S-4 1 h57245sv4.htm FORM S-4 - REGISTRATION STATEMENT sv4
Table of Contents

As filed with the Securities and Exchange Commission on June 6, 2008
Registration Statement No. 333-      
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
 
 
Stone Energy Corporation
(Exact name of registrant as specified in its charter)
 
         
Delaware   1311   72-1235413
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)
 
625 East Kaliste Saloom Rd.
Lafayette, LA 70508
(337) 237-0410
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
 
 
Andrew L. Gates, III
Senior Vice President, General Counsel and Secretary
625 East Kaliste Saloom Rd.
Lafayette, LA 70508
(337) 237-0410
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
 
 
Copies to:
 
         
Alan P. Baden
Shelley A. Barber
Vinson & Elkins L.L.P.
666 Fifth Avenue, 26th
Floor
New York, New York 10103
(212) 237-0000
  Gary W. Blackie
President and Chief Executive Officer
Bois d’Arc Energy, Inc.
600 Travis St., Suite 5200
Houston, Texas 77002
(713) 228-0438
  Jack E. Jacobsen
Melissa M. Winchester
Locke Lord Bissell & Liddell LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
(214) 740-8000
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions to the merger described herein.
 
If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o
(Do not check if a smaller reporting company)
 
 
 
 
CALCULATION OF REGISTRATION FEE
 
                         
            Proposed Maximum
    Proposed Maximum
     
Title of Each Class of
    Amount to be
    Offering Price
    Aggregate Offering
    Amount of
Securities to be Registered(1)     Registered(2)     per Share     Price(3)     Registration Fee
Common stock, par value $0.01 per share
    11,317,057     $64.67     $731,874,077     $28,763
                         
 
(1) This registration statement also covers the associated preferred stock purchase rights (the “Rights”) issued pursuant the Rights Agreement dated as of October 15, 1998, between the registrant and Mellon Investor Services, LLC, as rights agent, as amended. Until the occurrence of certain events, the Rights will not be exercisable for or evidenced separately from the shares of common stock of the registrant.
(2) Represents the maximum number of shares of the common stock of the registrant that may be issued to stockholders of Bois d’Arc Energy, Inc. (“Bois d’Arc”) pursuant to the merger described herein, giving effect to the exchange of outstanding options to acquire Bois d’Arc common stock for the merger consideration.
(3) Pursuant to Rules 457(c) and 457(f) of the Securities Act of 1933, as amended, and estimated solely for purposes of calculating the registration fee, the proposed maximum aggregate offering price is based on the average of the high and low sales prices of the registrant’s common stock, as reported on the New York Stock Exchange on June 4, 2008, and computed based on the estimated maximum number of shares that may be exchanged for the common stock of the registrant being registered, including shares issuable upon an exchange for outstanding options to acquire Bois d’Arc common stock.
 
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 


Table of Contents

The information in this joint proxy statement/prospectus is not complete and may be changed. Stone Energy Corporation may not distribute or issue the shares of Stone Energy Corporation common stock being registered pursuant to this registration statement until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to distribute these securities and Stone Energy Corporation is not soliciting offers to receive these securities in any state where such offer or distribution is not permitted.
 
SUBJECT TO COMPLETION, DATED JUNE 6, 2008
 
     
Stone logo   Bois logo
 
To the Stockholders of Stone Energy Corporation and Bois d’Arc Energy, Inc.:
 
The boards of directors of Stone Energy Corporation and Bois d’Arc Energy, Inc. have each approved or adopted an agreement and plan of merger pursuant to which Bois d’Arc will merge with and into Stone Energy Offshore, L.L.C., a wholly owned subsidiary of Stone and a Delaware limited liability company, with Stone Energy Offshore, L.L.C. surviving the merger as a wholly owned subsidiary of Stone Energy Corporation, which is referred to as the merger. Pursuant to the merger agreement, Bois d’Arc stockholders will receive $13.65 in cash, without interest, and 0.165 shares of Stone common stock for each share of Bois d’Arc common stock.
 
Stone and Bois d’Arc will each hold special meetings of their respective stockholders in connection with the proposed merger. At the Stone special meeting, Stone stockholders will be asked to consider a proposal to approve the issuance of additional shares of Stone common stock in the merger. At the Bois d’Arc special meeting, Bois d’Arc stockholders will be asked to approve the agreement and plan of merger, dated as of April 30, 2008, among Stone, Stone Energy Offshore, L.L.C., and Bois d’Arc, which agreement is referred to as the merger agreement.
 
Shares of Stone common stock trade on the New York Stock Exchange under the symbol “SGY.” We estimate that immediately after the effective time of the merger, former Bois d’Arc stockholders will hold shares of Stone common stock representing approximately 29% of the then-outstanding diluted shares of Stone common stock (based on the number of outstanding shares of Bois d’Arc common stock on April 29, 2008).
 
The merger cannot be completed unless (i) Stone stockholders approve the issuance of additional shares of Stone common stock in the merger by the affirmative vote of the holders of a majority of the votes cast at a meeting at which a majority of the shares outstanding on            , 2008, the record date for the Stone special meeting, of Stone common stock are present and voting and (ii) Bois d’Arc stockholders approve the merger agreement by the affirmative vote of the holders of the majority of the shares of Bois d’Arc common stock outstanding on          , 2008, the record date for the Bois d’Arc special meeting.
 
The Stone board of directors has approved the merger agreement and the transactions contemplated by the merger agreement and recommends that Stone stockholders vote FOR the proposal to issue additional shares of Stone common stock in the merger. The Bois d’Arc board of directors has adopted the merger agreement and the transactions contemplated by the merger agreement and recommends that Bois d’Arc stockholders vote FOR the proposal to approve the merger agreement, which is described in detail in this joint proxy statement/prospectus.
 
In considering the recommendation of the Bois d’Arc board of directors, stockholders of Bois d’Arc should be aware that certain members of the board of directors and executive officers of Bois d’Arc have agreements and arrangements that provide them with interests in the merger that differ from, or are in addition to, those of Bois d’Arc stockholders generally. See “The Merger — Interests of the Directors and Executive Officers of Bois d’Arc in the Merger.”
 
The accompanying joint proxy statement/prospectus contains detailed information about the merger, the merger agreement and the special meetings. This document is also a prospectus for the additional shares of Stone common stock that will be issued pursuant to the merger. We encourage Stone and Bois d’Arc stockholders to read this joint proxy statement/prospectus carefully and in its entirety before voting, including the section entitled “Risk Factors” beginning on page 16.
 
Your vote is very important.  Whether or not you plan to attend the Stone special meeting or the Bois d’Arc special meeting, please take the time to submit your proxy by completing and mailing the enclosed proxy card or, if the option is available to you, by granting your proxy electronically over the Internet or by telephone. If your shares of Stone common stock or Bois d’Arc common stock are held in “street name,” you must instruct your broker how to vote such shares.
 
     
Signature   Signature
David H. Welch
  Gary W. Blackie
President and Chief Executive Officer   President and Chief Executive Officer
Stone Energy Corporation   Bois d’Arc Energy, Inc.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this joint proxy statement/prospectus or has passed upon the adequacy or accuracy of the disclosure in this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.
 
This joint proxy statement/prospectus is dated          , 2008, and is first being mailed to Stone stockholders and Bois d’Arc stockholders on or about          , 2008.


Table of Contents

Stone Energy Corporation
625 East Kaliste Saloom Rd.
Lafayette, LA 70508
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON          , 2008
 
To the Stockholders of Stone Energy Corporation:
 
We will hold a special meeting of stockholders of Stone Energy Corporation on          , 2008 at 10:00 a.m., Lafayette time, at 625 E. Kaliste Saloom Road, Lafayette, Louisiana 70508, for the following purposes:
 
1. to consider and vote on the proposal to approve the issuance of additional shares of Stone common stock pursuant to the Agreement and Plan of Merger, dated as of April 30, 2008 (which we refer to as the merger agreement), by and among Stone, Stone Energy Offshore, L.L.C., a Delaware limited liability company and a wholly owned subsidiary of Stone, and Bois d’Arc Energy, Inc., a Nevada corporation, as the agreement may be amended from time to time; and
 
2. to transact any other business that may properly come before the special meeting or any adjournment or postponement of the special meeting.
 
Only Stone stockholders of record at the close of business on          , 2008, the record date for the Stone special meeting, are entitled to notice of, and to vote at, the Stone special meeting and any adjournments or postponements of the Stone special meeting.
 
The Stone board of directors has approved the merger agreement and the transactions contemplated by the merger agreement and recommends that you vote FOR the proposal to approve the issuance of additional shares of Stone common stock in the merger pursuant to the merger agreement, which is described in detail in this joint proxy statement/prospectus.
 
 
By Order of the Board of Directors of
Stone Energy Corporation,
 
David H. Welch
President and Chief Executive Officer
 
Lafayette, Louisiana
          , 2008
 
 
YOUR VOTE IS IMPORTANT
 
Whether or not you plan to attend the meeting, please submit a proxy as soon as possible.  To submit a proxy, call the toll-free telephone number listed on your proxy card, use the internet as described on the enclosed proxy card, or complete, sign, date and mail your proxy card. Submitting a proxy will assure that your vote is counted at the meeting if you do not attend in person. If your shares of Stone common stock are held in “street name” by your broker or other nominee, only that nominee can vote your shares of Stone common stock and the vote cannot be cast unless you provide instructions to that nominee. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares of Stone common stock. You may revoke your proxy at any time before it is exercised by sending a written notice of revocation, by submitting a later-dated proxy or by attending the meeting and voting your shares in person. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the merger and the special meeting.
 


Table of Contents

Bois d’Arc Energy, Inc.
600 Travis Street, Suite 5200
Houston, Texas 77002
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON          , 2008
 
To the Stockholders of Bois d’Arc Energy, Inc.:
 
We will hold a special meeting of stockholders of Bois d’Arc on          , 2008 at 10:00 a.m., Houston time, at 600 Travis Street, Suite 5200, Houston, Texas 77002, for the following purposes:
 
1. to consider and vote on the proposal to approve the Agreement and Plan of Merger, dated as of April 30, 2008 (which we refer to as the merger agreement), by and among Stone Energy Corporation, a Delaware corporation, Stone Energy Offshore, L.L.C., a Delaware limited liability company and a wholly owned subsidiary of Stone, and Bois d’Arc, as the agreement may be amended from time to time; and
 
2. to transact any other business that may properly come before the special meeting or any adjournment or postponement of the special meeting.
 
Only Bois d’Arc stockholders of record at the close of business on          , 2008, the record date for the Bois d’Arc special meeting, are entitled to notice of, and to vote at, the Bois d’Arc special meeting and any adjournments or postponements of the Bois d’Arc special meeting.
 
The Bois d’Arc board of directors has adopted the merger agreement and the transactions contemplated by the merger agreement and recommends that you vote FOR the proposal to approve the merger agreement, which is described in detail in this joint proxy statement/prospectus.
 
In considering the recommendation of the Bois d’Arc board of directors, stockholders of Bois d’Arc should be aware that members of the board of directors and executive officers of Bois d’Arc have agreements and arrangements that provide them with interests in the merger that differ from, or are in addition to, those of Bois d’Arc stockholders. See “The Merger — Interests of the Directors and Executive Officers of Bois d’Arc in the Merger.”
 
By Order of the Board of Directors of
Bois d’Arc Energy, Inc.,
 
Gary W. Blackie
President and Chief Executive Officer
 
Houston, Texas
          , 2008
 
 
YOUR VOTE IS IMPORTANT
 
Whether or not you plan to attend the meeting, please submit a proxy as soon as possible.  To submit a proxy, call the toll-free telephone number listed on your proxy card, use the internet as described on the enclosed proxy card, or complete, sign, date and mail your proxy card. Submitting a proxy will assure that your vote is counted at the meeting if you do not attend in person. If your shares of Bois d’Arc common stock are held in “street name” by your broker or other nominee, only that nominee can vote your shares of Bois d’Arc common stock and the vote cannot be cast unless you provide instructions to that nominee. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares of Bois d’Arc common stock. You may revoke your proxy at any time before it is exercised, by sending a written notice of revocation, by submitting a later-dated proxy or by attending the meeting and voting your shares in person. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the merger and the special meeting.
 
 


Table of Contents

ADDITIONAL INFORMATION
 
This joint proxy statement/prospectus incorporates by reference important business and financial information about Stone and Bois d’Arc from documents that are not included or delivered with this joint proxy statement/prospectus. See “Where You Can Find More Information; Incorporation by Reference” beginning on page 95.
 
Documents incorporated by reference are available to Stone and Bois d’Arc stockholders without charge upon written or oral request, excluding any exhibits to those documents, unless the exhibit is specifically incorporated by reference as an exhibit in this joint proxy statement/prospectus. You can obtain any of these documents by requesting them in writing or by telephone from the appropriate company.
 
     
Stone Energy Corporation
  Bois d’Arc Energy, Inc.
625 East Kaliste Saloom Rd.
  600 Travis Street, Suite 5200
Lafayette, LA 70508
  Houston, Texas 77002
Attention: General Counsel
  Attention: Investor Relations
Telephone: (337) 237-0410
  Telephone: (713) 228-0438
www.stoneenergy.com
  www.boisdarcenergy.com
 
In order for you to receive timely delivery of the documents in advance of the applicable special meeting, Stone or Bois d’Arc, as applicable, should receive your request by no later than          , 2008.
 
ABOUT THIS DOCUMENT
 
This document, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission, which is referred to as the SEC, by Stone (File No. 333-       ), constitutes a prospectus of Stone under Section 5 of the U.S. Securities Act of 1933, as amended, which is referred to as the Securities Act, with respect to the additional shares of Stone common stock to be issued to Bois d’Arc stockholders in the merger pursuant to the merger agreement. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the U.S. Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act, with respect to the special meeting of Stone stockholders, at which Stone stockholders will be asked to consider and vote upon a proposal to approve the issuance of additional shares of Stone common stock in the merger pursuant to the merger agreement, and with respect to the special meeting of Bois d’Arc stockholders, at which Bois d’Arc stockholders will be asked to consider and vote upon a proposal to approve the merger agreement.


Table of Contents

TABLE OF CONTENTS
 
         
    iv  
    1  
    1  
    1  
    2  
    2  
    2  
    3  
    3  
    3  
    4  
    4  
    4  
    4  
    5  
    5  
    6  
    6  
    7  
    7  
    7  
    7  
    8  
    8  
    8  
    9  
    9  
    9  
    9  
    10  
SUMMARY RESERVE INFORMATION OF STONE AND BOIS d’ARC
    13  
    14  
    15  
    16  
    20  
    22  
    22  
    22  
    22  
    22  
    22  
    23  


i


Table of Contents

         
    23  
    23  
    23  
    24  
    24  
    24  
    24  
    24  
    25  
    25  
    25  
    26  
    26  
    27  
    27  
    27  
    34  
    36  
    38  
    44  
    55  
    59  
    60  
    63  
    63  
    64  
    64  
    65  
    65  
    65  
    65  
    66  
    68  
    69  
    71  
    75  
    83  
    86  
    87  
    87  
    87  
    88  
    88  
    88  


ii


Table of Contents

         
    89  
    89  
    90  
    90  
    90  
    92  
    93  
    94  
    94  
    94  
    94  
    94  
    95  
    98  
    F-1  
ANNEXES
       
Annex A — Agreement and Plan of Merger
       
Annex B — Opinion of Tudor, Pickering, Holt & Co. Securities, Inc.
       
Annex C — Opinion of Raymond James & Associates, Inc.
       
 Letter from Ernst & Young LLP
 Awareness Letter of Ernst & Young LLP
 Consent of Ernst & Young LLP, Lafayette, Louisiana
 Consent of Ernst & Young LLP, Houston, Texas
 Consent of Netherland, Sewell & Associates, Inc.
 Consent of Lee Keeling and Associates, Inc.
 Consent of Tudor, Pickering, Holt & Co. Securities, Inc.
 Consent of Raymond James & Associates, Inc.


iii


Table of Contents

 
QUESTIONS AND ANSWERS ABOUT THE MERGER
 
The following are some questions that Stone and Bois d’Arc stockholders may have regarding the proposed merger and the proposals being considered at the Stone and Bois d’Arc special meetings and brief answers to those questions. Stone and Bois d’Arc urge you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section does not provide all the information that might be important to you. Additional important information is also contained in the annexes to, and the documents incorporated by reference in, this joint proxy statement/prospectus. Unless stated otherwise, all references in this joint proxy statement/prospectus to Stone are to Stone Energy Corporation, a Delaware corporation; all references to Bois d’Arc are to Bois d’Arc Energy, Inc., a Nevada corporation; all references to Merger Sub are to Stone Energy Offshore, L.L.C., a Delaware limited liability company and a wholly owned subsidiary of Stone; and all references to the merger agreement are to the Agreement and Plan of Merger, dated as of April 30, 2008, by and among Stone, Merger Sub and Bois d’Arc, a copy of which is attached as Annex A to this joint proxy statement/prospectus and is incorporated by reference herein. For an explanation of oil and gas abbreviations and terms used in this joint proxy statement/prospectus, see “Glossary of Oil and Gas Terms” beginning on page 98.
 
Q: What is the proposed transaction?
 
A: Stone and Bois d’Arc have entered into a merger agreement, pursuant to which Bois d’Arc will merge with and into Merger Sub, with Merger Sub surviving the merger as a wholly owned subsidiary of Stone, which is referred to as the merger.
 
Q: Why are Stone and Bois d’Arc proposing the merger?
 
A: The boards of directors of Stone and Bois d’Arc believe that the merger will 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. The boards of directors of Stone and Bois d’Arc also believe that the merger should be accretive to Stone’s stockholders during 2008 and 2009 with respect to earnings per share, reserves and production. To review the boards of directors’ reasons for the merger in greater detail, see “The Merger — Recommendation of the Stone Board of Directors and Its Reasons for the Merger” and “The Merger — Recommendation of the Bois d’Arc Board of Directors and Its Reasons for the Merger.”
 
Q: Why am I receiving this joint proxy statement/prospectus?
 
A: Stone stockholders are being asked to approve the issuance of additional shares of Stone common stock in the merger pursuant to the merger agreement. Under the Stone restated bylaws and the rules of the New York Stock Exchange, referred to as the NYSE, which govern Stone, approval of the issuance of additional shares of Stone common stock in the merger pursuant to the merger agreement requires the affirmative vote of the holders of a majority of the votes cast at the special meeting at which a majority of the outstanding shares of Stone common stock are present and entitled to vote. If a Stone stockholder attends but fails to vote, or if a Stone stockholder abstains, that stockholder will be considered present in determining the presence of a quorum, but will not constitute a vote cast and accordingly, will have no effect on the outcome of the vote. A broker will not be able to vote shares of Stone common stock held in “street name” unless the beneficial owner of those shares instructs such broker how to vote. Such broker non-votes will have no effect on the outcome of the vote. The approval by Stone stockholders of the issuance of additional shares of Stone common stock in the merger pursuant to the merger agreement is a condition to the completion of the merger.
 
Bois d’Arc stockholders are being asked to approve the merger agreement. Under the Nevada Revised Statutes, which govern Bois d’Arc, approval of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Bois d’Arc capital stock entitled to vote, provided that a quorum is present. Accordingly, if a Bois d’Arc stockholder fails to vote, or if a Bois d’Arc stockholder abstains, that will have the same effect as a vote against the approval of the merger agreement. A broker will not be able to vote shares of Bois d’Arc common stock held in “street name” unless the beneficial owner of those shares instructs such broker how to vote. Such broker non-votes will also have the effect of


iv


Table of Contents

a vote against the approval of the merger agreement. Approval of the merger agreement by Bois d’Arc stockholders is a condition to the completion of the merger.
 
This joint proxy statement/prospectus contains important information about the proposed merger, the merger agreement and the special meetings, which information you should read carefully before voting. The enclosed voting materials allow you to cause your shares of Stone common stock or Bois d’Arc common stock to be voted without attending the Stone special meeting or the Bois d’Arc special meeting, as applicable, in person.
 
Your vote is very important. You are encouraged to submit a proxy as soon as possible.
 
Q: What is the amount of cash and the number of shares of Stone common stock that Bois d’Arc stockholders will be entitled to receive for their shares of Bois d’Arc common stock?
 
A: Under the merger agreement, Bois d’Arc stockholders will receive $13.65 in cash, without interest, and 0.165 shares of Stone common stock for each share of Bois d’Arc common stock.
 
Based on the number of outstanding shares of Bois d’Arc common stock on April 29, 2008, Stone will issue approximately 11.3 million shares of Stone common stock in the merger, representing approximately 29% of the shares of Stone common stock outstanding immediately prior to the merger, and will pay approximately $936 million in cash to Bois d’Arc stockholders in the merger pursuant to the merger agreement.
 
Q: What conditions are required to be fulfilled to complete the merger?
 
A: Stone and Bois d’Arc are not required to complete the merger unless certain specified conditions are satisfied or waived. These conditions include approval by Stone stockholders of the issuance of the additional shares of Stone common stock to be issued in the merger pursuant to the merger agreement, approval by Bois d’Arc stockholders of the merger agreement, the effectiveness of the Form S-4 registration statement, of which this joint proxy statement/prospectus constitutes a part, relating to the additional shares of Stone common stock to be issued in the merger pursuant to the merger agreement, and expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. There can be no assurance that such conditions will be satisfied. For a more complete summary of the conditions that must be satisfied or waived prior to the effective time of the merger, see “The Merger Agreement — Conditions to the Completion of the Merger” beginning on page 69.
 
Q: Are there risks associated with the merger that I should consider in deciding how to vote?
 
A: Yes. You should carefully read the detailed description of the risks associated with the merger and the operations of Stone after the merger described in “Risk Factors” beginning on page 16.
 
Q: What are the tax consequences of the merger?
 
A: Stone and Bois d’Arc each expect the merger to qualify as a reorganization pursuant to section 368(a) of the Internal Revenue Code of 1986, as amended, referred to as the Internal Revenue Code.
 
Please review carefully the information under the caption “The Merger — Certain Material U.S. Federal Income Tax Consequences” beginning on page 60 for a description of certain material U.S. federal income tax consequences of the merger. The tax consequences to you will depend on your own situation. Please consult your tax advisors for a full understanding of the tax consequences of the merger to you.
 
Q: How will Stone finance the cash component of the merger consideration?
 
A: On April 29, 2008, Stone, Bank of America, N.A. and Banc of America Securities LLC entered into a commitment letter and fee letter with respect to the financing of the merger and the related transactions. The commitment letter, which is subject to customary conditions, provides for a commitment of an aggregate of up to $700 million in financing under a three-year amended and restated revolving credit facility. Stone expects to finance the cash portion of the merger consideration, which is approximately $936 million (based on the number of outstanding shares of Bois d’Arc common stock on April 29, 2008), with its cash on hand and approximately $500 million to $600 million in borrowings under the amended and restated credit facility.


v


Table of Contents

Stone expects also to use the credit facility to pay for estimated direct merger costs, to repay and retire certain indebtedness of Bois d’Arc, and for working capital purposes. See “Financing of the Merger” beginning on page 86.
 
Q: When do Stone and Bois d’Arc expect to complete the merger?
 
A: Stone and Bois d’Arc are working to complete the merger as quickly as practicable. Stone and Bois d’Arc currently expect to complete the merger during the third quarter of 2008. However, neither Stone nor Bois d’Arc can predict the exact timing of the effective time of the merger because it is subject to certain conditions both within and beyond their respective control. See “The Merger Agreement — Conditions to the Completion of the Merger” beginning on page 69.
 
Q: Are Bois d’Arc stockholders entitled to appraisal or dissenters’ rights?
 
A: Bois d’Arc is organized under the laws of the State of Nevada. Under Nevada law, no holder of shares of Bois d’Arc common stock is entitled to appraisal or dissenter’s rights or similar rights to a court valuation of the fair value of its shares in connection with the merger because such shares are listed on the NYSE and such holder will be entitled to cash and shares of Stone common stock that will be listed on the NYSE.
 
Q: How does the Stone board of directors recommend that Stone stockholders vote?
 
A: The Stone board of directors has determined that the merger agreement is advisable and the transactions contemplated by the merger agreement, including the issuance of additional shares of Stone common stock in the merger, are in the best interests of the Stone stockholders and recommends that Stone stockholders vote FOR the proposal to approve the issuance of additional shares of Stone common stock in the merger pursuant to the merger agreement. For a more complete description of the recommendation of the Stone board of directors, see “The Merger — Recommendation of the Stone Board of Directors and Its Reasons for the Merger” beginning on page 39.
 
Q: How does the Bois d’Arc board of directors recommend that Bois d’Arc stockholders vote?
 
A: The Bois d’Arc board of directors has determined that the merger and other transactions contemplated by the merger agreement are fair to, and in the best interests of, the Bois d’Arc stockholders and recommends that Bois d’Arc stockholders vote FOR the proposal to approve the merger agreement. For a more complete description of the recommendation of the Bois d’Arc board of directors, see “The Merger — Recommendation of the Bois d’Arc Board of Directors and Its Reasons for the Merger” beginning on page 36.
 
Q: Have Bois d’Arc’s principal stockholders agreed to vote in favor of the merger?
 
A: Concurrently with the execution of the merger agreement, Stone entered into stockholder agreements with each of Comstock Resources, Inc., which is referred to as Comstock, Wayne and Gayle Laufer and Gary Blackie. As of such date, Comstock, Mr. and Mrs. Laufer and Mr. Blackie beneficially owned an aggregate of approximately 67% of the total issued and outstanding shares of Bois d’Arc common stock. During the term of the stockholder agreements, Comstock, Mr. and Mrs. Laufer and Mr. Blackie each agreed to vote their shares of Bois d’Arc common stock in favor of the merger and the approval of the merger agreement and against any transaction that would impede or delay the merger and granted Stone a proxy to vote their shares at any meeting of the stockholders of Bois d’Arc convened to consider such matters. Each of these Bois d’Arc stockholders also agreed not to violate the no-solicitation provisions of the merger agreement and to be bound by all of the restrictions and obligations of such provisions that are applicable to Bois d’Arc.
 
In addition, in its stockholder agreement, Comstock agreed to a one-year lock-up with respect to any securities of Stone that it will own upon completion of the merger, including the shares of Stone common stock that it will receive in the merger. Comstock is expected to own about 14% of the total outstanding Stone common stock upon completion of the merger. Comstock also agreed to certain restrictions on transfer of any securities of Stone that it will own upon completion of the merger during the period beginning upon the expiration of the one-year lock-up ending on the earlier of three years after the effective date of the


vi


Table of Contents

merger or such time as Comstock owns less than 5% of the outstanding voting securities of Stone. In addition, for the period beginning upon the effective date of the merger and until the earlier of three years after the effective date of the merger or such time as Comstock owns less than 5% of the outstanding voting securities of Stone, Comstock agreed not to acquire, agree to acquire or make any proposal to acquire any additional shares of Stone common stock or other securities or property of Stone or to enter into extraordinary transactions with Stone or seek to influence the management or control of Stone. In addition, Stone agreed to grant certain registration rights to Comstock.
 
Q: Do any of the directors and executive officers of Bois d’Arc have interests in the merger?
 
A: In considering the recommendation of the Bois d’Arc board of directors with respect to the merger agreement, Bois d’Arc stockholders should be aware that certain of Bois d’Arc’s directors and executive officers have interests in the transactions contemplated by the merger agreement that may be different from, in addition to, or in conflict with, the interests of Bois d’Arc stockholders generally. These interests may include, among other things:
 
• Executive officers whose employment is terminated under certain circumstances after the effective time of the merger or who elect to terminate for any reason within six months thereafter will receive severance benefits.
 
• Bois d’Arc restricted stock and stock options held by its directors and executive officers will become fully vested upon the effective time of the merger.
 
• Upon the merger, all outstanding stock options will be cancelled and the holders will receive a payment based on the determination of the value of the option as described in “The Merger — Interests of the Directors and Officers of Bois d’Arc in the Merger — Stock Options and Restricted Stock.”
 
• Certain of Bois d’Arc’s directors and executive officers are entitled to receive payments upon the effective time of the merger to make them “whole” for any excise tax liabilities arising from the accelerated vesting of their restricted stock and stock options.
 
• All current and certain former directors and officers will be indemnified by Stone with respect to their acts or omissions prior to the effective time of the merger.
 
In addition, concurrently with the execution of the merger agreement, certain key employees of Bois d’Arc, including Gary Blackie, Bois d’Arc’s President and Chief Executive Officer, entered into a participation agreement with Stone pursuant to which such employees agreed to identify and develop oil and gas prospects during the term of the agreement jointly with Stone through a newly formed entity to be wholly owned by such employees, with such agreement to be effective upon completion of the merger. Mr. Blackie and other employees intend to resign from Bois d’Arc upon completion of the merger and work for the new entity. See “The Merger — Interests of the Directors and Executive Officers of Bois d’Arc in the Merger — Participation Agreement.”
 
The Bois d’Arc board of directors was aware of these interests and considered them, among other matters, in making its recommendation. See “The Merger — Recommendation of the Bois d’Arc Board of Directors and Its Reasons for the Merger.”
 
Q: When and where is the special meeting of the Stone stockholders?
 
A: The Stone special meeting will take place on          , 2008 at 10:00 a.m., Lafayette time, at 625 E. Kaliste Saloom Road, Lafayette, Louisiana 70508.
 
Q: When and where is the special meeting of the Bois d’Arc stockholders?
 
A: The Bois d’Arc special meeting will be held on          , 2008 at 10:00 a.m., Houston time, at 600 Travis Street, Suite 5200, Houston, Texas 77002.


vii


Table of Contents

 
Q: Who can attend and vote at the special meetings?
 
A: All Stone stockholders of record as of the close of business on          , 2008, the record date for the Stone special meeting, are entitled to receive notice of and to vote at the Stone special meeting.
 
All Bois d’Arc stockholders of record as of the close of business on          , 2008, the record date for the Bois d’Arc special meeting, are entitled to receive notice of and to vote at the Bois d’Arc special meeting.
 
Q: How will Stone stockholders be affected by the merger and share issuance?
 
A: After the merger, each Stone stockholder will have the same number of shares of Stone common stock that the stockholder held immediately prior to the merger. However, because Stone will be issuing new shares of Stone common stock to Bois d’Arc stockholders in the merger, each outstanding share of Stone common stock immediately prior to the merger will represent a smaller percentage of the aggregate number of shares of Stone common stock outstanding after the merger. As a result of the merger, each Stone stockholder will own shares in a larger company with more assets.
 
Q: What do I need to do now?
 
A: After you have carefully read this joint proxy statement/prospectus and the appendices hereto, please respond by completing, signing and dating your proxy card and returning it in the enclosed postage-paid envelope or by submitting your proxy by telephone or through the Internet as soon as possible so that your shares of Stone common stock or Bois d’Arc common stock will be represented and voted at the applicable special meeting.
 
Please refer to your proxy card or the information forwarded by your broker or other nominee to see which options are available to you.
 
The Internet and telephone proxy submission procedures are designed to authenticate stockholders and to allow you to confirm that your instructions have been properly recorded.
 
The method by which you submit a proxy will in no way limit your right to vote at the Stone special meeting or Bois d’Arc special meeting if you later decide to attend the meeting in person. If your shares of Stone common stock or Bois d’Arc common stock are held in the name of a broker or other nominee, you must obtain a proxy, executed in your favor, from the holder of record, to be able to vote at the applicable special meeting.
 
