    348,979Gas production
    
    
    336,665
    
    
    
    329,047
    
    
    
    337,321Derivative income, net
    
    
    3,327
    
    
    
    
    
    
    
    2,688Total operating revenue
    
    
    801,042
    
    
    
    753,252
    
    
    
    688,988Operating expenses:Lease operating expenses
    
    
    171,107
    
    
    
    149,702
    
    
    
    159,043Production taxes
    
    
    7,990
    
    
    
    9,945
    
    
    
    13,472Depreciation, depletion and amortization
    
    
    288,384
    
    
    
    302,739
    
    
    
    320,696Write-down of oil and gas properties
    
    
    1,309,403
    
    
    
    8,164
    
    
    
    510,013Goodwill impairment
    
    
    465,985
    
    
    
    
    
    
    
    Accretion expense
    
    
    17,392
    
    
    
    17,620
    
    
    
    12,391Salaries, general and administrative expenses
    
    
    43,504
    
    
    
    33,584
    
    
    
    34,266Incentive compensation expense
    
    
    2,315
    
    
    
    5,117
    
    
    
    4,356Derivative expenses, net
    
    
    
    
    
    
    666
    
    
    
    Total operating expenses
    
    
    2,306,080
    
    
    
    527,537
    
    
    
    1,054,237Gain on Rocky Mountain Region properties divestiture
    
    
    
    
    
    
    59,825
    
    
    
    Income (loss) from operations
    
    
    (1,505,038
    )
    
    
    285,540
    
    
    
    (365,249
    )Other (income) expenses:Interest expense
    
    
    13,243
    
    
    
    32,068
    
    
    
    35,931Interest income
    
    
    (11,250
    )
    
    
    (12,135
    )
    
    
    (2,524
    )Other income, net
    
    
    (5,877
    )
    
    
    (5,657
    )
    
    
    (4,657
    )Merger expense reimbursement
    
    
    
    
    
    
    
    
    
    
    (51,500
    )Merger expenses
    
    
    
    
    
    
    
    
    
    
    50,029Early extinguishment of debt
    
    
    
    
    
    
    844
    
    
    
    Total other (income) expenses
    
    
    (3,884
    )
    
    
    15,120
    
    
    
    27,279Net income (loss) before income taxes
    
    
    (1,501,154
    )
    
    
    270,420
    
    
    
    (392,528
    )Provision (benefit) for income taxes:Current
    
    
    6,998
    
    
    
    95,579
    
    
    
    227Deferred
    
    
    (370,921
    )
    
    
    (6,595
    )
    
    
    (138,533
    )Total income taxes
    
    
    (363,923
    )
    
    
    88,984
    
    
    
    (138,306
    )Net income (loss)
    
    
    ($1,137,231
    )
    
    $
    181,436
    
    
    
    ($254,222
    )Basic earnings (loss) per share
    
    
    ($35.58
    )
    
    $
    6.57
    
    
    
    ($9.29
    )Diluted earnings (loss) per share
    
    
    ($35.58
    )
    
    $
    6.54
    
    
    
    ($9.29
    )Average shares outstanding
    
    
    31,961
    
    
    
    27,612
    
    
    
    27,366Average shares outstanding assuming dilution
    
    
    31,961
    
    
    
    27,723
    
    
    
    27,366
  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 31,2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    
    ($1,137,231
    )
    
    $
    181,436
    
    
    
    ($254,222
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation, depletion and amortization
    
    
    288,384
    
    
    
    302,739
    
    
    
    320,696Write-down of oil and gas properties
    
    
    1,309,403
    
    
    
    8,164
    
    
    
    510,013Goodwill impairment
    
    
    465,985
    
    
    
    
    
    
    
    Accretion expense
    
    
    17,392
    
    
    
    17,620
    
    
    
    12,391Deferred income tax benefit
    
    
    (370,921
    )
    
    
    (6,595
    )
    
    
    (138,533
    )Gain on sale of oil and gas properties
    
    
    
    
    
    
    (59,825
    )
    
    
    Settlement of asset retirement obligations
    
    
    (49,242
    )
    
    
    (87,144
    )
    
    
    (18,545
    )Non-cash stock compensation expense
    
    
    8,405
    
    
    
    5,395
    
    
    
    4,358Excess tax benefits
    
    
    (3,045
    )
    
    
    (1,071
    )
    
    
    Non-cash derivative (income) expense
    
    
    (2,592
    )
    
    
    666
    
    
    
    (377
    )Early extinguishment of debt
    
    
    
    
    
    
    844
    
    
    
    Other non-cash expenses
    
    
    1,687
    
    
    
    2,259
    
    
    
    2,066Increase (decrease) in current income taxes payable
    
    
    (87,110
    )
    
    
    58,579
    
    
    
    (Increase) decrease in accounts receivable
    
    
    110,689
    
    
    
    47,549
    
    
    
    (30,145
    )(Increase) decrease in other current assets
    
    
    (866
    )
    
    
    (167
    )
    
    
    1,780Increase in inventory
    
    
    (33,530
    )
    
    
    
    
    
    
    Increase (decrease) in accounts payable
    
    
    24,950
    
    
    
    (900
    )
    
    
    1,300Decrease in other current liabilities
    
    
    (17,780
    )
    
    
    (4,596
    )
    
    
    (11,682
    )Investment in hedging contracts
    
    
    (1,914
    )
    
    
    
    
    
    
    Other
    
    
    (186
    )
    
    
    205
    
    
    
    (65
    )Net cash provided by operating activities
    
    
    522,478
    
    
    
    465,158
    
    
    
    399,035Cash flows from investing activities:Acquisition of Bois dArc Energy, Inc., net of cash acquired
    
    
    (922,714
    )
    
    
    
    
    
    
    Investment in oil and gas properties
    
    
    (446,771
    )
    
    
    (227,651
    )
    
    
    (657,878
    )Proceeds from sale of oil and gas properties, net of expenses
    
    
    13,339
    
    
    
    571,857
    
    
    
    (38
    )Sale of fixed assets
    
    
    4
    
    
    
    691
    
    
    
    Investment in fixed and other assets
    
    
    (1,765
    )
    
    
    (85
    )
    
    
    (2,540
    )Net cash provided by (used in) investing activities
    
    
    (1,357,907
    )
    
    
    344,812
    
    
    
    (660,456
    )Cash flows from financing activities:Proceeds from bank borrowings
    
    
    425,000
    
    
    
    
    
    
    
    85,000Repayments of bank borrowings
    
    
    
    
    
    
    (172,000
    )
    
    
    (76,000
    )Proceeds from issuance of senior floating rate notes
    
    
    
    
    
    
    
    
    
    
    225,000Redemption of senior floating rate notes
    
    
    
