Stone Energy Corporation

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Lafayette, La.-based Stone Energy Corp. (NYSE: SGY) is an oil and gas exploration and production company. It also has offices in Houston, Texas and Morgentown, West Virginia. The company has in excess of 30,000 net acres in the Marcellus shale play.

Stone was reported in September, 2008 to have drilled one well in the Deleware River Basin. The company is expecting to fracture its well in the forth quarter of 2008.

In November, 2008 it was reported Stone had the one and only well drilled so far in Wayne County, Pennsylvania, although both Chesapeake Energy and Cabot Oil and Gas Corp. have also been very active leasing drilling rights in the that county. It is unknown whether this is the same well as referred to above. This report came from an unrelated source.

A January, 2009 report from yet another source indicated that Stone had drilled a well on the Matoushek property in Wayne County which had been capped in June, 2008. It is also unknown whether this well is the same one already mentioned. In March, 2009 there was still an additional report that drilling had been shut down on a well in the summer of 2008, because it lacked a permit from the Delaware River Basin Commission (DRBC) to operate. It is located in the Wayne County township of Clinton. All of these reports probably refer to the same well since Wayne County remains the focal point of each news item. The information came to light as part of a proposed settlement with the Commission and Stone's subsequent application to use 21 million gallons of water over a 30-day period from the West Branch of the Lackawaxen River.

In February, 2009 the company announced that in 2008 it had drilled two Marcellus shale wells in which it owns a 50% interest. The combined production from both wells is just over 500 Mcf/d. According to the same report, its acreage position is 30,000 net acres, and the company will drill up to six Marcellus wells during 2009. Most of the company's activity will be in West Virginia. Some drilling is also planned for Pennsylvania.

In May, 2009 more information surfaced about Stone's well in Wayne County and its future plans there. This vertical well is located in Clinton Township and is known as the Matoushek #1. The company plans to target the Marcellus shale. It applied for a permit to the DRBC in February to withdraw water from the Lackawaxen River (West Branch) where it runs through Mount Pleasant Township. This water will be used to hydro-fracture the Matoushek #1. A second permit requests the withdrawal of 21 million gallons during a 30 day period. The stated reason is to support drilling activity at the Matoushek #1 well and for two new wells planned in Preston and Mt. Pleasant Townships.

A June, 2009 report found Stone had applied for two water withdrawal permits for 750,000 gallons/day each from Wyalusing Creek, in Rush Twp about twenty miles west of Montrose in Susquehanna County, PA. These permits were approved by the Susquehanna River Basin Commission for use on well pads at the Hogan and Stang farms.

According to an October, 2009 company update, Stone had two rigs operating in northeastern Pennsylvania and West Virginia. It planned to drill 4 to 5 additional wells in West Virginia before the end of 2009, and 2 to 3 wells in Pennsylvania. At the time it had fielded two rigs in the Appalachian area and was operator of each. The company had recently drilled one vertical well in West Virginia that had flowed at the rate of 1.5 Mmcf/d. It planned to hydro-fracture a second vertical well there during the second half of October. Stone had also applied for a number of drilling permits in both WV and PA, and expected to ramp up its drilling activities during 2010. It owns between 50-100% of the working interest in its leases and planned to be the operator on most of the planned wells.

In late October, another report surfaced that Stone was doing the drilling in Susquehanna County for the Carizzo/Avista joint venture which held a 12% working interest in two wells underway there.

A company update in January, 2010 noted that during the third and fourth quarters of 2009, Stone had drilled six vertical operated Marcellus wells--four were in West Virginia and two in Pennsylvania. Four of the wells had produced in a range between .5 and 2.0 Mmcf/d. Two more awaited completion as winter weather permitted. The company reported that the initial production from these wells had established the viability of the Marcellus play on its leasehold.

• David Welch is Stone's CEO.
• Kenneth H. Beer is its CFO.