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Stone Energy Corporation Announces Second Quarter 2008 Results

August 5, 2008

LAFAYETTE, La., Aug. 5 /PRNewswire-FirstCall/ — Stone Energy Corporation today announced record net income of $82.8 million, or $2.91 per share, on operating revenue of $263.0 million for the second quarter of 2008 compared to net income of $72.0 million, or $2.60 per share, on operating revenue of $200.3 million in the second quarter of 2007. The second quarter 2007 results included an after-tax gain of $36.3 million associated with the sale of substantially all of Stone’s Rocky Mountain properties, which was completed on June 29, 2007. For the six months ended June 30, 2008, net income totaled $145.1 million, or $5.13 per share, on operating revenue of $466.2 million compared to net income of $82.5 million, or $2.98 per share, on operating revenue of $373.2 million during the comparable 2007 period. All per share amounts are on a diluted basis.

Discretionary cash flow was a record $180.5 million during the second quarter of 2008 compared to $123.8 million generated during the second quarter of 2007 and $150.3 million during the first quarter of 2008. For the first six months of 2008, discretionary cash flow totaled $330.8 million compared to $225.9 million for the comparable 2007 period. Please see “Non-GAAP Financial Measure” and the accompanying financial statements for a reconciliation of discretionary cash flow, a non-GAAP financial measure, to net cash flow provided by operating activities.

Net daily production volumes during the second quarter of 2008 averaged 196 million cubic feet of gas equivalent (MMcfe) per day, representing a 6% increase over average daily production of 185 MMcfe per day for the first quarter of 2008. After adjusting for divested properties, comparable production for the second quarter of 2007 was 204 MMcfe per day. For the six months ended June 30, 2008, net average daily production volumes were 190 MMcfe compared to an adjusted 197 MMcfe per day for the six months ended June 30, 2007. The adjusted 2007 production figures exclude volumes from the divested Rocky Mountain properties which averaged 32 MMcfe per day and 37 MMcfe per day respectively for the second quarter and first six months of 2007. Similarly, the adjusted 2007 production numbers also exclude volumes from the divested non-core Gulf of Mexico properties which averaged 8 MMcfe per day for the second quarter of 2007 and 7 MMcfe for the first six months of 2007.

CEO David Welch stated, “We are pleased with our results for the second quarter, particularly delivering increased production over first quarter 2008 and reporting record quarterly discretionary cash flow of $180.5 million. Obviously the biggest new item of the quarter was the announced merger agreement with Bois d’Arc Energy. We remain very excited about the opportunities created by the Bois d’Arc merger, and look forward to having our exploitation and exploration teams follow up on the initial Bois d’Arc efforts. We now expect a closing in late August and we are very appreciative of the hard work and cooperation exhibited by both groups.”

“Although the proposed Bois d’Arc merger was the quarter’s most significant news, we made progress on other fronts during the period as well. Our exploitation program at Ewing Bank 305 proved to be successful and provided us with incremental volumes. The active workover program at South Pelto 23 also helped with production during the period. Our activity in Appalachia accelerated with the drilling of three wells and the acquisition of additional acreage. We expect an increase in activity in this prospective area during the remainder of 2008. Although our Main Pass 72 Caprock project was deemed currently uneconomic, we have a strong inventory of exploitation projects for 2009, including a multi-well program at Amberjack on Mississippi Canyon Block 109. We continue to advance our exploration prospects and expect to spud several more exploratory wells by year end, followed by additional prospects in 2009. Finally, we continue to evaluate acquisition opportunities afforded by a strong balance sheet and cash flow.”