    
    
    
    (225,000
    )
    
    
    Deferred financing costs
    
    
    (8,766
    )
    
    
    (855
    )
    
    
    (3,283
    )Excess tax benefits
    
    
    3,045
    
    
    
    1,071
    
    
    
    Expenses for stock offering
    
    
    (54
    )
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (6,724
    )
    
    
    
    
    
    
    Net proceeds from exercise of stock options and vesting of restricted stock
    
    
    15,939
    
    
    
    3,078
    
    
    
    9,858Net cash provided by (used in) financing activities
    
    
    428,440
    
    
    
    (393,706
    )
    
    
    240,575Net increase (decrease) in cash and cash equivalents
    
    
    (406,989
    )
    
    
    416,264
    
    
    
    (20,846
    )Cash and cash equivalents, beginning of year
    
    
    475,126
    
    
    
    58,862
    
    
    
    79,708Cash and cash equivalents, end of year
    
    $
    68,137
    
    
    $
    475,126
    
    
    $
    58,862Supplemental disclosures of cash flow information:Cash paid during the year for:Interest (net of amount capitalized)
    
    $
    13,001
    
    
    $
    34,083
    
    
    $
    31,982Income taxes
    
    
    94,109
    
    
    
    36,771
    
    
    
    227
  F-5




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##### Table of Contents



STONE ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
(Amounts in thousands of dollars)
 AccumulatedOtherAdditional
    
    
    Unearned
    
    
    
    
    
    
    Comprehen-
    
    
    TotalCommon
    
    
    Treasury
    
    
    Paid-In
    
    
    Compen-
    
    
    Retained
    
    
    sive Income
    
    
    StockholdersStock
    
    
    Stock
    
    
    Capital
    
    
    sation
    
    
    Earnings
    
    
    (Loss)
    
    
    EquityBalance, December 31, 2005
    
    $
    272
    
    
    
    ($1,348
    )
    
    $
    500,228
    
    
    
    ($15,068
    )
    
    $
    455,183
    
    
    $
    4,856
    
    
    $
    944,123Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (254,222
    )
    
    
    
    
    
    
    (254,222
    )Adjustment for fair value accounting
of derivatives, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,993
    
    
    
    3,993Exercise of stock options and
vesting of restricted stock
    
    
    4
    
    
    
    
    
    
    
    9,853
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,857Reverse unearned compensation
on restricted stock
    
    
    
    
    
    
    
    
    
    
    (15,068
    )
    
    
    15,068
    
    
    
    
    
    
    
    
    
    
    
    Amortization of stock compensation
expense
    
    
    
    
    
    
    
    
    
    
    7,734
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,734Issuance of treasury stock
    
    
    
    
    
    
    187
    
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    155Balance, December 31, 2006
    
    
    276
    
    
    
    (1,161
    )
    
    
    502,747
    
    
    
    
    
    
    
    200,929
    
    
    
    8,849
    
    
    
    711,640Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,436
    
    
    
    
    
    
    
    181,436Adjustment for fair value accounting
of derivatives, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,584
    )
    
    
    (19,584
    )Exercise of stock options and
vesting of restricted stock
    
    
    2
    
    
    
    
    
    
    
    3,076
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,078Amortization of stock compensation
expense
    
    
    
    
    
    
    
    
    
    
    8,774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,774Tax benefit from stock option
exercises and restricted stock
vesting
    
    
    
    
    
    
    
    
    
    
    458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    458Balance, December 31, 2007
    
    
    278
    
    
    
    (1,161
    )
    
    
    515,055
    
    
    
    
    
    
    
    382,365
    
    
    
    (10,735
    )
    
    
    885,802Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,137,231
    )
    
    
    
    
    
    
    (1,137,231
    )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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,740Issuance 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
    
    
    $
    
    
    
    
    ($754,987
    )
    
    $
    84,912
    
    
    $
    587,092
  F-6




---



##### Table of Contents



STONE ENERGY CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Amounts in thousands of dollars)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Net income (loss)
    
    
    ($1,137,231
    )
    
    $
    181,436
    
    
    
    ($254,222
    )Other comprehensive income (loss) net of tax effect:Adjustment for fair value accounting of derivatives, net of tax
    
    
    95,647
    
    
    
    (19,584
    )
    
    
    3,993Comprehensive income (loss)
    
    
    ($1,041,584
    )
    
    $
    161,852
    
    
    
    ($250,229
    )
  F-7




---



##### 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:
 Note 7  Fair Value Measurements
  Cash and Cash Equivalents:
  F-8




---



##### Table of Contents



Oil and Gas Properties:
    Note 4  Investment in Oil and Gas Properties
  Asset Retirement Obligations:
  Building and Land:
  Inventory:
  Business Combinations and Goodwill:
  F-9




---



##### Table of Contents



Earnings Per Common Share:
  Note 5
- Acquisitions and Divestitures
 Production Revenue:
  Income Taxes:
  Derivative Instruments and Hedging Activities:
  Stock-Based Compensation:
  F-10




---



##### Table of Contents



Recent Accounting Developments:
 Non-controlling Interests & Business Combinations .
 Derivative Instruments and Hedging Activities .
  NOTE 2  ACCOUNTS RECEIVABLE:
  As of December 31,2008
    
    
    2007Accounts Receivable:Other co-venturers
    
    $
    10,701
    
    
    $
    8,640Trade
    
    
    87,420
    
    
    
    103,010Insurance receivable on hurricane claims
    
    
    19,899
    
    
    
    70,366Officers and employees
    
    
    25
    
    
    
    5Unbilled accounts receivable
    
    
    33,596
    
    
    
    4,832$
    151,641
    
    
    $
    186,853
  NOTE 3  CONCENTRATIONS:
 Sales to Major Customers
  December 31,2008
    
    2007
    
    2006Chevron Texaco E&P Company
    
    
    18
    %
    
    
    19
    %
    
    
    (a
    )Conoco, Inc.
    