All shares of Stone common stock entitled to vote and represented by properly completed proxies that are received prior to the Stone special meeting and not revoked will be voted at the Stone special meeting as instructed on the proxies. If you properly complete and sign your proxy card but do not indicate how your shares of Stone common stock should be voted on a matter, the shares of Stone common stock represented by your proxy will be voted as the Stone board of directors recommends and therefore FOR the issuance of additional shares of Stone common stock in the merger pursuant to the merger agreement.
 
All shares of Bois d’Arc common stock entitled to vote and represented by properly completed proxies that are received prior to the Bois d’Arc special meeting and not revoked will be voted at the Bois d’Arc special meeting as instructed on the proxies. If you properly complete and sign your proxy card but do not indicate how your shares of Bois d’Arc common stock should be voted on a matter, the shares of Bois d’Arc common stock represented by your proxy will be voted as the Bois d’Arc board of directors recommends and therefore FOR the adoption of the merger agreement.
 
Q: If I am a Bois d’Arc stockholder, should I send in my stock certificates with my proxy card?
 
A: No. Please DO NOT send your Bois d’Arc stock certificates with your proxy card. Promptly after the effective time of the merger, the exchange agent will send a letter of transmittal to each person who was a Bois d’Arc stockholder at the effective time of the merger. This mailing will contain instructions on how


viii


Table of Contents

to surrender certificates formerly representing shares of Bois d’Arc common stock in exchange for the merger consideration the holder is entitled to receive under the merger agreement.
 
Q: Can I change my vote after I have delivered my proxy?
 
A: Yes. You may change your vote at any time before your proxy is exercised at the Stone special meeting or the Bois d’Arc special meeting, as applicable. You can do this in any of the three following ways:
 
• by sending a written notice to the Secretary of Stone or Bois d’Arc, as applicable, in time to be received before the Stone special meeting or the Bois d’Arc special meeting, as applicable, stating that you would like to revoke your proxy;
 
• by completing, signing and dating a later proxy card or by submitting a later proxy through the Internet or by telephone, in which case your later-submitted proxy will be recorded and your earlier proxy revoked; or
 
• if you are a holder of record, by attending the special meeting and voting in person. Simply attending the Stone special meeting or Bois d’Arc special meeting without voting will not revoke your proxy or change your vote.
 
If your shares of Stone common stock or Bois d’Arc common stock are held in an account at a broker or other nominee and you desire to change your vote, you should contact such nominee.
 
Q: What should I do if I receive more than one set of voting materials for the Stone special meeting or the Bois d’Arc special meeting?
 
A: You may receive more than one set of voting materials for the Stone special meeting or the Bois d’Arc special meeting, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares of Stone common stock or Bois d’Arc common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares of Stone common stock or Bois d’Arc common stock. If you are a holder of record and your shares of Stone common stock or Bois d’Arc common stock are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive.
 
Q: If my shares of Stone common stock or Bois d’Arc common stock are held in “street name” by my broker or other nominee, will such nominee vote my shares of Stone common stock or Bois d’Arc common stock for me?
 
A: No. Without instructions from you, your broker will not be able to vote your shares. You must instruct your broker to vote your shares, following the directions your broker provides. In connection with the Stone special meeting, “broker non-votes” will be considered in determining the presence of a quorum, but will not constitute votes cast and, accordingly, will have no effect on the outcome of the Stone stockholder vote. In connection with the Bois d’Arc special meeting, “broker non-votes” will be considered in determining the presence of a quorum and will have the same effect as a vote AGAINST the approval of the merger agreement. You should therefore provide your broker or other nominee with instructions as to how to vote your shares of Stone common stock or Bois d’Arc common stock.
 
Q: Who can answer my questions?
 
A: If you have any questions about the merger or how to submit your proxy, or if you need additional copies of this joint proxy statement/prospectus, the enclosed proxy card or voting instructions, you should contact the information agent:


ix


Table of Contents

 
SUMMARY
 
The following is a summary that highlights information contained in this joint proxy statement/prospectus. This summary may not contain all of the information that is important to you. For a more complete description of the merger agreement and the transactions contemplated by the merger agreement, Stone and Bois d’Arc encourage you to carefully read this entire joint proxy statement/prospectus, including the attached annexes. In addition, Stone and Bois d’Arc encourage you to read the information incorporated by reference into this joint proxy statement/prospectus, which includes important business and financial information about Stone and Bois d’Arc that has been filed with the SEC. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find More Information; Incorporation by Reference” on page 95.
 
The Companies
 
Stone Energy Corporation.  Stone is an independent oil and natural gas company engaged in the acquisition and subsequent exploration, development, operation and production of oil and gas properties located primarily in the Gulf of Mexico. As of December 31, 2007, Stone’s oil and natural gas properties were estimated by Netherland, Sewell and Associates, Inc., or NSAI, to have proved reserves of approximately 402 billion cubic feet equivalent, or Bcfe.
 
Stone common stock is traded on the NYSE under the symbol “SGY.”
 
Stone’s principal executive offices are located at 625 E. Kaliste Saloom Road, Lafayette, Louisiana 70508, (337) 237-0410.
 
Bois d’Arc Energy, Inc.  Bois d’Arc is an independent exploration company engaged in the discovery and production of oil and natural gas in the Gulf of Mexico. Bois d’Arc was formed in July 2004 as an oil and natural gas exploration company by Comstock Resources, Inc. and Bois d’Arc Resources, Ltd. and other participants in their exploration activities. On May 11, 2005, Bois d’Arc completed its initial public offering. As of December 31, 2007, Bois d’Arc’s oil and natural gas properties were estimated by Lee Keeling and Associates, Inc., or Lee Keeling, to have proved reserves of 398 Bcfe.
 
Bois d’Arc common stock is traded on the NYSE under the symbol “BDE.”
 
Bois d’Arc’s principal executive offices are located at 600 Travis Street, Suite 5200, Houston, Texas 77002, (713) 228-0438.
 
Merger Sub.  Merger Sub is a wholly owned subsidiary of Stone and was formed as a limited liability company under the laws of the State of Delaware. Merger Sub was formed on April 28, 2008 solely for the purpose of effecting the merger. Merger Sub has not conducted any business operations other than activities incidental to its formation and in connection with the transactions contemplated by the merger agreement.
 
The principal executive offices of Merger Sub are located at 625 E. Kaliste Saloom Road, Lafayette, Louisiana 70508, (337) 237-0410.
 
The Merger (see page 27)
 
Stone and Bois d’Arc have agreed to combine their businesses pursuant to the merger agreement described in this joint proxy statement/prospectus. Under the terms of the merger agreement, Bois d’Arc will merge with and into Merger Sub, with Merger Sub surviving the merger as a wholly owned subsidiary of Stone.
 
The merger agreement is attached as Annex A to this joint proxy statement/prospectus and is incorporated by reference herein. Stone and Bois d’Arc encourage you to read the merger agreement in its entirety because it is the legal document that governs the merger.


1


Table of Contents

 
Merger Consideration (see page 65)
 
The merger agreement provides that at the effective time of the merger, each outstanding share of Bois d’Arc common stock will be converted into the right to receive 0.165 shares of Stone common stock and $13.65 in cash, without interest. The aggregate amount of cash and the total number of shares of Stone common stock to be paid and issued, respectively, pursuant to the merger agreement are fixed. Based on the number of outstanding shares of Bois d’Arc common stock on April 29, 2008, Stone will issue approximately 11.3 million shares of Stone common stock in the merger, representing approximately 29% of the shares of Stone common stock outstanding immediately prior to the merger, and will pay approximately $936 million in cash to Bois d’Arc stockholders in the merger pursuant to the merger agreement. Stone will not issue any fractional shares of its common stock in the merger. Instead, each holder of shares of Bois d’Arc common stock who would otherwise be entitled to receive a fractional share of Stone common stock pursuant to the merger will be entitled to receive a cash payment, in lieu thereof, in an amount equal to the product of (1) the average of the closing sale price of Stone common stock on the NYSE for the five trading days immediately preceding the two business days prior to the effective date of the merger and (2) the fraction of a share of Stone common stock that such holder would otherwise be entitled to receive. See “The Merger Agreement — Merger Consideration.”
 
Following the effective time of the merger, Bois d’Arc stockholders are expected to own approximately 29% of Stone on a diluted basis, based on the outstanding shares of Stone common stock and Bois d’Arc common stock on April 29, 2008.
 
Conversion of Bois d’Arc Shares; Exchange of Certificates (see page 66)
 
The conversion of shares of Bois d’Arc common stock into the right to receive the merger consideration will occur automatically at the effective time of the merger. As soon as reasonably practicable after the effective time of the merger, BNY Mellon Shareowner Services, or BNY Mellon, as exchange agent, will exchange certificates formerly representing shares of Bois d’Arc common stock for merger consideration to be received in the merger pursuant to the merger agreement. For more information on the Bois d’Arc share exchange procedures, see “The Merger Agreement — Conversion of Shares; Exchange of Certificates; Fractional Shares; Treatment of Stock Options and Restricted Stock.”
 
Treatment of Stock Options and Restricted Stock (see page 67)
 
Prior to the effective time of the merger, Bois d’Arc has agreed pursuant to the terms of the merger agreement to take all actions necessary under the Bois d’Arc long-term incentive plan to cause each holder of a Bois d’Arc stock option that is outstanding immediately prior to the effective time to be cancelled at the effective time.
 
Each cancelled Bois d’Arc stock option will be converted into the right to receive, from Stone, within two business days after the effective time of the merger, an amount of Stone common stock and cash, less any applicable withholding taxes and without interest, referred to herein as the “stock option amount,” equal to (1) the number of shares of Bois d’Arc stock subject to such option multiplied by (a) $13.65, plus (b) the value of 0.165 shares of Stone common stock multiplied by the average closing sales prices of Stone common stock as reported by The Wall Street Journal for the five trading days immediately preceding the two business days prior to the effective time of the merger, referred to herein as the “option amount stock consideration,” minus (2) the per share exercise price of such Bois d’Arc stock option. The portion of the stock option amount to be paid in cash, will be an amount equal to the quotient of (a) $13.65 divided by (b) the sum of $13.65 and the option amount stock consideration. Any applicable withholding taxes will be withheld from the cash portion of the stock option amount. The remaining portion of the stock option amount will be paid in Stone common stock based on the value of Stone common stock, as described above. No fractional shares will be issued. Cash will be paid in lieu of any fractional shares.
 
As of the effective time of the merger, all outstanding restricted shares of Bois d’Arc common stock will become fully vested. As a result, each holder of Bois d’Arc restricted stock will be treated at the effective


2


Table of Contents

time of the merger the same as, and have the same rights and be subject to the same conditions as, other Bois d’Arc stockholders.
 
Recommendation of Stone Board of Directors (see page 34)
 
The Stone board of directors has determined that the merger agreement is advisable and the transactions contemplated by the merger agreement, including the issuance of additional shares of Stone common stock in the merger, are in the best interests of the Stone stockholders, and has approved the merger agreement and the transactions contemplated by the merger agreement. The Stone board of directors recommends that Stone stockholders vote FOR the proposal to approve the issuance of additional shares of Stone common stock in the merger.
 
Recommendation of Bois d’Arc Board of Directors (see page 36)
 
The Bois d’Arc board of directors has determined that the merger agreement is advisable and the transactions contemplated by the merger agreement are fair to, and in the best interests of, the Bois d’Arc stockholders, and has adopted the merger agreement and the transactions contemplated by the merger agreement. The Bois d’Arc board of directors recommends that Bois d’Arc stockholders vote FOR the proposal to approve the merger agreement.
 
Stockholders Entitled to Vote; Vote Required (see pages 22 and 24)
 
Stone
 
Stone stockholders can vote at the Stone special meeting if they owned shares of Stone common stock at the close of business on          , 2008, which is referred to as the Stone record date. On the Stone record date, there were           shares of Stone common stock outstanding and entitled to vote at the Stone special meeting, held by approximately          stockholders of record. Stone stockholders may cast one vote for each share of Stone common stock that they owned on the Stone record date.
 
The affirmative vote of the holders of a majority of the votes cast at the special meeting, at which a quorum is present, is required to approve the issuance of additional shares of Stone common stock in the merger pursuant to the merger agreement.
 
Abstentions and broker non-votes will be counted in determining whether a quorum is present at the Stone special meeting. However, an abstention or broker non-vote will not constitute a vote cast and, accordingly, will have no effect on the outcome of the vote.
 
Your vote is very important. You are encouraged to vote as soon as possible. If you do not indicate how your shares of Stone common stock should be voted, the shares of Stone common stock represented by your properly completed proxy will be voted as the Stone board of directors recommends and therefore FOR the issuance of additional shares of Stone common stock in the merger.
 
Bois d’Arc
 
Bois d’Arc stockholders can vote at the Bois d’Arc special meeting if they owned shares of Bois d’Arc common stock at the close of business on          , 2008, which is referred to as the Bois d’Arc record date. On the Bois d’Arc record date, there were           shares of Bois d’Arc common stock outstanding and entitled to vote at the Bois d’Arc special meeting, held by approximately           stockholders of record. Bois d’Arc stockholders may cast one vote for each share of Bois d’Arc common stock that they owned on the Bois d’Arc record date.
 
The affirmative vote of the holders of a majority of the shares of Bois d’Arc common stock entitled to vote and outstanding as of the Bois d’Arc record date and present at the special meeting, either in person or by proxy, is necessary for the approval of the merger agreement.


3


Table of Contents

Abstentions and broker non-votes will be counted in determining whether a quorum is present at the Bois d’Arc special meeting. Abstentions and broker non-votes will have the same effect as a vote against the proposal to approve the merger agreement.
 
Your vote is very important. You are encouraged to vote as soon as possible. If you do not indicate how your shares of Bois d’Arc common stock should be voted, the shares of Bois d’Arc common stock represented by your properly completed proxy will be voted as the Bois d’Arc board of directors recommends and therefore FOR the adoption of the merger agreement.
 
Opinions of Financial Advisors (see pages 38 and 44)
 
Opinion of Stone’s Financial Advisor
 
In connection with the merger, Stone’s financial advisor, Tudor, Pickering, Holt & Co. Securities, Inc., which is referred to as TudorPickeringHolt, delivered a written opinion dated April 29, 2008 to the Stone board as to the fairness, from a financial point of view and as of the date of the opinion, to Stone of the consideration to be paid by Stone in the merger.
 
The full text of TudorPickeringHolt’s written opinion, dated April 29, 2008 is attached to this joint proxy statement/prospectus as Annex B. Holders of Stone common stock are encouraged to read the opinion carefully in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations on the scope of the review undertaken. TudorPickeringHolt’s opinion was provided to the Stone board of directors in connection with its evaluation of the aggregate consideration to be paid by Stone in the merger, does not address any other aspect of the proposed merger and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matter relating to the merger.
 
Opinion of Bois d’Arc’s Financial Advisor
 
Bois d’Arc engaged Raymond James & Associates, Inc., which is referred to as Raymond James, to act as one of Bois d’Arc’s financial advisors in connection with the proposed merger. On April 29, 2008, Raymond James rendered its opinion as to the fairness, from a financial point of view, as of such date and based upon and subject to certain matters stated in the opinion letter, of the consideration to be offered in the merger to Bois d’Arc’s stockholders.
 
The full text of the written opinion of Raymond James, dated April 29, 2008, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this joint proxy statement/prospectus as Annex C, and you are encouraged to read the opinion in its entirety. Raymond James’ opinion was provided for the information and assistance of Bois d’Arc’s board of directors in connection with its consideration of the merger, and the opinion does not constitute a recommendation as to how any holder of shares of Bois d’Arc common stock should vote or act on any matter relating to the merger.
 
Directors and Executive Officers of Stone After the Merger
 
The directors and executive officers of Stone prior to the merger will continue as the directors and executive officers of Stone after the merger.
 
Executive Offices of Stone After the Merger
 
The corporate headquarters of Stone after the merger will remain in Lafayette, Louisiana.
 
Ownership of Stone After the Merger
 
Based on the number of shares of Bois d’Arc common stock outstanding on April 29, 2008, Stone would issue approximately 11.3 million shares of Stone common stock in the merger, representing approximately 29% of the outstanding common stock of Stone on a diluted basis. Comstock currently owns approximately


4


Table of Contents

48.5% of Bois d’Arc’s outstanding common stock and would receive shares representing up to approximately 14% of Stone’s outstanding common stock in exchange for its shares of Bois d’Arc common stock in the merger. Comstock has entered into a stockholder agreement with Stone pursuant to which it agreed to a one-year lock-up with respect to any securities of Stone that it will own upon completion of the merger, including the shares of Stone common stock that it will receive in the merger. Comstock also agreed to certain restrictions on transfer of any securities of Stone that it will own upon completion of the merger during the period beginning upon the expiration of the one-year lock-up and ending upon the earlier of three years after the effective date of the merger and such time as Comstock owns less than 5% of the outstanding voting securities of Stone. In addition, for the period beginning upon the effective date of the merger and until the earlier of three years after the effective date of the merger or such time as Comstock owns less than 5% of the outstanding voting securities of Stone, Comstock agreed that it will not acquire, agree to acquire or make any proposal to acquire any additional shares of Stone common stock or other securities or property of Stone or enter into extraordinary transactions with Stone or seek to influence the management or control of Stone. The directors and officers of Bois d’Arc and their affiliates would receive shares representing up to approximately 5.6% of Stone’s outstanding common stock as of the effective time of the merger in exchange for their shares of Bois d’Arc common stock in the merger. See “The Merger — Stockholder Agreements.”
 
Share Ownership of Directors and Officers of Bois d’Arc
 
At the close of business on April 29, 2008, the directors and executive officers of Bois d’Arc and their affiliates, excluding Comstock, beneficially owned and were entitled to vote approximately 13.2 million shares of Bois d’Arc common stock, collectively representing approximately 19.8% of the shares of Bois d’Arc common stock outstanding and entitled to vote on that date.
 
Interests of the Directors and Executive Officers of Bois d’Arc in the Merger (see page 55)
 
In considering the recommendation of the Bois d’Arc board of directors with respect to the merger agreement, Bois d’Arc stockholders should be aware that certain of Bois d’Arc’s directors and executive officers have interests in the transactions contemplated by the merger agreement that may be different from, in addition to, or in conflict with, the interests of Bois d’Arc stockholders generally. These interests may include, among other things:
 
  •  Executive officers whose employment is terminated under certain circumstances after the effective time of the merger or who elect to terminate for any reason within six months thereafter will receive severance benefits.
 
  •  Bois d’Arc restricted stock and stock options held by its directors and executive officers will become fully vested upon the effective time of the merger.
 
  •  Upon the merger, all outstanding stock options will be cancelled and the holders will receive a payment based on the determination of the value of the option as described in “The Merger — Interests of the Directors and Officers of Bois d’Arc in the Merger — Stock Options and Restricted Stock.”
 
  •  Certain of Bois d’Arc’s directors and executive officers are entitled to receive payments upon the effective time of the merger to make them “whole” for any excise tax liabilities arising from the accelerated vesting of their restricted stock and stock options.
 
  •  All current and certain former directors and officers will be indemnified by Stone with respect to their acts or omissions prior to the effective time of the merger.
 
In addition, concurrently with the execution of the merger agreement, certain key employees of Bois d’Arc, including Gary Blackie, Bois d’Arc’s President and Chief Executive Officer, entered into a participation agreement with Stone pursuant to which such employees agreed to identify and develop oil and gas prospects during the term of the agreement jointly with Stone through a newly formed entity to be wholly owned by such employees, with such agreement to be effective upon completion of the merger. Mr. Blackie and other employees intend to resign from Bois d’Arc upon completion of the merger and work for the new


5


Table of Contents

entity. See “The Merger — Interests of the Directors and Executive Officers of Bois d’Arc in the Merger — Participation Agreement.”
 
The Bois d’Arc board of directors was aware of these interests and considered them, among other matters, in making its recommendation. See “The Merger — Recommendation of the Bois d’Arc Board of Directors and Its Reasons for the Merger.”
 
Stockholder Agreements (see page 57)
 
Concurrently with the execution of the merger agreement, Stone entered into stockholder agreements with each of Comstock, Wayne and Gayle Laufer and Gary Blackie. As of such date, Comstock, Mr. and Mrs. Laufer and Mr. Blackie beneficially owned an aggregate of approximately 67% of the total issued and outstanding shares of Bois d’Arc common stock. During the term of the stockholder agreements, each of Comstock, Mr. and Mrs. Laufer and Mr. Blackie has agreed to vote their shares of Bois d’Arc common stock in favor of the merger and the approval of the merger agreement and against any transaction that would impede or delay the merger and granted Stone a proxy to vote their shares at any meeting of the stockholders of Bois d’Arc convened to consider such matters. Each of these Bois d’Arc stockholders has also agreed not to violate the no-solicitation provisions of the merger agreement and to be bound by all of the restrictions and obligations of such provisions that are applicable to Bois d’Arc.
 
In addition, in its stockholder agreement, Comstock has agreed to a one-year lock-up with respect to any securities of Stone that it will own upon completion of the merger, including the shares of Stone common stock that it will receive in the merger. Comstock is expected to own about 14% of the total outstanding Stone common stock upon completion of the merger. Comstock also agreed to certain restrictions on transfer of any securities of Stone that it will own upon completion of the merger during the period beginning upon the expiration of the one-year lock-up and the earlier of three years after the effective date of the merger and such time as Comstock owns less than 5% of the outstanding voting securities of Stone. In addition, for the period beginning upon the effective date of the merger and until the earlier of three years after the effective date of the merger or such time as Comstock owns less than 5% of the outstanding voting securities of Stone, Comstock has agreed not to acquire, agree to acquire or make any proposal to acquire any additional shares of Stone common stock or other securities or property of Stone or to enter into extraordinary transactions with Stone or seek to influence the management or control of Stone.
 
As consideration for Comstock’s agreement to be bound by these restrictions, Stone granted Comstock certain registration rights for the shares of Stone common stock that Comstock will receive in the merger. Pursuant to these registration rights, Comstock may elect to participate in any underwritten offering conducted by Stone during the one-year lock-up period, subject to customary cut-back rights of the underwriters, and Stone will use its commercially reasonable efforts to cause a registration statement for the resale from time to time by Comstock of such shares of Stone common stock to become effective as of the expiration of the one-year lock-up period and to be continuously effective thereafter until the earlier of (i) the time that Comstock has sold all of the shares of Stone common stock received in the merger, (ii) the time that Comstock is able to sell all shares of Stone common stock received in the merger and still held by it without restriction under Rule 144(b)(i) and (iii) the date that is three years following the effective date of the merger.
 
The stockholder agreements will terminate on the first to occur of the effective time of the merger and the date that the merger agreement terminates pursuant to its terms; provided, that, if the merger is consummated, the lock-up and other restrictions and registration rights contained in the Comstock stockholder agreement described above will remain in effect after the effective date of the merger for the periods described above. See “The Merger — Stockholder Agreements.”
 
Listing of Shares of Stone Common Stock; Delisting and Deregistration of Shares of Bois d’Arc Common Stock (see page 63)
 
Stone will use its reasonable best efforts to cause the shares of Stone common stock that are issued in the merger pursuant to the merger agreement to be approved for listing on the NYSE, subject to official notice of issuance, upon the effective time of the merger. Approval of the listing on the NYSE of such shares of Stone


6


Table of Contents

common stock to be issued in the merger pursuant to the merger agreement is a condition to each party’s obligation to complete the merger. If the merger is completed, shares of Bois d’Arc common stock will be delisted from the NYSE and deregistered under the Exchange Act.
 
No Dissenter’s Rights in the Merger (see page 66)
 
Under Nevada law, no holder of shares of Bois d’Arc common stock is entitled to appraisal or dissenter’s rights or similar rights to a court valuation of the fair value of its shares in connection with the merger because such shares are listed on the NYSE and such holder will be entitled to cash and shares of Stone common stock that will be listed on the NYSE.
 
Conditions to the Completion of the Merger (see page 69)
 
A number of conditions must be satisfied or waived, where legally permissible, before the proposed merger can be consummated. These include, among others:
 
  •  approval of the merger agreement by Bois d’Arc stockholders;
 
  •  approval by Stone stockholders of the issuance of the additional shares of Stone common stock to be issued pursuant to the merger agreement;
 
  •  the expiration or termination of the waiting period (and any extension thereof) applicable to the consummation of the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, referred to as the HSR Act (which occured on June 6, 2008);
 
  •  effectiveness of the Form S-4 registration statement, of which this joint proxy statement/prospectus constitutes a part, and the absence of a stop order or proceedings for such purpose pending before or threatened by the SEC; and
 
  •  authorization for listing on the NYSE of the shares of Stone common stock issuable to the Bois d’Arc stockholders in the merger pursuant to the merger agreement, subject to official notice of issuance.
 
Neither Stone nor Bois d’Arc can give any assurance when or if all of the conditions to the merger will be either satisfied or waived or that the merger will occur as intended.
 
Regulatory Approvals Required for the Merger (see page 70)
 
The merger is subject to review under the HSR Act by the Antitrust Division of the U.S. Department of Justice, which is referred to as the Antitrust Division, and the Federal Trade Commission, which is referred to as the FTC. The waiting period imposed by the HSR Act terminated on June 6, 2008.
 
No Solicitation (see page 79)
 
Under the merger agreement, neither Stone nor Bois d’Arc is permitted:
 
  •  to initiate, solicit or knowingly encourage or facilitate any inquiries regarding or the making or submission of any other acquisition proposal;
 
  •  subject to certain exceptions, to disclose any non-public information or afford access to its properties, books or records to, or participate or engage in discussions or negotiations with, any third party that has made or is considering making such an acquisition proposal; or
 
  •  to accept an acquisition proposal or enter into any agreement, including any letter of intent (other than a confidentiality agreement in certain circumstances), that provides for or relates to an acquisition proposal or that would require or cause it to terminate the merger agreement or fail to consummate the merger.


7


Table of Contents

 
However, before receipt of the requisite approval by its stockholders, Stone or Bois d’Arc may engage in discussions or negotiations with a third party making an unsolicited, written acquisition proposal, provided that:
 
  •  the board of directors of the party receiving the acquisition proposal has determined in good faith that:
 
  —  such acquisition proposal constitutes, or is reasonably likely to lead to, a superior proposal;
 
  —  the failure to take such action would be inconsistent with its fiduciary duties to the applicable company and its stockholders; and
 
  —  the third party making such acquisition proposal has the ability to consummate such proposal; and
 
  •  the party receiving such acquisition proposal has complied with the terms of the merger agreement relating to acquisition proposals.
 
Termination of the Merger Agreement (see page 83)
 
The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger by mutual written consent of Stone and Bois d’Arc. Either party will also have the right to terminate the merger agreement upon the occurrence of any of the following:
 
  •  the failure to consummate the merger by December 31, 2008, provided that a party may not terminate upon occurrence of this event if such party’s failure to fulfill its obligations has caused or resulted in the merger not occurring before such time;
 
  •  if, prior to obtaining the necessary stockholder vote, the board of directors of Stone or Bois d’Arc, as applicable, withdraws, amends or modifies its approval, recommendation or declaration of advisability of the merger agreement or recommends, adopts, approves or publicly proposes to recommend, adopt or approve any other acquisition proposal (an “adverse recommendation change”);
 
  •  the failure to obtain the necessary stockholder approval;
 
  •  the existence of a law or regulation prohibiting the merger, or the entry of a final and nonappealable government order which permanently restrains, enjoins or prohibits consummation of the merger;
 
  •  a material breach of the other party’s representations, warranties or covenants that gives rise to a failure of certain conditions to closing or the representations and warranties of the other party are or become untrue, which untruth gives rise to a failure of certain conditions to closing (subject, in each case, to a 30-day cure period, if the breach or untruth, as applicable, is capable of being cured); or
 
  •  a material breach or failure to perform by the other party of any of its covenants or agreements contained in the merger agreement as described under “The Merger Agreement — Covenants — No Solicitation of Alternative Transactions.”
 
See “The Merger Agreement — Termination of the Merger Agreement — General.”
 
Termination Fees (see page 84)
 
Under the merger agreement, Stone may be required to pay to Bois d’Arc a termination fee of $55 million if the merger agreement is terminated under certain circumstances, and Bois d’Arc may be required to pay Stone a termination fee of $55 million if the merger agreement is terminated under certain circumstances. Each party will bear the cost of its own expenses. See “The Merger Agreement — Termination of the Merger Agreement — Termination Fees and Expenses.”
 
Certain Material U.S. Federal Income Tax Consequences of the Merger (see page 60)
 
The merger is intended to qualify as a reorganization under section 368(a) of the Internal Revenue Code for U.S. federal income tax purposes.


8


Table of Contents

Please refer to “The Merger — Certain Material U.S. Federal Income Tax Consequences” beginning on page 60 of this joint proxy statement/prospectus for a more complete discussion of the U.S. federal income tax consequences of the merger. Determining the actual tax consequences of the merger to you may be complex and will depend on your specific situation. You are urged to consult your tax advisor for a full understanding of the tax consequences of the merger to you.
 
Accounting Treatment (see page 63)
 
Stone will account for the merger using the purchase method of accounting for business combinations under U.S. generally accepted accounting principles, which are referred to herein as GAAP.
 
Payment of Dividends (see page 15)
 
Stone
 
Stone does not currently pay cash dividends on its common stock and has no intention of doing so in the near future. Stone’s present or future ability to pay dividends is governed by (1) the provisions of the Delaware General Corporation Law, (2) the indentures governing Stone’s outstanding senior notes, and (3) Stone’s bank credit facility. The provisions in the indentures pertaining to Stone’s senior notes and bank credit facility limit Stone’s ability to make restricted payments, which include dividend payments. The future payment of cash dividends, if any, on the Stone common stock is within the discretion of the Stone board of directors and will depend on Stone’s earnings, capital requirements, financial condition and other relevant factors.
 
Bois d’Arc
 
Bois d’Arc does not currently pay cash dividends on its common stock. The merger agreement generally provides that Bois d’Arc may not declare, set aside or pay any dividend prior to the effective time of the merger or the termination of the merger agreement. In addition, the provisions in Bois d’Arc’s credit agreement limit Bois d’Arc’s ability to make restricted payments, which include dividend payments.
 
Financing of the Merger (see page 86)
 
On April 29, 2008, Stone, Bank of America, N.A. and Banc of America Securities LLC entered into a commitment letter and fee letter with respect to the financing of the merger and the related transactions and the refinancing of certain of Stone’s existing debt. The commitment letter, which is subject to customary conditions, provides for a commitment of an aggregate of up to $700 million in financing under a three-year amended and restated revolving credit facility. Stone expects to finance the cash portion of the merger consideration, which is expected to be approximately $936 million (based on the outstanding shares of Bois d’Arc common stock on April 29, 2008), with cash on hand and approximately $500 million to $600 million of borrowings under the amended and restated credit facility. Stone expects also to use the credit facility to pay for estimated direct merger costs, to repay and retire certain indebtedness of Bois d’Arc, and for working capital purposes.
 
Comparison of Rights of Bois d’Arc and Stone Stockholders (see page 87)
 
As a result of the merger, all outstanding shares of Bois d’Arc common stock will be converted into shares of Stone common stock and cash. Because Bois d’Arc is a corporation organized under the laws of Nevada and Stone is a corporation organized under the laws of Delaware, there are material differences between the rights of Bois d’Arc stockholders and the rights of Stone stockholders. These differences, as well as certain differences between the charters and bylaws of Stone and Bois d’Arc, are described in detail under “Comparison of Rights of Bois d’Arc Stockholders and Stone Stockholders.”


9


Table of Contents

 
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
 
The following summary unaudited pro forma combined statements of operations data of Stone for the year ended December 31, 2007 and three months ended March 31, 2008 have been prepared to give effect to the merger as if the merger had occurred on January 1, 2007. The unaudited pro forma combined balance sheet data of Stone as of March 31, 2008 has been prepared to give effect to the merger as if the merger had occurred on March 31, 2008.
 