Prices realized during the second quarter of 2008 averaged $110.10 per barrel (Bbl) of oil and $11.46 per thousand cubic feet (Mcf) of natural gas, which represents a 64% increase, on an Mcfe basis, over second quarter 2007 average realized prices of $64.41 per Bbl of oil and $7.50 per Mcf of natural gas. Average realized prices during the first six months of 2008 were $103.28 per Bbl of oil and $10.15 per Mcf of natural gas representing a 57% increase on a Mcfe basis compared to $60.63 per Bbl of oil and $7.23 per Mcf of natural gas realized during the first six months of 2007. All unit pricing amounts include the cash settlement of effective hedging contracts. Hedging transactions in the second quarter of 2008 decreased the average realized price of natural gas by $0.03 per Mcf, compared to an increase in average realized prices of $0.01 per Mcf of natural gas during the second quarter of 2007. Hedging transactions in the second quarter of 2008 decreased the realized oil prices by $14.63 per Bbl, compared to no impact during the comparable quarter of 2007.

Lease operating expenses (LOE) incurred during the second quarter of 2008 totaled $34.9 million compared to $40.5 million for the comparable quarter in 2007, and $30.3 million in the first quarter 2008. On a per unit basis, LOE was $1.96 per Mcfe in the second quarter of 2008 versus $1.83 per Mcfe in the second quarter of 2007 and $1.80 per Mcfe in the first quarter of 2008. For the six months ended June 30, 2008 and 2007, lease operating expenses were $65.2 million and $91.6 million, respectively. The decrease is a result of the sale of substantially all of the Rocky Mountain properties, decreased major maintenance activity, and operational efficiencies.

Depreciation, depletion and amortization (DD&A) on oil and gas properties for the second quarter of 2008 totaled $70.2 million compared to $80.4 million for the second quarter of 2007. DD&A expense on oil and gas properties for the six months ended June 30, 2008 totaled $132.9 compared to $158.2 million during the comparable period of 2007. Additionally, our investment in our Bohai Bay, China exploratory venture was impaired in the second quarter of 2008 by $10.1 million and recorded under “Write-down of oil and gas properties”.

Salaries, general and administrative (SG&A) expenses for the second quarter of 2008 were $11.3 million compared to $9.4 million in the second quarter of 2007. For the six months ended June 30, 2008 and 2007, SG&A totaled $21.5 million and $17.6 million, respectively. The increase is primarily due to additional stock based compensation and higher legal fees.

There were no borrowings outstanding at June 30, 2008 under our bank credit facility. Stone had letters of credit totaling $46.1 million, resulting in $128.9 million of available borrowings, at June 30, 2008. The borrowing base under the credit facility is re-determined periodically based on the bank group’s evaluation of our proved oil and gas reserves. On April 29, 2008, Stone and Bank of America, N.A. executed a commitment letter which provides for up to $700 million in financing under a three-year amended and restated revolving credit facility to partially fund the proposed Bois d’Arc acquisition.

Capital expenditures before capitalized SG&A and interest during the second quarter of 2008 totaled $125.3 million, including $18.0 million of lease and acquisition costs. Additionally, $4.8 million of SG&A expenses and $4.7 million of interest were capitalized during the quarter.

Operational Update

Ewing Bank 305. Stone successfully drilled and completed two wells in the Ewing Bank 305 drilling program and is in the process of completing a third drill well. In addition, two wells have been successfully worked over. Net incremental production from the drilling and remedial work was approximately 21 MMcfe per day for the second quarter.

South Pelto Block 23. Stone has successfully worked over two wells and recompleted each in new pay sands. Well C-4 ST1 BP1 was recompleted in the CP-29 sand for an initial gross rate of 5 MMcfe per day. Well D-1 was recompleted in the W sand for an initial gross rate of 2 MMcfe per day. Stone has a 96.4% working interest (WI) and a 78% revenue interest (NRI) in these wells.

Main Pass 72 (Caprock). The Main Pass 72 Caprock prospect was drilled and evaluated as an uneconomic well in the 2nd quarter. Test data is being further analyzed to see if there is any additional potential for this prospect.