    
    29
    %
    
    
    16
    %
    
    
    12
    %Sequent Energy Management LP
    
    
    (a
    )
    
    
    (a
    )
    
    
    10
    %Shell Trading (US) Company
    
    
    16
    %
    
    
    11
    %
    
    
    13
    %
 
 (a)
    
    Less than 10 percent   F-11




---



##### Table of Contents



Production and Reserve Volumes
  Cash and Cash Equivalents
  NOTE 4  INVESTMENT IN OIL AND GAS PROPERTIES:
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Oil and gas properties  United States, proved and unevaluated:Balance, beginning of year
    
    $
    3,310,074
    
    
    $
    4,450,808
    
    
    $
    3,691,138Costs incurred during the year (capitalized):Acquisition costs, net of sales of unevaluated properties
    
    
    1,830,468
    
    
    
    18,730
    
    
    
    228,108Exploratory costs
    
    
    146,303
    
    
    
    16,556
    
    
    
    121,883Development costs (1)
    
    
    59,586
    
    
    
    154,507
    
    
    
    370,201Sale of Rocky Mountain Region properties
    
    
    
    
    
    
    (1,363,939
    )
    
    
    Salaries, general and administrative costs
    
    
    19,507
    
    
    
    20,176
    
    
    
    23,215Interest
    
    
    25,195
    
    
    
    13,419
    
    
    
    16,743Less: overhead reimbursements
    
    
    (136
    )
    
    
    (183
    )
    
    
    (480
    )Total costs incurred during the year, net of divestitures
    
    
    2,080,923
    
    
    
    (1,140,734
    )
    
    
    759,670Balance, end of year
    
    $
    5,390,997
    
    
    $
    3,310,074
    
    
    $
    4,450,808Accumulated depreciation, depletion and amortization (DD&A):Balance, beginning of year
    
    
    ($2,158,327
    )
    
    
    ($2,706,936
    )
    
    
    ($1,880,180
    )Provision for DD&A
    
    
    (284,672
    )
    
    
    (299,182
    )
    
    
    (316,781
    )Write-down of oil and gas properties
    
    
    (1,278,421
    )
    
    
    
    
    
    
    (510,013
    )Sale of proved properties
    
    
    (45,256
    )
    
    
    847,791
    
    
    
    38Balance, end of year
    
    
    ($3,766,676
    )
    
    
    ($2,158,327
    )
    
    
    ($2,706,936
    )Net capitalized costs  United States (proved and unevaluated)
    
    $
    1,624,321
    
    
    $
    1,151,747
    
    
    $
    1,743,872DD&A per Mcfe
    
    $
    4.45
    
    
    $
    3.67
    
    
    $
    4.11
 
 (1)
    
    Includes asset retirement costs of ($96,346), $20,171 and $161,048, respectively. Costs incurred during the year (expensed):Lease operating expenses
    
    $
    171,107
    
    
    $
    149,702
    
    
    $
    159,043Production taxes
    
    
    7,990
    
    
    
    9,945
    
    
    
    13,472Accretion expense
    
    
    17,392
    
    
    
    17,620
    
    
    
    12,391Expensed costs  United States
    
    $
    196,489
    
    
    $
    177,267
    
    
    $
    184,906
   Unevaluated
oil and gas properties  United States
    
    2008
    
    
    2007
    
    
    2006Net costs incurred (evaluated) during year:Acquisition costs
    
    $
    308,325
    
    
    $
    29,461
    
    
    $
    16,007Exploration costs
    
    
    24,531
    
    
    
    (5,396
    )
    
    
    2,389Capitalized interest
    
    
    10,314
    
    
    
    10,212
    
    
    
    13,828$
    343,170
    
    
    $
    34,277
    
    
    $
    32,224
 F-12




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##### Table of Contents



Year Ended December 31,2008
    
    
    2007
    
    
    2006Oil and gas properties  China:Balance, beginning of year
    
    $
    37,729
    
    
    $
    40,553
    
    
    $
    Costs incurred during the year (capitalized):Exploratory costs
    
    
    226
    
    
    
    (5,590
    )
    
    
    38,488Salaries, general and administrative costs
    
    
    31
    
    
    
    
    
    
    
    587Interest
    
    
    1,160
    
    
    
    2,766
    
    
    
    1,478Total costs incurred during the year
    
    
    1,417
    
    
    
    (2,824
    )
    
    
    40,553Balance, end of year (fully evaluated at December 31, 2008
and unevaluated at December 31, 2007 and 2006)
    
    $
    39,146
    
    
    $
    37,729
    
    
    $
    40,553Accumulated depreciation, depletion and amortization (DD&A):Balance, beginning of year
    
    
    ($8,164
    )
    
    $
    
    
    
    $
    Write-down of oil and gas properties
    
    
    (30,982
    )
    
    
    (8,164
    )
    
    
    Balance, end of year
    
    
    ($39,146
    )
    
    
    ($8,164
    )
    
    $
    Net capitalized costs  China
    
    $
    
    
    
    $
    29,565
    
    
    $
    40,553
  Net Costs Incurred (Evaluated) During theBalance as of
    
    
    Year Ended December 31,December 31,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20052008
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    and priorAcquisition costs
    
    $
    372,548
    
    
    $
    346,272
    
    
    $
    10,997
    
    
    $
    11,605
    
    
    $
    3,674Exploration costs
    
    
    99,908
    
    
    
    30,786
    
    
    
    24,244
    
    
    
    30,401
    
    
    
    14,477Capitalized interest
    
    
    21,282
    
    
    
    8,001
    
    
    
    7,429
    
    
    
    4,379
    
    
    
    1,473Total unevaluated costs
    
    $
    493,738
    
    
    $
    385,059
    
    
    $
    42,670
    
    
    $
    46,385
    
    
    $
    19,624
  F-13




---



##### Table of Contents



NOTE 5  ACQUISITIONS AND DIVESTITURES:
 Acquisitions
  Note 7  Fair Value Measurements)
 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. Note 6  Goodwill Impairment
 F-14




---



##### Table of Contents



Year EndedDecember 31,2008
    
    
    2007Revenues
    
    $
    1,161,761
    
    
    $
    1,108,712Income (loss) from operations
    
    
    (1,409,589
    )
    
    
    294,721Net income (loss)
    
    
    (1,083,322
    )
    
    
    179,940Basic earnings (loss) per share
    
    
    ($27.52
    )
    
    $
    4.62Diluted earnings (loss) per share
    
    
    ($27.52
    )
    
    $
    4.61
 Divestitures
   Proceeds from the sale (after post-closing adjustments)
    
    $
    581,958Add: Transfer of asset retirement and other obligations
    
    
    1,823Less: Transaction costs
    
    
    (6,088
    )Carrying value of oil and gas properties
    
    
    (516,148
    )Carrying value of other assets
    
    
    (1,720
    )Net gain on sale
    
    $
    59,825
  NOTE 6  GOODWILL IMPAIRMENT:
  F-15




---



##### Table of Contents



NOTE 7  FAIR VALUE MEASUREMENTS:
  Note 12  Hedging Activities
 1 4 3 4
 F-16




---



##### Table of Contents



Fair Value Measurements at December 31, 2008Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableIdentical Assets
    
    
    Observable Inputs
    
    
    InputsAssets
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Money market funds
    
    $
    47,637
    
    
    $
    47,637
    
    
    $
    
    
    
    $
    Hedging contracts
    
    
    136,072
    
    
    