The following unaudited pro forma financial information is not necessarily indicative of the results that might have occurred had the transaction taken place on January 1, 2007 or March 31, 2008 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected in the following unaudited pro forma financial information because of normal production declines, changes in commodity prices, future acquisitions and divestitures, future development and exploration activities, and other factors. The following unaudited pro forma financial information should be read in conjunction with the unaudited pro forma combined financial statements and the notes thereto included elsewhere in this joint proxy statement/prospectus.
 
Statement of Operations Data:
 
                         
    Year Ended December 31, 2007  
    Stone
    Bois d’Arc
    Pro Forma
 
    Historical     Historical     Combined  
 
Operating revenue:
                       
Oil production
  $ 424,205     $ 123,895     $ 548,100  
Gas production
    329,047       231,565       560,612  
                         
Total operating revenue
    753,252       355,460       1,108,712  
                         
Operating expenses:
                       
Lease operating expenses
    149,702       56,346       206,048  
Production taxes
    9,945       2,495       12,440  
Depreciation, depletion and amortization
    302,739       112,197       521,285  
Write-down of oil and gas properties
    8,164       344       8,164  
Exploration expense
          36,040        
Accretion expense
    17,620       3,088       20,708  
Salaries, general and administrative expenses
    33,584       12,179       45,763  
Incentive compensation expense
    5,117       2,690       7,807  
Derivative expenses, net
    666             666  
                         
Total operating expenses
    527,537       225,379       822,881  
                         
Gain on Rocky Mountain Region properties divestiture
    59,825             59,825  
                         
Income from operations
    285,540       130,081       345,656  
                         
Other (income) expenses:
                       
Interest expense
    32,068       9,033       62,156  
Interest income
    (12,135 )     (512 )     (12,647 )
Other income, net
    (5,657 )     (541 )     (6,198 )
Early extinguishment of debt
    844             844  
                         
Total other expenses, net
    15,120       7,980       44,155  
                         
Income before taxes
    270,420       122,101       301,501  
                         
Income tax provision (benefit):
                       
Current
    95,579       13,717       109,296  
Deferred
    (6,595 )     29,714       (8,738 )
                         
Total income taxes
    88,984       43,431       100,558  
                         
Net income
  $ 181,436     $ 78,670     $ 200,943  
                         
Basic earnings per share
  $ 6.57     $ 1.20     $ 5.16  
Diluted earnings per share
  $ 6.54     $ 1.17     $ 5.15  
Average shares outstanding
    27,612       65,392       38,929  
Average shares outstanding assuming dilution
    27,723       67,224       39,040  
 


10


Table of Contents

                         
    Three Months Ended March 31, 2008  
    Stone
    Bois d’Arc
    Pro Forma
 
    Historical     Historical     Combined  
 
Operating revenue:
                       
Oil production
  $ 122,707     $ 43,091     $ 165,798  
Gas production
    80,526       70,175       150,701  
                         
Total operating revenue
    203,233       113,266       316,499  
                         
Operating expenses:
                       
Lease operating expenses
    30,253       14,614       44,867  
Production taxes
    1,400       824       2,224  
Depreciation, depletion and amortization
    63,387       27,683       114,926  
Exploration expense
          6,417        
Accretion expense
    4,368       685       5,053  
Salaries, general and administrative expenses
    10,256       2,606       12,862  
Incentive compensation expense
    1,018       569       1,587  
Derivative expenses, net
    259             259  
                         
Total operating expenses
    110,941       53,398       181,778  
                         
Income from operations
    92,292       59,868       134,721  
                         
Other (income) expenses:
                       
Interest expense
    3,859       1,363       9,269  
Interest income
    (4,914 )     (83 )     (4,997 )
Other income, net
    (1,041 )     (135 )     (1,176 )
                         
Total other (income) expenses, net
    (2,096 )     1,145       3,096  
                         
Income before taxes
    94,388       58,723       131,625  
                         
Income tax provision:
                       
Current
    13,950       10,282       24,232  
Deferred
    18,196       10,292       20,968  
                         
Total income taxes
    32,146       20,574       45,200  
                         
Net income
  $ 62,242     $ 38,149     $ 86,425  
                         
Basic earnings per share
  $ 2.24     $ 0.58     $ 2.21  
Diluted earnings per share
  $ 2.22     $ 0.56     $ 2.19  
Average shares outstanding
    27,819       65,782       39,136  
Average shares outstanding assuming dilution
    28,060       67,587       39,377  

11


Table of Contents

Balance Sheet Data as of March 31, 2008:
 
                         
    Stone
    Bois d’Arc
    Pro Forma
 
    Historical     Historical     Combined  
 
ASSETS
Current assets:
                       
Cash and cash equivalents
  $ 517,033     $ 13,965     $ 96,998  
Accounts receivable
    153,944       48,466       202,410  
Fair value of hedging contracts
    306             306  
Deferred tax asset
    18,296             18,296  
Other current assets
    494       4,097       4,591  
                         
Total current assets
    690,073       66,528       322,601  
Oil and gas properties — United States — full cost method of accounting:
                       
Proved, net of accumulated depletion
    949,432       893,557       2,417,676  
Unevaluated
    194,476       21,194       549,232  
Oil and gas properties — China — full cost method of accounting:
                       
Unevaluated, net of accumulated depletion
    30,328             30,328  
Building and land, net
    5,653             5,653  
Fixed assets, net
    5,277       2,761       8,038  
Other assets, net
    23,443       2,764       35,207  
Fair value of hedging contracts
    3,222             3,222  
Goodwill
                472,350  
                         
Total assets
  $ 1,901,904     $ 986,804     $ 3,844,307  
                         
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
                       
Accounts payable to vendors
  $ 95,582     $ 32,822     $ 128,404  
Undistributed oil and gas proceeds
    31,852       9,295       41,147  
Fair value of hedging contracts
    27,188             27,188  
Asset retirement obligations
    46,353             46,353  
Current income taxes payable
    13,950       10,154       24,104  
Other current liabilities
    11,353       681       12,034  
                         
Total current liabilities
    226,278       52,952       279,230  
Long-term debt
    400,000       56,000       993,988  
Deferred taxes
    114,155       191,191       624,135  
Asset retirement obligations
    201,722       45,608       245,938  
Other long-term liabilities
    8,003             8,003  
                         
Total liabilities
    950,158       345,751       2,151,294  
                         
Common stock
    279       664       392  
Treasury stock
    (860 )           (860 )
Additional paid-in capital
    522,863       504,970       1,264,017  
Retained earnings
    444,486       135,419       444,486  
Accumulated other comprehensive loss
    (15,022 )           (15,022 )
                         
Total stockholders’ equity
    951,746       641,053       1,693,013  
                         
Total liabilities and stockholders’ equity
  $ 1,901,904     $ 986,804     $ 3,844,307  
                         


12


Table of Contents

SUMMARY RESERVE INFORMATION OF STONE AND BOIS d’ARC
 
The following is a summary of Stone’s estimated proved reserves as of December 31, 2007.
 
         
    As of December 31,
 
Estimated Proved Reserves
  2007  
 
Oil (MBbls)
    31,586  
Natural gas (MMcf)
    213,083  
Equivalents (MMcfe)
    402,598  
 
All of Stone’s proved reserves as of December 31, 2007 were estimated by Netherland, Sewell & Associates, Inc., independent petroleum consultants, in accordance with guidelines established by the SEC.
 
The following is a summary of Bois d’Arc’s estimated proved reserves as of December 31, 2007.
 
         
    As of December 31,
 
Estimated Proved Reserves
  2007  
 
Oil (MBbls)
    24,632  
Natural gas (MMcf)
    250,134  
Equivalents (MMcfe)
    397,926  
 
All of Bois d’Arc’s proved reserves as of December 31, 2007 were estimated by Lee Keeling, independent petroleum consultants, in accordance with guidelines established by the SEC.
 
Stone and its independent petroleum consultants have not completed a comprehensive review of the Bois d’Arc reserves. Stone’s preliminary review of Bois d’Arc’s estimated proved reserves indicated estimated oil and natural gas reserve volumes of 335,000 MMcfe at December 31, 2007.
 
Following completion of the merger, Stone and its independent petroleum consultants intend to undertake a comprehensive review of Bois d’Arc’s reserves. Reserve engineering is a complex and subjective process of estimating underground accumulations of natural gas and oil that cannot be measured in an exact way and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, estimates prepared by one engineer may vary from those prepared by another. Upon completion of such a review, it is likely that the Stone estimate of Bois d’Arc’s reserves will be different, and those differences could be significant.


13


Table of Contents

 
UNAUDITED COMPARATIVE PER SHARE DATA
 
The following table summarizes unaudited per share data for Stone and Bois d’Arc on a historical basis, on an equivalent pro forma combined basis for Bois d’Arc and on a pro forma basis for Stone giving effect to the merger. It has been assumed for purposes of the pro forma financial information provided below that the merger was completed on January 1, 2007 for statement of operations purposes, and on March 31, 2008 for balance sheet purposes. The following information should be read in conjunction with the audited consolidated financial statements of Stone and Bois d’Arc as of and for the years ended December 31, 2007, which is incorporated by reference into this joint proxy statement/prospectus, and with the information under “Unaudited Pro Forma Combined Financial Statements” and related notes included elsewhere in this joint proxy statement/prospectus. The pro forma information presented below is for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have been achieved if the merger had been completed as of the beginning of the period presented, nor is it necessarily indicative of the future operating results or financial position of Stone after the merger.
 
                                 
                Bois d’Arc
       
    Stone
    Bois d’Arc
    Pro Forma
    Stone Pro
 
    Historical     Historical     Equivalents(2)     Forma(3)  
 
For the year ended December 31, 2007 (per share):
                               
Net income:
                               
Basic
  $ 6.57     $ 1.20     $ 0.85     $ 5.16  
Diluted
    6.54       1.17       0.85       5.15  
Dividends declared
                       
For the three months ended March 31, 2008 (per share):
                               
Net income:
                               
Basic
    2.24       0.58       0.36       2.21  
Diluted
    2.22       0.56       0.36       2.19  
Dividends declared
                       
As of March 31, 2008 (per share):
                               
Book value at period end(1)
    33.43       9.65       7.02       42.55  
 
 
(1) Book value per share is computed by dividing stockholders’ equity by the number of shares of common stock at the end of such period.
 
(2) Bois d’Arc equivalent pro forma combined per share amounts are calculated by multiplying the pro forma combined per share amounts by an exchange ratio of 0.165 shares of Stone common stock that would be exchanged for each share of Bois d’Arc common stock pursuant to the merger.
 
(3) The pro forma combined net income per share is calculated by dividing the pro forma net income by the pro forma weighted average number of shares outstanding during the period.


14


Table of Contents

 
COMPARATIVE STONE AND BOIS d’ARC
MARKET PRICE DATA AND DIVIDEND INFORMATION
 
Stone common stock is listed on the NYSE under the symbol “SGY.” Bois d’Arc common stock is listed on the NYSE under the symbol “BDE.” The table below sets forth, for the calendar quarters indicated, the high and low intraday sale prices per share of Stone common stock and Bois d’Arc common stock on the NYSE. No cash dividends have been declared on shares of Stone common stock or Bois d’Arc common stock for the calendar quarters indicated. Stone’s present or future ability to pay dividends is governed by (1) the provisions of the Delaware General Corporation Law, (2) Stone’s 81/4% Senior Subordinated Notes due 2011 and Stone’s 63/4% Senior Subordinated Notes due 2014 and (3) Stone’s bank credit facility. The provisions in the indentures pertaining to Stone’s senior subordinated notes and bank credit facility limit Stone’s ability to make restricted payments, which include dividend payments. The future payment of cash dividends, if any, on the Stone common stock is within the discretion of the Stone board of directors and will depend on Stone’s earnings, capital requirements, financial condition and other relevant factors. The merger agreement generally provides that Bois d’Arc may not declare, set aside or pay any dividend prior to the effective time of the merger or the termination of the merger agreement. As of April 29, 2008, the high and low stock price for Stone was $69.19 and $67.27, respectively, and the high and low stock price for Bois d’Arc was $27.12 and $25.82, respectively. Based on the closing price of Stone common stock on April 29, 2008 of $67.85 per share, Bois d’Arc stockholders would be entitled to receive approximately 55% of the merger consideration in cash and 45% in Stone common stock had the merger been effected on that date.
 
                                         
          Stone
    Bois d’Arc
 
          Common Stock     Common Stock  
Calendar Year
  High     Low     High     Low  
 
  2005     First Quarter   $ 52.21     $ 41.16       n/a       n/a  
        Second Quarter     51.93       40.51     $ 15.61     $ 11.50  
        Third Quarter     62.50       48.98       17.72       13.40  
        Fourth Quarter     61.75       42.00       18.00       13.58  
  2006     First Quarter     51.40       38.55       19.94       13.75  
        Second Quarter     51.50       40.12       18.89       13.78  
        Third Quarter     48.25       39.64       17.13       14.41  
        Fourth Quarter     40.19       34.71       16.76       14.10  
  2007     First Quarter     35.35       26.92       15.65       12.49  
        Second Quarter     35.60       29.03       17.94       13.01  
        Third Quarter     40.43       27.43       20.06       15.35  
        Fourth Quarter     48.53       38.59       23.64       17.88  
  2008     First Quarter     55.89       39.14       22.86       17.38  
        Second Quarter (as of June 5, 2008)     73.96       52.20       27.21       21.27  
 
Stone and Bois d’Arc urge their stockholders to obtain current market quotations for shares of Stone common stock and Bois d’Arc common stock before making any decision regarding the issuance of additional shares of Stone common stock in the merger or the approval of the merger agreement, as applicable.


15


Table of Contents

 
RISK FACTORS
 
In addition to the other information included or incorporated by reference in this joint proxy statement/prospectus, including the matters addressed under “Cautionary Statement Concerning Forward-Looking Statements,” Stone and Bois d’Arc stockholders should carefully consider the following risks before deciding how to vote. In addition, Stone and Bois d’Arc stockholders should read and consider the risks associated with the businesses of each of Stone and Bois d’Arc in deciding whether to vote to issue the shares or approve the merger agreement because these risks will relate to Stone after the merger. Certain of these risks can be found in Stone’s Annual Report on Form 10-K for the year ended December 31, 2007 and Stone’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 and in Bois d’Arc’s Annual Report on Form 10-K for the year ended December 31, 2007, as amended, which are incorporated by reference into this joint proxy statement/prospectus. You should also consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information; Incorporation by Reference.”
 
Because the market price of shares of Stone common stock will fluctuate, Bois d’Arc stockholders cannot be sure of the value of the merger consideration they will receive.
 
Upon the effective time of the merger, each share of Bois d’Arc common stock will be converted into the right to receive merger consideration consisting of shares of Stone common stock and cash pursuant to the terms of the merger agreement.
 
Because Stone is issuing a fixed number of shares of Stone common stock and a fixed amount of cash for each outstanding share of Bois d’Arc common stock, any change in the price of shares of Stone common stock prior to the effective time of the merger will affect the value of the merger consideration that Bois d’Arc stockholders will be entitled to receive upon the effective time of the merger. Based on the number of outstanding shares of Bois d’Arc common stock on April 29, 2008, Stone will issue approximately 11.3 million shares of Stone common stock in the merger, representing approximately 29% of the shares of Stone common stock outstanding immediately prior to the merger, and will pay approximately $936 million in cash to Bois d’Arc stockholders in the merger pursuant to the merger agreement.
 
Changes in the price of shares of Stone common stock may result from a variety of factors, including:
 
  •  market reaction to the announcement of the merger and market assessment of its likelihood of being consummated;
 
  •  changes in oil or natural gas prices;
 
  •  changes in the respective businesses, operations and prospects of Stone and Bois d’Arc, including Stone’s and Bois d’Arc’s ability to meet earnings estimates;
 
  •  governmental or litigation developments or regulatory considerations affecting Stone or Bois d’Arc or the industry generally; and
 
  •  general business, market, industry or economic conditions.
 
Many of these factors are beyond the control of Stone and Bois d’Arc.
 
Any delay in completing the merger may reduce the benefits expected to be obtained from the merger.
 
In addition to obtaining the required regulatory clearances and approvals, the merger is subject to a number of other conditions beyond the control of Bois d’Arc and Stone that may prevent, delay or otherwise materially adversely affect its completion. See “The Merger Agreement — Conditions to the Completion of the Merger.” Stone and Bois d’Arc cannot predict whether or when these other conditions will be satisfied. Any delay in completing the merger may materially adversely affect the synergies and other benefits that Stone and Bois d’Arc expect to achieve if the merger and the integration of their respective businesses is completed within the expected timeframe.


16


Table of Contents

Stone and Bois d’Arc will incur transaction and merger-related costs in connection with the merger.
 
Stone and Bois d’Arc expect to incur a number of non-recurring transaction fees and other costs associated with completing the merger, combining the operations of the two companies and achieving desired synergies. Additional unanticipated costs may be incurred in the integration of the businesses of Stone and Bois d’Arc. Although Stone and Bois d’Arc expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of their businesses will offset the incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all.
 
The businesses of Stone and Bois d’Arc, as well as other businesses that Stone may acquire after completion of the merger, may be difficult to integrate, disrupt Stone’s business, dilute stockholder value or divert management attention.
 
Risks with respect to the combination of Stone and Bois d’Arc, as well as other future acquisitions, include:
 
  •  difficulties in the integration of the operations and personnel of the acquired company;
 
  •  diversion of management’s attention away from other business concerns; and
 
  •  the assumption of any undisclosed or other potential liabilities of the acquired company.
 
Directors and executive officers of Bois d’Arc may have conflicts of interest in recommending that Bois d’Arc stockholders vote to approve the merger agreement.
 
Executive officers of Bois d’Arc negotiated the terms of the merger agreement, and the Bois d’Arc board of directors unanimously adopted the merger agreement and unanimously recommends that Bois d’Arc stockholders vote in favor of the proposal to approve the merger agreement. These directors and executive officers may have interests in the merger that are different than, or in addition to or in conflict with, those of Bois d’Arc stockholders. Bois d’Arc stockholders should take into account such interests when they consider the Bois d’Arc board of directors’ recommendation that they vote for approval of the merger agreement.
 
These interests may include:
 
  •  Executive officers whose employment is terminated under certain circumstances after the effective time of the merger or who elect to terminate for any reason within six months thereafter will receive severance benefits.
 
  •  Bois d’Arc restricted stock and stock options held by its directors and executive officers will become fully vested upon the effective time of the merger.
 
  •  Upon the merger, all outstanding stock options will be cancelled and the holders will receive a payment based on the determination of the value of the option as described in “The Merger — Interests of the Directors and Officers of Bois d’Arc in the Merger — Stock Options and Restricted Stock.”
 
  •  Certain of Bois d’Arc’s directors and executive officers are entitled to receive payments upon the effective time of the merger to make them “whole” for any excise tax liabilities arising from the accelerated vesting of their restricted stock and stock options.
 
  •  All current and certain former directors and officers will be indemnified by Stone with respect to their acts or omissions prior to the effective time of the merger.
 
In addition, concurrently with the execution of the merger agreement, certain key employees of Bois d’Arc, including Gary Blackie, Bois d’Arc’s President and Chief Executive Officer, entered into a participation agreement with Stone, pursuant to which such employees have agreed to identify and develop oil and gas prospects during the term of the agreement jointly with Stone through a newly formed entity to be wholly owned by such employees, with such agreements to be effective upon completion of the merger. Mr. Blackie and other employees intend to resign from Bois d’Arc upon completion of the merger and work for


17


Table of Contents

the new entity. See “The Merger — Interests of the Directors and Executive Officers of Bois d’Arc in the Merger — Participation Agreement.”
 
As a result of these interests, these directors and executive officers may be more likely to support and to vote to approve the merger agreement than if they did not have these interests. For a discussion of the interests of directors and executive officers in the merger, see “The Merger — Interests of the Directors and Executive Officers of Bois d’Arc in the Merger.”
 
In certain circumstances, the merger agreement requires payment of a termination fee of $55 million by each party to the other and, under certain circumstances, each of Stone and Bois d’Arc must allow the other party five business days to match any alternative acquisition proposal prior to any change in the Stone or Bois d’Arc board’s recommendation. These terms could affect the decisions of a third party proposing an alternative transaction to the merger, or the likelihood that such a proposal would be made at all.
 
Under the merger agreement, each of Stone and Bois d’Arc may be required to pay to the other a termination fee of $55 million if the merger agreement is terminated under certain circumstances. Should the merger agreement be terminated in circumstances under which such a termination fee is payable, the payment of this fee could have material and adverse consequences on the terminating party’s financial condition and operations. Additionally, under the merger agreement, in the event of a potential change by either the Stone or the Bois d’Arc board of directors of its recommendation with respect to the merger, each of Stone and Bois d’Arc must allow the other a five business day period to make a revised proposal, prior to which either the Stone or the Bois d’Arc board of directors may not change its recommendation with respect to the merger agreement. These terms could affect the structure, pricing and terms proposed by other parties seeking to acquire or merge with Stone or Bois d’Arc and make it more difficult for another party to make a superior acquisition proposal for Stone or Bois d’Arc. For a description of the termination rights of each party and the termination fee payable by Stone or Bois d’Arc under the merger agreement, see “The Merger Agreement — Termination of the Merger Agreement.”
 
The rights of Bois d’Arc stockholders will be governed by Delaware law and Stone’s certificate of incorporation and restated bylaws.
 
All Bois d’Arc stockholders will receive shares of Stone common stock in the merger and will become Stone stockholders; therefore their rights as stockholders will be governed by Stone’s certificate of incorporation, as amended, its restated bylaws and the Delaware General Corporation Law. As a result, there will be material differences between the current rights of Bois d’Arc stockholders, which are governed by Bois d’Arc’s articles of incorporation and bylaws and the Nevada Revised Statutes, and the rights of such holders as Stone stockholders. For more information on these differences, see “Comparison of Rights of Bois d’Arc Stockholders and Stone Stockholders.”
 
Stone’s debt level and the covenants in the current and any future agreements governing its debt could negatively impact its financial condition, results of operations and business prospects.
 
As of May 2, 2008, Stone had $400 million in outstanding indebtedness. Stone had a borrowing base under its current bank credit facility of $175 million with availability of an additional $122.2 million of borrowings as of May 2, 2008. Stone will incur additional indebtedness if the merger is consummated. In connection with the merger, Stone expects to amend and restate its current bank credit facility to increase the borrowing base thereunder to $700 million in order to fund a part of the cash portion of the merger consideration. Stone expects to borrow approximately $500 million to $600 million under the amended and restated bank credit facility for this purpose.
 
The terms of the current agreements governing Stone’s debt impose, and the terms of its future debt agreements, including the amended and restated credit facility that Stone will enter into in connection with the


18


Table of Contents

merger, will impose significant restrictions on its ability to take a number of actions that Stone may otherwise desire to take, including:
 
  •  incurring additional debt;
 
  •  paying dividends on stock, redeeming stock or redeeming subordinated debt;
 
  •  making investments;
 
  •  creating liens on its assets;
 
  •  selling assets;
 
  •  guaranteeing other indebtedness;
 
  •  entering into agreements that restrict dividends from its subsidiary to itself;
 
  •  merging, consolidating or transferring all or substantially all of its assets; and
 
  •  entering into transactions with affiliates.
 
Stone’s level of indebtedness, and the covenants contained in current and future agreements governing its debt, could have important consequences on its operations, including:
 
  •  making it more difficult for Stone to satisfy its obligations under the indentures or other debt and increasing the risk that Stone may default on its debt obligations;
 
  •  requiring Stone to dedicate a substantial portion of its 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 Stone’s ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and other general business activities;
 
  •  limiting Stone’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates;
 
  •  detracting from its ability to successfully withstand a downturn in its business or the economy generally;
 
  •  placing Stone at a competitive disadvantage against other less leveraged competitors; and
 
  •  making Stone vulnerable to increases in interest rates, because debt under its credit facility is at a variable rate.
 
Stone may be required to repay all or a portion of its debt on an accelerated basis in certain circumstances. If Stone fails to comply with the covenants and other restrictions in the agreements governing its debt, it could lead to an event of default and the acceleration of its repayment of outstanding debt. Stone’s ability to comply with these covenants and other restrictions may be affected by events beyond its control, including prevailing economic and financial conditions. Stone’s borrowing base under its bank credit facility, which is re-determined periodically, is based on an amount established by the bank group after its evaluation of its proved oil and gas reserve values. Upon a re-determination, if borrowings in excess of the revised borrowing capacity were outstanding, Stone could be forced to repay a portion of its bank debt.
 
Stone may not have sufficient funds to make such repayments. If Stone is unable to repay its debt out of cash on hand, Stone could attempt to refinance such debt, sell assets or repay such debt with the proceeds from an equity offering. Stone cannot assure you that it will be able to generate sufficient cash flow from operating activities to pay the interest on its debt or that future borrowings, equity financings or proceeds from the sale of assets will be available to pay or refinance such debt. The terms of Stone’s debt, including its credit facility and its indentures, may also prohibit Stone from taking such actions. Factors that will affect Stone’s ability to raise cash through an offering of its capital stock, a refinancing of its debt or a sale of assets include financial market conditions and its market value and operating performance at the time of such offering or other financing. Stone cannot assure you that any such offering, refinancing or sale of assets can be successfully completed.


19


Table of Contents

 
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
 
This joint proxy statement/prospectus, including information included or incorporated by reference into this joint proxy statement/prospectus, contains certain forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Generally, the words “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions identify forward-looking statements, and any statements regarding the potential benefits of the merger, or Stone’s or Bois d’Arc’s future financial condition, results of operations and business, are also forward-looking statements. Without limiting the generality of the preceding sentence, certain statements contained in the sections “The Merger — Background of the Merger,” “The Merger — Recommendation of the Stone Board of Directors and Its Reasons for the Merger” and “The Merger — Recommendation of the Bois d’Arc Board of Directors and Its Reasons for the Merger” constitute forward-looking statements.
 
These forward-looking statements appear in a number of places and include statements with respect to, among other things:
 
  •  estimates of oil and gas reserves;
 
  •  estimates of 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;
 
  •  the various risks and other factors considered by the respective boards of Stone and Bois d’Arc as described under “The Merger — Recommendation of the Stone Board of Directors and Its Reasons for the Merger” and under “The Merger — Recommendation of the Bois d’Arc Board of Directors and Its Reasons for the Merger;”
 
  •  the amount and timing of any synergies expected to result from the merger;
 
  •  outlook on oil and gas prices;
 
  •  the impact of political and regulatory developments;
 
  •  future and pro forma financial condition or results of operations and future revenues and expenses; and
 
  •  business strategy and other plans and objectives for future operations.
 
These forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond Stone’s and Bois d’Arc’s control, incident to the exploration for and development, production and marketing of oil and gas. These risks include, but are not limited to, commodity price volatility, third party interruption of sales to market, inflation, lack of availability of goods and services, environmental risks, drilling and other operating risks, tropical cyclones (including hurricanes, tropical storms and tropical depressions) and other weather conditions, regulatory changes, 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 under the caption “Risk Factors” in Stone’s Annual Report on Form 10-K for the year ended December 31, 2007 and Stone’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 and in Bois d’Arc’s Annual Report on Form 10-K for the year ended December 31, 2007, as amended.
 
Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimates depends on the quality of available data, the interpretation of such data, and price and cost assumptions made by reservoir engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered.


20


Table of Contents

Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others, the following factors:
 
  •  the ability to consummate the merger;
 
  •  difficulties and delays in obtaining regulatory approvals for the merger;
 
  •  difficulties and delays in achieving synergies and cost savings; and
 
  •  potential difficulties in meeting conditions set forth in the merger agreement.
 
Should one or more of the risks or uncertainties described above or elsewhere in Stone’s Annual Report on Form 10-K for the year ended December 31, 2007 and Stone’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 or in Bois d’Arc’s Annual Report on Form 10-K for the year ended December 31, 2007, as amended, occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements.
 
All forward-looking statements, expressed or implied, included in this joint proxy statement/prospectus are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Stone, Bois d’Arc or persons acting on their behalf may issue.
 
Except as otherwise required by applicable law, Stone and Bois d’Arc disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section. See also “Where You Can Find More Information; Incorporation by Reference.”


21


Table of Contents

 
THE STONE SPECIAL MEETING
 
Date, Time, Place and Purpose of the Stone Special Meeting
 
The special meeting of Stone stockholders will be held on          , 2008, at 10:00 a.m., Lafayette time, at 625 E. Kaliste Saloom Road, Lafayette, Louisiana 70508. The purpose of the Stone special meeting is:
 
1. to consider and vote on the proposal to approve the issuance of additional shares of Stone common stock in the merger pursuant to the merger agreement; and
 
2. to transact any other business that may properly come before the Stone special meeting or any adjournment or postponement of the Stone special meeting.
 
The Stone board of directors recommends that Stone stockholders vote FOR the proposal to issue additional shares of Stone common stock in the merger pursuant to the merger agreement. For the reasons for this recommendation, see “The Merger — Recommendation of the Stone Board of Directors and Its Reasons for the Merger.”
 
Who Can Vote at the Stone Special Meeting
 
Only holders of record of Stone common stock at the close of business on          , 2008, the Stone record date, are entitled to notice of, and to vote at, the Stone special meeting. As of that date, there were shares of Stone common stock outstanding and entitled to vote at the Stone special meeting, held by approximately           stockholders of record. Each share of Stone common stock is entitled to one vote at the Stone special meeting.
 
Vote Required for Approval; Quorum
 
The affirmative vote of the holders of a majority of the votes cast at the special meeting, at which a quorum is present, is required to approve the issuance of additional shares of Stone common stock in the merger pursuant to the merger agreement. If a Stone stockholder attends but fails to vote, or if a Stone stockholder abstains, that stockholder will be considered present in determining the presence of a quorum, but will not constitute a vote cast and, accordingly, will have no effect on the outcome of the vote.
 
The holders of a majority of the shares of Stone common stock issued and outstanding and entitled to vote as of the Stone record date, present in person or represented by proxy, will constitute a quorum at the Stone special meeting for the conduct of business.
 
Adjournments
 
If a quorum of Stone stockholders is not present in person or by proxy at the Stone special meeting, the Stone special meeting may be adjourned from time to time until a quorum is present or represented. In addition, adjournments of the Stone special meeting may be made for the purpose of soliciting additional proxies in favor of the proposal. However, no proxy that is voted against a proposal described in this joint proxy statement/prospectus will be voted in favor of adjournment of the Stone special meeting for the purpose of soliciting additional proxies.
 
Manner of Voting
 
Stone stockholders may submit their votes for or against the proposals submitted at the Stone special meeting in person or by proxy. Stone stockholders may be able to submit a proxy in the following ways:
 
  •  Internet.  Stone stockholders may submit a proxy over the Internet by going to the website listed on their proxy card. Once at the website, they should follow the instructions to submit a proxy.
 
  •  Telephone.  Stone stockholders may submit a proxy using the toll-free number listed on their proxy card. Easy-to-follow voice prompts will help Stone stockholders and confirm that their submission instructions have been followed.


22


Table of Contents

 
  •  Mail.  Stone stockholders may submit a proxy by signing, dating and returning their proxy card in the preaddressed, postage-paid envelope provided.
 
Stone stockholders should refer to their proxy cards or the information forwarded by their bank, broker or other nominee to see which options are available to them.
 
The Internet and telephone proxy submission procedures are designed to authenticate stockholders and to allow them to confirm that their instructions have been properly recorded.
 