Appalachia. Through the second quarter, Stone has drilled or participated in three wells in the Appalachia area and expects to spud a fourth well this month. Stone continues to review the results of these wells, and expects to increase activity in the area during the second half of 2008 and into 2009.

Bois d’Arc Merger Agreement

On April 30, 2008, Stone and its wholly owned subsidiary, Stone Energy Offshore, L.L.C., entered into an Agreement and Plan of Merger with Bois d’Arc Energy, Inc. (“Bois d’Arc”), pursuant to which Stone agreed to acquire all of the outstanding shares of Bois d’Arc common stock. Pursuant to the merger, each outstanding share of Bois d’Arc common stock will be converted into the right to receive (i) 0.165 shares of Stone common stock and (ii) $13.65 in cash. Stone expects to use existing cash on its balance sheet, borrowings from a proposed amended and restated $700 million credit facility and the issuance of approximately 11.3 million shares of Stone common stock to fund the merger. The transaction is subject to stockholder approval of both companies and other customary conditions.

Stone has scheduled a special meeting of its stockholders for August 27, 2008 at 10:00 a.m. CDT to consider and vote on the proposal of the proposed merger with Bois d’Arc.

2008 Guidance

Estimates for Stone’s future production volumes are based on assumptions of capital expenditure levels and the assumption that market demand and prices for oil and gas will continue at levels that allow for economic production of these products. The production, transportation and marketing of oil and gas are subject to disruption due to transportation and processing availability, mechanical failure, human error, hurricanes, and numerous other factors. Stone’s estimates are based on certain other assumptions, such as well performance, which may vary significantly from those assumed. Lease operating expenses, which include major maintenance costs, vary in response to changes in prices of services and materials used in the operation of our properties and the amount of maintenance activity required. Estimates of DD&A rates can vary according to reserve additions, capital expenditures, future development costs, and other factors. Therefore, we can give no assurance that our future production volumes, lease operating expenses or DD&A rate will be as estimated.

The following 2008 guidance DOES NOT account for any adjustments from the pending merger with Bois d’Arc. Stone intends to adjust its 2008 guidance following the closing of the merger.

Capital Expenditure Budget. The current 2008 capital expenditure budget is approximately $395 million, which excludes acquisitions, capitalized interest and G&A, and abandonment expenditures. Stone expects to spend approximately 60% of the 2008 capital budget on its Gulf of Mexico (GOM) exploitation program and facilities, and an estimated 40% on exploration and business development activities including deep water, shelf and onshore exploration drilling, GOM lease sale expenditures, onshore drilling and lease acquisition including Appalachia, seismic and reprocessing expenditures, and drilling activity in Bohai Bay, China. In addition, Stone expects to spend approximately $25 million on normal abandonment projects.

Production. For the third quarter of 2008, Stone expects net daily production to average between 180-200 MMcfe. Stone expects full year 2008 average daily production to be in the range of 175-200 MMcfe per day.

Lease Operating Expenses. Stone expects lease operating costs, excluding production taxes, to range between $140-$155 million for 2008 based upon current operating conditions and budgeted maintenance activities.

Depreciation, Depletion & Amortization. Stone expects its DD&A rate to range between $3.70-$3.95 per Mcfe during 2008.

Salaries, General & Administrative Expenses. Stone expects its SG&A expenses (excluding incentive compensation expense) to range between $38-$42 million during 2008.

Corporate Tax Rate. For 2008, Stone expects its corporate tax rate to be approximately 34%.