    
    
    
    
    67,949
    
    
    
    68,123Total
    
    $
    183,709
    
    
    $
    47,637
    
    
    $
    67,949
    
    
    $
    68,123
 Fair Value Measurements at December 31, 2008Quoted Prices inActive Markets for
    
    
    
    
    
    
    SignificantIdentical
    
    
    Significant Other
    
    
    UnobservableLiabilities
    
    
    Observable Inputs
    
    
    InputsLiabilities
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Hedging contracts
    
    
    ($1,221
    )
    
    $
    
    
    
    
    ($1,221
    )
    
    $
    Total
    
    
    ($1,221
    )
    
    $
    
    
    
    
    ($1,221
    )
    
    $
    
  HedgingContracts, netBalance as of January 1, 2008
    
    
    ($16,804
    )Total gains/(losses) (realized or unrealized):Included in earnings
    
    
    2,459Included in other comprehensive income
    
    
    64,042Purchases, sales, issuances and settlements
    
    
    18,426Transfers in and out of Level 3
    
    
    Balance as of December 31, 2008
    
    $
    68,123The amount of total gains/(losses) for the period
included in earnings attributable to the change in
unrealized gain/(losses) relating to derivatives
still held at December 31, 2008
    
    $
    2,170
   F-17




---



##### Table of Contents



NOTE 8  ASSET RETIREMENT OBLIGATIONS:
   Year Ended December 31,2008
    
    
    2007
    
    
    2006Asset retirement obligations as of
the beginning of the year, including
current portion
    
    $
    289,790
    
    
    $
    340,376
    
    
    $
    166,937Liabilities incurred
    
    
    2,779
    
    
    
    5,279
    
    
    
    10,326Liabilities settled
    
    
    (60,642
    )
    
    
    (86,795
    )
    
    
    (18,545
    )Liabilities assumed
    
    
    128,023
    
    
    
    
    
    
    
    Divestment of properties
    
    
    (32,890
    )
    
    
    (1,233
    )
    
    
    Accretion expense
    
    
    17,392
    
    
    
    17,620
    
    
    
    12,391Revision of estimates
    
    
    (87,597
    )
    
    
    14,543
    
    
    
    169,267Asset retirement obligations as of
the end of the year, including
current portion
    
    $
    256,855
    
    
    $
    289,790
    
    
    $
    340,376
  NOTE 9  INCOME TAXES:
  As of December 31,2008
    
    
    2007Temporary differences:Oil and gas properties  full cost
    
    
    ($252,273
    )
    
    
    ($174,314
    )Hurricane insurance receivable
    
    
    (19,373
    )
    
    
    (16,246
    )Asset retirement obligations
    
    
    89,812
    
    
    
    101,427Stock compensation
    
    
    4,053
    
    
    
    3,588Hedges
    
    
    (47,198
    )
    
    
    5,881Other
    
    
    (1,361
    )
    
    
    (962
    )($226,340
    )
    
    
    ($80,626
    )
   Year Ended December 31,2008
    
    
    2007
    
    
    2006Income tax
expense computed at the statutory federal income tax rate
    
    
    (35.0
    %)
    
    
    35.0
    %
    
    
    (35.0
    %)Domestic production activities deduction
    
    
    
    
    
    
    (1.6
    )
    
    
    State taxes and other
    
    
    
    
    
    
    (0.5
    )
    
    
    (0.1
    )Goodwill impairment
    
    
    10.9
    
    
    
    
    
    
    
    Statutory depletion
    
    
    (0.1
    )
    
    
    
    
    
    
    Reversal of valuation allowance
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Effective income tax rate
    
    
    (24.2
    %)
    
    
    32.9
    %
    
    
    (35.2
    %)
 F-18




---



##### Table of Contents



Total unrecognized tax benefits as of January 1, 2008
    
    $
    1,178Increases (decreases) in unrecognized tax benefits as a result of:Tax positions taken during a prior period
    
    
    Tax positions taken during the current period
    
    
    Settlements with taxing authorities
    
    
    Lapse of applicable statute of limitations
    
    
    Total unrecognized tax benefits as of December 31, 2008
    
    $
    1,178
   NOTE 10  LONG-TERM DEBT:
  As of December 31,2008
    
    
    200781/4% Senior Subordinated Notes due 2011
    
    $
    200,000
    
    
    $
    200,00063/4% Senior Subordinated Notes due 2014
    
    
    200,000
    
    
    
    200,000Bank debt
    
    
    425,000
    
    
    
    Total long-term debt
    
    $
    825,000
    
    
    $
    400,000
    F-19




---



##### Table of Contents



3 4 pari passu 1 4
 1 4 pari passu 3 4
 1 4 3 4
 1 4 3 4 1 4 3 4
  NOTE 11  STOCK-BASED COMPENSATION:
   F-20




---



##### Table of Contents



Stock Options.
 Year Ended December 31,2008
    
    
    2007
    
    
    2006(Amounts in table represent actual values exceptwhere indicated otherwise)Stock options granted
    
    
    40,000
    
    
    
    25,000
    
    
    
    15,000Fair value of stock options granted ($ in thousands)
    
    $
    980
    
    
    $
    342
    
    
    $
    314Weighted average grant date fair value
    
    $
    24.51
    
    
    $
    13.66
    
    
    $
    20.90Assumptions:Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    37.70
    %
    
    
    33.01
    %
    
    
    36.59
    %Risk-free rate
    
    
    3.65
    %
    
    
    4.60
    %
    
    
    4.58
    %Expected option life
    
    10.0 years
    
    6.0 years
    
    6.0 yearsForfeiture rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
   Wgtd.
    
    
    
    
    
    
    AggregateNumber
    
    
    Avg.
    
    
    Wgtd.
    
    
    Intrinsicof
    
    
    Exercise
    
    
    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
    
    
    
  F-21




---



##### Table of Contents



Wgtd.
    
    
    
    
    
    
    AggregateNumber
    
    
    Avg.
    
    
    Wgtd.
    
    
    Intrinsicof
    
    
    Exercise
    
    
    Avg.
    
    
    ValueOptions
    
    
    Price
    
    
    Term
    
    
    (in thousands)Options outstanding, beginning of period
    
    
    1,394,835
    
    
    $
    42.87Granted
    
    
    25,000
    
    
    
    33.19Exercised
    
    
    (127,636
    )
    
    
    33.29
    
    
    
    
    
    
    $
    707Forfeited
    
    
    (52,490
    )
    
    
    37.42Expired
    
    
    (308,120
    )
    
    
    44.40Options outstanding, end of period
    
    
    931,589
    
    
    
    43.72
    
    
    4.7 years
    
    
    5,254Options exercisable, end of period
    
    
    736,659
    
    
    
    43.74
    
    
    4.1 years
    
    
    4,475Options unvested, end of period
    
    
    194,930
    
    
    
    43.64
    
    
    7.0 years
    
    
    779
  Wgtd.
    
    
    
    
    
    
    AggregateNumber
    
    
    Avg.
    