The method by which Stone stockholders submit a proxy will in no way limit their right to vote at the Stone special meeting if they later decide to attend the meeting in person. If shares of Stone common stock are held in the name of a bank, broker or other nominee, Stone stockholders must obtain a proxy, executed in their favor, from the holder of record, to be able to vote at the Stone special meeting.
 
All shares of Stone common stock entitled to vote and represented by properly completed proxies received prior to the Stone special meeting, and not revoked, will be voted at the Stone special meeting as instructed on the proxies. If Stone stockholders do not indicate how their shares of Stone common stock should be voted on a matter, the shares of Stone common stock represented by their properly completed proxy will be voted as the Stone board of directors recommends and therefore FOR the proposal to issue additional shares of Stone common stock in the merger.
 
Revoking a Proxy
 
Stone stockholders may revoke their proxy at any time before it is exercised by timely delivering a properly executed, later-dated proxy (including over the Internet or telephone) or by voting by ballot at the Stone special meeting. Simply attending the Stone special meeting without voting will not revoke their proxy.
 
Shares Held in “Street Name”
 
If Stone stockholders hold their shares of Stone common stock in an account at a bank, broker or other nominee and they wish to vote such shares, they must return their voting instructions to the bank, broker or other nominee.
 
If Stone stockholders own shares of Stone common stock through a bank, broker or other nominee and attend the Stone special meeting, they should bring a legal proxy from their bank, broker or other nominee authorizing them to vote.
 
Brokers of Stone stockholders will NOT vote shares of Stone common stock held in “street name” unless such Stone stockholders instruct such brokers how to vote. In connection with the Stone special meeting, “broker non-votes” will be considered in determining the presence of a quorum, but will not constitute votes cast and, accordingly, will have no effect on the outcome of the Stone stockholder vote. Stone stockholders should therefore provide their brokers or other nominees with instructions as to how to vote their shares of Stone common stock.
 
Tabulation of the Votes
 
Stone has appointed BNY Mellon to serve as the Inspector of Election for the Stone special meeting. BNY Mellon will independently tabulate affirmative and negative votes and abstentions.
 
Solicitation
 
Stone will pay the cost of soliciting proxies.  Directors, officers and employees of Stone and Bois d’Arc may solicit proxies on behalf of Stone in person or by telephone, facsimile or other means.
 
In accordance with the regulations of the SEC and the NYSE, Stone also will reimburse brokerage firms and other custodians, nominees and fiduciaries for their expenses incurred in sending proxies and proxy materials to beneficial owners of shares of Stone common stock.


23


Table of Contents

 
THE BOIS d’ARC SPECIAL MEETING
 
Date, Time, Place and Purpose of the Bois d’Arc Special Meeting
 
The special meeting of Bois d’Arc stockholders will be held on          , 2008, at 10:00 a.m., Houston time, at 600 Travis Street, Suite 5200, Houston, Texas 77002. The purpose of the Bois d’Arc special meeting is:
 
1. to consider and vote on the proposal to approve the merger agreement; and
 
2. to transact any other business as may properly come before the Bois d’Arc special meeting or any adjournment or postponement of the Bois d’Arc special meeting.
 
The Bois d’Arc board of directors recommends that Bois d’Arc stockholders vote FOR the proposal to approve the merger agreement. For the reasons for this recommendation, see “The Merger — Recommendation of the Bois d’Arc Board of Directors and Its Reasons for the Merger.”
 
Who Can Vote at the Bois d’Arc Special Meeting
 
Only holders of record of Bois d’Arc common stock at the close of business on          , 2008, the Bois d’Arc record date, are entitled to notice of, and to vote at, the Bois d’Arc special meeting. As of that date, there were          shares of Bois d’Arc common stock outstanding and entitled to vote at the Bois d’Arc special meeting, held by approximately          stockholders of record. Each share of Bois d’Arc common stock is entitled to one vote at the Bois d’Arc special meeting.
 
Vote Required for Approval; Quorum
 
The affirmative vote of the holders of a majority of the shares of Bois d’Arc common stock entitled to vote at the special meeting, at which a quorum is present, is required for the approval of the merger agreement. If a Bois d’Arc stockholder fails to vote, or if a Bois d’Arc stockholder abstains, that will have the same effect as a vote against approval of the merger agreement.
 
The holders of a majority of the total number of outstanding shares of Bois d’Arc common stock entitled to vote at the special meeting and outstanding as of the Bois d’Arc record date, present in person or represented by proxy, will constitute a quorum at the Bois d’Arc special meeting for the conduct of business.
 
Adjournments
 
Although it is not currently expected, the special meeting may be adjourned if a quorum is not present at the Bois d’Arc special meeting or for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement. The chairman of the meeting or the holders of a majority of the issued and outstanding stock of the company, present in person or by proxy, at the special meeting, whether or not a quorum is present, shall have the power to adjourn such meeting from time to time. However, no proxy that is voted against the merger agreement will be voted in favor of adjournment of the Bois d’Arc special meeting for the purpose of soliciting additional proxies. If the special meeting is adjourned, notice need not be given of the date, time or place of the adjorned meeting if they are announced at the special meeting, unless the adjournment is for more than 30 days. A determination of stockholders of record entitled to notice of or to vote at the special meeting applies to an adjournment of the meeting unless the board of directors fixes a new record date for the adjourned meeting. The board of directors will fix a new record date if the meeting is adjourned to a date more than 60 days later than the date set for the special meeting. If a new record date is fixed for the adjourned meeting, Bois d’Arc will give notice of the adjourned meeting to each stockholder of record as of the new record date.


24


Table of Contents

 
Manner of Voting
 
Bois d’Arc stockholders may submit their votes for or against the proposal submitted at the Bois d’Arc special meeting in person or by proxy. Bois d’Arc stockholders may submit a proxy in the following ways:
 
  •  Internet.  Bois d’Arc stockholders may submit a proxy over the Internet by going to the website listed on their proxy card. Once at the website, they should follow the instructions to submit a proxy.
 
  •  Telephone.  Bois d’Arc stockholders may submit a proxy using the toll-free number listed on their proxy card. Easy-to-follow voice prompts will help Bois d’Arc stockholders and confirm that their submission instructions have been followed.
 
  •  Mail.  Bois d’Arc stockholders may submit a proxy by signing, dating and returning their proxy card in the preaddressed, postage-paid envelope provided.
 
Bois d’Arc stockholders should refer to their proxy cards or the information forwarded by their bank, broker or other nominee to see which options are available to them.
 
The Internet and telephone proxy submission procedures are designed to authenticate stockholders and to allow them to confirm that their instructions have been properly recorded.
 
The method by which Bois d’Arc stockholders submit a proxy will in no way limit their right to vote at the Bois d’Arc special meeting if they later decide to attend the meeting in person. If shares of Bois d’Arc common stock are held in the name of a bank, broker or other nominee, Bois d’Arc stockholders must obtain a proxy, executed in their favor, from the holder of record, to be able to vote at the Bois d’Arc special meeting.
 
All shares of Bois d’Arc common stock entitled to vote and represented by properly completed proxies received prior to the Bois d’Arc special meeting, and not revoked, will be voted at the Bois d’Arc special meeting as instructed on the proxies. If Bois d’Arc stockholders do not indicate how their shares of Bois d’Arc common stock should be voted on a matter, the shares of Bois d’Arc common stock represented by their properly completed proxy will be voted as the Bois d’Arc board of directors recommends and therefore FOR the approval of the merger agreement.
 
Revoking a Proxy
 
Bois d’Arc stockholders may revoke their proxy at any time before it is exercised by timely delivering an instrument or transmission revoking it, or a properly executed, later-dated proxy, or by attending and voting by ballot at the Bois d’Arc special meeting. Simply attending the Bois d’Arc special meeting without voting will not revoke their proxy.
 
Shares Held in “Street Name”
 
If Bois d’Arc stockholders hold shares of Bois d’Arc common stock in an account at a bank, broker or other nominee and they wish to vote, they must return their voting instructions to the bank, broker or other nominee.
 
If Bois d’Arc stockholders own shares of Bois d’Arc common stock through a bank, broker or other nominee and attend the Bois d’Arc special meeting, they should bring a legal proxy from their bank, broker or other nominee authorizing them to vote.
 
Brokers of Bois d’Arc stockholders will NOT vote shares of Bois d’Arc common stock held in “street name” unless Bois d’Arc stockholders instruct their broker how to vote. Such failure to vote will have the same effect as a vote AGAINST approval of the merger agreement. Bois d’Arc stockholders should therefore provide their brokers or other nominees with instructions as to how to vote their shares of Bois d’Arc common stock.


25


Table of Contents

 
Tabulation of the Votes
 
Bois d’Arc has appointed           to serve as the Inspector of Election for the Bois d’Arc special meeting. will independently tabulate affirmative and negative votes and abstentions.
 
Solicitation
 
Bois d’Arc will pay the cost of soliciting proxies.  Directors, officers and employees of Bois d’Arc and Stone may solicit proxies on behalf of Bois d’Arc in person or by telephone, facsimile or other means.
 
In accordance with the regulations of the SEC and the NYSE, Bois d’Arc also will reimburse brokerage firms and other custodians, nominees and fiduciaries for their expenses incurred in sending proxies and proxy materials to beneficial owners of shares of Bois d’Arc common stock.


26


Table of Contents

 
THE MERGER
 
The following is a description of the material aspects of the merger. While Stone and Bois d’Arc believe that the following description covers the material terms of the merger, the description may not contain all of the information that is important to Stone and Bois d’Arc stockholders. Stone and Bois d’Arc encourage Stone and Bois d’Arc stockholders to carefully read this entire joint proxy statement/prospectus, including the merger agreement attached to this joint proxy statement/prospectus as Annex A and incorporated by reference herein, for a more complete understanding of the merger.
 
General
 
Each of the Stone and Bois d’Arc board of directors has approved or adopted the merger agreement and the transactions contemplated by the merger agreement. In the merger, Bois d’Arc will merge with and into Merger Sub, with Merger Sub surviving the merger as a wholly owned subsidiary of Stone. Bois d’Arc stockholders will receive the merger consideration described below under “The Merger Agreement — Merger Consideration.”
 
Background of the Merger
 
During the latter half of 2006, the senior management of Bois d’Arc began to develop concerns regarding the long-term continuity of management and Bois d’Arc’s growth strategy. Bois d’Arc’s chief executive officer was approaching retirement age, and while the president was available to assume the chief executive officer role, Bois d’Arc did not have a clear plan for developing a management team beyond its two founders. In addition, senior management was of the view that Bois d’Arc’s level of staffing might not be adequate to allow Bois d’ Arc to continue its historical growth. Senior management continued to consider the alternatives available to Bois d’ Arc and began to conduct general discussions with financial advisors regarding strategic alternatives.
 
Towards the end of 2006, merger and acquisition activity by international companies and private equity funds related to Gulf of Mexico properties had increased, and Bois d’Arc was approached by two investment banks regarding possible transactions. At the end of December 2006, senior management of Bois d’Arc met with the principals of a privately held exploration and production company introduced to the company by one of the banks. However, no action resulted from this meeting.
 
In March 2007, senior management of Bois d’Arc met with the chief executive officer of a public exploration and production company to discuss a potential combination of the two companies. Again, no action resulted from this meeting.
 
On May 22, 2007, during Bois d’Arc’s regularly scheduled board meeting, the directors discussed concerns regarding Bois d’Arc’s long-term growth strategy. The directors reviewed recent merger and acquisition activity and compared the value paid for Gulf of Mexico properties to the value at which Bois d’Arc’s stock was trading. At the conclusion of the discussions, the board requested that management contact potential financial advisors to provide guidance regarding the strategic alternatives available to Bois d’Arc, including a potential sale of the company.
 
On June 1, 2007, the board of directors of Bois d’Arc held a special meeting, at which four groups of financial advisors made presentations regarding the board’s contemplated pursuit of strategic alternatives. At the conclusion of the last presentation, the board discussed the presentations and narrowed its discussion down to two of the groups that had presented. After further discussion of these groups, the board unanimously determined to pursue further discussions with Scotia Waterous and Raymond James, who had proposed a joint engagement, and authorized Roland Burns, the Chief Financial Officer of Bois d’Arc, to conduct negotiations regarding their engagement. On June 5, 2007 the board conducted a telephonic board meeting to consider, among other matters, the engagement of financial advisors, and unanimously approved the engagement of Scotia Waterous and Raymond James pursuant to the terms of an engagement letter. In addition, Raymond James was retained to provide a fairness opinion to the Bois d’Arc board on any transaction involving the sale


27


Table of Contents

of Bois d’Arc or its assets that the board would be asked to approve pursuant to the review of strategic alternatives.
 
On June 5, 2007, Bois d’Arc publicly announced that it had retained Scotia Waterous and Raymond James to evaluate and advise the board regarding strategic alternatives to enhance stockholder value, with an emphasis on the potential sale of the company.
 
On June 13, 2007, representatives of Scotia Waterous and Raymond James conducted a meeting with senior management commencing the strategic alternatives process and outlining how the process would be handled. The formal exploration of strategic alternatives commenced on July 11, 2007 with Scotia Waterous and Raymond James sending introductory letters to a list of 130 potential buyers that had been approved by Bois d’Arc. Once the process started, representatives of Scotia Waterous and Raymond James met with Bois d’Arc senior management weekly to provide a progress report on the process. Throughout the strategic alternatives process, Scotia Waterous and Raymond James were in active dialogue with numerous parties attempting to solicit interest in a potential acquisition of Bois d’Arc. In total, 22 potential buyers, including Stone, executed confidentiality agreements with Bois d’Arc. These potential buyers gained access to an online data room and were able to examine due diligence materials, which included, among other documents, certain material, non-public information regarding Bois d’Arc such as reserve reports and related information and certain financial and operations projections. During September and October 2007, ten of the potential buyers, including Stone, attended a data room presentation given by representatives of Scotia Waterous and Raymond James regarding the assets, operations, and financial performance of Bois d’Arc. Nine of these potential buyers, including Stone, also attended meetings at Bois d’Arc’s offices where they had the opportunity to review seismic data and meet with Bois d’Arc management to discuss the assets and operations of Bois d’Arc.
 
Proposals from the potential buyers were due on October 16, 2007, and on that date, representatives of Scotia Waterous and Raymond James met with senior management to provide them with a report of the proposals received. Two parties submitted written bids. Neither of these parties demonstrated the financial capability to fund the transaction immediately. One of the potential buyers submitted a revised bid that included an increase in price, but the party still had not secured financing. Stone did not submit a bid at this time, but did submit a letter indicating it had significant interest in Bois d’Arc. Bois d’Arc’s management instructed Scotia Waterous and Raymond James to continue discussions with the other parties that showed interest but failed to submit a bid, and instructed the advisors to request second round bids be submitted by November 5, 2007.
 
Between October 16, 2007 and November 5, 2007, a number of parties continued working towards potentially submitting a proposal to acquire Bois d’Arc. On October 19, 2007, Scotia Waterous and Raymond James gave Bois d’Arc’s management an update regarding these parties.
 
On November 5, 2007, the day that the second round bids were due, representatives of Scotia Waterous and Raymond James reviewed the entire process they had conducted with the full Bois d’Arc board of directors, and explained that two parties had submitted information — one a bid, and the other an indication of interest in further pursuing a transaction. The Bois d’Arc board directed Scotia Waterous and Raymond James to speak with these two parties to determine their ability to finance a transaction, their timetable, and their remaining due diligence requests, and to report back to the board the following week.
 
On November 13, 2007, Scotia Waterous and Raymond James met with the Bois d’Arc board to report on the progress and status of the second round of bidders. The party that had submitted the second round bid failed to secure adequate financing. The other party requested more time to submit a bid, but intended to do so only after receiving a reserve report on Bois d’Arc’s reserves from its own engineering consulting firm and performing additional due diligence. The Bois d’Arc board had significant concerns about the ability of this party to obtain financing necessary to consummate a transaction. As a result, there was no certainty of the time frame within which this party might submit a bid or the ability of this party to obtain financing to complete an acquisition of Bois d’Arc. The financial advisors acknowledged that there were no viable bids to acquire Bois d’Arc at this time. Based on the lack of progress made with the two parties, and the uncertainties regarding their ability to finance a transaction, the Bois d’Arc board decided to terminate the strategic alternatives process, in part because no definitive offers had been received in which a potential buyer had


28


Table of Contents

established that sufficient financing was currently available to complete a transaction. On November 13, 2007, Bois d’Arc issued a press release announcing the cessation of the strategic alternatives process.
 
On November 19, 2007, senior management of Bois d’Arc met and discussed the potential retirement of Bois d’Arc’s Chief Executive Officer. On November 21, 2007, Bois d’Arc announced that the Chief Executive Officer was retiring, effective as of November 30, 2007, and Gary W. Blackie was appointed as Bois d’Arc’s new Chief Executive Officer.
 
No significant activity regarding possible strategic alternatives for Bois d’Arc occurred during the remainder of 2007. During the time that Bois d’Arc was engaged in the publicly announced strategic alternatives process, its stock price had increased. However, its stock price declined after the announcement that the strategic alternatives process had been concluded, which made a potential transaction more feasible for certain possible bidders. Although the formal strategic alternatives process was concluded in November 2007, Scotia Waterous received permission from Bois d’Arc senior management to have preliminary conversations with additional potential buyers in January 2008. During January 2008, Scotia Waterous began discussions with five potential buyers, including Stone. Stone indicated that it was interested in pursuing a Gulf of Mexico acquisition, and was encouraged that Bois d’Arc’s board might be willing to consider accepting stock as a significant portion of the consideration for a strategic transaction. Stone indicated that it would be interested in pursuing discussions with and a review of Bois d’Arc.
 
In mid-February 2008, Scotia Waterous submitted a report to the Bois d’Arc board regarding potential buyers and developments concerning interest in Bois d’Arc. The Bois d’Arc board instructed management to direct Scotia Waterous to continue discussions with four of the potential acquirors, including Stone. Also, at that meeting, the board authorized Scotia Waterous to meet with several potential buyers in Asia to gauge their potential interest in Bois d’Arc.
 
A Scotia Waterous representative contacted David Welch, the Chief Executive Officer of Stone, about possible discussions with Bois d’Arc. A meeting was set for February 20, 2008 at Stone’s offices in Lafayette, Louisiana with Mr. Welch, Kenneth Beer, the Chief Financial Officer of Stone, Richard Smith, the Vice President of Exploration & Business Development of Stone, Gary Blackie, the Chief Executive Officer of Bois d’Arc, Mr. Burns, the Chief Financial Officer of Bois d’Arc, and a Scotia Waterous representative. At the meeting, the parties provided each other with presentations on their respective companies and discussed a potential transaction. Following the meeting, there were several follow-up telephone calls between the parties expressing an interest in a possible transaction.
 
On February 28, 2008, Mr. Welch and Mr. Beer met with M. Jay Allison, the Chairman of Bois d’Arc and Chief Executive Officer of Comstock Resources, Mr. Blackie and Mr. Burns in Dallas, Texas. Comstock Resources owned approximately 49% of the Bois d’Arc common stock, and together with the personal holdings of Messrs. Blackie, Burns and Allison, the group controlled approximately 56.5% of the Bois d’Arc common stock. The merits of a combination of the two companies were examined and all parties agreed to continue discussions relating to a potential transaction. The consideration discussed was a combination of cash and stock, with a range of 80%-55% being cash and 20% - 45% being stock.
 
Mr. Welch indicated that as part of its due diligence review, Stone required a preliminary review of Bois d’Arc’s estimated proved reserves by Stone’s independent reserve engineer, Netherland, Sewell & Associates, Inc. (“NSAI”). Mr. Blackie agreed to provide the Bois d’Arc reserve report as of December 31, 2007 and access to a few key Bois d’Arc personnel. However, both companies recognized the strict need for confidentiality so as not to impair the normal activity of Bois d’Arc. Accordingly, the number of persons involved in this preliminary evaluation remained very limited.
 
After the meeting, there were several telephone conversations between the parties highlighting the merits of a combined company. During the first week of March 2008, reserve data was provided to NSAI. On March 5, 2008, Mr. Smith met with Mr. Blackie in the Bois d’Arc offices and reviewed Bois d’ Arc’s exploration program.
 
Discussions between Scotia Waterous and the four potential buyers, including Stone, continued during February and March. In addition, during early March 2008, Scotia Waterous representatives traveled to Asia


29


Table of Contents

and met with multiple Asian parties concerning a possible transaction; however, none of these parties indicated any significant, immediate interest in Bois d’Arc.
 
On March 10, 2008, the Stone board of directors held a special meeting by teleconference and was advised by Mr. Welch that there had been preliminary discussions concerning a possible transaction with Bois d’Arc, and that Stone had received permission to conduct preliminary due diligence on Bois d’Arc’s reserves.
 
Also during March 2008, a financial advisor for a different company approached Bois d’Arc regarding a potential transaction whereby Bois d’Arc would acquire a client of the financial advisor; however, Bois d’Arc was not interested in entering into a transaction with the proposed counterparty. On March 19, 2008, another potential buyer submitted an expression of interest to acquire Bois d’Arc. Bois d’Arc then executed a confidentiality agreement with this party and gave the party access to the online data room so that it could complete its due diligence on Bois d’Arc. Bois d’Arc did not receive any further formal communication from this party. Scotia Waterous was of the opinion that this party would have difficulty financing this acquisition.
 
On March 26, 2008, a number of representatives of Stone and NSAI met with representatives of Bois d’Arc to discuss NSAI’s preliminary findings. The Bois d’Arc representatives provided additional information on their methodology used in estimating Bois d’Arc’s reserves as of December 31, 2007.
 
During a Bois d’Arc board meeting on April 3, 2008, Bois d’Arc management presented a report prepared by Scotia Waterous that contained an update on recent discussions with potential buyers, the expression of interest received on March 19, 2008 from one potential buyer, the developments with Stone, and its meetings in Asia.
 
On April 8, 2008, Mr. Allison and Mr. Welch met briefly to discuss Stone’s progress with respect to its due diligence investigation of Bois d’Arc. On April 8 and 9, 2008, a team of engineers and geoscientists from Stone met with Bois d’Arc personnel to evaluate further Bois d’Arc’s assets.
 
On April 15, 2008, the Stone board of directors held a special meeting by teleconference to discuss a possible transaction with Bois d’Arc. Mr. Welch noted that Stone was in the process of hiring TudorPickeringHolt to provide financial advisory services and provide a fairness opinion in connection with the proposed transaction. TudorPickeringHolt was selected as an advisor due to Stone’s long relationship with one of its named partners, and its strong reputation in the advisory and energy sector.
 
On April 16, 2008, Mr. Welch and Mr. Beer had a conference call with Mr. Allison and Mr. Burns to discuss possible pricing to determine whether the valuation range would be acceptable to both sides. Both companies’ share prices had experienced upward moves over the previous ten trading days, so the group tentatively agreed to use the average share price for both stocks over the previous 20 days as a starting point to determine an appropriate ratio for the stock portion of the consideration. These prices were approximately $22.75 per share for Bois d’Arc and $55.00 per share for Stone. The cash/stock ratio was proposed to be 60%/40% based on these average prices to permit a tax-deferred exchange on the stock component of the merger consideration for the Bois d’Arc stockholders. This calculated to $13.65 in cash and 0.165 shares of Stone common stock per share of Bois d’Arc common stock. The group agreed to use this formula as the tentative value when discussing the possible transaction with their respective boards of directors.
 
On April 16, 2008, Stone and Bois d’Arc executed a confidentiality agreement allowing Bois d’Arc to review Stone’s confidential information.
 
On April 16, 2008, Stone contacted Bank of America to provide a proposal to finance a portion of the cash component of the merger consideration. Discussions continued between Stone and Bank of America throughout the weekend.
 
From April 17 through April 23, 2008, the parties conducted mutual due diligence investigations.
 
On April 20, 2008, certain members of the Stone board of directors met in New Orleans, Louisiana in person and by teleconference with Messrs. Welch and Beer to discuss the status of negotiations with Bois d’Arc


30


Table of Contents

and the due diligence investigation. The meeting was not a formal board meeting, but was solely informational in nature.
 
On April 21, 2008, the Stone board of directors held a special meeting by teleconference to discuss a possible merger with Bois d’Arc. TudorPickeringHolt reviewed the benefits of a possible transaction, outlined the analyses that TudorPickeringHolt planned to conduct and described the next steps in the process.
 
On April 22 and 23, 2008, a group of engineers and geoscientists from Stone met again with Bois d’Arc representatives to further review the Bois d’Arc property base.
 
On April 23, 2008, Stone received a financing proposal from Bank of America with final approval scheduled for April 29, 2008. The proposal would provide Stone with a firm commitment from Bank of America to provide a $700 million credit facility when approved.
 
On April 23, 2008, Stone presented a draft of the agreement and plan of merger to Bois d’Arc. On April 25, 2008, Bois d’Arc forwarded to Stone its initial comments to the draft agreement.
 
On April 25, 2008, the Stone board of directors held a special meeting in New Orleans, Louisiana in person and by teleconference to discuss the possible merger with Bois d’Arc. Management updated the board of directors on the key terms for the proposed transaction and provided a summary of the ongoing due diligence process. Representatives from NSAI participated via conference call and described their process of reviewing a portion of the Bois d’Arc estimated proved reserves. NSAI had reviewed over 60% of Bois d’Arc’s estimated proved reserves, and their analysis was incorporated into Stone’s internal estimate of Bois d’Arc’s estimated proved reserves. The Stone internal figure for estimated proved reserves was approximately 335 Bcfe as compared with the year end 2007 Lee Keeling estimate of 398 Bcfe. The Stone board discussed and considered this difference.
 
Representatives from TudorPickeringHolt also attended the meeting and provided preliminary valuation analyses to the board. TudorPickeringHolt utilized a number of different valuation approaches in their analyses. The board concluded that the proposed consideration was within the preliminary valuation ranges provided by TudorPickeringHolt. A representative from the investment banking firm Johnson Rice & Company LLC also attended the meeting and participated in the discussions concerning the proposed transaction.
 
The proposed terms of the merger included obtaining the agreement of Comstock and Messrs. Blackie and Laufer to vote in favor of the proposed transaction. Certain Stone board members also suggested that Comstock agree to a one year lock up with respect to future sales of Stone common stock to be acquired in the proposed transaction. Mr. Welch discussed proposed employment arrangements with Mr. Blackie and his team following the merger. After a lengthy discussion of the proposed terms, the board recommended that Mr. Welch explore a reduction in the proposed merger consideration. The board also emphasized the importance of securing the services of Mr. Blackie and his team following the merger. The board concluded the meeting by expressing support for the proposed combination, subject to the negotiation of the final terms and conditions of the transaction.
 
After the meeting, Mr. Welch contacted Mr. Allison and expressed the board’s desire to move forward, but that the current terms might not be acceptable to the Stone board. Mr. Allison suggested that any reduction in the proposed merger consideration might not be acceptable to the Bois d’Arc board. Mr. Welch and Mr. Allison agreed to talk the following day. Representatives from Scotia Waterous and TudorPickeringHolt also had conversations to explore possible alternatives to the proposed terms.
 
On April 26, 2008, Mr. Beer contacted Mr. Allison and again expressed concern that the Stone board might not accept the current terms. Mr. Allison again suggested that any reduction in the proposed merger consideration might not be acceptable to the Bois d’Arc board. Mr. Welch then spoke with Mr. Allison and both agreed to utilize the current proposal while drafting a merger agreement. During the day, Messrs. Welch and Beer individually contacted the members of the board to gauge their interest in moving forward under the proposed terms. The Stone board members individually agreed to move forward subject to a final board meeting in which the board could have a final review of all of the terms and conditions, as well as a fairness opinion from TudorPickeringHolt.


31


Table of Contents

On April 28, 2008, representatives from Stone, Vinson & Elkins L.L.P., or Vinson & Elkins, Stone’s legal advisor, TudorPickeringHolt, Bois d’Arc, Locke Lord Bissell & Liddell LLP, or Locke Lord, Bois d’Arc’s legal advisor, Scotia Waterous, and Raymond James met in the Houston office of Vinson & Elkins to review the draft merger agreement and the stockholder agreements and resolve any outstanding issues. Mr. Welch and Mr. Blackie had a discussion on a possible cooperative post-merger structure that would align Stone and individual members of the Bois d’Arc management and technical team. The possible alternatives ranged from becoming Stone employees to a participation agreement whereby Stone would have the right to participate in any prospect generated by the group. The meeting lasted all day with a few issues left unresolved.
 
During the evening of April 28, 2008, on April 29, 2008 and in the early morning hours of April 30, 2008, Mr. Blackie and his counsel from Thompson & Knight LLP met with Mr. Welch and Mr. Andrew Gates, Senior Vice President and General Counsel of Stone, and representatives of Vinson & Elkins, and negotiated the terms of the participation agreement. Additionally, the final terms of the merger agreement were negotiated.
 
On April 29, 2008, the Stone board of directors held a special meeting by teleconference to consider the strategic business combination between Stone and Bois d’Arc. Prior to the meeting, the board of directors was provided with a substantially final draft of each of the merger agreement, the stockholder agreements and the participation agreement and other materials related to this proposed transaction. At the meeting:
 
  •  Stone management updated the board of directors on the terms of the proposed transaction and the results of the due diligence process;
 
  •  Representatives of Vinson & Elkins reviewed the terms of the proposed merger agreement, the stockholder agreements and the participation agreement and advised the board of directors of its fiduciary obligations when considering a strategic business combination with Bois d’Arc; and
 
  •  TudorPickeringHolt rendered an oral opinion (as subsequently confirmed in writing in an opinion dated April 29, 2008) that as of that date and based on and subject to the assumptions made, procedures followed, matters considered and limitations of review set forth in the opinion, the aggregate merger consideration to be paid by Stone in the merger was fair from a financial point of view to Stone (see “ — Opinion of Stone’s Financial Advisor”).
 
Following discussion, the Stone board of directors approved the merger agreement, the merger, the stockholder agreements, the participation agreement and the other transactions contemplated by the merger agreement and the issuance of Stone common stock in connection with the merger and resolved to recommend the approval by Stone stockholders of the issuance of Stone common stock in connection with the merger.
 
On April 29, 2008, the Bois d’Arc board of directors also held a special meeting primarily to discuss the status of the negotiations with Stone. All of Bois d’Arc’s directors were present, with Mr. Harris participating via teleconference. Mr. Allison served as Chairman of the meeting and discussed the history of the strategic alternatives process. He then asked representatives of Scotia Waterous and Raymond James to join the meeting. Representatives of Scotia Waterous and Raymond James made a joint presentation discussing the strategic alternatives process, the financial condition, operating history, and stock performance of each of Bois d’Arc and Stone, as well as the proposed terms of the transaction. During the presentation, representatives of Scotia Waterous and Raymond James responded to numerous questions from board members as to the financial analysis of Bois d’Arc, the financial analysis of Stone, the relative stock performances, the proposed terms of the merger and the consideration to be received by Bois d’Arc stockholders. After this initial presentation, representatives of Raymond James made the Raymond James’ fairness opinion presentation to the board. Representatives of Raymond James responded to questions from board members as to the financial analysis of Bois d’Arc, the financial analysis of Stone, the relative stock performances, the proposed terms of the merger and the proposed consideration to be received by Bois d’Arc stockholders. At the conclusion of this presentation, a representative of Raymond James presented to the board the opinion of Raymond James that the consideration to be paid under the proposed terms of the merger agreement was fair, from a financial point of view, to the Bois d’Arc stockholders.


32


Table of Contents

Mr. Allison then asked the representatives from Scotia Waterous and Raymond James to leave the meeting.
 