Hedge Position

The following tables illustrate Stone’s derivative positions for calendar years 2008 and 2009:

                                  Zero-Premium Collars               -------------------------------------------------------------                          Natural Gas                        Oil               ------------------------------   ----------------------------                  Daily                          Daily                  Volume     Floor   Ceiling     Volume     Floor   Ceiling                (MMBtus/d)   Price    Price     (Bbls/d)    Price    Price               -----------  -------  --------   --------   -------  --------   2008           30,000*    $8.00    $14.05      3,000    $60.00    $90.20   2008           20,000**    7.50     11.35      2,000     65.00     81.00   2008           20,000***   9.00     17.90      3,000     70.00    110.25   2008           20,000***   9.00     18.45   2009           20,000      8.00     14.30      3,000     80.00    135.00   2009           20,000      9.00     14.63    * January - March   ** April - December   *** July - December                                      Fixed-Price Swaps                     ------------------------------------------------                           Natural Gas                   Oil                     ---------------------    -----------------------                       Daily                     Daily                       Volume       Swap         Volume       Swap                     (MMBtus/d)     Price       (Bbls/d)      Price                     ----------   --------    -----------   ---------          2009         20,000      $10.15        2,000       $107.90                                        Put Contracts                         ---------------------------------------                                      Natural Gas                         ---------------------------------------                            Daily                            Volume                  Unamortized                          (MMBtus/d)     Floor         Cost                         -----------   --------    -------------          2008              20,000*     $10.00      $0.52/MMBtu          *July - December                            Non-GAAP Financial Measure   

In this press release, we refer to a non-GAAP financial measure we call “discretionary cash flow.” Management believes discretionary cash flow is a financial indicator of our company’s ability to internally fund capital expenditures and service debt. Management also believes this non-GAAP financial measure of cash flow is useful information to investors because it is widely used by professional research analysts in the valuation, comparison, rating and investment recommendations of companies within the oil and gas exploration and production industry. Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income, as defined by GAAP. Please see the “Reconciliation of Non-GAAP Financial Measure” for a reconciliation of discretionary cash flow to cash flow provided by operating activities.

Other Information

Stone Energy has planned a conference call for 10:00 a.m. Central Time on Wednesday, August 6, 2008 to discuss the operational and financial results for the second quarter of 2008. Anyone wishing to participate should visit our website at http://www.stoneenergy.com/ for a live web cast or dial 1-877-228-3598 and request the “Stone Energy Call.” If you are unable to participate in the original conference call, a digital recording accessed by dialing 1-800-642-1687 (ID #55670500) will be available at approximately 12:00 p.m. Central Time for 48 hours. A web replay will be available approximately 24 hours following the completion of the call on Stone Energy’s website at http://www.stoneenergy.com/. The web replay will be available for approximately one week.

Stone Energy is an independent oil and natural gas company headquartered in Lafayette, Louisiana, and is engaged in the acquisition, exploration, exploitation, development and operation of oil and gas properties located primarily in the Gulf of Mexico. For additional information, contact Kenneth H. Beer, Chief Financial Officer, at 337-237-0410-phone, 337-237-0426-fax or via e-mail at CFO@StoneEnergy.com.

Certain statements in this press release are forward-looking and are based upon Stone’s current belief as to the outcome and timing of future events. All statements, other than statements of historical facts, that address activities that Stone plans, expects, believes, projects, estimates or anticipates will, should or may occur in the future, including future production of oil and gas, future capital expenditures and drilling of wells and future financial or operating results are forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include the timing and extent of changes in commodity prices for oil and gas, operating risks and other risk factors as described in Stone’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission (“SEC”). Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, Stone’s actual results and plans could differ materially from those expressed in the forward-looking statements.