    
    Wgtd.
    
    
    Intrinsicof
    
    
    Exercise
    
    
    Avg.
    
    
    ValueOptions
    
    
    Price
    
    
    Term
    
    
    (in thousands)Options outstanding, beginning of period
    
    
    1,902,062
    
    
    $
    41.99Granted
    
    
    15,000
    
    
    
    47.75Exercised
    
    
    (290,219
    )
    
    
    33.96
    
    
    
    
    
    
    $
    3,545Forfeited
    
    
    (107,077
    )
    
    
    37.63Expired
    
    
    (124,931
    )
    
    
    55.29Options outstanding, end of period
    
    
    1,394,835
    
    
    
    42.87
    
    
    4.5 years
    
    
    759Options exercisable, end of period
    
    
    1,018,716
    
    
    
    43.15
    
    
    3.6 years
    
    
    751Options unvested, end of period
    
    
    376,119
    
    
    
    42.09
    
    
    7.0 years
    
    
    8
 Restricted Stock.
  2008
    
    
    2007
    
    
    2006Wgtd.
    
    
    
    
    
    
    Wgtd.
    
    
    
    
    
    
    Wgtd.Number of
    
    
    Avg.
    
    
    Number of
    
    
    Avg.
    
    
    Number of
    
    
    Avg.Restricted
    
    
    Fair Value
    
    
    Restricted
    
    
    Fair Value
    
    
    Restricted
    
    
    Fair ValueShares
    
    
    Per Share
    
    
    Shares
    
    
    Per Share
    
    
    Shares
    
    
    Per ShareRestricted stock outstanding,
beginning of period
    
    
    311,486
    
    
    $
    39.86
    
    
    
    328,447
    
    
    $
    46.97
    
    
    
    344,038
    
    
    $
    51.52Issuances
    
    
    278,646
    
    
    
    47.92
    
    
    
    193,084
    
    
    
    34.06
    
    
    
    151,150
    
    
    
    41.15Lapse of restrictions
    
    
    (167,818
    )
    
    
    44.62
    
    
    
    (114,740
    )
    
    
    48.01
    
    
    
    (106,261
    )
    
    
    51.39Forfeitures
    
    
    (13,931
    )
    
    
    44.99
    
    
    
    (95,305
    )
    
    
    42.74
    
    
    
    (60,480
    )
    
    
    50.50Restricted stock outstanding,
end of period
    
    
    408,383
    
    
    $
    43.31
    
    
    
    311,486
    
    
    $
    39.86
    
    
    
    328,447
    
    
    $
    46.97
   F-22




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##### Table of Contents



NOTE 12  HEDGING ACTIVITIES:
        Year Ended December 31,2008
    
    
    2007
    
    
    2006Cash settlement on the ineffective portion of derivatives
    
    
    ($736
    )
    
    $
    
    
    
    
    ($2,311
    )Amortization of the cost of puts
    
    
    1,914
    
    
    
    
    
    
    
    Changes in fair market value of ineffective portion of derivatives
    
    
    (4,505
    )
    
    
    666
    
    
    
    (377
    )Total derivative expense (income)
    
    
    ($3,327
    )
    
    $
    666
    
    
    
    ($2,688
    )
 F-23




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##### Table of Contents



Zero-Premium CollarsNatural Gas
    
    OilDailyVolume
    
    Floor
    
    Ceiling
    
    Daily Volume
    
    Floor
    
    Ceiling(MMBtus/d)
    
    Price
    
    Price
    
    (Bbls/d)
    
    Price
    
    Price2009
    
    
    20,000
    
    
    $
    8.00
    
    
    $
    14.30
    
    
    
    3,000
    
    
    $
    80.00
    
    
    $
    135.002009
    
    
    20,000
    
    
    
    9.00
    
    
    
    14.63
 Fixed-Price SwapsNatural Gas
    
    OilDaily
    
    
    
    DailyVolume
    
    Swap
    
    Volume
    
    Swap(MMBtus/d)
    
    Price
    
    (Bbls/d)
    
    Price2009
    
    
    20,000
    
    
    $
    10.15
    
    
    
    2,000
    
    
    $
    107.902010
    
    
    20,000
    
    
    
    6.97
    
    
    
    2,000
    
    
    
    63.002010
    
    
    30,000
    
    
    
    6.50
 NOTE 13  SHARE REPURCHASE PROGRAM:
  NOTE 14  TERMINATED MERGERS:
   NOTE 15  COMMITMENTS AND CONTINGENCIES:
  2009
    
    $
    7932010
    
    
    7652011
    
    
    4192012
    
    
    140
  F-24




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##### Table of Contents



th
 F-25




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##### Table of Contents



NOTE 16  EMPLOYEE BENEFIT PLANS:
   i.
    
    The Annual Incentive Compensation Plan provided for an annual cash incentive bonus that
ties incentives to the annual return on our common stock, to a comparison of the price
performance of our common stock to the average quarterly returns on the shares of stock of a
peer group of companies with which we compete and to the growth in our net earnings per
share, net cash flows and net asset value. Incentive bonuses were awarded to participants
based upon individual performance factors. This plan was terminated upon the approval and
adoption of the Revised Annual Incentive Compensation Plan, discussed below.In February 2005, our board of directors approved and adopted the Revised Annual Incentive
Compensation Plan. In November 2007, our board of directors approved and adopted the Amended
and Restated Revised Annual Incentive Compensation Plan. The revised plan 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 $2,315, $5,117, and $4,356, net of amounts capitalized, for each of the years ended
December 31, 2008, 2007 and 2006, respectively, related to incentive compensation bonuses to
be paid under the revised plan. A substantial portion of the 2006 annual incentive bonuses
were not earned by performance but were a result of an employee retention program put in
place by the board of directors to address employee uncertainty that resulted from two
terminated merger agreements in 2006.ii.
    
    The companys 2004 Amended and Restated Stock Incentive Plan (the Plan) provides for
the granting of incentive stock options, restricted stock awards, bonus stock awards, or any
combination as is best suited to the circumstances of the particular employee or nonemployee
director. The Plan provides for 4,225,000 shares of common stock to be reserved for
issuance pursuant to this plan. Under the 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 Plan
provides that shares available under the 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. On May 15, 2008, restricted stock was
granted to nonemployee directors with a 7 1/2 month vesting period. At December 31, 2008, we
had approximately 673,887 additional shares available for issuance pursuant to the Plan.
 F-26




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##### Table of Contents



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,
2008, 2007 and 2006, Stone contributed $1,119, $870 and $964, respectively, to the plan.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, 2008 and 2007, plan assets of $4,052 and $3,782, respectively, were included in
other assets. An equal amount of plan liabilities were included in other long-term
liabilities.v.
    