A representative from Locke Lord then provided the board with an overview of the material terms of the merger agreement, including, without limitation, the (i) purchase price, (ii) corporate approval process, (iii) representations, warranties and covenants included in the merger agreement, (iv) closing conditions, (v) termination provisions, including those relating to payment of a termination fee, (vi) circumstances under which the board could entertain an unsolicited competing transaction from a third party, (vii) treatment of stock options, and (viii) indemnification of Bois d’Arc’s officers and directors. The representative from Locke Lord also discussed the fiduciary obligations of the board in light of the proposed merger, including, without limitation, (i) the duty to assess the efforts undertaken by the board to explore strategic alternatives, (ii) the obligation owed by the board to evaluate the merger agreement, the merger and all related transactions on behalf of the Bois d’Arc stockholders, (iii) the duties stemming from Bois d’Arc’s right to terminate the proposed merger agreement to accept an alternative superior transaction under certain circumstances, and (iv) the obligation of the board to be fully informed and to exercise due care in its deliberations and efforts.
 
Another representative from Locke Lord joined the meeting and provided the board with a comprehensive analysis of the securities class action litigation pending against Stone. That representative then left the meeting.
 
Mr. Allison then informed the board of the arrangement being negotiated between Mr. Blackie and Stone. As part of the transaction negotiations, Stone had asserted that an important part of the transaction from its point of view was a continued relationship with Mr. Blackie and his team of geologists. Mr. Allison advised the board that the Stone board had approved the transaction only if Mr. Blackie would agree to either an employment arrangement or entering into an exploration joint venture with Stone post-merger. Mr. Allison advised the board that Mr. Blackie and his attorneys were working with Stone on a participation agreement; but that the agreement was not yet finalized.
 
As a result, the Bois d’Arc board determined that until the participation agreement was finalized and the board was advised of all the terms of such agreement, the proposed merger would not be presented to the board for a vote.
 
Nevertheless, a general discussion then ensued as to the advisability of the merger, including the factors set forth below under “— Recommendation of the Bois d’Arc Board of Directors and its Reasons for the Merger.” Mr. Allison then adjourned the meeting until such time as Mr. Blackie had finalized the participation agreement with Stone so that the board could be made fully aware of the terms of such arrangement when it voted on the merger.
 
The Bois d’Arc board meeting was reconvened several hours later, with Messrs. Allison, Burns and Blackie participating in person and Messrs. Duvieilh, Harris, Laufer, Lockett, Martin and Sledge participating via teleconference. Mr. Allison reviewed with the board in detail the terms of the proposed participation agreement between Mr. Blackie and Stone. Mr. Blackie informed the board that while the agreement was still not finalized, the terms were as Mr. Allison described and no key points remained outstanding.
 
At that point, Mr. Allison was prepared to submit the merger to a vote. Because Mr. Blackie had a personal interest in the transactions separate and apart from the interests of the Bois d’Arc stockholders through the participation agreement, he informed the board that he was recusing himself from the vote on the merger and left the meeting. Mr. Allison then gave the remaining members of the board the opportunity to discuss the merger and the participation agreement that Mr. Blackie was to enter into with Stone.
 
The board then unanimously found that after due consideration of all relevant factors (including the opinion rendered by Raymond James, but without expressly adopting its analysis), the merger agreement and the merger and related transactions were fair to and in the best interests of the Bois d’Arc stockholders, and approved and adopted the merger agreement (including for purposes of Sections 78.441 to 78.444 inclusive of the Nevada Revised Statutes) and recommended that Bois d’Arc’s stockholders vote for the approval of the merger agreement.


33


Table of Contents

On April 30, Bois d’Arc, Stone and Stone Energy Offshore executed the merger agreement and the related agreements were executed by the parties thereto. On April 30, 2008, prior to the opening of trading on the NYSE, Bois d’Arc and Stone issued press releases announcing the transaction.
 
Recommendation of the Stone Board of Directors and Its Reasons for the Merger
 
The Stone board of directors has determined that the merger is fair to, and in the best interests of, Stone and its stockholders. In deciding to approve the merger agreement and to recommend that Stone’s stockholders vote to approve the issuance of Stone common stock in connection with the merger, the Stone board of directors consulted with Stone’s management and legal and financial advisors and considered several factors, including:
 
  •  the oral opinion delivered by TudorPickeringHolt on April 29, 2008 (as subsequently confirmed in writing in an opinion dated April 29, 2008) that, as of that date and subject to the assumptions made, procedures followed, matters considered and limitations of review set forth in the opinion, the aggregate merger consideration to be paid by Stone in the merger was fair from a financial point of view to Stone;
 
  •  that the merger should be accretive to Stone’s stockholders during 2008 and 2009 with respect to earnings per share, reserves and production;
 
  •  that the combined company will be positioned as one of the largest independent Gulf of Mexico-focused exploration and production companies, which may allow it to participate in larger scale exploratory and development drilling projects and acquisition opportunities than would be available to Stone on a stand-alone basis and could reduce volatility related to large-scale deepwater projects;
 
  •  that the merger would increase Stone’s estimated proved reserves by over 85% and increase its average daily production by over 60%;
 
  •  that the reserve life of the combined company will be one year longer than the reserve life of Stone on a stand-alone basis;
 
  •  that Bois d’Arc has a strong portfolio for continued development of proved and probable reserves;
 
  •  that all of Bois d’Arc’s proved reserves and production are located in the offshore Gulf of Mexico, which should facilitate the integration of the Stone and Bois d’Arc businesses and allow for synergies in operations;
 
  •  that Stone’s existing knowledge and experience with respect to similar offshore Gulf of Mexico reservoirs should be applicable to Bois d’Arc’s assets;
 
  •  that the combined company will be significantly larger than Stone is now and, as a result, should have greater exploration and production strengths, should have greater liquidity in the market for its securities and should be able to consider future strategic opportunities that might not otherwise be possible;
 
  •  that the combined company should benefit from the prospect development efforts of key members of Bois d’Arc’s management team pursuant to the participation agreement;
 
  •  the terms of the merger agreement and the structure of the transaction, including the conditions to each party’s obligation to complete the merger;
 
  •  that the merger agreement requires Bois d’Arc to pay a termination fee of $55 million if the merger agreement is terminated in accordance with certain provisions of the merger agreement;
 
  •  the ability of Stone and Bois d’Arc to complete the merger, including their ability to obtain the necessary regulatory approvals and their obligations to attempt to obtain those approvals;
 
  •  the terms of the commitment letter from Bank of America, N.A. to finance, in part, the cash portion of the merger consideration; and


34


Table of Contents

 
  •  that the structure of the merger will constitute a reorganization under section 368(a) of the Internal Revenue Code, with the stock component of the merger consideration being tax deferred.
 
Each of these factors favored the conclusion of Stone’s board of directors that the merger is advisable and in the best interests of Stone and its stockholders. The board of directors relied on the Stone and Bois d’Arc management teams to provide accurate and complete financial information, projections and assumptions as the starting point for its analysis.
 
The Stone board of directors considered a number of additional factors concerning the merger agreement and the transactions contemplated by the merger agreement, including the merger. These factors included:
 
  •  information concerning the financial condition, results of operations, prospects and businesses of Stone and Bois d’Arc, including the respective companies’ estimated reserves, production volumes, cash flows from operations, recent performance of common stock and ratio of Stone’s common stock price to Bois d’Arc’s common stock price over various periods, as well as current industry, economic and market conditions;
 
  •  the net asset value per share of the common stock of both Stone and Bois d’Arc; and
 
  •  the results of business, legal and financial due diligence of Bois d’Arc conducted by Stone’s management and legal advisors.
 
Stone’s board of directors also considered a variety of risks and other potentially negative factors concerning the merger agreement and the transactions contemplated by the merger agreement, including the merger. These factors included:
 
  •  that there are significant risks inherent in combining and integrating two companies, including that the companies may not be successfully integrated, and that successful integration of the companies will require the dedication of significant management resources, which will temporarily detract attention from the day-to-day businesses of the combined company;
 
  •  the effects on net asset value, cash flows from operations and other financial measures under various modeling assumptions, and the uncertainties in timing with respect to some anticipated benefits of the merger;
 
  •  the risk of changes in oil and gas prices from those used to evaluate the merger, which may not be mitigated by hedging;
 
  •  that Stone’s internal estimates of Bois d’Arc’s proved reserves at year end were lower than Bois d’ Arc’s estimates;
 
  •  that the percentage of the combined company’s proved reserves attributable to the “proved undeveloped” category will increase from 20% to 28%;
 
  •  the risk that the proved undeveloped, probable and possible reserves of Bois d’Arc may never be converted to proved developed reserves;
 
  •  the risks inherent in owning properties located in the Gulf of Mexico, including the risks of future hurricanes that could damage or destroy the acquired properties;
 
  •  the increased level of indebtedness of the combined company as a result of Stone’s financing of a portion of the merger consideration;
 
  •  that the merger agreement imposes limitations on Stone’s ability to solicit offers for the acquisition of Stone as well as the possibility that Stone could be required to pay a termination fee of $55 million in certain circumstances;
 
  •  that the capital requirements necessary to achieve the expected growth of the combined company’s businesses will be significant, and there can be no assurance that the combined company will be able to fund all of its capital requirements from operating cash flows, and the fact that the combined company would have substantially more total long-term debt than Stone on a stand-alone basis;


35


Table of Contents

 
  •  that the merger might not be completed as a result of a failure to satisfy the conditions contained in the merger agreement; and
 
  •  other matters described under the caption “Risk Factors.”
 
This discussion of the information and factors considered by the Stone board of directors in reaching its conclusion and recommendations includes all of the material factors considered by the board but is not intended to be exhaustive. In view of the wide variety of factors considered by the Stone board of directors in evaluating the merger agreement and the transactions contemplated by it, including the merger, and the complexity of these matters, the Stone board of directors did not find it practicable to, and did not attempt to, quantify, rank or otherwise assign relative weight to those factors. In addition, different members of the Stone board of directors may have given different weight to different factors.
 
It should be noted that this explanation of the reasoning of the Stone board of directors and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 19 of this document.
 
The Stone board of directors determined that the merger, the merger agreement and the other transactions contemplated by the merger agreement are in the best interests of Stone and its stockholders. Accordingly, the Stone board of directors approved and adopted the merger agreement and recommends that Stone stockholders vote “FOR” approval of the issuance of Stone common stock in the merger.
 
Recommendation of the Bois d’Arc Board of Directors and Its Reasons for the Merger
 
By unanimous vote (with Mr. Blackie recusing himself) at a meeting held April 29, 2008, the board of directors of Bois d’Arc determined that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interests of the Bois d’Arc stockholders and adopted the merger agreement and the transactions contemplated thereby, including the merger. The Bois d’Arc board of directors unanimously recommends that Bois d’Arc stockholders vote FOR the proposal to approve the merger agreement at the Bois d’Arc special meeting.
 
In reaching its decision to approve the merger, Bois d’Arc’s board of directors consulted with legal and financial advisors and considered a number of factors, including the following:
 
First, the Bois d’Arc board considered:
 
  •  the $13.65 in cash and 0.165 shares of Stone common stock to be paid to the Bois d’Arc stockholders for each share of Bois d’Arc common stock as consideration in the merger, which, as of April 29, 2008, had a market value of $24.85 and represented a 16% premium to the closing price of Bois d’Arc as of March 31, 2008 (four weeks prior to April 29, 2008), and a 14% premium to the closing price of Bois d’Arc as of March 3, 2008 (eight weeks prior to April 29, 2008), but a 4% discount to the Bois d’Arc closing price on April 29, 2008; and
 
  •  that the merger is the result of an active sale process in which Bois d’Arc, through Scotia Waterous and Raymond James, had initial contact with approximately 130 parties.
 
Then the Bois d’Arc board considered a number of factors in favor of the merger, including the following:
 
  •  the fact that, as of April 29, 2008, approximately 55% of the merger consideration to be received by the Bois d’Arc stockholders will be cash;
 
  •  the fact that the stock component of the merger consideration will be tax deferred;
 
  •  the financial and other terms and conditions of the merger agreement and the fact that such terms and conditions were the product of arm’s-length negotiations between the parties;
 
  •  the board’s belief that the merger is more favorable to the Bois d’Arc stockholders than any other alternative reasonably available to the company and the Bois d’Arc stockholders, including the


36


Table of Contents

  alternative of remaining a stand-alone, independent company, as well as the risks and uncertainties associated with those alternatives;
 
  •  the financial presentations (including the assumptions and methodologies underlying the analysis in connection therewith) and the fairness opinion by Raymond James that, as of April 29, 2008, the merger consideration is fair to the Bois d’Arc stockholders from a financial point of view;
 
  •  historical and current information concerning each of Bois d’Arc’s and Stone’s business, financial performance and condition, operations, technology, management and competitive position, including the pending litigation against Stone; and current industry, economic and market conditions, including Bois d’Arc’s prospects if it were to remain an independent company;
 
  •  the terms of the merger agreement, including without limitation:
 
  the limited number and nature of the conditions to Stone’s and its subsidiary’s obligation to consummate the merger and the limited risk of non-satisfaction of such conditions (including, in particular, the absence of any financing condition);
 
  the provisions of the merger agreement that allow the board, under certain limited circumstances if required to comply with its fiduciary duties under applicable law, to change its recommendation that the Bois d’Arc stockholders vote in favor of the approval of the merger agreement;
 
  the provisions of the merger agreement that allow the company, under certain limited circumstances if required by the board to comply with its fiduciary duties under applicable law, to furnish information to and enter into discussions with third parties;
 
  the provisions of the merger agreement that provide the board the ability to terminate the merger agreement in order to accept a financially superior proposal (subject to certain conditions contained in the merger agreement, including the payment to Stone of a $55.0 million termination fee);
 
  the provisions of the merger agreement providing that Bois d’Arc would be entitled to receive a $55.0 million termination fee in the event Stone terminated the merger agreement in certain circumstances;
 
  •  the conclusion of the board that the $55.0 million termination fee payable to Stone (and the circumstances when such fee is payable), in the event that the merger agreement is terminated under certain circumstances, was reasonable in light of the benefits of the merger and the sale process conducted by Bois d’Arc with the assistance of Scotia Waterous and Raymond James;
 
  •  the advice received by the Bois d’Arc board from Scotia Waterous and Raymond James, as financial advisors, and Locke Lord, as legal advisor, each of which has extensive experience in transactions similar to the merger; and
 
  •  the fact that the completion of the merger requires the approval of the holders of a majority of Bois d’Arc’s common stock entitled to vote and outstanding as of the Bois d’Arc record date and present at the special meeting.
 
The board also considered a variety of risks and other countervailing factors, including:
 
  •  the risk that the merger might not be completed in a timely manner or at all;
 
  •  the fact that, upon completion of the merger, Bois d’Arc will no longer exist as an independent, publicly traded company and the Bois d’Arc stockholders will only participate in the future earnings or growth of Stone and will therefore only indirectly benefit from any appreciation in the value of Bois d’Arc;
 
  •  the restrictions on the conduct of Bois d’Arc’s business prior to the completion of the merger, requiring Bois d’Arc to conduct its business only in the ordinary course, subject to specific limitations, which may delay or prevent Bois d’Arc from undertaking drilling opportunities that may arise pending completion of the merger; and


37


Table of Contents

 
  •  the restrictions on Bois d’Arc’s ability to solicit or engage in discussions or negotiations with a third party regarding specified transactions involving Bois d’Arc and the requirement that Bois d’Arc pay Stone a $55.0 million termination fee in order for the board to accept a superior proposal.
 
After taking into account all of the factors set forth above, as well as others, the board of directors agreed that the benefits of the merger outweighed the risks and that the merger agreement, the merger and the related transactions contemplated by the merger agreement are fair to and in the best interests of the Bois d’Arc stockholders. The board of directors has approved and adopted the merger agreement and recommends that the Bois d’Arc stockholders vote to approve the merger agreement at the special meeting. The board of directors did not assign relative weights to the above factors or the other factors considered by it. In addition, the board of directors did not reach any specific conclusion on each factor considered, but conducted an overall analysis of these factors. Individual members of the board of directors may have given different weights to different factors.
 
It should be noted that this explanation of the reasoning of the Bois d’Arc board of directors and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Cautionary Statement Concerning Forward-Looking Statements.”
 
Opinion of Stone’s Financial Advisor
 
Stone engaged TudorPickeringHolt to act as its financial advisor in connection with the merger on April 15, 2008. On April 29, 2008, TudorPickeringHolt rendered its oral opinion to the board of directors of Stone (as subsequently confirmed in writing in an opinion dated April 29, 2008), that, as of that date, the aggregate merger consideration agreed to be paid by Stone in the merger was fair to Stone from a financial point of view.
 
The full text of TudorPickeringHolt’s opinion dated April 29, 2008, is included as Annex B to this joint proxy statement/prospectus. Holders of Stone’s common stock are encouraged to read TudorPickeringHolt’s opinion carefully in its entirety for a description of the assumptions made, procedures followed, factors considered and limitations on the review undertaken by TudorPickeringHolt in rendering its opinion. TudorPickeringHolt provided its opinion for the information and assistance of Stone’s board of directors in connection with its consideration of the merger. The following is a summary of TudorPickeringHolt’s opinion and the methodology that TudorPickeringHolt used to render its opinion. This summary is qualified in its entirety by reference to the full text of the opinion.
 
TudorPickeringHolt’s opinion and its presentation to the board of directors of Stone were among many factors taken into consideration by the board of directors of Stone in approving the merger agreement and making its recommendation regarding the merger.
 
In connection with rendering its opinion and performing its related financial analysis, TudorPickeringHolt reviewed, among other things:
 
  •  the merger agreement;
 
  •  annual reports to stockholders and annual reports on Form 10-K of Stone for the five years ended December 31, 2007;
 
  •  annual reports to stockholders and annual reports on Form 10-K of Bois d’Arc for the three years ended December 31, 2007;
 
  •  certain interim reports to stockholders and quarterly reports on Form 10-Q of Stone and Bois d’Arc;
 
  •  certain other communications from Stone and Bois d’Arc to their respective stockholders;
 
  •  the estimated proved, probable and possible reserve report for Stone effective December 31, 2007, prepared by Netherland, Sewell & Associates, Inc., an independent engineering firm;
 
  •  the estimated proved reserve report for Bois d’Arc effective December 31, 2007, prepared by Lee Keeling and Associates, Inc., an independent engineering firm;


38


Table of Contents

 
  •  the estimated proved and probable reserves of Bois d’Arc as of December 31, 2007, as estimated by Stone;
 
  •  certain financial and estimated reserve and production information and forecasts for Stone and Bois d’Arc prepared by the management of Stone (the “Forecasts”);
 
  •  certain publicly available research analyst reports with respect to the future financial performance of Stone and Bois d’Arc, which TudorPickeringHolt discussed with the senior management of Stone; and
 
  •  a commitment letter from Bank of America, N.A. for a senior secured revolving credit facility with an initial borrowing base of $700,000,000.
 
TudorPickeringHolt also held discussions with members of the senior managements of Stone and Bois d’Arc regarding their assessment of the strategic rationale for, and the potential benefits of, the merger and the past and current business operations, financial condition and future prospects of their respective entities. In addition, TudorPickeringHolt reviewed the reported price and trading activity for Stone’s common stock and Bois d’Arc’s common stock, compared certain financial and stock market information for Stone and Bois d’Arc with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the exploration and production industry specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as TudorPickeringHolt considered appropriate.
 
For purposes of the opinion, TudorPickeringHolt assumed and relied upon the accuracy and completeness of all of the financial, accounting, legal, tax and other information discussed with or reviewed by or for TudorPickeringHolt, or publicly available. TudorPickeringHolt has not independently verified such information, and TudorPickeringHolt has further relied upon the assurances of management of Stone that they are not aware of any facts or circumstances that would make such information inaccurate or misleading. In that regard, TudorPickeringHolt has assumed with Stone’s consent that the Forecasts have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of Stone. TudorPickeringHolt has also assumed that all governmental, regulatory or other consents or approvals necessary for the consummation of the merger will be obtained without any material adverse effect on Stone or Bois d’Arc, the holders of Stone common stock or the merger, and that the merger will be consummated in accordance with the terms of the agreement without waiver of any of the conditions precedent contained therein. Further, TudorPickeringHolt has assumed Stone will obtain financing consistent with the commitment letter it has provided to TudorPickeringHolt.
 
In addition, TudorPickeringHolt has not made an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Stone or any of its subsidiaries or Bois d’Arc or any of its subsidiaries and TudorPickeringHolt has not been furnished with any such evaluation or appraisal.
 
TudorPickeringHolt’s opinion is necessarily based upon economic, monetary, market and other conditions as in effect on, and the information made available to it as of, April 29, 2008. TudorPickeringHolt has disclaimed any undertaking or obligation to update, revise or reaffirm its opinion or to advise any person of any change in any matter affecting its opinion which may be brought to its attention after the date of its opinion.
 
The estimates contained in TudorPickeringHolt’s analysis and the results from any particular analysis are not necessarily indicative of future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the value of businesses or assets neither purports to be appraisals nor do they necessarily reflect the prices at which businesses or assets may actually be sold. Accordingly, TudorPickeringHolt’s analysis and estimates are inherently subject to substantial uncertainty.
 
In arriving at its opinion, TudorPickeringHolt did not attribute any particular weight to any particular analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Several analytical methodologies were employed by TudorPickeringHolt in its analyses, and no one single method of analysis should be regarded as critical to the overall conclusion reached


39


Table of Contents

by TudorPickeringHolt. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques. Accordingly, TudorPickeringHolt believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it, without considering all analyses and factors in their entirety could create a misleading or incomplete view of the evaluation process underlying its opinion. The conclusion reached by TudorPickeringHolt, therefore, is based on the application of TudorPickeringHolt’s own experience and judgment to all analyses and factors considered by TudorPickeringHolt, taken as a whole.
 
TudorPickeringHolt’s opinion relates solely to the fairness from a financial point of view to Stone of the merger consideration to be paid as contemplated by the merger agreement. TudorPickeringHolt’s opinion was provided for the information and assistance of the board of directors of Stone in connection with its consideration of the merger agreement and the merger, and does not constitute a recommendation to any holder of Stone common stock, or any other holder of interests in Stone, as to how such holder should vote on the merger.
 
TudorPickeringHolt’s opinion does not address the relative merits of the merger as compared to any alternative business transaction or strategic alternative that might be available to Stone, nor does it address the underlying business decision of Stone to engage in the merger. TudorPickeringHolt does not express any view on, and its opinion does not address, any other term or aspect of the merger agreement or the merger, including, without limitation, the fairness of the merger to, or any consideration received in connection therewith by, creditors or other constituencies of Stone or Bois d’Arc; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Stone or Bois d’Arc, or any class of such persons, in connection with the merger. TudorPickeringHolt has not been asked to consider, and its opinion does not address, the price at which Stone’s common stock will trade at any time. TudorPickeringHolt is not rendering any legal or accounting advice and understands Stone is relying on its legal counsel and accounting advisors as to legal and accounting matters in connection with the merger.
 
The data and analysis summarized herein is from TudorPickeringHolt’s presentation to the board of directors of Stone delivered on April 29, 2008, which primarily utilized data from market closing prices as of April 29, 2008.
 
Valuation Analyses Used to Estimate the Value of Bois d’Arc’s Common Shares in Comparison to the Merger Consideration Paid
 
The merger consideration to be paid by Stone to stockholders of Bois d’Arc’s common stock will be 0.165 shares of Stone’s common stock and $13.65 in cash for each outstanding Bois d’Arc share. Based on the last trading price of Stone’s common stock of $67.85 on April 29, 2008, the value of the merger consideration to be paid was $24.85 per outstanding Bois d’Arc share. TudorPickeringHolt analyzed the merger in accordance with the following methodologies: comparable transaction analysis, comparable company analysis, net asset valuation analysis, and the pro forma impact of the merger to Stone. Each of these methodologies was used to generate a reference enterprise value range for Bois d’Arc. The enterprise value range was adjusted for appropriate on-and off-balance sheet assets and liabilities as of March 31, 2008, to arrive at a common equity value range (in aggregate dollars). The equity value range was used to derive implied equity value per share of common equity for Bois d’Arc, which was then compared to the merger consideration agreed to in the merger agreement. The value per Bois d’ Arc common share, derived using the various valuation methodologies listed, and the analysis of the pro forma impact of the merger to Stone supported the conclusion that the merger consideration agreed to be paid by Stone in the merger was fair to Stone from a financial point of view.
 
In applying the various valuation methodologies to Bois d’Arc’s business, operations and prospects, and the particular circumstances of the merger, TudorPickeringHolt made qualitative judgments as to the significance and relevance of each analysis. In addition, TudorPickeringHolt made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Bois d’Arc. Accordingly, the methodologies and the implied value of Bois d’Arc’s common shares set forth in the analyses below must be considered as a whole and in the context of the narrative description of the financial analyses, including the assumptions underlying these analyses.


40


Table of Contents

Considering the implied value of Bois d’Arc’s common shares in comparison to the value of the merger consideration to be paid by Stone set forth in the tables without considering the full narrative description of the financial analyses, including the assumptions underlying these analyses, could create a misleading or incomplete view of the process underlying, and conclusions represented by, TudorPickeringHolt’s opinion. For purposes of its analysis, TudorPickeringHolt defined EBITDAX as net income plus income taxes, interest expense (less interest income), depreciation, amortization and exploration expense.
 
Comparable Transaction Analysis
 
TudorPickeringHolt conducted a comparable transactions analysis to assess how similar transactions were valued. TudorPickeringHolt reviewed certain publicly available information on selected corporate and asset level exploration and production transactions it deemed comparable to Bois d’Arc, in whole or in part. The transactions included:
 
  •  Contango Oil & Gas Co./ Undisclosed Sellers
 
  •  Korea National Oil Corporation and Samsung Corporation/ Taylor Energy Company LLC
 
  •  Mariner Energy, Inc. / StatoilHydro ASA
 
  •  Petsec Energy Ltd. / LLOG Exploration Co.
 
  •  McMoRan Exploration Co. / Newfield Exploration Co.
 
  •  Energy XXI (Bermuda) Limited/ Pogo Producing Co.
 
  •  Itochu Corp. / Range Resources Corp.
 
  •  Coldren Resources LP / Noble Energy Incorporated
 
  •  Apache Corp. / BP plc
 
  •  Merit Energy Corp. / The Houston Exploration Company
 
  •  Cal Dive International, Inc. / Remington Oil and Gas Corporation
 
  •  W&T Offshore, Inc. / Kerr-McGee Corp.
 
  •  Norsk Hydro ASA / Spinnaker Exploration Co.
 
  •  Mariner Energy, Inc. / Forest Oil Corporation
 
For the comparable transactions analysis, relevant transaction multiples were analyzed including:
 
  •  the transaction value (defined as the equity purchase price plus assumed net debt obligations, if any) over proved reserves; and
 
  •  the transaction value over daily production.
 
The observed multiple ranges from the comparable transaction analysis as compared to the resulting implied transaction multiples resulting from the proposed merger consideration are summarized below:
 
                 
    Transaction Value/
  Transaction Value/
    Proved Reserves
  Daily Production
    (Mcfe)   (Mcfe/d)
 
High
  $ 6.90     $ 17,797  
Median
    3.87       7,640  
Low
    3.17       3,574  
Merger Consideration
  $ 5.19     $ 15,051  
 
Comparable Company Analysis
 
TudorPickeringHolt conducted a publicly traded comparable companies analysis to assess how similar companies were valued. TudorPickeringHolt reviewed the public stock market trading multiples for the


41


Table of Contents

following exploration and production companies, which TudorPickeringHolt selected because their businesses and operating profiles are reasonably similar to that of Bois d’Arc:
 
  •  ATP Oil & Gas Corporation
 
  •  Callon Petroleum Company
 
  •  Energy Partners, Ltd.
 
  •  Energy XXI (Bermuda) Limited
 
  •  Mariner Energy, Inc.
 
  •  McMoRan Exploration Co.
 
  •  Stone Energy Corporation
 
  •  W&T Offshore, Inc.
 
As part of its comparable company analysis, TudorPickeringHolt calculated and analyzed Bois d’Arc’s and each comparable company’s enterprise value (sum of the market value of common equity, total debt, book value of preferred stock and minority interest minus cash) multiples of certain historical and projected financial and operating criteria including:
 
  •  Enterprise value / proved reserves
 
  •  Enterprise value / daily production
 
  •  Enterprise value / estimated 2008 EBITDAX using Wall Street equity research consensus estimates
 
  •  Enterprise value / estimated 2008 EBITDAX using estimates provided by Stone management adjusted for Wall Street research consensus commodity price estimates
 
The observed multiple ranges from the comparable company analysis as compared to the resulting implied transaction multiples resulting from the proposed merger consideration are summarized below:
 
                                 
    2008 EBITDAX     Proved
    Daily
 
    Consensus
    Management
    Reserves
    Production
 
    Estimates     Estimates     (Mcfe)     (Mcfe/d)  
 
High
    5.0 x     5.0 x   $ 8.35     $ 13,547  
Median
    3.9 x     3.9 x     4.37       10,071  
Low
    3.1 x     3.1 x     3.10       6,942  
Merger Consideration
    5.2 x     4.2 x   $ 5.19     $ 15,051  
 
Net Asset Valuation Analysis
 
TudorPickeringHolt performed an illustrative net asset value analysis of Bois d’Arc. TudorPickeringHolt calculated the present value of the pre-tax future cash flows that Bois d’Arc could be expected to generate from its existing base of estimated proved reserves, probable reserves, and drilling prospect inventory (“Risked Drilling Program”) as of January 1, 2008, as provided by Stone management. TudorPickeringHolt estimated Bois d’Arc’s net asset value by adding (i) the present value of the pre-tax cash flows generated by these estimated proved and probable reserves and the Risked Drilling Program, less (ii) the present value of future general and administrative expenditures based on discussions with the management teams of Stone and Bois d’Arc, less (iii) the expected income taxes to be paid, less (iv) other corporate obligations including net debt (total debt less cash). All cash flows were discounted at a rate of 8 to 10%. The commodity price deck utilized to derive the cash flows through 2012 was based on the NYMEX forward curve on April 29, 2008.


42


Table of Contents

The commodity price deck utilized to derive cash flows in 2013 and beyond (“Tail Price”) was based on $7.00 / MMBtu for natural gas and $70.00 / Bbl for oil. The price deck is summarized below:
 
                 
Year
  Gas (per MMbtu)   Oil (per Bbl)
 
2008
  $ 10.43     $ 109.85  
2009
    10.30       109.13  
2010
    9.59       106.49  
2011
    9.38       105.65  
2012
    9.27       105.50  
Thereafter (Tail Price)
    7.00       70.00  
 
TudorPickeringHolt sensitized commodity price assumptions, the credit given to the Risked Drilling Program, drilling costs and operating costs. For select sensitivities, TudorPickeringHolt used (i) NYMEX forward curve pricing for 2008 and then held the Tail Price flat at $7.00 — $9.00 / MMBtu for natural gas and $70.00 — $90.00 / Bbl for oil for 2009 and beyond; and (ii) an increase of 25% and a decrease of 25% to the credit given to the Risked Drilling Program. Taken together, the foregoing sensitivities, at a 9% discount rate, resulted in an implied Bois d’Arc common stock valuation of $18.71 — $30.84 per share as compared to the value of the merger consideration of $24.85 on April 29, 2008.
 