                          STONE ENERGY CORPORATION                             SUMMARY STATISTICS               (In thousands, except per share/unit amounts)                                (Unaudited)                                  Three Months Ended      Six Months Ended                                      June 30,               June 30,                                -------------------   --------------------                                   2008      2007        2008       2007   FINANCIAL RESULTS            --------- ---------   ---------  ---------     Net income                  $82,811   $71,983    $145,053    $82,459     Net income per share          $2.91     $2.60       $5.13      $2.98    PRODUCTION QUANTITIES     Oil (MBbls)                   1,422     1,726       2,704      3,377     Gas (MMcf)                    9,284    11,834      18,417     23,308     Oil and gas (MMcfe)          17,816    22,190      34,641     43,570    AVERAGE DAILY PRODUCTION     Oil (MBbls)                      16        19          15         19     Gas (MMcf)                      102       130         101        129     Oil and gas (MMcfe)             196       244         190        241    REVENUE DATA (1)     Oil revenue                $156,569  $111,173    $279,276   $204,757     Gas revenue                 106,393    88,718     186,919    168,467                                --------- ---------   ---------  ---------     Total oil and gas revenue  $262,962  $199,891    $466,195   $373,224    AVERAGE PRICES (1)     Oil (per Bbl)               $110.10    $64.41     $103.28     $60.63     Gas (per Mcf)                 11.46      7.50       10.15       7.23     Per Mcfe                      14.76      9.01       13.46       8.57    COST DATA     Lease operating expenses    $34,900   $40,510     $65,153    $91,596     Salaries, general and      administrative expenses     11,278     9,402      21,534     17,635     DD&A expense on oil and      gas properties              70,172    80,357     132,879    158,192    AVERAGE COSTS (per Mcfe)     Lease operating expenses      $1.96     $1.83       $1.88      $2.10     Salaries, general and      administrative expenses       0.63      0.42        0.62       0.40     DD&A expense on oil and      gas properties                3.94      3.62        3.84       3.63    AVERAGE SHARES OUTSTANDING    - Diluted                     28,459    27,706      28,260     27,642     (1) Includes the cash settlement of effective hedging contracts.                             STONE ENERGY CORPORATION                    CONSOLIDATED STATEMENT OF OPERATIONS                               (In thousands)                                (Unaudited)                                      Three Months Ended   Six Months Ended                                          June 30,            June 30,                                   -------------------- -------------------                                       2008      2007      2008      2007   STATEMENT OF OPERATIONS         ---------- --------- --------- ---------     Operating revenue:        Oil production              $156,569  $111,173  $279,276  $204,757        Gas production               106,393    88,718   186,919   168,467        Derivative income, net             -       409         -         -                                   ---------- --------- --------- ---------           Total operating revenue   262,962   200,300   466,195   373,224                                   ---------- --------- --------- ---------     Operating expenses:        Lease operating expenses      34,900    40,510    65,153    91,596        Production taxes               3,503     2,808     4,903     6,672        Depreciation, depletion         and amortization             70,831    81,340   134,218   160,179        Write-down of oil and gas         properties                   10,100         -    10,100         -        Accretion expense              3,853     4,416     8,221     8,832        Salaries, general and         administrative expenses      11,278     9,402    21,534    17,635        Incentive compensation         expense                         882       515     1,900     1,361        Derivative expenses, net       3,353         -     3,612        91                                   ---------- --------- --------- ---------           Total operating expenses  138,700   138,991   249,641   286,366                                   ---------- --------- --------- ---------        Gain on Rockies divestiture        -    55,816         -    55,816                                   ---------- --------- --------- ---------     Income from operations          124,262   117,125   216,554   142,674                                   ---------- --------- --------- ---------     Other (income) expenses:        Interest expense               3,633    10,284     7,492    21,475        Interest income               (3,432)   (1,036)   (8,346)   (1,609)        Other income, net             (1,313)   (1,933)   (2,354)   (3,235)           Total other (income)    ---------- --------- --------- ---------            expenses                  (1,112)    7,315    (3,208)   16,631                                   ---------- --------- --------- ---------     Income before taxes             125,374   109,810   219,762   126,043                                   ---------- --------- --------- ---------     Provision for income taxes:        Current                       33,028    17,500    46,978    17,500        Deferred                       9,535    20,327    27,731    26,084                                   ---------- --------- --------- ---------           Total income taxes         42,563    37,827    74,709    43,584                                   ---------- --------- --------- ---------     Net income                      $82,811   $71,983  $145,053   $82,459                                   ========== ========= ========= =========                             STONE ENERGY CORPORATION                RECONCILIATION OF NON-GAAP FINANCIAL MEASURE                               (In thousands)                                (Unaudited)                                      Three Months Ended   Six Months Ended                                          June 30,            June 30,                                    ------------------- -------------------                                       2008      2007      2008      2007                                    --------- --------- --------- ---------   Net income as reported            $82,811   $71,983  $145,053   $82,459    Reconciling items:     Depreciation, depletion and      amortization                    70,831    81,340   134,218   160,179     Write-down of oil and gas      properties                      10,100         -    10,100         -     Deferred income tax provision     9,535    20,327    27,731    26,084     Accretion expense                 3,853     4,416     8,221     8,832     Gain on sale of oil and gas      properties                           -   (55,816)        -   (55,816)     Stock compensation expense        2,185     1,162     4,322     2,530     Other                             1,167       400     1,132     1,678                                    --------- --------- --------- ---------   Discretionary cash flow           180,482   123,812   330,777   225,946    Increase (decrease) in current    income taxes payable              (3,581)   16,569   (47,131)   16,569   Settlement of asset retirement    obligations                      (15,004)  (18,773)  (33,651)  (18,773)   Investment in put contracts        (1,914)        -    (1,914)        -   Working capital changes           (32,908)  (13,914)   (8,692)   (6,322)    Net cash provided by operating   --------- --------- --------- ---------    activities                      $127,075  $107,694  $239,389  $217,420                                    ========= ========= ========= =========                             STONE ENERGY CORPORATION                         CONSOLIDATED BALANCE SHEET                               (In thousands)                                (Unaudited)                                                       June 30,   December 31,                                                        2008         2007              Assets                               ------------  ------------    Current assets:     Cash and cash equivalents                        $568,117     $475,126     Accounts receivable                               192,314      186,853     Deferred tax asset                                 52,188        9,039     Other current assets                                1,316        2,684        Total current assets                           813,935      673,702    Oil and gas properties, net - United States     Proved                                          1,001,271    1,001,179     Unevaluated                                       204,985      150,568   Oil and gas properties - China (unevaluated)         20,659       29,565   Building and land, net                                5,620        5,667   Fixed assets, net                                     5,097        5,584   Other assets, net                                    24,530       23,338                                                   ------------  ------------        Total assets                                $2,076,097   $1,889,603                                                   ============  ============            Liabilities and Stockholders' Equity    Current liabilities:     Accounts payable to vendors                      $143,296      $88,801     Undistributed oil and gas proceeds                 42,530       37,743     Investment in hedging contracts                   118,922       18,968     Asset retirement obligations                       31,349       44,180     Current income taxes payable                       10,500       57,631     Other current liabilities                           6,146       13,934                                                   ------------  ------------        Total current liabilities                      352,743      261,257    8 1/4% Senior Subordinated Notes due 2011           200,000      200,000   6 3/4% Senior Subordinated Notes due 2014           200,000      200,000   Deferred taxes                                      110,461       89,665   Investment in hedging contracts                      34,602            -   Asset retirement obligations                        200,249      245,610   Other long-term liabilities                           8,129        7,269                                                   ------------  ------------        Total liabilities                            1,106,184    1,003,801                                                   ------------  ------------   Common stock                                            283          278   Treasury stock                                         (860)      (1,161)   Additional paid-in capital                          541,515      515,055   Retained earnings                                   527,297      382,365   Accumulated other comprehensive loss                (98,322)     (10,735)                                                   ------------  ------------        Total stockholders' equity                     969,913      885,802                                                   ------------  ------------        Total liabilities and stockholders' equity  $2,076,097   $1,889,603                                                   ============  ============  

Stone Energy Corporation

CONTACT: Kenneth H. Beer, Chief Financial Officer of Stone EnergyCorporation, +1-337-237-0410, fax, +1-337-237-0426, CFO@StoneEnergy.com

Web site: http://www.stoneenergy.com/




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