    On December 7, 2007, our board of directors approved and adopted the Stone Energy
Corporation Executive Change of Control and Severance Plan (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 Severance Plan amended and restated the companys previous
Executive Change of Control and Severance Plan dated November 16, 2006. The Severance Plan
will provide the companys executives 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 Severance Plan. The Severance Plan covers all
officers, other than those covered by the companys Executive Change in Control Severance
Policy (currently only the Chief Executive Officer and Chief Financial Officer). Severance
is triggered by a termination of employment by the company for the convenience of the
company, as determined by the compensation committee of the board, whether or not a change
of control has occurred. On and during the 12 month period following a change of control, a
termination of the executive other than for cause or a resignation for good reason is
deemed to be for the convenience of the company. Executives who are terminated within the
scope of the Severance Plan will be entitled to certain payments and benefits including the
following: a lump sum equal to his annual pay (or 2.99 times his annual pay if the
termination is on or after a change of control), a pro-rated portion of the projected bonus,
if any, for the year of termination or change of control, continued health plan coverage for
six months and outplacement services. 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-27




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##### Table of Contents



NOTE 17  OIL AND GAS RESERVE INFORMATION  UNAUDITED:
    Oil andOil
    
    
    Natural Gas
    
    
    Natural Gas(MBbls)
    
    
    (MMcf)
    
    
    (MMcfe)Estimated proved reserves as of December 31, 2005
    
    
    41,509
    
    
    
    344,088
    
    
    
    593,142Revisions of previous estimates
    
    
    (5,064
    )
    
    
    (43,241
    )
    
    
    (73,625
    )Extensions, discoveries and other additions
    
    
    2,580
    
    
    
    74,069
    
    
    
    89,549Purchase of producing properties
    
    
    7,928
    
    
    
    11,374
    
    
    
    58,942Production
    
    
    (5,593
    )
    
    
    (43,508
    )
    
    
    (77,066
    )Estimated proved reserves as of December 31, 2006
    
    
    41,360
    
    
    
    342,782
    
    
    
    590,942Revisions of previous estimates
    
    
    4,584
    
    
    
    27,183
    
    
    
    54,688Extensions, discoveries and other additions
    
    
    1,635
    
    
    
    20,765
    
    
    
    30,573Sale of reserves
    
    
    (9,905
    )
    
    
    (132,559
    )
    
    
    (191,988
    )Production
    
    
    (6,088
    )
    
    
    (45,088
    )
    
    
    (81,617
    )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
    
    
    
    518,935Estimated proved developed reserves:as of December 31, 2006
    
    
    33,301
    
    
    
    222,664
    
    
    
    422,470as of December 31, 2007
    
    
    25,172
    
    
    
    171,815
    
    
    
    322,846as of December 31, 2008
    
    
    28,410
    
    
    
    227,857
    
    
    
    398,317
  Standardized Measure Year Ended December 31,2008
    
    
    2007
    
    
    2006Future cash inflows
    
    $
    3,210,283
    
    
    $
    4,538,017
    
    
    $
    4,199,788Future production costs
    
    
    (1,131,548
    )
    
    
    (915,166
    )
    
    
    (1,254,374
    )Future development costs
    
    
    (1,153,950
    )
    
    
    (842,040
    )
    
    
    (966,627
    )Future income taxes
    
    
    (8,989
    )
    
    
    (734,139
    )
    
    
    (279,867
    )Future net cash flows
    
    
    915,796
    
    
    
    2,046,672
    
    
    
    1,698,92010% annual discount
    
    
    (122,692
    )
    
    
    (525,083
    )
    
    
    (450,090
    )Standardized measure of discounted future net cash flows
    
    $
    793,104
    
    
    $
    1,521,589
    
    
    $
    1,248,830
 F-28




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##### Table of Contents



Changes in Standardized MeasureYear Ended December 31,2008
    
    
    2007
    
    
    2006Standardized measure at beginning of year
    
    $
    1,521,589
    
    
    $
    1,248,830
    
    
    $
    1,932,979Sales and transfers of oil and gas produced, net of
production costs
    
    
    (618,618
    )
    
    
    (593,605
    )
    
    
    (513,785
    )Changes in price, net of future production costs
    
    
    (2,209,114
    )
    
    
    857,529
    
    
    
    (931,742
    )Extensions and discoveries, net of future production
and development costs
    
    
    37,201
    
    
    
    114,729
    
    
    
    120,314Changes in estimated future development costs, net of
development costs incurred during the period
    
    
    98,029
    
    
    
    (25,223
    )
    
    
    (14,222
    )Revisions of quantity estimates
    
    
    (220,387
    )
    
    
    363,783
    
    
    
    (247,092
    )Accretion of discount
    
    
    203,715
    
    
    
    142,605
    
    
    
    256,508Net change in income taxes
    
    
    509,621
    
    
    
    (338,336
    )
    
    
    454,881Purchases of reserves in-place
    
    
    1,514,487
    
    
    
    
    
    
    
    217,701Sales of reserves in-place
    
    
    (45,822
    )
    
    
    (202,648
    )
    
    
    Changes in production rates due to timing and other
    
    
    2,403
    
    
    
    (46,075
    )
    
    
    (26,712
    )Net increase (decrease) in standardized measure
    
    
    (728,485
    )
    
    
    272,759
    
    
    
    (684,149
    )Standardized measure at end of year
    
    $
    793,104
    
    
    $
    1,521,589
    
    
    $
    1,248,830
 NOTE 18  SUMMARIZED QUARTERLY FINANCIAL INFORMATION  UNAUDITED:
 Three Months EndedMarch 31,
    
    
    June 30,
    
    
    Sept. 30,
    
    
    Dec. 31,2008Operating revenue
    
    $
    203,233
    
    
    $
    262,962
    
    
    $
    172,355
    
    
    $
    166,104Income (loss) from operations
    
    
    92,292
    
    
    
    124,262
    
    
    
    55,250
    
    
    
    (1,776,842
    ) (a)Net income (loss)
    
    
    62,242
    
    
    
    82,811
    
    
    
    34,121
    
    
    
    (1,316,405
    ) (a)Basic earnings (loss) per common share
    
    $
    2.24
    
    
    $
    2.95
    
    
    $
    1.05
    
    
    
    ($33.40
    )Diluted earnings (loss) per common share
    
    
    2.22
    
    
    
    2.91
    
    
    