Pro Forma Merger Consequences Analysis
 
TudorPickeringHolt analyzed the pro forma impact of the merger on Stone’s projected 2008 and 2009 discretionary cash flow per share. TudorPickeringHolt prepared a pro forma merger model including estimated transaction costs and pro forma capitalization based on (i) financial projections provided by the Stone management team, and (ii) Factset consensus estimates as of April 29, 2008. TudorPickeringHolt compared the discretionary cash flow per share of Stone on a standalone basis to the discretionary cash flow per share pro forma for the merger. TudorPickeringHolt noted that the merger is expected to be accretive to discretionary cash flow per share in 2008 and 2009.
 
TudorPickeringHolt also analyzed the pro forma impact of the merger on Stone’s estimated net asset value per share. TudorPickeringHolt prepared a pro forma net asset value per share model consistent with the methodology outlined in the Net Asset Valuation Analysis summary and also included estimated transaction costs and pro forma capitalization.
 
TudorPickeringHolt compared the net asset value per share of Stone on a stand-alone basis to the net asset value per share pro forma for the merger across the following sensitivities: (i) credit applied to Stone’s Risked Drilling Program and Bois d’Arc’s Risked Drilling Program, (ii) changes in estimated capital and operating costs, and (iii) commodity prices consistent with the Net Asset Valuation Analysis summary. Based on the foregoing sensitivities, TudorPickeringHolt noted that the merger may impact Stone’s net asset valuation per share in the range of (11%) to 8%.
 
General
 
TudorPickeringHolt and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. Stone selected TudorPickeringHolt to provide a fairness opinion in connection with the merger because of TudorPickeringHolt’s expertise, reputation and familiarity with the oil and gas industry generally and the exploration and production industry specifically and because its investment banking professionals have substantial experience in transactions comparable to the merger.
 
TudorPickeringHolt is a full service securities firm engaged, either directly or through its affiliates, in securities trading, financing and brokerage activities for both companies and individuals. Although TudorPickeringHolt has not provided investment banking services to Stone or Bois d’Arc, other than with respect to its


43


Table of Contents

opinion, it may provide such services to Stone, Bois d’Arc or Comstock in the future. In connection with the above-described investment banking services, TudorPickeringHolt may receive compensation.
 
The description set forth above constitutes a summary of the analyses employed and factors considered by TudorPickeringHolt in rendering its opinion to the board of directors of Stone. TudorPickeringHolt believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses and factors, could create an incomplete view of the process underlying its opinion. The preparation of a fairness opinion is a complex, analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and is not necessarily susceptible to partial analysis or summary description.
 
No company or transaction used in the analyses of comparable transactions summarized above is identical to Stone, Bois d’Arc or the merger. Accordingly, these analyses must take into account differences in the financial and operating characteristics of the selected publicly traded companies and differences in the structure and timing of the selected transactions and other factors that would affect the public trading value and acquisition value of the companies considered.
 
Pursuant to the terms of the engagement of TudorPickeringHolt, Stone agreed to pay TudorPickeringHolt a fee for rendering its opinion, and an additional fee upon the closing of the transaction. In addition, Stone has agreed to reimburse TudorPickeringHolt for its reasonably incurred out-of-pocket expenses incurred in connection with the engagement, including fees and disbursements of its legal counsel. Stone has also agreed to indemnify TudorPickeringHolt and its officers, directors, agents, employees and controlling persons for liabilities related to or arising out of its rendering of services under its engagement, including liabilities under the federal securities laws. Investors should consider the issue of to what extent, if any, the opinion of TudorPickeringHolt may have been affected by the fact that the primary portion of its fee is conditioned on the closing of the merger. In the ordinary course of business, TudorPickeringHolt or its affiliates may trade in the debt or equity securities of Stone for the accounts of its customers or for its own account and, accordingly, may at any time hold a long or short position in such securities.
 
Opinion of Bois d’Arc’s Financial Advisor
 
Bois d’Arc retained Scotia Waterous and Raymond James as financial advisors on June 5, 2007 to assist the board in reviewing strategic alternatives. In addition, the Bois d’Arc board of directors requested that Raymond James evaluate the fairness, from a financial point of view, to the holders of Bois d’Arc’s common stock of the merger consideration to be received by such holders pursuant to the draft merger agreement.
 
At the April 29, 2008 meeting of the Bois d’Arc board of directors, Raymond James gave its opinion that, as of such date and based upon and subject to various qualifications and assumptions described with respect to its opinion, the merger consideration to be received by the stockholders of Bois d’Arc pursuant to the draft merger agreement was fair, from a financial point of view, to the holders of Bois d’Arc’s outstanding common stock.
 
The full text of the written opinion of Raymond James, dated April 29, 2008, which sets forth assumptions made, matters considered, and limits on the scope of review undertaken, is attached as Annex C to this document. The summary of the opinion of Raymond James set forth in this document is qualified in its entirety by reference to the full text of such opinion.
 
Holders of Bois d’Arc common stock are urged to read this opinion in its entirety. Raymond James’s opinion, which is addressed to the Bois d’Arc board of directors, is directed only to the fairness, from a financial point of view, of the merger consideration to be received by holders of Bois d’Arc common stock in connection with the proposed merger. Raymond James’s opinion does not constitute a recommendation to any holder of Bois d’Arc common stock as to how such stockholder should vote at the special meeting of Bois d’Arc stockholders and does not address any other aspect of the proposed merger or any related transaction. Raymond James does not express any opinion as to the likely trading range of Stone’s common stock following the merger, which may vary depending on numerous factors that generally impact the price of securities or on the financial condition of Stone at that time.


44


Table of Contents

In connection with Raymond James’s review of the proposed Merger and the preparation of Raymond James’s opinion herein, Raymond James has, among other things:
 
  •  reviewed the draft merger agreement, including the financial terms and conditions;
 
  •  reviewed Annual Reports on Form 10-K and related audited financial statements of Bois d’Arc and Stone as of and for the years ended December 31, 2005, December 31, 2006 and December 31, 2007 and certain interim reports on Form 10-Q of Bois d’Arc and Stone for such years, and Bois d’Arc’s preliminary unaudited financial statements for the period ended March 31, 2008;
 
  •  reviewed certain estimates of Bois d’Arc’s and Stone’s oil and gas reserves, including estimates of proved reserves prepared by the independent engineering firms of each of Bois d’Arc and Stone as of December 31, 2007;
 
  •  reviewed other Bois d’Arc and Stone financial and operating information requested from and/or provided by Bois d’Arc and Stone;
 
  •  reviewed certain other publicly available business and financial information on Bois d’Arc and Stone;
 
  •  discussed with members of the senior management of each of Bois d’Arc and Stone past and current business, operations, financial information and prospects and information relating to the aforementioned and any other matters which Raymond James has deemed relevant to Raymond James’s inquiry;
 
  •  compared the financial terms of the draft merger agreement with financial terms of other transactions that Raymond James deemed to be relevant;
 
  •  reviewed the historical market prices and trading history of Bois d’Arc and Stone;
 
  •  discussed the current and projected operations and prospects of Bois d’Arc and Stone with management;
 
  •  compared financial and stock market information for Bois d’Arc and Stone with similar information for comparable companies with publicly traded equity securities;
 
  •  considered the responses received from the efforts of Bois d’Arc and its advisors to secure indications of interest and definitive proposals from third parties; and
 
  •  performed other such analyses, and considered such other information and factors, as Raymond James considered relevant and appropriate.
 
In connection with its review, Raymond James assumed and relied upon the accuracy and completeness of all information supplied or otherwise made available to Raymond James by Bois d’Arc, Stone or any other party, and did not undertake any duty or responsibility to verify independently any of such information. Raymond James has not made or obtained an independent appraisal of the assets or liabilities (contingent or otherwise) of Bois d’Arc or Stone. With respect to projected financial and operating data, Raymond James assumed that the data was reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Bois d’Arc and Stone relating to the future financial and operational performance of Bois d’Arc and Stone, respectively, and relied upon each party to advise Raymond James promptly if any information previously provided became inaccurate or was required to be updated during the period of its review.
 
In rendering its opinion, Raymond James assumed that the merger would be consummated on the terms described in the draft Agreement. Furthermore, Raymond James assumed, in all respects material to its analyses, that the representations and warranties of each party contained in the draft Agreement were true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the draft Agreement and that all conditions to the consummation of the merger will be satisfied without being waived. Raymond James also assumed that all material governmental, regulatory or other consents and approvals will be obtained and that, in the course of obtaining any necessary governmental, regulatory or other consents and approvals, or any amendments, modifications or waivers to any documents to which Bois d’Arc is a party, as contemplated by the draft Agreement, no restrictions will be imposed or amendments,


45


Table of Contents

modifications or waivers made that would have any material adverse effect on Bois d’Arc. In its financial analyses, Raymond James assumed the merger consideration had a value of $24.99 per Bois d’Arc share (based on the closing price of Stone as of April 28, 2008 and the proposed exchange ratio of 0.165 Stone share per Bois d’Arc share plus $13.65 cash per Bois d’Arc share). Raymond James expressed no opinion as to the underlying business decision to effect the merger, the structure or tax consequences of the draft Agreement, or the availability or advisability of any alternatives to the merger. In the capacity of rendering the opinion, Raymond James reviewed the terms of the draft Agreement and offered no judgment as to the negotiations resulting in such terms.
 
In conducting its investigation and analyses and in arriving at its opinion expressed herein, Raymond James has taken into account such financial and investment banking procedures and considerations as Raymond James has deemed relevant, including the review of (i) the estimated net asset value of Bois d’Arc; (ii) financial and operating information concerning selected precedent transactions which Raymond James deemed comparable in whole or in part to the transaction; (iii) historical and projected earnings before interest, taxes, depreciation, amortization and exploration (“EBITDAX”), proved reserves, production, and capitalization of Bois d’Arc and certain other publicly held companies Raymond James believes to be comparable to Bois d’Arc; (iv) the current and projected financial position and results of operations of Bois d’Arc and of Stone; and (v) the general condition of the securities and energy markets. The delivery of this opinion was approved by Raymond James’s Fairness Opinion Committee.
 
The following summarizes the material financial analyses presented by Raymond James to the Bois d’Arc board of directors at its meeting on April 29, 2008, which material was considered by Raymond James in rendering the opinion described below. No company or transaction used in the analyses described below is directly comparable to Bois d’Arc, Stone or the contemplated merger.
 
Trading Analysis.  Raymond James calculated the premiums (discounts) implied by comparing the implied value of the Stone offer of $24.99 per share of Bois d’Arc stock to historical trading prices of Bois d’Arc common stock for specified periods between April 28, 2007 to April 28, 2008, the last trading day prior to the finalization of Raymond James’ analysis for its April 29, 2008 presentation to the Bois d’Arc board of directors, and for specified periods between June 5, 2006 and June 5, 2007, the day of Bois d’Arc’s public announcement of its intent to explore strategic alternatives. The results of this analysis are summarized below:
 
                 
    Price per
    Implied
 
    Share     Premium/(Discount)  
 
Merger Consideration Value
  $ 24.99        
Bois d’Arc Closing Stock Price as of April 28, 2008
  $ 27.02       (8 )%
4 Weeks (20 trading days) Prior to and Including April 28, 2008
  $ 22.13       13 %
8 Weeks (40 trading days) Prior to and Including April 28, 2008
  $ 21.77       15 %
52 Week Low Bois d’Arc Stock Price
  $ 14.97       67 %
52 Week High Bois d’Arc Stock Price
  $ 27.02       (8 )%
Bois d’Arc Closing Stock Price as of June 5, 2007
  $ 17.24       45 %
4 Weeks (20 trading days) Prior to and Including June 5, 2007
  $ 16.24       54 %
8 Weeks (40 trading days) Prior to and Including June 5, 2007
  $ 13.82       81 %
1 Year Prior to and Including June 5, 2007
  $ 15.96       57 %
52 Week Low Bois d’Arc Stock Price Prior to June 5, 2007
  $ 12.70       97 %
52 Week High Bois d’Arc Stock Price Prior to June 5, 2007
  $ 17.30       44 %
 
Selected Public Companies Analysis.  Raymond James selected seven comparable public companies focused on the exploration and production of oil and gas in the Gulf of Mexico to perform an evaluation of Bois d’Arc. Raymond James calculated various financial multiples for each company, including (i) enterprise value (market value plus debt, less cash) compared to EBITDAX for the forecasted period of calendar year 2008 and 2009, referred to as CY08E and CY09E, respectively, (ii) enterprise value compared to proved reserves at December 31, 2007, and (iii) enterprise value compared to the average daily production for the last reported quarter. Bois d’Arc’s CY08E and CY09E EBITDAX forecasts were based on Bois d’Arc


46


Table of Contents

management’s financial models using I/B/E/S consensus commodity prices for 2008 and 2009. The estimates used for the remaining comparable public companies were based on consensus estimates from Wall Street analysts aggregated by I/B/E/S. The estimates published by Wall Street research analysts were not prepared in connection with the merger or at Raymond James’s request and may or may not prove to be accurate. Raymond James reviewed the median, and a high and low (defined as 10% above and below the median, respectively) relative valuation multiples of the selected public companies and compared them to corresponding valuation multiples for Bois d’Arc.
 
Raymond James determined that the following companies were relevant to an evaluation based on Raymond James’ view of the comparability of the operating and financial characteristics of these companies to those of Bois d’Arc:
 
  •  ATP Oil & Gas Corporation
 
  •  Energy XXI (Bermuda) Limited
 
  •  Energy Partners, Ltd.
 
  •  Mariner Energy, Inc.
 
  •  McMoRan Exploration Co.
 
  •  Stone Energy Corporation
 
  •  W&T Offshore, Inc.
 
The results of the selected public companies analysis are summarized below:
 
                                 
    Enterprise Value
    EBITDAX   Proved Reserves
  Daily Production
    CY08E   CY09E   (Mcfe)   (Mcfe/d)
 
High
    3.9 x     3.7 x   $ 5.22     $ 11,021  
Median
    3.6 x     3.3 x     4.75       10,019  
Low
    3.2 x     3.0 x     4.27       9,017  
                                 
Merger Consideration
    4.0 x     3.6 x   $ 4.47     $ 15,289  
 
Furthermore, Raymond James applied the median, and a high and low (defined as 10% above and below the median, respectively) relative valuation multiples for each of the metrics to Bois d’Arc’s actual and projected financial results and determined the implied equity price per share of Bois d’Arc common stock and then compared those implied equity values per share to the merger consideration of $24.99 per share. The results of this are summarized below:
 
                                 
    Enterprise Value  
    EBITDAX     Proved Reserves
    Daily Production
 
    CY08E     CY09E     (Mcfe)     (Mcfe/d)  
 
High
  $ 24.33     $ 25.40     $ 29.37     $ 17.76  
Median
    22.03       23.00       26.61       16.06  
Low
    19.74       20.61       23.86       14.36  
                                 
Merger Consideration
  $ 24.99     $ 24.99     $ 24.99     $ 24.99  
 
Precedent Transactions Analysis.  Raymond James reviewed selected publicly available information for five corporate transactions and nineteen asset transactions to assess how similar transactions were valued.


47


Table of Contents

Raymond James analyzed publicly available information relating to selected corporate acquisitions of oil and gas exploration and production companies focused on the Gulf of Mexico and prepared a summary of the relative valuation multiples in these transactions. The selected transactions used in the analysis included:
 
     
Acquirer
 
Target
 
Saratoga Resources Inc. 
  Harvest Oil and Gas LLC
Energy XXI (Bermuda) Limited
  Marlin Texas LP
Helix Energy Solutions Group Inc. 
  Remington Oil & Gas Corp.
Norsk Hydro ASA
  Spinnaker Exploration Co.
Woodside Petroleum Ltd
  Gryphon Exploration Co.
 
Raymond James examined valuation multiples of transaction enterprise value compared to the target companies’ proved reserves and daily production, where such information was publicly available. Raymond James reviewed the median, and a high and low (defined as 10% above and below the median, respectively) relative valuation multiples of the selected transactions and compared them to corresponding valuation multiples for Bois d’Arc implied by the merger consideration. Furthermore, Raymond James applied the median, a high and low (defined as 10% above and below the median, respectively) relative valuation multiples to Bois d’Arc’s year-end 2007 proved reserves and average daily production for the three months ended March 31, 2008 to determine the implied equity price per share and then compared those implied equity values per share to the merger consideration of $24.99 per share. The results of the selected transactions analysis are summarized below:
 
                                 
    Enterprise Value/
  Enterprise Value /
  Proved Reserves
  Daily Production
    Proved Reserves
  Daily Production
  Implied Equity
  Implied Equity
    (Mcfe)   (Mcfe/d)   Price per Share   Price per Share
 
High
  $ 4.50     $ 14,265     $ 25.20     $ 23.26  
Median
    4.10       12,968       22.83       21.06  
Low
    3.69       11,671       20.45       18.86  
Merger Consideration
  $ 4.47     $ 15,289     $ 24.99     $ 24.99  
 
Raymond James analyzed publicly available information relating to selected asset acquisitions of oil and gas assets in the Gulf of Mexico and prepared a summary of the relative valuation multiples in these transactions. The selected asset transactions used in the analysis included:
 
     
Acquirer
 
Target Assets
 
CIECO Energy
  Callon Petroleum Co.
Mariner Energy Inc. 
  StatoilHydro ASA
W&T Offshore Inc. 
  Apache Corp.
Petsec Energy Ltd
  LLOG Exploration Co.
McMoran Exploration Co. 
  Newfield Exploration Co.
Eni SpA
  Dominion Resources Inc.
Energy XXI (Bermuda) Limited
  Pogo Producing Co.
Itochu Corp. 
  Range Resources Corp.
Callon Petroleum Co. 
  BP plc
Phoenix Exploration Co. 
  Cabot Oil & Gas Corp.
Coldren Resources LP
  Noble Energy Incorporated
Mitsui Oil and affiliated companies
  Pogo Producing Co.
Apache Corp. 
  BP plc
Merit Energy Corp. 
  The Houston Exploration Co.
W&T Offshore Inc. 
  Kerr-McGee Corp.
Mariner Energy Inc. 
  Forest Oil Corp.
Energy Resources Technology GOM Inc., Helix Energy Solutions Group Inc. 
  Murphy Oil Corp.
StatoilHydro ASA
  EnCana Corp.
Nippon Oil Corp. 
  Devon Energy Corp.


48


Table of Contents

Raymond James examined valuation multiples of transaction enterprise value compared to the target assets’ proved reserves and daily production, where such information was publicly available. Raymond James reviewed the median, and a high and low (defined as 10% above and below the median, respectively) relative valuation multiples of the selected transactions and compared them to corresponding valuation multiples for Bois d’Arc implied by the merger consideration. Furthermore, Raymond James applied the median, and a high and low (defined as 10% above and below the median, respectively) relative valuation multiples to Bois d’Arc’s year-end 2007 proved reserves and average daily production for the three months ended December 31, 2007 to determine the implied equity price per share and then compared those implied equity values per share to the merger consideration of $24.99 per share. The results of the selected transactions analysis are summarized below:
 
                                 
    Enterprise Value/
  Enterprise Value /
  Proved Reserves
  Daily Production
    Proved Reserves
  Daily Production
  Implied Equity
  Implied Equity
    (Mcfe)   (Mcfe/d)   Price per Share   Price per Share
 
High
  $ 3.82     $ 7,178     $ 21.23     $ 11.24  
Median
    3.47       6,525       19.21       10.13  
Low
    3.13       5,873       17.20       9.03  
Merger Consideration
  $ 4.47     $ 15,289     $ 24.99     $ 24.99  
 
Net Asset Value Analysis.  The net asset value analysis is predicated on, based on guidance from management, the company’s third party proved reserve report. Raymond James analyzed the present value of the future after-tax cash flows expected to be generated from the company’s third party prepared proved reserve report as of December 31, 2007 and undeveloped acreage. The present value of the future after-tax cash flow was determined using a discount rate of 10% and assuming a tax rate of 35%. Raymond James added to such estimated values for proved reserves assessments of the value of certain other assets and liabilities provided by Bois d’Arc, including the company’s undeveloped acreage and deferred tax liability. Raymond James under the guidance of Bois d’Arc’s management risked each reserve category. Bois d’Arc’s proved developed producing, proved developed non-producing, proved developed behind pipe and proved undeveloped reserves were risked with ranges of 95% — 100%, 85% — 95%, 80% — 90%, and 75% — 85%, respectively. These risk ratings were based on discussions with Bois d’Arc management. The net asset valuation analysis was performed under two commodity price scenarios which are summarized below.
 
                                                                                 
                                        Escalation
NYMEX Strip
  2008E   2009E   2010E   2011E   2012E   2013E   2014E   2015E   2016E   Thereafter
 
Natural Gas (Mcf)
  $ 11.22     $ 10.58     $ 9.78     $ 9.50     $ 9.39     $ 9.31     $ 9.29     $ 9.34     $ 9.42       0 %
Oil (Bbl)
  $ 116.53     $ 111.66     $ 108.57     $ 107.54     $ 107.31     $ 107.41     $ 108.04     $ 108.43     $ 109.01       0 %
 
                         
            Escalation
I/B/E/S
  2008E   2009E   Thereafter
 
Natural Gas (Mcf)
  $ 8.47     $ 8.37       0 %
Oil (Bbl)
  $ 92.09     $ 88.43       0 %
 
The resulting range of total asset values was adjusted by Bois d’Arc’s liabilities and divided by the number of diluted shares outstanding in order to arrive at a range of implied equity values per share of Bois d’Arc. Raymond James reviewed the range of per share prices derived in the net asset value analysis and compared them to the price per share for Bois d’Arc implied by the merger consideration. The high, median and low represent three cases with different risk ratings assigned to proved reserves. The high represents the lowest amount of risk applied from the risk ratings range to the proved reserves, and the low represents the


49


Table of Contents

greatest amount of risk applied from the risk ratings range to the proved reserves. The results of the net asset value analysis are summarized below:
 
         
    Bois d’Arc
 
    Equity Value/
 
    per Share  
 
NYMEX Strip Pricing
       
High
  $ 25.24  
Mid-point
    23.96  
Low
    22.69  
I/B/E/S Consensus Pricing
       
High
  $ 18.94  
Mid-point
    17.93  
Low
    16.92  
Merger Consideration
  $ 24.99  
 
Transaction Premium Analysis.  Raymond James analyzed the stock price premiums paid in the last thirty closed merger and acquisition transactions prior to April 28, 2008, the closing price used in the fairness opinion, with transaction values between $1 billion and $5 billion. Raymond James measured each transaction price per share relative to each seller’s closing price per share one day, one week and four weeks prior to announcement of the transaction. Raymond James compared the median, a high and low (defined as 10% above and below the median, respectively) premiums paid from this set of transactions to the Bois d’Arc merger consideration expressed as a premium relative to the closing price per share of Bois d’Arc one day, one week and four weeks prior to April 28, 2008. The results of the transaction premium analysis are summarized below:
 
                         
    Transaction Premium  
    1-Day     1-Week     4-Weeks  
 
High
    26.4 %     27.5 %     30.9 %
Median
    24.0 %     25.0 %     28.1 %
Low
    21.6 %     22.5 %     25.3 %
Merger consideration
  $ 24.99     $ 24.99     $ 24.99  
Bois d’Arc closing stock price per share
  $ 27.02     $ 26.37     $ 22.13  
Implied Transaction premium (discount)
    (7.5 )%     (5.2 )%     12.9 %
 
In addition, Raymond James analyzed the stock price premiums paid in the last thirty closed merger and acquisition transactions prior to June 5, 2007, the date the board of Bois d’Arc announced it was reviewing strategic alternatives, with transaction values between $1 billion and $5 billion. Raymond James measured each transaction price per share relative to each seller’s closing price per share one day, one week and four weeks prior to announcement of the transaction. Raymond James compared the median, a high and low (defined as 10% above and below the median, respectively) premiums paid from this set of transactions to the Bois d’Arc merger consideration expressed as a premium relative to the closing price per share of Bois d’Arc one day, one week and four weeks prior to June 5, 2007. The results of the transaction premium analysis are summarized below:
 
                         
    Transaction Premium  
    1-Day     1-Week     4-Weeks  
 
High
    25.8 %     28.2 %     31.8 %
Median
    23.5 %     25.7 %     29.0 %
Low
    21.1 %     23.1 %     26.1 %
Merger consideration
  $ 24.99     $ 24.99     $ 24.99  
Bois d’Arc closing stock price per share
  $ 17.24     $ 17.30     $ 16.24  
Implied Transaction premium (discount)
    45.0 %     44.5 %     53.9 %


50


Table of Contents

Furthermore, Raymond James applied the median, and a high and low (defined as 10% above and below the median, respectively) premiums as of April 28, 2008 for each of the metrics to Bois d’Arc’s actual corresponding closing stock prices to determine the implied equity price per share and then compared those implied equity values per share to the merger consideration of $24.99 per share. The results of this are summarized below:
 
                         
    Implied Equity Price per Share  
    1-Day     1-Week     4-Weeks  
 
High
  $ 34.15     $ 33.62     $ 28.98  
Median
    33.50       32.96       28.36  
Low
    32.85       32.30       27.73  
Merger consideration
  $ 24.99     $ 24.99     $ 24.99  
 
Furthermore, Raymond James applied the median, and a high and low (defined as 10% above and below the median, respectively) premiums as of June 5, 2007 for each of the metrics to Bois d’Arc’s actual corresponding closing stock prices to determine the implied equity price per share and then compared those implied equity values per share to the merger consideration of $24.99 per share. The results of this are summarized below:
 
                         
    Implied Equity Price per Share  
    1-Day     1-Week     4-Weeks  
 
High
  $ 21.69     $ 22.18     $ 21.41  
Median
    21.29       21.74       20.94  
Low
    20.88       21.29       20.47  
Merger consideration
  $ 24.99     $ 24.99     $ 24.99  
 
Contribution Analysis.  Raymond James analyzed the pro rata contribution of Bois d’Arc to the combined company’s results for the twelve months ended December 31, 2007 and projected results for the twelve months ending December 31, 2008 and December 31, 2009, assuming the merger had closed as of the beginning of these respective years. Raymond James used actual results for CY07 and company provided forecast models with I/B/E/S consensus commodity prices for CY08E and CY09E. Raymond James compared Bois d’Arc’s pro rata contribution to the combined company’s results to Bois d’Arc’s relative contribution to the enterprise value of the combined company, calculated as the sum of the enterprise value of Bois d’Arc implied by the merger consideration and the enterprise value of Stone as of April 28, 2008. The results of this analysis are summarized below:
 
                 
    Bois d’Arc     Stone  
 
12/31/07 Proved Reserves
    51 %     49 %
CY07 Average Daily Production
    34 %     66 %
CY07 Revenues
    32 %     68 %
CY07 EBITDAX
    34 %     66 %
CY08E Average Daily Production
    40 %     60 %
CY08E EBITDAX
    40 %     60 %
CY09E Average Daily Production
    43 %     57 %
CY09E EBITDAX
    42 %     58 %
                 
Enterprise value
    50 %     50 %
 
Additional Considerations.  The preparation of a fairness opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. Raymond James believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying the analyses set forth in its opinion. In addition, Raymond James considered the results of all such analyses and did not assign relative weights to any of the analyses, but rather made qualitative judgments as to significance and relevance of each


51


Table of Contents

analysis and factor, so the ranges of valuations resulting from any particular analysis described above should not be taken to be Raymond James’s view of the actual value of Bois d’Arc and Stone.
 
In performing its analyses, Raymond James made numerous assumptions with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond the control of Bois d’Arc and Stone. The analyses performed by Raymond James are not necessarily indicative of actual values, trading values or actual future results which might be achieved, all of which may be significantly more or less favorable than suggested by such analyses. Such analyses were provided to the Bois d’Arc board of directors and were prepared solely as part of Raymond James’s analysis of the fairness, from a financial point of view, to the Bois d’Arc stockholders of the consideration to be received by such holders in connection with the proposed merger. The analyses do not purport to be appraisals or to reflect the prices at which companies may actually be sold, and such estimates are inherently subject to uncertainty. The opinion of Raymond James was one of many factors taken into consideration by the Bois d’Arc board of directors in making its determination to approve the merger. Consequently, the analyses described above should not be viewed as determinative of the Bois d’Arc board of directors’ opinion with respect to the value of Bois d’Arc. Bois d’Arc placed no limits on the scope of the analysis performed, or opinion expressed, by Raymond James.
 
Raymond James’s opinion was necessarily based upon market, economic, financial and other circumstances and conditions existing and disclosed to it on April 28, 2008, and any material change in such circumstances and conditions may affect Raymond James’s opinion, but Raymond James does not have any obligation to update, revise or reaffirm that opinion.
 
For services rendered in connection with the delivery of its opinion, Bois d’Arc paid Raymond James a customary investment banking fee upon delivery of its opinion. Bois d’Arc will also pay Raymond James a customary fee for advisory services in connection with the merger, which is contingent upon the closing of the merger. Bois d’Arc also agreed to reimburse Raymond James for its expenses incurred in connection with its services, including the fees and expenses of its counsel, and will indemnify Raymond James against certain liabilities arising out of its engagement.
 
Raymond James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private placements, business combinations and similar transactions. In the ordinary course of business, Raymond James may trade in the securities of Bois d’Arc and Stone for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.
 
Evaluation of Stone
 
The following summarizes the material financial analyses on Stone presented by Raymond James to the Bois d’Arc board of directors at its meeting on April 29, 2008. No company used in the analyses described below is directly comparable to Bois d’Arc, Stone or the contemplated merger.
 
Trading Analysis.  Raymond James reviewed the historical trading prices of Stone for specified periods between April 28, 2007 to April 28, 2008, the last trading day prior to the finalization of Raymond James’ analysis for its April 29, 2008 presentation to the Bois d’Arc board of directors, and for specified periods


52


Table of Contents

between June 5, 2006 and June 5, 2007, the day of Bois d’Arc’s public announcement of its intent to explore strategic alternatives. The results of this analysis are summarized below:
 
         
    Price per
 
    Share  
 
Stone Closing Stock Price as of April 28, 2008
  $ 68.74  
4 Weeks (20 trading days) Prior to and Including April 28, 2008
  $ 53.80  
8 Weeks (40 trading days) Prior to and Including April 28, 2008
  $ 51.85  
52 Week Low Stone Stock Price
  $ 28.41  
52 Week High Stone Stock Price
  $ 68.74  
Stone Closing Stock Price as of June 5, 2007
  $ 33.44  
4 Weeks (20 trading days) Prior to and Including June 5, 2007
  $ 31.23  
8 Weeks (40 trading days) Prior to and Including June 5, 2007
  $ 30.16  
1 Year Prior to and Including June 5, 2007
  $ 49.10  
52 Week Low Stone Stock Price Prior to June 5, 2007
  $ 27.37  
52 Week High Stone Stock Price Prior to June 5, 2007
  $ 48.95  
 
Selected Public Companies Analysis.  Raymond James selected seven comparable public companies focused on the exploration and production of oil and gas in the Gulf of Mexico to perform an evaluation of Stone. Raymond James calculated various financial multiples for each company, including (i) enterprise value (market value plus debt, less cash) compared to EBITDAX for the forecasted period of calendar year 2008 and 2009, referred to as CY08E and CY09E, respectively, (ii) enterprise value compared to proved reserves at December 31, 2007, and (iii) enterprise value compared to the average daily production for the three months ended December 31, 2007. Stone’s CY08E and CY09E EBITDAX forecasts were based on Stone’s management’s financial models using I/B/E/S consensus commodity prices for 2008 and 2009. The estimates used for the remaining comparable public companies were based on consensus estimates from Wall Street analysts aggregated by I/B/E/S. The estimates published by Wall Street research analysts were not prepared in connection with the merger or at Raymond James’s request and may or may not prove to be accurate. Raymond James reviewed the median, and a high and low (defined as 10% above and below the median, respectively) relative valuation multiples of the selected public companies and compared them to corresponding valuation multiples for Stone.
 