    1.04
    
    
    
    (33.40
    )
 
 (a)
    
    Includes a ceiling test write-down of $1,290,544 before taxes ($838,854 after taxes) and goodwill impairment of $465,985 (no tax
effect). 2007Operating revenue
    
    $
    173,333
    
    
    $
    200,300
    
    
    $
    178,412
    
    
    $
    201,616Income from operations
    
    
    25,549
    
    
    
    117,125
    (b)
    
    
    52,616
    
    
    
    90,250Net income
    
    
    10,476
    
    
    
    71,983
    (b)
    
    
    34,068
    
    
    
    64,909Basic earnings per common share
    
    $
    0.38
    
    
    $
    2.61
    
    
    $
    1.23
    
    
    $
    2.34Diluted earnings per common share
    
    
    0.38
    
    
    
    2.60
    
    
    
    1.23
    
    
    
    2.33
 
 (b)
    
    Includes a gain on sale of properties of $59,825 before taxes, $40,143 after taxes. F-29




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##### Table of Contents



NOTE 19  GUARANTOR FINANCIAL STATEMENTS:
 1 4 3 4 Note 10  Long-Term
Debt
 CONSOLIDATING BALANCE SHEET (UNAUDITED)
DECEMBER 31, 2008
(In thousands of dollars)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    67,122
    
    
    $
    818
    
    
    $
    197
    
    
    $
    
    
    
    $
    68,137Accounts receivable
    
    
    119,918
    
    
    
    32,080
    
    
    
    99
    
    
    
    (456
    )
    
    
    151,641Fair value of hedging contracts
    
    
    136,072
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,072Current income tax receivable
    
    
    29,480
    
    
    
    1,703
    
    
    
    
    
    
    
    
    
    
    
    31,183Inventory
    
    
    32,965
    
    
    
    2,710
    
    
    
    
    
    
    
    
    
    
    
    35,675Other current assets
    
    
    1,356
    
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    1,413Total current assets
    
    
    386,913
    
    
    
    37,368
    
    
    
    296
    
    
    
    (456
    )
    
    
    424,121Oil and gas properties  United States
Proved, net
    
    
    654,048
    
    
    
    474,953
    
    
    
    1,582
    
    
    
    
    
    
    
    1,130,583Unevaluated
    
    
    218,297
    
    
    
    275,441
    
    
    
    
    
    
    
    
    
    
    
    493,738Building and land, net
    
    
    5,615
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,615Fixed assets, net
    
    
    5,068
    
    
    
    258
    
    
    
    
    
    
    
    
    
    
    
    5,326Other assets, net
    
    
    46,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,620Investment in subsidiary
    
    
    199,932
    
    
    
    1,475
    
    
    
    
    
    
    
    (201,407
    )
    
    
    Total assets
    
    $
    1,516,493
    
    
    $
    789,495
    
    
    $
    1,878
    
    
    
    ($201,863
    )
    
    $
    2,106,003Liabilities
and Stockholders EquityCurrent liabilities:Accounts payable to vendors
    
    $
    82,129
    
    
    $
    61,582
    
    
    $
    761
    
    
    
    ($456
    )
    
    $
    144,016Undistributed oil and gas proceeds
    
    
    37,517
    
    
    
    365
    
    
    
    
    
    
    
    
    
    
    
    37,882Deferred taxes
    
    
    32,416
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,416Asset retirement obligations
    
    
    45,634
    
    
    
    25,075
    
    
    
    
    
    
    
    
    
    
    
    70,709Other current liabilities
    
    
    13,861
    
    
    
    1,898
    
    
    
    
    
    
    
    
    
    
    
    15,759Total current liabilities
    
    
    211,557
    
    
    
    88,920
    
    
    
    761
    
    
    
    (456
    )
    
    
    300,782Long-term debt
    
    
    825,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    825,000Deferred taxes *
    
    
    25,315
    
    
    
    117,338
    
    
    
    
    
    
    
    51,271
    
    
    
    193,924Asset retirement obligations
    
    
    133,109
    
    
    
    52,787
    
    
    
    250
    
    
    
    
    
    
    
    186,146Fair value of hedging contracts
    
    
    1,221
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,221Other long-term liabilities
    
    
    11,751
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,751Total liabilities
    
    
    1,207,953
    
    
    
    259,045
    
    
    
    1,011
    
    
    
    50,815
    
    
    
    1,518,824Minority interest
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    87Commitments and contingenciesStockholders equity:Common stock
    
    
    394
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394Treasury stock
    
    
    (860
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (860
    )Additional paid-in capital
    
    
    1,257,633
    
    
    
    1,647,428
    
    
    
    1,474
    
    
    
    (1,648,902
    )
    
    
    1,257,633Retained earnings (deficit)
    
    
    (1,033,539
    )
    
    
    (1,116,978
    )
    
    
    (694
    )
    
    
    1,396,224
    
    
    
    (754,987
    )Accumulated other comprehensive income
    
    
    84,912
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,912Total stockholders equity
    
    
    308,540
    
    
    
    530,450
    
    
    
    780
    
    
    
    (252,678
    )
    
    
    587,092Total liabilities and stockholders
equity
    
    $
    1,516,493
    
    
    $
    789,495
    
    
    $
    1,878
    
    
    
    ($201,863
    )
    
    $
    2,106,003
 
 *
    
    Deferred income taxes have been allocated to guarantor subsidiary where related oil and gas
properties reside. F-30




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##### 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
    
    $
    444,826
    
    
    $
    16,224
    
    
    $
    
    
    
    $
    
    
    
    $
    461,050Gas production
    
    
    305,637
    
    
    
    31,028
    
    
    
    
    
    
    
    
    
    
    
    336,665Derivative income, net
    
    
    3,327
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,327Total operating revenue
    
    
    753,790
    
    
    
    47,252
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    327,891
    
    
    
    981,512
    
    
    
    
    
    
    
    
    
    
    
    1,309,403Goodwill impairment
    
    
    
    
    
    
    465,985
    
    
    
    
    
    
    
    
    
    
    
    465,985Impairment of investment in subsidiary
    
    
    1,447,497
    
    
    
    
    
    
    
    
    
    
    
    (1,447,497
    )
    
    
    Accretion expense
    
    
    15,887
    
    
    
    1,492
    
    
    
    13
    
    
    
    
    
    
    
    17,392Salaries, general and administrative
    
    
    42,949
    
    
    
    555
    
    
    
    
    
    
    
    
    
    
    
    43,504Incentive compensation expense
    
    
    2,315
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,315Total operating expenses
    
    
    2,238,795
    
    
    
    1,514,716
    
    
    
    66
    
    
    
    (1,447,497
    )
    