Raymond James determined that the following companies were relevant to an evaluation based on Raymond James’ view of the comparability of the operating and financial characteristics of these companies to those of Stone:
 
  •  ATP Oil & Gas Corporation
 
  •  Bois d’Arc Energy, Inc.
 
  •  Energy XXI (Bermuda) Limited
 
  •  Energy Partners, Ltd.
 
  •  Mariner Energy, Inc.
 
  •  McMoRan Exploration Co.
 
  •  W&T Offshore, Inc.


53


Table of Contents

 
The results of the selected public companies analysis are summarized below:
 
                                 
    Enterprise Value/  
    EBITDAX     Proved
    Daily
 
    CY08E     CY09E     Reserves     Production  
                (Mcfe)     (Mcfe/d)  
 
High
    4.4 x     4.0 x   $ 5.22     $ 11,161  
Median
    4.0 x     3.7 x     4.75       10,146  
Low
    3.6 x     3.3 x     4.27       9,132  
 
Furthermore, Raymond James applied the median, and a high and low (defined as 10% above and below the median, respectively) relative valuation multiples for each of the metrics to Stone’s actual and projected financial results and determined the implied equity price per share of Stone. The results of this are summarized below:
 
                                 
    Enterprise Value/  
    EBITDAX     Proved
    Daily
 
    CY08E     CY09E     Reserves     Production  
                (Mcfe)     (Mcfe/d)  
 
High
  $ 104.98     $ 100.22     $ 73.32     $ 81.50  
Median
    95.74       91.41       66.96       74.39  
Low
    86.50       82.60       60.60       67.29  
 
Net Asset Value Analysis.  The net asset value analysis is predicated on, based on guidance from management, the company’s third party proved reserve report. Raymond James analyzed the present value of the future after-tax cash flows expected to be generated from the company’s third party prepared proved reserve report as of December 31, 2007 and undeveloped acreage. The present value of the future after-tax cash flow was determined using a discount rate of 10% and assuming a tax rate of 35%. Raymond James added to such estimated values for proved reserves assessments of the value of certain other assets and liabilities provided by Stone, including the company’s undeveloped acreage and deferred tax liability. Raymond James under the guidance of Bois d’Arc’s management risked each reserve category. Stone’s proved developed producing, proved developed non-producing, and proved undeveloped reserves were risked with ranges of 95% — 100%, 80% — 90%, and 75% — 85%, respectively. These risk ratings were based on discussions with Bois d’Arc management. The net asset valuation analysis was performed under two commodity price scenarios which are summarized below.
 
                                                                                 
                                        Escalation
NYMEX Strip
  2008E   2009E   2010E   2011E   2012E   2013E   2014E   2015E   2016E   Thereafter
 
Natural Gas (Mcf)
  $ 11.22     $ 10.58     $ 9.78     $ 9.50     $ 9.39     $ 9.31     $ 9.29     $ 9.34     $ 9.42       0 %
Oil (Bbl)
  $ 116.53     $ 111.66     $ 108.57     $ 107.54     $ 107.31     $ 107.41     $ 108.04     $ 108.43     $ 109.01       0 %
 
                         
            Escalation
I/B/E/S
  2008E   2009E   Thereafter
 
Natural Gas (Mcf)
  $ 8.47     $ 8.37       0 %
Oil (Bbl)
  $ 92.09     $ 88.43       0 %
 
The resulting range of total asset values was adjusted by Stone’s liabilities and divided by the number of diluted shares outstanding in order to arrive at a range of implied equity values per share of Stone. Raymond James reviewed the range of per share prices derived in the net asset value analysis. The high, median and low represent three cases with different risk ratings assigned to proved reserves. The high represents the lowest amount of risk applied from the risk ratings range to the proved reserves and the low represents the greatest


54


Table of Contents

amount of risk applied from the risk ratings range to the proved reserves. The results of the net asset value analysis are summarized below:
 
         
    Stone
 
    Equity Value
 
    per Share  
 
NYMEX Strip Pricing
       
High
  $ 69.99  
Mid-point
    67.39  
Low
    64.79  
I/B/E/S Consensus Pricing
       
High
  $ 54.48  
Mid-point
    52.50  
Low
    50.51  
 
Interests of the Directors and Executive Officers of Bois d’Arc in the Merger
 
In considering the recommendation of the Bois d’Arc board of directors with respect to the merger agreement, Bois d’Arc stockholders should be aware that certain of Bois d’Arc’s directors and executive officers have interests in the transactions contemplated by the merger agreement that may be different from, in addition to, or in conflict with, the interests of Bois d’Arc stockholders generally. These interests and arrangements may create potential conflicts of interest. The Bois d’Arc board of directors was aware of these interests and considered them, among other matters, in making its recommendation.
 
Change in Control and Severance Arrangements
 
Certain directors and executive officers will be entitled to the change in control and potential severance benefits under the agreements described below.
 
Employment Agreements.  Employment agreements between Bois d’Arc and each of Gary Blackie, Greg Martin, and William Holman, provide, following a change in control of Bois d’Arc, including the merger, that if Bois d’Arc (or its successor) terminates the employment of the executive without “cause,” as defined in the employment agreement, or if the executive terminates his employment with Bois d’Arc either (a) for “good reason,” as defined in the agreement, or (b) for any reason within six months following the change in control, Bois d’Arc is obligated to pay the executive a lump-sum severance payment of 2.99 times the sum of (i) his annual rate of base salary and (ii) his highest annual bonus amount. In addition, Bois d’Arc is obligated to (i) continue the executive’s coverage under Bois d’Arc’s group health plan for a period of 18 months, (ii) provide the executive with outplacement services, and (iii) assign to the executive any life insurance policies on the life of the executive. Based on their current compensation, if this occurred, Mr. Blackie would receive approximately $2.1 million. Mr. Martin would receive approximately $1.7 million, and Mr. Holman would receive approximately $1.6 million.
 
Each of the employment agreements also includes a provision designed to keep the executive “whole” in the event any payment to the executive, whether pursuant to his employment agreement or otherwise, would be subject to the excise tax imposed by section 4999 of the Internal Revenue Code on “excess parachute payments” (the “Excise Tax”). In such event, the executive would be entitled to receive an additional payment under his employment agreement (a “Parachute Gross-up Payment”) such that, after the payment of all income and excise taxes on such additional payment, the executive retains an amount of the additional payment sufficient to pay all Excise Taxes. As of the date of this joint proxy statement/prospectus, assuming all benefits under the employment agreements and other arrangements are required to be provided to these executives, an additional Parachute Gross-up Payment would likely have to be made to each of them. While the precise amount of each such additional payment is not yet known, it is anticipated that the additional payment to Messrs. Blackie, Martin and Holman may exceed $1,076,312, $866,782 and $833,112, respectively. These amounts are estimates and the actual amount of the additional payments to the executives may be more or less than such estimated amounts.


55


Table of Contents

Pursuant to the merger agreement and to the extent required in the employment agreements, Stone has agreed to assume and perform each of the employment agreements as of the effective time of the merger.
 
Change in Control Agreements.  Pursuant to the change in control agreements with M. Jay Allison and Roland O. Burns, Bois d’Arc is obligated to pay Parachute Gross-up Payments to each of them with respect to any Excise Taxes they may incur upon the merger. It is anticipated that Parachute Gross-up Payments will be made to Messrs. Allison and Burns in the amounts of $257,839 and $257,839, respectively.
 
Stock Options and Restricted Stock
 
Certain directors and executive officers will benefit from the accelerated vesting of restricted stock and stock options, and payment of the stock option amount as described below.
 
Prior to the effective time of the merger, Bois d’Arc has agreed pursuant to the terms of the merger agreement to take all actions necessary under the Bois d’Arc long-term incentive plans to cause each holder of a Bois d’Arc stock option that is outstanding immediately prior to the effective time to be cancelled at the effective time.
 
Each cancelled Bois d’Arc stock option will be converted into the right to receive, from Stone, within two business days after the effective time of the merger, an amount of Stone common stock and cash, less any applicable withholding taxes and without interest, referred to herein as the “stock option amount,” equal to (1) the number of shares of Bois d’Arc stock subject to such option multiplied by (a) $13.65, plus (b) the value of 0.165 shares of Stone common stock multiplied by the average closing sales prices of Stone common stock as reported by The Wall Street Journal for the five trading days immediately preceding the two business days prior to the effective time of the merger, referred to herein as the “option amount stock consideration,” minus (2) the per share exercise price of such Bois d’Arc stock option. The portion of the stock option amount to be paid in cash, will be an amount equal to the quotient of (a) $13.65 divided by (b) the sum of $13.65 and the option amount stock consideration. Any applicable withholding taxes will be withheld from the cash portion of the stock option amount. The remaining portion of the stock option amount will be paid in Stone common stock, based on the value of Stone common stock, as described above. No fractional shares will be issued. Cash will be paid in lieu of any fractional shares.
 
As of the effective time of the merger, all outstanding restricted shares of Bois d’Arc common stock shall become fully vested. As a result, each holder of Bois d’Arc restricted stock will be treated at the effective time of the merger the same as, and have the same rights and be subject to the same conditions as, other Bois d’Arc stockholders.
 
Participation Agreement
 
Concurrently with the execution of the merger agreement, Stone entered into a participation agreement with Gary Blackie, William Holman and Greg Martin. Pursuant to and during the term of this participation agreement, Messrs. Blackie, Holman and Martin, through a newly formed entity to be wholly owned by them, agreed to identify and develop oil and gas prospects exclusively for the benefit of the parties to the agreement, effective upon completion of the merger. Messrs. Blackie, Holman and Martin intend to resign their employment with Bois d’Arc at the effective time of the merger and will then work for the new entity.
 
During the term of the participation agreement, Messrs. Blackie, Holman and Martin have agreed to cause the new entity to use its reasonable efforts to discover new prospects located in an exploration region covering specified outer continental shelf blocks and the Louisiana state coastal waters contiguous thereto and present such prospects to Stone. Stone will have the right, but not the obligation to participate in any prospects presented by the new entity. Upon Stone’s election not to participate in a prospect, the new entity will have no further obligation to include Stone in future transactions related to that prospect. As to each prospect in which Stone elects to participate, Stone shall be the operator to develop any prospect located inside the specified exploration region and the new entity shall be the operator to develop any prospect outside the specified exploration region. Also, regarding each prospect in which Stone elects to participate within the specified exploration region, Stone will assign to the new entity a 2.5% of 8/8ths overriding royalty interest in such


56


Table of Contents

prospect; however, upon payout of an individual prospect, the amount of such overriding royalty interest will be increased to a 4% of 8/8ths overriding royalty interest. With respect to each prospect in which Stone elects to participate located outside the specified exploration region, Stone will assign to the new entity a 2% of 8/8ths overriding royalty interest in such prospect. All overriding royalty interests assigned to the new entity by Stone are subject to a proportional reduction based on the actual participation interests in any well. The participation interest of Stone and the new entity are each 50%; however, the new entity is obligated to offer to Stone the right to acquire up to an additional one-half of the new entity’s participation interest in a prospect in which Stone elects to participate on terms no less favorable to the new entity than the new entity offers to or accepts from a third party.
 
Under the participation agreement, Stone has agreed to advance to the new entity up to $3,000,000 for the purpose of enabling it to acquire seismic data covering all or any part of the exploration region; however, depending on the number of prospects accepted by Stone under the participation agreement, Stone may receive a return of up to $1,500,000 of these seismic data costs. Stone has also agreed to pay up to one half of the general and administrative expenses actually incurred by the new entity, in an amount not to exceed $135,000 per month. Stone and the new entity will pay their respective shares of all leasehold acquisition costs relating to any prospect.
 
The participation agreement is to commence on the effective time of the merger, and, unless extended or otherwise terminated in accordance with its terms, continue until December 31, 2011. Stone has the right to terminate the participation agreement upon 60 days prior written notice.
 
Directors’ and Officers’ Insurance and Indemnification
 
In the merger agreement, Stone has agreed that all rights to exculpation, advancement of expenses and indemnification for acts or omissions occurring prior to the effective time of the merger in favor of the current and former officers and directors of Bois d’Arc as provided in the articles of incorporation or bylaws of Bois d’Arc or in the employment agreements with certain of Bois d’Arc’s officers, in each case in effect as of the date of the merger, will survive the merger and continue in full force and effect in accordance with their terms and without amendment thereof.
 
In the merger agreement, Stone has agreed to maintain the directors’ and officers’ (D&O) insurance that serves to reimburse persons currently covered by Bois d’Arc’s D&O insurance in full force and effect for the continued benefit of such persons for a continuous period of not less than three years from the effective time of the merger on terms that are not materially different from Bois d’Arc’s D&O insurance in effect as of the date of the merger agreement (provided that Stone may substitute therefor policies of at least the same coverage containing terms and conditions that are not less favorable) with respect to matters occurring prior to the effective time of the merger. However, Stone will not be obligated to make annual premium payments for this insurance to the extent the premiums exceed 150% of the annual premium paid by Bois d’Arc for such insurance on the date of the merger agreement. In the event that the annual premium for such insurance exceeds such maximum amount, Stone will purchase as much coverage per policy year as reasonably obtainable for such maximum amount.
 
Stockholder Agreements
 
Concurrently with the execution of the merger agreement, Stone entered into Stockholder Agreements with each of Comstock, Wayne and Gayle Laufer and Gary Blackie. As of such date, Comstock, Mr. and Mrs. Laufer and Mr. Blackie beneficially owned an aggregate of approximately 67% of the total issued and outstanding shares of Bois d’Arc common stock. During the term of the stockholder agreements, each of Comstock, Mr. and Mrs. Laufer and Mr. Blackie has agreed to vote their shares of Bois d’Arc common stock in favor of the merger and the approval of the merger agreement and against any transaction that would impede or delay the merger and granted Stone a proxy to vote their shares at any meeting of the stockholders


57


Table of Contents

of Bois d’Arc convened to consider such matters. Each of these Bois d’Arc stockholders has also agreed, prior to the consummation of the merger:
 
  •  not to sell, transfer, pledge (other than a bona fide pledge to a financial institution or brokerage firm), assign or otherwise dispose or enter into any contract to sell, transfer, pledge, assign or otherwise dispose of any of their shares of Bois d’Arc common stock or any interest therein;
 
  •  not to grant any proxy, power of attorney or enter into any voting agreement or other voting arrangement with respect to their shares of Bois d’Arc common stock;
 
  •  not to acquire or agree to acquire any additional securities or property of Bois d’Arc, Stone or any of their subsidiaries;
 
  •  not to propose to enter into any merger, recapitalization or other business combination with respect to Bois d’Arc, Stone or any of their subsidiaries, including making any acquisition proposal for such stockholder’s own account; and
 
  •  to be bound by all of the restrictions and obligations of the no-solicitation provisions contained in the merger agreement that are applicable to Bois d’Arc.
 
In addition, in its stockholder agreement, Comstock has agreed to a one-year lock-up with respect to any securities of Stone that it will own upon completion of the merger, including the shares of Stone common stock that it will receive in the merger, except for transfers:
 
  •  pursuant to an underwritten offering; or
 
  •  resulting in a bona fide pledge of any voting securities of Stone to a financial institution or brokerage firm, provided that such pledge does not materially affect Comstock’s ability to perform its obligations under its stockholder agreement.
 
Comstock is expected to own about 14% of the total outstanding Stone common stock upon completion of the merger. Comstock has also agreed not to transfer any securities of Stone that it will own upon completion of the merger during the period beginning upon the expiration of the one-year lock-up and the earlier of three years after the effective date of the merger and such time as Comstock owns less than 5% of the outstanding voting securities of Stone, except in transfers:
 
  •  that Comstock reasonably believes (based upon a review of reports filed under Sections 13(d) and 13(e) of the Exchange Act) will not result in the transferee holding more than 5% of the outstanding voting securities of Stone;
 
  •  that Comstock reasonably believes (based upon a review of reports filed under Sections 13(d) and 13(e) of the Exchange Act) will not result in the transferee holding more than 10% of the outstanding voting securities of Stone and that the transferee is acquiring such securities in the ordinary course of business and not with the purpose or effect of changing or influencing the control of Stone;
 
  •  in connection with a business combination approved by Stone and/or its security holders;
 
  •  pursuant to a tender or exchange offer for voting securities of Stone by any person other than Comstock or its affiliates that is not opposed by Stone’s board of directors;
 
  •  resulting in a bona fide pledge of any voting securities of Stone to a financial institution or brokerage firm (provided, that such pledge does not materially affect Comstock’s ability to perform its obligations under the stockholder agreement); or
 
  •  upon the liquidation or dissolution of Stone or other transfer that is effected by operation of law.
 
In addition, for the period beginning upon the effective date of the merger until the earlier of three years after the effective date of the merger or such time as Comstock owns less than 5% of the outstanding voting securities of Stone, Comstock has agreed not to acquire, agree to acquire or make any proposal to acquire any additional shares of Stone common stock or other securities or property of Stone or to enter into extraordinary transactions with Stone or seek to influence the management or control of Stone.


58


Table of Contents

As consideration for Comstock’s agreement to be bound by these restrictions, Stone granted Comstock certain registration rights for the shares of Stone common stock that Comstock will receive in the merger. Pursuant to these registration rights, Comstock may elect to participate in any underwritten offering conducted by Stone during the one-year lock-up period, subject to customary cut-back rights of the underwriters and subject to Stone’s right not to include Comstock’s shares in the underwritten offering if Comstock is requesting to sell less than $25 million of its shares in the underwritten offering. Stone has also agreed to use its commercially reasonable efforts to cause a registration statement for the resale from time to time by Comstock of such shares of Stone common stock to become effective as of the expiration of the one-year lock-up period and to be continuously effective thereafter, subject to customary suspension rights, not to exceed an aggregate of 90 days in any 365-day period, until the earlier of (i) the time that Comstock has sold all of the shares of Stone common stock received in the merger, (ii) the time that Comstock is able to sell all shares of Stone common stock received in the merger and still held by it without restriction under Rule 144(b)(i) and (iii) the date that is three years following the effective date of the merger. In addition, Comstock has agreed not to make any public sale or distribution of its shares of Stone common stock for a period of 90 days (or such shorter period imposed by the underwriters) following any underwritten offering by Stone during the one-year lock-up period and during the period that Stone is obligated to keep the resale registration statement effective.
 
The stockholder agreements will terminate on the first to occur of the effective time of the merger and the date that the merger agreement terminates pursuant to terms; provided, that, if the merger is consummated, the lock-up and registration rights and other restrictions contained in the Comstock stockholder agreement described above will remain in effect after the effective date of the merger for the periods described above.
 
The foregoing description of the stockholder agreements is qualified in its entirety by reference to the full text of the stockholder agreements, which have previously been filed by Stone with the SEC and are incorporated by reference herein.
 
Conditions to the Completion of the Merger
 
Antitrust Approvals
 
The merger is subject to the expiration or termination of the applicable waiting period under the HSR Act. Under the HSR Act, the merger may not be consummated until notifications have been given and certain information has been furnished to the Antitrust Division and the FTC and the applicable waiting period has expired or been terminated.
 
On May 29, 2008, Stone and Bois d’Arc filed the requisite Pre-Merger Notification and Report Forms under the HSR Act with the Antitrust Division and the FTC. The waiting period terminated on June 6, 2008.
 
There can be no assurance that the merger will not be challenged on antitrust or competition grounds or, if a challenge is made, what the outcome would be. The Antitrust Division, the FTC, any U.S. state and other applicable regulatory bodies may challenge the merger on antitrust or competition grounds at any time, including after the expiration or termination of the HSR Act waiting period or other applicable process, as they may deem necessary or desirable or in the public interest. Accordingly, at any time before or after the completion of the merger, any such party could take action under the antitrust laws, including, without limitation, by seeking to enjoin the effective time of the merger or permitting completion subject to regulatory concessions or conditions. Private parties may also seek to take legal action under antitrust laws under certain circumstances.
 
Other Regulatory Procedures
 
The merger may be subject to certain regulatory requirements of other municipal, state, federal and foreign governmental agencies and authorities, including those relating to the offer and sale of securities. Stone and Bois d’Arc are currently working to evaluate and comply in all material respects with these requirements, as appropriate, and do not currently anticipate that they will hinder, delay or restrict completion of the merger.


59


Table of Contents

It is possible that one or more of the regulatory approvals required to complete the merger will not be obtained on a timely basis or at all. In addition, it is possible that any of the governmental entities with which filings are made may seek regulatory concessions as conditions for granting approval of the merger. Under the merger agreement, Stone and Bois d’Arc have each agreed to use commercially reasonable efforts to complete the merger, including to gain clearance from antitrust authorities and obtain other required approvals. See “The Merger Agreement — Covenants.”
 
Although Stone and Bois d’Arc do not expect regulatory authorities to raise any significant objections to the merger, Stone and Bois d’Arc cannot be certain that all required regulatory approvals will be obtained or that these approvals will not contain terms, conditions or restrictions that would be detrimental to Stone after the effective time of the merger. Stone and Bois d’Arc have not yet obtained any of the governmental or regulatory approvals required to complete the merger.
 
Certain Material U.S. Federal Income Tax Consequences
 
General
 
The following is a general discussion of certain material U.S. federal income tax consequences of the merger that may be relevant to a Bois d’Arc stockholder that holds shares of Bois d’Arc common stock as a capital asset (generally property held for investment) and is:
 
  •  an individual citizen or resident of the United States;
 
  •  a corporation or other entity taxable as a corporation created in or organized under the laws of the United States or any political subdivision thereof;
 
  •  an estate the income of which is subject to U.S. federal income tax without regard to its source; or
 
  •  a trust, if a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of the substantial decisions of such trust.
 
This discussion is addressed only to Bois d’Arc stockholders who exchange shares of Bois d’Arc common stock for shares of Stone common stock and cash in the merger.
 
This discussion is not intended to be a complete analysis and does not address all potential tax consequences that may be relevant to Bois d’Arc stockholders. Moreover, this discussion does not apply to a Bois d’Arc stockholder that is subject to special treatment under the Internal Revenue Code, including, without limitation, because such stockholder is:
 
  •  a foreign person or entity;
 
  •  a tax-exempt organization, financial institution, mutual fund, dealer or broker in securities or insurance company;
 
  •  a trader who elects to mark its securities to market for U.S. federal income tax purposes;
 
  •  a person who holds shares of Bois d’Arc common stock as part of an integrated investment such as a straddle, hedge, constructive sale, conversion transaction or other risk reduction transaction;
 
  •  a person who holds shares of Bois d’Arc common stock in an individual retirement or other tax-deferred account;
 
  •  a United States person whose functional currency is not the U.S. dollar;
 
  •  an individual who received shares of Bois d’Arc common stock, or who acquires shares of Stone common stock, pursuant to the exercise of employee stock options or otherwise as compensation or in connection with the performance of services;


60


Table of Contents

 
  •  a partnership or other flow-through entity (including an S corporation or a limited liability company treated as a partnership for U.S. federal income tax purposes) and persons who hold an interest in such entities; or
 
  •  a person subject to the alternative minimum tax.
 
If a partnership, or other entity or arrangement treated as a partnership for U.S. federal income tax purposes, exchanges its shares of Bois d’Arc common stock in the merger, the tax treatment of a partner in the partnership will depend upon the status of that partner and the activities of the partnership. Partners in a partnership that intends to exchange its shares of Bois d’Arc common stock in the merger should consult their tax advisors as to the particular U.S. federal income tax consequences applicable to them.
 
This discussion also does not address the tax consequences of the merger under foreign, state, local or other tax laws. The following discussion is based on existing U.S. federal income tax law, including the provisions of the Internal Revenue Code, the Treasury Regulations thereunder, IRS rulings, judicial decisions and other administrative pronouncements, all as in effect on the date of this joint proxy statement/prospectus. Neither Stone nor Bois d’Arc can provide any assurance that future legislative, administrative or judicial changes or interpretations will not affect the accuracy of the statements or conclusions set forth below. Any future change in the U.S. federal income tax law or interpretation thereof could apply retroactively and could affect the accuracy of the following discussion. In addition, neither Stone nor Bois d’Arc can assure Bois d’Arc stockholders that the IRS will agree with the conclusions expressed herein.
 
Bois d’Arc stockholders are strongly urged to consult their tax advisors as to the U.S. federal income tax consequences of the merger, including the income tax consequences arising from their own facts and circumstances, and as to any estate, gift, state, local or foreign tax consequences, arising out of the merger and the ownership and disposition of shares of Stone common stock.
 
Certain U.S. Federal Income Tax Consequences of the Merger
 
The obligation of Stone and Bois d’Arc to consummate the merger is conditioned upon the receipt of tax opinions, reasonably satisfactory in form and in substance, dated the effective time of the merger, from Vinson & Elkins L.L.P. and Locke Lord Bissell & Liddell LLP, respectively, that the merger will be treated for U.S. federal income tax purposes as a “reorganization” qualifying under the provisions of section 368(a) of the Internal Revenue Code.
 
The tax opinions described above will be based on certain facts, representations, covenants and assumptions, including representations of Stone and Bois d’Arc, and assume that the parties will comply with certain reporting obligations under the Internal Revenue Code. This discussion and the tax opinions are not binding on the IRS or any court and do not preclude the IRS or a court from reaching a contrary conclusion. Therefore, while Stone and Bois d’Arc believe that the merger will be treated as a reorganization under section 368(a) of the Internal Revenue Code, no assurance can be provided that the IRS will agree with this conclusion.
 
The following discussion regarding the U.S. federal income tax consequences of the merger assumes that the merger will be consummated as described in the merger agreement and this joint proxy statement/prospectus. Assuming further that the merger is treated as a reorganization under section 368(a) of the Internal Revenue Code, the following tax consequences will result:
 
  •  a Bois d’Arc stockholder generally will recognize capital gain (but not loss) in the merger. Any such gain recognized will equal the lesser of (1) the excess, if any, of (a) the sum of the amount of cash (excluding any cash received instead of a fractional share) and the fair market value of the shares of Stone common stock received in the merger (plus any fractional share for which cash is received in lieu thereof) over (b) its adjusted tax basis in the shares of Bois d’Arc common stock exchanged or (2) the amount of cash received in the merger (excluding cash received instead of a fractional share, as discussed below). For this purpose, Bois d’Arc stockholders must calculate gain or loss separately for each identifiable block (that is, stock acquired at the same time for the same price) of shares of


61


Table of Contents

  Bois d’Arc common stock they exchange. The amount of any gain recognized in the merger by such stockholder may be treated as a dividend (as discussed in the last bullet point below).
 
  •  the aggregate tax basis of any shares of Stone common stock received by a Bois d’Arc stockholder in the merger (before reduction for the basis in any fractional share of Stone common stock) will be the same as the aggregate tax basis of the Bois d’Arc common stock exchanged in the merger, decreased by the amount of cash received (excluding any cash received in lieu of a fractional share) and increased by the amount of gain or dividend income recognized in the merger (excluding any gain recognized as a result of cash received in lieu of a fractional share).
 
  •  the holding period of any shares of Stone common stock a Bois d’Arc stockholder receives in the merger generally will include the holding period of the shares of Bois d’Arc common stock it exchanged for such shares of Stone common stock.
 
  •  if a Bois d’Arc stockholder has differing bases or holding periods in respect of its shares of Bois d’Arc common stock, it should consult its tax advisor prior to the exchange with regard to identifying the bases or holding periods of the particular shares of Stone common stock received in the merger.
 
  •  because Stone will not issue any fractional shares of Stone common stock in the merger, if any Bois d’Arc stockholder exchanges shares of Bois d’Arc common stock in the merger and would otherwise have received a fraction of a share of Stone common stock, such stockholder will receive cash for that fractional share. Any cash received in lieu of a fractional share of Stone common stock should be treated as received in an exchange of that fractional share for cash. The amount of any capital gain or loss attributable to the deemed sale will be equal to the amount of cash received with respect to the fractional interest less the ratable portion of the tax basis of the shares of Bois d’Arc common stock surrendered that is allocated to the fractional interest. The deductibility of capital losses is subject to certain limitations.
 
  •  any capital gain recognized by an individual stockholder of Bois d’Arc generally will be subject to U.S. federal income tax at a maximum 15% rate if such individual’s holding period in the shares of Bois d’Arc common stock is more than one year on the date of completion of the merger. Any amount received in the merger by such individual stockholder that is treated as a dividend (as discussed in the following bullet point) generally will be subject to U.S. federal income tax at a maximum 15% rate.
 
  •  it is possible that some or all of the cash received by a Bois d’Arc stockholder in the merger will be treated as a dividend giving rise to ordinary income rather than as stock disposition proceeds giving rise to capital gain. In general, the appropriate tax treatment will depend upon whether and to what extent the exchange reduces the Bois d’Arc stockholder’s percentage stock ownership (including stock that is either actually owned or deemed owned under constructive ownership rules) of Stone, which is determined by treating the Bois d’Arc stockholder as if it first exchanged all of its shares of Bois d’Arc common stock solely for shares of Stone common stock and then Stone immediately redeemed all or a portion of the shares of Stone common stock in exchange for the cash actually received by the stockholder. Gain recognized in the deemed redemption generally will be treated as a dividend to the extent of the stockholder’s ratable share of undistributed earnings and profits of Bois d’Arc if the deemed redemption does not result in a “meaningful reduction” in the stockholder’s actual and deemed stock ownership of Stone. In making this determination, each Bois d’Arc stockholder will, under the constructive ownership rules, be deemed to own not only the stock actually owned, but also stock that is owned by certain related persons and entities or that the stockholder or such persons or entities have the right to acquire pursuant to an option. The IRS has ruled that a stockholder in a publicly held corporation whose relative stock interest is minimal and who exercises no control with respect to corporate affairs is generally considered to have a “meaningful reduction” if that stockholder has any reduction in its percentage stock ownership under the above analysis. Thus, any stockholder in this situation generally should recognize capital gain. These rules are complex and dependent upon the specific factual circumstances particular to each holder. Each Bois d’Arc stockholder should consult its tax advisor as to the application of these rules to its particular facts.


62


Table of Contents

 
If the IRS were to successfully challenge the qualification of the merger as a reorganization, Bois d’Arc stockholders would generally be required to recognize gain or loss equal to the difference between their adjusted tax basis in the shares of Bois d’Arc common stock they surrendered in the merger and an amount equal to any cash received plus the fair market value, as of the effective time of the merger, of shares of Stone common stock received in the merger. Generally, in such event, each Bois d’Arc stockholder’s tax basis in the shares of Stone common stock received in the merger would equal their fair market value as of the date of the merger, and such Bois d’Arc stockholder’s holding period for the shares of Stone common stock would begin on the day after the merger.
 
U.S. Information Reporting and Backup Withholding
 
Under U.S. federal income tax laws, Stone or the exchange agent will generally be required to report to a Bois d’Arc stockholder and to the IRS any reportable payments made to such Bois d’Arc stockholder in the merger. Additionally, if any Bois d’Arc stockholder that is considered a “significant holder” receives shares of Stone common stock in the merger, such stockholder will be required (i) to file a statement with its U.S. federal income tax return providing certain facts pertinent to the merger, including the tax basis in the shares of Bois d’Arc common stock surrendered and the fair market value of the shares of Stone common stock received in the merger and (ii) to retain permanent records of these facts relating to the merger. A “significant holder” for this purpose is any Bois d’Arc stockholder who, immediately before the merger, (a) owned at least 5% (by vote or value) of the Bois d’Arc common stock or (b) owned Bois d’Arc securities with a tax basis of $1 million or more.
 