    
    2,306,080Income (loss) from operations
    
    
    (1,485,005
    )
    
    
    (1,467,464
    )
    
    
    (66
    )
    
    
    1,447,497
    
    
    
    (1,505,038
    )Other (income) expenses:Interest expense
    
    
    13,212
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    13,243Interest income
    
    
    (11,223
    )
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    (11,250
    )Other (income) expense, net
    
    
    (6,550
    )
    
    
    45
    
    
    
    628
    
    
    
    
    
    
    
    (5,877
    )Total other (income) expenses
    
    
    (4,561
    )
    
    
    49
    
    
    
    628
    
    
    
    
    
    
    
    (3,884
    )Income (loss) before taxes
    
    
    (1,480,444
    )
    
    
    (1,467,513
    )
    
    
    (694
    )
    
    
    1,447,497
    
    
    
    (1,501,154
    )Provision (benefit) for income taxes:Current
    
    
    6,998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,998Deferred
    
    
    (71,657
    )
    
    
    (350,535
    )
    
    
    
    
    
    
    51,271
    
    
    
    (370,921
    )Total income taxes
    
    
    (64,659
    )
    
    
    (350,535
    )
    
    
    
    
    
    
    51,271
    
    
    
    (363,923
    )Net income (loss)
    
    
    ($1,415,785
    )
    
    
    ($1,116,978
    )
    
    
    ($694
    )
    
    $
    1,396,226
    
    
    
    ($1,137,231
    )
 F-31




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##### 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)
    
    
    ($1,415,785
    )
    
    
    ($1,116,978
    )
    
    
    ($694
    )
    
    $
    1,396,226
    
    
    
    ($1,137,231
    )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
    
    
    327,891
    
    
    
    981,512
    
    
    
    
    
    
    
    
    
    
    
    1,309,403Goodwill impairment
    
    
    
    
    
    
    465,985
    
    
    
    
    
    
    
    
    
    
    
    465,985Impairment of investment in subsidiary
    
    
    1,447,497
    
    
    
    
    
    
    
    
    
    
    
    (1,447,497
    )
    
    
    Accretion expense
    
    
    15,887
    
    
    
    1,492
    
    
    
    13
    
    
    
    
    
    
    
    17,392Deferred income tax benefit
    
    
    (71,657
    )
    
    
    (350,535
    )
    
    
    
    
    
    
    51,271
    
    
    
    (370,921
    )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
    )Other non-cash expenses
    
    
    1,687
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,687Decrease in current income taxes
payable
    
    
    (87,110
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (87,110
    )(Increase) decrease in accounts
receivable
    
    
    70,983
    
    
    
    39,182
    
    
    
    68
    
    
    
    456
    
    
    
    110,689Increase in other current assets
    
    
    (824
    )
    
    
    (42
    )
    
    
    
    
    
    
    
    
    
    
    (866
    )Increase in inventory
    
    
    (32,965
    )
    
    
    (565
    )
    
    
    
    
    
    
    
    
    
    
    (33,530
    )Decrease in accounts payable
    
    
    12,718
    
    
    
    11,455
    
    
    
    777
    
    
    
    
    
    
    
    24,950Increase in other current liabilities
    
    
    (299
    )
    
    
    (17,481
    )
    
    
    
    
    
    
    
    
    
    
    (17,780
    )Investment in hedging contracts
    
    
    (1,914
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,914
    )Other
    
    
    3,724
    
    
    
    (3,833
    )
    
    
    (77
    )
    
    
    
    
    
    
    (186
    )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 proceeds from exercise of stock
options and vesting of restricted
stock
    
    
    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-32




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##### Table of Contents



GLOSSARY OF CERTAIN INDUSTRY TERMS
 http://www.sec.gov/divisions/corpfin/forms/regsx.htm#gas
 Active property
 BBtu
 Bcf
 Bcfe.
 Bbl
 Btu.
 Development well
 Exploratory well
 Gross acreage or gross wells
 LIBOR
 Liquidity.
 MBbls
 Mcf
 Mcfe
 MMBbls
 MMBtu.
 MMcf
 MMcfe
 MMcfe/d
 Make-Whole Amount 1 4
 Net acres or net wells
 G-1




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##### Table of Contents



Net profits interest.
 Overriding royalty interest
 Pari Passu
 Primary term lease.
 Production payment.
 Productive well
 Proved developed reserves
 Proved reserves
 Proved undeveloped reserves
 Standardized measure of discounted future net cash flows.
 Undeveloped acreage
 Volumetric production payment.
 Working interest
 G-2




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1
    
    
    Agreement and Plan of Merger, by and among Stone Energy Corporation, Stone Energy Offshore,
L.L.C. and Bois dArc Energy, Inc., dated as of April 30, 2008 (incorporated by reference
to Exhibit 2.1 to the Registrants Current Report on Form 8-K dated April 30, 2008 (File
No. 001-12074)).2.2
    
    
    Stockholder Agreement, by and among Stone Energy Corporation and Comstock Resources, Inc.,
dated as of April 30, 2008 (incorporated by reference to Exhibit 2.2 to the Registrants
Current Report on Form 8-K dated April 30, 2008 (File No. 001-12074)).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 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 dated May 15, 2008
(File No. 001-12074)).4.1
    
    
    Indenture between Stone Energy Corporation and JPMorgan Chase Bank dated December 10, 2001
(incorporated by reference to Exhibit 4.4 to the Registrants Registration Statement on
Form S-4 (Registration No. 333-81380)).4.2
    
    
    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.)4.3
    
    
    First Supplemental Indenture, dated August 28, 2008, to the Indenture between Stone Energy
Corporation and JPMorgan Chase Bank dated December 10, 2001 (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on Form 8-K dated August 27, 2008 (File No.
001-12074)).4.4
    
    
    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 dated August 27, 2008 (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 2004 Amended and Restated Stock Incentive Plan (incorporated by
reference to the Registrants Registration Statement on Form S-8 (Registration No.
333-107440)).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)).




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##### 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. 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
dated June 28, 2007 (File No. 001-12074)).10.10
    
    
    $700,000,000 Second Amended and Restated Credit Agreement between Stone Energy Corporation
and the financial institutions named therein, dated August 28, 2008 (incorporated by
reference to Exhibit 4.4 to the Registrants Quarterly Report on Form 10-Q for the quarter
ended September 30, 2008 (File No. 001-12074)).10.11
    
    
    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)).10.12
    
    
    Stone Energy Corporation Executive Change of Control and Severance Plan (as amended and
restated) dated December 7, 2007 (incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on Form 8-K, filed December 12, 2007 (File No. 001-12074)).10.13
    
    
    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)).10.14
    
    
    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)).*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.
 
 *
    
    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.