Bois d’Arc stockholders may be subject to a backup withholding tax at the rate of 28% with respect to any cash received in the merger (including cash in lieu of fractional shares of Stone common stock), unless they (1) are a corporation or come within certain other exempt categories or (2) provide a correct taxpayer identification number and, in each case, otherwise comply with applicable requirements of the backup withholding rules. To prevent backup withholding on payments made to Bois d’Arc stockholders pursuant to the merger, Bois d’Arc stockholders must provide the exchange agent with their correct taxpayer identification number by completing an IRS Form W-9 or a substitute Form W-9. If a Bois d’Arc stockholder does not provide its correct taxpayer identification number, it may be subject to penalties imposed by the IRS in addition to backup withholding. Any amounts withheld under these rules may be credited against a Bois d’Arc stockholder’s U.S. federal income tax liability if such stockholder files proper documentation with the IRS.
 
The foregoing discussion is for general information only and not intended to be legal or tax advice to any particular Bois d’Arc stockholder. Tax matters regarding the merger are very complicated, and the tax consequences of the merger to any particular Bois d’Arc stockholder will depend on that stockholder’s particular situation. Bois d’Arc stockholders should consult their own tax advisors regarding the specific tax consequences of the merger, including tax return reporting requirements, the applicability of U.S. federal, state, local and foreign tax laws and the effect of any proposed change in the tax laws to them.
 
Accounting Treatment
 
Stone intends to account for the merger under the purchase method of accounting for business combinations with Stone being deemed to have acquired Bois d’Arc. This means that the assets and liabilities of Bois d’Arc will be recorded, as of the completion of the merger, at their fair values and added to those of Stone.
 
Listing of Stone Common Stock
 
Stone will use its reasonable best efforts to cause the shares of Stone common stock to be issued in connection with the merger to be approved for listing on the NYSE upon the completion of the merger. Approval of the listing on the NYSE of the shares of Stone common stock to be issued pursuant to the merger is a condition to each party’s obligation to complete the merger.


63


Table of Contents

 
Delisting and Deregistration of Bois d’Arc Common Stock
 
If the merger is completed, Bois d’Arc common stock will be delisted from the NYSE and deregistered under the Exchange Act.
 
Restrictions on Sales of Shares of Stone Common Stock Received in the Merger
 
The shares of Stone common stock to be issued in connection with the merger will be registered under the Securities Act and will be freely transferable, except for shares of Stone common stock issued to any person who is deemed to be an “affiliate” of Stone after the effective time of the merger. Bois d’Arc stockholders who become affiliates of Stone as a result of the merger may not sell any of the shares of Stone common stock received by them in connection with the merger except pursuant to an effective registration statement under the Securities Act covering the resale of those shares or any applicable exemption under Rule 144 or otherwise under the Securities Act.


64


Table of Contents

 
THE MERGER AGREEMENT
 
The following summary describes selected material provisions of the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus and is incorporated by reference herein. This summary may not contain all of the information about the merger agreement that is important to Stone and Bois d’Arc stockholders. Stone and Bois d’Arc stockholders are encouraged to carefully read the merger agreement in its entirety.
 
The representations and warranties described below and included in the merger agreement were made by each of Stone and Bois d’Arc to the other. These representations and warranties were made as of specific dates and are subject to important exceptions and limitations, including a contractual standard of materiality different from that generally applicable under federal securities laws. In addition, the representations and warranties may have been included in the merger agreement for the purpose of allocating risk between Stone and Bois d’Arc, rather than to establish matters as facts. The merger agreement is described in this joint proxy statement/prospectus and attached as Annex A hereto only to provide Stone and Bois d’Arc stockholders with information regarding its terms and conditions, and not to provide any other factual information regarding Stone, Bois d’Arc or their respective businesses. Accordingly, Stone and Bois d’Arc stockholders should not rely on the representations and warranties in the merger agreement as characterizations of the actual state of facts about Stone or Bois d’Arc, and Stone and Bois d’Arc stockholders should read the information provided elsewhere in this joint proxy statement/prospectus and in the documents incorporated by reference into this joint proxy statement/prospectus for information regarding Stone and Bois d’Arc and their respective businesses. See “Where You Can Find More Information; Incorporation by Reference.”
 
Structure of the Merger
 
Pursuant to the terms and subject to the conditions of the merger agreement, at the effective time, Bois d’Arc will merge with and into Merger Sub, a wholly owned subsidiary of Stone, with Merger Sub surviving the merger as a wholly owned subsidiary of Stone, which is referred to herein as the merger.
 
Effective Time of the Merger
 
The closing of the merger and the other transactions contemplated by the merger agreement will occur no later than the second business day after all of the conditions to the completion of the merger contained in the merger agreement have been satisfied or waived, or at such other time as Stone and Bois d’Arc may agree. At the closing, the appropriate parties will file a certificate of merger with the Secretary of State of the State of Delaware and articles of merger with the Secretary of State of the State of Nevada relating to the merger. The merger will become effective upon the filing of the certificate of merger and the articles of merger or at such other time as Stone and Bois d’Arc agree and specify in the certificate of merger and the articles of merger.
 
Merger Consideration
 
The merger agreement provides that at the effective time of the merger each share of Bois d’Arc common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive 0.165 shares of Stone common stock, together with rights to purchase shares of junior participating preferred stock that Stone may issue pursuant to its rights agreement, and $13.65 in cash, without interest.
 
Based on the number of shares of Bois d’Arc common stock outstanding on April 29, 2008, Stone would issue approximately 11.3 million shares of Stone common stock and pay approximately $936 million in cash in the merger. Those amounts will be adjusted upwards depending on the actual number of shares of Bois d’Arc common stock outstanding at the effective time of the merger, which will increase if Bois d’Arc issues any shares in accordance with the terms of the merger agreement, such as through the exercise of Bois d’Arc stock options. Based on the outstanding shares of Bois d’Arc common stock on April 29, 2008 and the maximum number of additional shares of Bois d’Arc common stock that may be issued in accordance with the merger agreement pursuant to the exercise of outstanding Bois d’Arc stock options or otherwise, the aggregate number of shares of Stone common stock that Stone would issue in the merger is approximately 11.3 million, and the aggregate amount that Stone would pay in cash is approximately $936 million.


65


Table of Contents

If, between the date of the merger agreement and the effective time of the merger, the shares of Stone common stock are changed into a different number or class of shares by reason of reclassification, split-up, combination, exchange of shares or similar readjustment, or a stock dividend is declared with a record date within that period, appropriate adjustments will be made to the per share stock consideration.
 
No Dissenter’s Rights
 
Under Nevada law, no holder of shares of Bois d’Arc common stock is entitled to appraisal or dissenter’s rights or similar rights to a court valuation of the fair value of their shares in connection with the merger because such shares are listed on the NYSE and such holder will be entitled to cash and shares of Stone common stock that will be listed on the NYSE.
 
Conversion of Shares; Exchange of Certificates; Fractional Shares; Treatment of Stock Options and Restricted Stock
 
The conversion of shares of Bois d’Arc common stock into the right to receive the merger consideration will occur automatically at the effective time of the merger. As soon as reasonably practicable after the effective time of the merger, BNY Mellon Shareowner Services, or BNY Mellon, as exchange agent, will exchange certificates formerly representing shares of Bois d’Arc common stock for merger consideration to be received in the merger pursuant to the merger agreement.
 
Exchange Procedures
 
Prior to the effective time of the merger, Stone will deposit with Mellon (the exchange agent in connection with the merger) sufficient cash and Stone common stock for the benefit of holders of shares of Bois d’Arc common stock to be converted into the merger consideration.
 
Promptly after the effective time of the merger, the exchange agent will send a letter of transmittal to each person who was a Bois d’Arc stockholder at the effective time of the merger. This mailing will contain instructions on how to surrender certificates formerly representing shares of Bois d’Arc common stock in exchange for the merger consideration the holder is entitled to receive under the merger agreement.
 
Dividends and Distributions with Respect to Unexchanged Bois d’Arc Common Stock
 
After the effective time of the merger, holders of shares of Bois d’Arc common stock will be entitled to dividends and other distributions payable with a record date after the effective time of the merger with respect to the number of shares of Stone common stock to which they are entitled upon exchange of their shares of Bois d’Arc common stock, without interest, but they will not be paid any dividends or other distributions on such shares of Stone common stock until they surrender their shares of Bois d’Arc common stock to the exchange agent in accordance with the exchange agent’s instructions. After the close of business on the date on which the effective time of the merger occurs, there will be no transfers on the stock transfer books of Bois d’Arc of any shares of Bois d’Arc common stock.
 
Fractional Shares
 
Fractional shares of Stone common stock will not be delivered pursuant to the merger. Instead, each holder of shares of Bois d’Arc common stock who would otherwise be entitled to receive a fractional share of Stone common stock pursuant to the merger will be entitled to receive a cash payment, in lieu thereof, in an amount equal to the product of (1) the average of the closing sale prices of shares of Stone common stock on the NYSE as reported by The Wall Street Journal for the five trading days immediately preceding the two business days prior to the effective date of the merger and (2) the fraction of a share of Stone common stock that such holder would otherwise be entitled to receive.


66


Table of Contents

Termination of Exchange Fund
 
Any portion of the merger consideration, or dividends payable in accordance with the merger agreement, made available to the exchange agent that remains unclaimed by holders of shares of Bois d’Arc common stock after 180 days following the effective time of the merger will be returned to Stone upon demand. Thereafter, a holder of Bois d’Arc common stock must look only to Stone for payment of the merger consideration to which the holder is entitled under the terms of the merger agreement. Any amounts remaining unclaimed by holders of shares of Bois d’Arc common stock immediately prior to such time, as such amounts would otherwise escheat to or become the property of any governmental authority, will become the property of Stone free and clear of any liens, claims or interest of any person previously entitled thereto.
 
Lost Stock Certificates
 
If a certificate formerly representing shares of Bois d’Arc common stock has been lost, stolen or destroyed, the exchange agent will issue the consideration properly payable under the merger agreement upon receipt of an affidavit as to that loss, theft or destruction, and, if required by Stone, the posting of a bond as indemnity.
 
Adjustments to Prevent Dilution
 
The per share consideration will be adjusted to provide holders of shares of Bois d’Arc common stock the same economic effect contemplated by the merger agreement if, at any time between the signing and the effective time of the merger, there is any change in the outstanding shares of capital stock of Bois d’Arc or Stone by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment, or stock dividend declared with a record date during such period.
 
Treatment of Stock Options
 
Prior to the effective time of the merger, Bois d’Arc will take all actions necessary under the Bois d’Arc stock plans to cause each holder of a Bois d’Arc stock option that is outstanding immediately prior to the effective time to be cancelled at the effective time. Each cancelled Bois d’Arc stock option will be converted into the right to receive, from Stone, within two business days after the effective time of the merger, an amount, less any applicable withholding taxes and without interest, referred to herein as the “stock option amount,” equal to (1) the number of shares of Bois d’Arc stock subject to such option multiplied by (a) $13.65, plus (b) the value of 0.165 shares of Stone common stock multiplied by the average closing sales prices of Stone common stock as reported by The Wall Street Journal for the five trading days immediately preceding the two business days prior to the effective time of the merger, referred to herein as the “option amount stock consideration,” minus (2) the per share exercise price of such Bois d’Arc stock option. The portion of the stock option amount to be paid in cash, will be an amount equal to the quotient of (a) $13.65 divided by (b) the sum of $13.65 and the option amount stock consideration. Any applicable withholding taxes will be withheld from the cash portion of the stock option amount. The remaining portion of the stock option amount will be paid in Stone common stock, based on the value of Stone common stock, as described above. No fractional shares will be issued. Cash will be paid in lieu of any fractional shares.
 
Treatment of Restricted Stock
 
As of the effective time of the merger, each restricted share of Bois d’Arc common stock then outstanding shall become fully vested. As a result, each holder of Bois d’Arc restricted stock will be treated at the effective time of the merger the same as, and have the same rights and be subject to the same conditions as, each Bois d’Arc stockholder. Holders of restricted stock will be subject to applicable tax withholding, as described below.
 
Withholding Tax
 
Each of Stone, the combined corporation and the exchange agent will be entitled to deduct and withhold from the merger consideration payable to any Bois d’Arc stockholder the amounts it is required to deduct and


67


Table of Contents

withhold under the Internal Revenue Code or any state, local or foreign tax law. Withheld amounts will be treated for all purposes of the merger as having been paid to the Bois d’Arc stockholders from whom they were withheld.
 
Stone will be entitled to deduct and withhold, or cause the exchange agent to deduct and withhold, from the consideration otherwise payable to any holders of Bois d’Arc stock options or Bois d’Arc restricted stock such amounts as it may be required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Stone or the exchange agent, as the case may be, the withheld amounts will be treated as having been paid to the holders of Bois d’Arc stock options or Bois d’Arc restricted stock, as applicable, in respect of which the deduction and withholding was made. Stone has agreed that no wage withholding will be made with respect to Bois d’Arc’s restricted stock if a valid and timely election has been made under Section 83(b) of the Internal Revenue Code unless required by applicable law.
 
Representations and Warranties
 
The merger agreement contains representations and warranties made by each of the parties regarding aspects of their respective businesses, financial condition and structure, as well as other facts pertinent to the merger. Each of Bois d’Arc, on the one hand, and Stone and Merger Sub, on the other hand, has made representations and warranties to the other in the merger agreement with respect to some or all of the following subject matters:
 
  •  corporate existence, good standing and qualification to conduct business;
 
  •  capitalization, including ownership of subsidiary capital stock and the absence of restrictions or encumbrances with respect to capital stock of any subsidiary;
 
  •  corporate power and authorization to enter into and carry out the obligations under the merger agreement and the enforceability of the merger agreement;
 
  •  absence of any conflict or violation of organizational documents, third party agreements or law or regulation as a result of entering into and carrying out the obligations of the merger agreement;
 
  •  governmental, third party and regulatory approvals or consents required to complete the merger;
 
  •  filings and reports with the SEC and financial information;
 
  •  oil and gas matters;
 
  •  absence of certain changes, events or circumstances;
 
  •  absence of undisclosed liabilities;
 
  •  accuracy of the information supplied for inclusion in this joint proxy statement/prospectus;
 
  •  employee benefit plans and ERISA;
 
  •  litigation and compliance with laws;
 
  •  intellectual property;
 
  •  material contracts;
 
  •  tax matters;
 
  •  environmental matters;
 
  •  oil and gas properties and other assets;
 
  •  insurance;
 
  •  labor matters and employees;
 
  •  transactions with affiliates;


68


Table of Contents

 
  •  derivative and hedging transactions;
 
  •  natural gas regulation;
 
  •  disclosure controls and procedures;
 
  •  investment company status;
 
  •  required vote by stockholders;
 
  •  recommendations of merger by boards of directors and opinions of financial advisors;
 
  •  fees payable to brokers in connection with the merger;
 
  •  reorganization; and
 
  •  no other representations or warranties.
 
Bois d’Arc has made additional representations and warranties to Stone in the merger agreement with respect to the inapplicability of any anti-takeover law or provision in Bois d’Arc’s articles of incorporation or bylaws with respect to the merger agreement or the stockholder agreements.
 
Stone has made additional representations and warranties to Bois d’Arc in the merger agreement with respect to the stockholder agreements and its rights agreement.
 
Certain representations and warranties of Stone and Bois d’Arc are qualified as to materiality or as to “material adverse effect,” which when used with respect to Stone and Bois d’Arc means, as the case may be, the existence of a material adverse change to the financial condition, business, assets, properties or results of operations of such party and its subsidiaries, taken as a whole, no matter how caused or how arising, except for any material adverse change that is caused by or arises from one or more of:
 
  •  changes to economic, political or business conditions affecting the domestic energy markets generally, except, in each case, to the extent any such changes or effects materially disproportionately affect such party;
 
  •  the occurrence of natural disasters of any type, including, without limitation, earthquakes and tsunamis but not including tropical cyclones (including hurricanes, tropical storms and tropical depressions);
 
  •  changes in market prices, both domestically and globally, for any carbon-based energy product and any write-down for accounting purposes of oil and gas reserves as a result of a “ceiling test” or property impairment to the extent but only to the extent such write-down or property impairment is directly attributable to changes in market prices of oil or gas (but not any change resulting from a default under any agreement or arrangement as a result of such write-down or property impairment);
 
  •  the announcement or pendency of the merger agreement and the transactions contemplated thereby, compliance with the terms thereof or the disclosure of the fact that Stone is the prospective owner of Bois d’Arc, including any litigation arising from any of the foregoing;
 
  •  the existence or occurrence of war, acts of war, terrorism or similar hostilities;
 
  •  changes in laws of general applicability or interpretations thereof by courts or governmental entities; or
 
  •  changes in the market price of either Stone common stock or Bois d’Arc common stock (but not any change underlying such changes in price to the extent such change would otherwise constitute a material adverse effect relating to Stone or Bois d’Arc, as the case may be).
 
Conditions to the Completion of the Merger
 
The completion of the merger is subject to various conditions. While it is anticipated that all of these conditions will be satisfied, there can be no assurance as to whether or when all of the conditions will be satisfied or, where permissible, waived.


69


Table of Contents

Conditions to Each Party’s Obligations
 
Each party’s obligation to complete the merger is subject to the satisfaction or waiver of the following conditions:
 
  •  approval by Bois d’Arc stockholders of the merger agreement;
 
  •  approval by Stone stockholders of the issuance of Stone common stock pursuant to the merger agreement;
 
  •  absence of any statute, rule, order, decree or regulation, and of any action taken by any court or other governmental entity, which temporarily, preliminarily or permanently restrains, precludes, enjoins or otherwise prohibits the consummation of the merger or makes the consummation of the merger illegal;
 
  •  expiration or termination of the waiting period (and any extension thereof) applicable to the consummation of the merger under the HSR Act (which occured on June 6, 2008);
 
  •  effectiveness of the S-4 registration statement, of which this joint proxy statement/prospectus constitutes a part, and absence of any stop order or proceedings for such purpose pending before or threatened by the SEC; and
 
  •  authorization for listing on the NYSE of shares of Stone common stock issuable to the stockholders of Bois d’Arc pursuant to the merger agreement, subject to official notice of issuance.
 
Additional Conditions to Bois d’Arc’s Obligations
 
The obligation of Bois d’Arc to complete the merger is subject to the satisfaction or waiver of the following conditions:
 
  •  Stone’s and Merger Sub’s representations and warranties set forth in the merger agreement (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth therein) shall be true and correct at and as of the closing date of the merger, as if made at and as of the closing date of the merger (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations to be true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth therein) individually or in the aggregate has not had, and would not be reasonably likely to have or result in, a material adverse effect on Stone; and Bois d’Arc shall have received an officers’ certificate from Stone to this effect;
 
  •  the performance or compliance in all material respects by Stone and Merger Sub of each of their respective obligations contained in the merger agreement; and Bois d’Arc shall have received an officers’ certificate from Stone to this effect;
 
  •  absence of any suit, action or proceeding by any court or other governmental entity seeking to (1) prohibit or limit in any material respect the ownership or operation by any of the parties to the merger agreement or any of their respective affiliates of a substantial portion of Bois d’Arc and its subsidiaries, taken as a whole, or require any such person to dispose of or hold separate any material portion of the business or assets of Bois d’Arc and its subsidiaries, taken as a whole, as a result of the merger or any of the other transactions contemplated by the merger agreement, or (2) restrain, preclude, enjoin or prohibit the merger or any of the other transactions contemplated by the merger agreement; and
 
  •  the receipt by Bois d’Arc of an opinion of its counsel, dated the closing date of the merger, to the effect that the merger will qualify as a reorganization under section 368(a) of the Internal Revenue Code and that Bois d’Arc and Stone will each be a “party to the reorganization” within the meaning of section 368 of the Internal Revenue Code.


70


Table of Contents

 
Additional Conditions to Stone’s and Merger Sub’s Obligations
 
The obligations of Stone and Merger Sub to complete the merger are subject to the satisfaction or waiver of the following conditions:
 
  •  Bois d’Arc’s representations and warranties set forth in the merger agreement shall be true and correct (without giving effect to any limitations as to “materiality” or “material adverse effect” set forth therein) both at and as of the closing date of the merger, as if made at and as of the closing date of the merger (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be true and correct (without giving effect to any limitations as to “materiality or material adverse effect”) individually or in the aggregate has not had, and would not be reasonably likely to have or result in, a material adverse effect on Bois d’Arc; and Stone shall have received an officers’ certificate from Bois d’Arc to this effect;
 
  •  the performance or compliance in all material respects by Bois d’Arc of each of its obligations contained in the merger agreement; and Stone shall have received an officers’ certificate from Bois d’Arc to this effect;
 
  •  absence of any suit, action or proceeding by any court or other governmental entity seeking to (1) prohibit or limit in any material respect the ownership or operation by any of the parties to the merger agreement or any of their respective affiliates of a substantial portion of the business or assets of Bois d’Arc and its subsidiaries, taken as a whole, or to require any person to dispose of or hold separate any material portion of the business or assets of Bois d’Arc and its subsidiaries, taken as a whole, as a result of the merger or any of the other transactions contemplated by the merger agreement, or (2) restrain, preclude, enjoin or prohibit the merger or any of the other transactions contemplated by the merger agreement; and
 
  •  the receipt by Stone of an opinion of its counsel, dated the closing date of the merger, to the effect that the merger will qualify as a reorganization under section 368(a) of the Internal Revenue Code and that Bois d’Arc and Stone will each be a “party to the reorganization” within the meaning of section 368 of the Internal Revenue Code.
 
Conduct of Business Pending the Merger
 
Operations of Bois d’Arc
 
Bois d’Arc has agreed that it will, and will cause its subsidiaries to, during the period from the date of the merger agreement until the effective time of the merger or the date, if any, on which the merger agreement is terminated, except as disclosed in Bois d’Arc’s disclosure letter, expressly contemplated or permitted by the merger agreement or agreed to in writing by Stone:
 
  •  conduct the business of Bois d’Arc and its subsidiaries only in and not take any action except in the ordinary course of business consistent with past practices;
 
  •  use its reasonable best efforts to preserve intact its business organization and goodwill and the business organization and goodwill of its subsidiaries;
 
  •  use its reasonable best efforts to keep available the services of the current officers and key employees of Bois d’Arc and its subsidiaries and preserve and maintain existing relationships with customers, suppliers, officers, employees and creditors and with other persons with which Bois d’Arc has significant business relationships;
 
  •  deliver promptly to Stone updates on the operations of Bois d’Arc at least monthly; and
 
  •  maintain all insurance policies and replacement insurance policies having substantially similar coverages as the insurance policies described in the Bois d’Arc disclosure letter.
 
Bois d’Arc has also agreed that it will not, and will not permit any of its subsidiaries to, during the period from the date of the merger agreement until the effective time of the merger or the date, if any, on which the


71


Table of Contents

merger agreement is terminated, except as disclosed in Bois d’Arc’s disclosure letter, expressly contemplated or permitted by the merger agreement or agreed to in writing by Stone:
 
  •  enter into any new line of business, incur or commit to any capital expenditures, or any obligations or liabilities in connection with any capital expenditures in excess of $2 million per obligation other than capital expenditures and obligations or liabilities incurred or committed to prior to the date of the merger agreement or incurred or committed to as may be reasonably required to conduct emergency operations on any well, pipeline or other facility;
 
  •  amend its articles of incorporation or bylaws or similar organizational documents;
 
  •  declare, set aside or pay any dividend or other distribution, whether payable in cash, stock or any other property or right, with respect to its capital stock or other equity interests, except that Bois d’Arc may permit any direct or indirect wholly owned subsidiary to pay dividends;
 
  •  adjust, split, combine, subdivide or reclassify any capital stock or other equity interests or issue, grant, sell, transfer, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class or of any other such securities or agreements of Bois d’Arc or any of its subsidiaries, other than issuances (1) of shares of Bois d’Arc common stock pursuant to the Bois d’Arc stock options or restricted stock unit awards outstanding on the date of the merger agreement, or (2) by a wholly owned subsidiary of Bois d’Arc of such subsidiary’s capital stock or other equity interests to Bois d’Arc or any other wholly owned subsidiary of Bois d’Arc, or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock or any other securities or agreements of the type described above;
 
  •  grant any increase in the compensation (including base salary and target bonus) or benefits payable to any officer or director of Bois d’Arc or any of its subsidiaries;
 
  •  except in connection with promotions on a basis consistent with past practices, grant any increase in the compensation or benefits payable to any employee who is not an officer of Bois d’Arc or any of its subsidiaries, or to any director of Bois d’Arc or its subsidiaries;
 
  •  except as required to comply with applicable law or any agreement in existence on the date of the merger agreement or as expressly provided in the merger agreement, adopt, enter into, amend or otherwise increase, or accelerate the payment or vesting of the amounts, benefits or rights payable or accrued or to become payable or accrued under any collective bargaining, bonus, profit sharing, thrift, incentive compensation, deferred compensation, severance, termination, change in control, retention, hospitalization or other medical, life, disability, insurance or other welfare, profit sharing, stock option, stock appreciation right, restricted stock or other equity based, pension, retirement or other employee compensation or benefit plan, program agreement or arrangement;
 
  •  enter into or amend any employment or consulting agreement or, except in accordance with existing contracts or agreements, grant any severance or termination pay to any officer, director or employee of Bois d’Arc or any of its subsidiaries other than made for purposes of complying with section 409A of the Internal Revenue Code;
 
  •  change its methods of accounting in effect at December 31, 2007, except in accordance with changes in U.S. GAAP and applicable law as concurred with by Bois d’Arc’s independent auditors;
 
  •  acquire or agree to acquire any person or other business organization, division or business by merger, consolidation, purchase of an equity interest or portion of assets, or by any other manner, or (other than in the ordinary course of business consistent with past practice) acquire any assets;
 
  •  sell, lease, farmout, exchange, transfer, assign or otherwise dispose of, or agree or commit to sell, lease, farmout, exchange, transfer, assign or otherwise dispose of, any of its assets except for the sale of hydrocarbons in the ordinary course of business consistent with past practice;


72


Table of Contents

 
  •  mortgage, pledge, hypothecate, grant any security interest in, or otherwise subject any of its assets to any liens, subject to limited exceptions;
 
  •  except for taxes, pay, discharge or satisfy any claims (including claims of stockholders), liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), except for the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities or obligations reflected or reserved against in Bois d’Arc’s balance sheet as of December 31, 2007 or liabilities or obligations in accordance with the terms of agreements in effect on the date of the merger agreement or entered into after the date of the merger agreement in the ordinary course of business consistent with past practice and not in violation of the merger agreement, or compromise, settle, grant any waiver or release relating to any litigation, other than settlements covered by insurance or where the amount paid or to be paid does not exceed $1.0 million for any individual claim or series of related claims or $1.0 million in the aggregate;
 
  •  engage in any transaction (except pursuant to agreements in effect at the time of the merger agreement or as disclosed in Bois d’Arc’s disclosure letter), or enter into any agreement, arrangement, or understanding, directly or indirectly, with any of Bois d’Arc’s affiliates (not including any employees of Bois d’Arc or any of its subsidiaries, other than the directors and executive officers thereof);
 
  •  change any material tax method of accounting, make or change any material tax election, authorize or undertake any indemnities for taxes, extend any period for assessment of any tax, file any request for ruling or determination, amend any material tax return, or settle or compromise any material tax liability, except where such action would not have a material effect on the tax position of Bois d’Arc and its subsidiaries taken as a whole;
 
  •  take any action that would reasonably be expected to result in (1) any of the conditions to the merger not being satisfied, (2) a material adverse effect on Bois d’Arc or (3) materially impair or delay consummation of the merger or the other transactions contemplated by the merger agreement;
 
  •  adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Bois d’Arc or any of its subsidiaries (other than the merger) or any agreement relating to an acquisition proposal (except certain confidentiality agreements);
 
  •  incur or assume any indebtedness, except for indebtedness incurred and letters of credit issued under Bois d’Arc’s credit agreement, in the ordinary course of business;
 
  •  modify any material indebtedness or other liability to increase Bois d’Arc’s (or any of its subsidiaries’) obligations with respect to such indebtedness;
 
  •  assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person (other than a wholly owned subsidiary of Bois d’Arc);
 
  •  make any loans, advances or capital contributions to, or investments in, any other person (other than to wholly owned subsidiaries of Bois d’Arc, or by wholly owned subsidiaries to Bois d’Arc);
 
  •  enter into any contract, commitment or transaction, except in the ordinary course of business and consistent with past practice, and in no event exceeding $2.0 million in the aggregate, except as otherwise permitted under the merger agreement;
 
  •  enter into any agreement, understanding or commitment that materially limits Bois d’Arc’s or any of Bois d’Arc’s affiliates’ or that would limit the combined company’s or any of the combined company’s affiliates’ ability to compete in or conduct any line of business or compete with any person or in any geographic area or during any period of time;
 
  •  enter into any material joint venture, partnership or other similar arrangement or materially amend or modify in an adverse manner the terms of (or waive any material rights under) any existing material


73


Table of Contents

  joint venture, partnership or other similar arrangement (other than any such action between its wholly owned subsidiaries);
 
  •  terminate any material contract to which it is a party or waive or assign any of its rights or claims in a manner that is materially adverse to Bois d’Arc or, except in the ordinary course of business consistent with past practice, modify or amend in any material respect any material contract;
 
  •  make, enter into or assume any derivative transaction or enter into any agreement to sell hydrocarbons other than in the ordinary course of business at market pricing;
 
  •  modify any existing agreement or enter into any new agreement with Bois d’Arc’s financial advisors or similar consultants; or
 
  •  enter into or publicly announce an intention to enter into an agreement, contract, commitment or arrangement to take any of the prohibited actions described above.
 
Operations of Stone
 
Stone has agreed that it will, and will cause its subsidiaries to, during the period from the date of the merger agreement until the effective time of the merger or the date, if any, on which the merger agreement is terminated, except as disclosed in Stone’s disclosure letter, expressly contemplated or permitted by the merger agreement, or agreed to in writing by Bois d’Arc, conduct the business of Stone and its subsidiaries only in the ordinary course consistent with past practices; provided, however, that the foregoing will not be deemed to prohibit Stone or any of its subsidiaries from engaging in any acquisition or divestiture transaction that does not constitute an acquisition proposal for Stone and would not reasonably be expected to have a material adverse effect on Stone or materially impair or delay the consummation of the transactions contemplated by the merger agreement.
 
Stone has also agreed that it will not, during the period from the date of the merger agreement until the effective time of the merger or the date, if any, on which the merger agreement is terminated, except as disclosed in Stone’s disclosure letter, as expressly contemplated or permitted by the merger agreement, or agreed to in writing by Bois d’Arc:
 
  •  declare, set aside, make or pay any dividend or other distribution, whether payable in cash, stock or any other property or right, with respect to its capital stock or other equity interests (except for wholly owned subsidiaries of Stone);
 
  •  permit any of its subsidiaries to (i) adjust, split, combine, subdivide or reclassify any capital stock or other equity interests or issue, grant, sell, transfer, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class or of any other such securities or agreements of Stone or any of its subsidiaries, other than issuances (1) of shares of Stone common stock pursuant to the Stone options outstanding on the date of the merger agreement or (2) by a wholly owned subsidiary of Stone of such subsidiary’s capital stock or other equity interests to Stone or any other wholly owned subsidiary of Stone; or (ii) redeem, purchase or otherwise acquire directly or indirectly any of its capital stock or any other securities or agreements of the type described in clause (i) above, other than purchases of shares of Stone common stock pursuant to Stone’s previously announced stock repurchase program;
 
  •  change its methods of accounting in effect at December 31, 2007, except changes in accordance with GAAP or applicable law as concurred with by Stone’s independent auditors;
 
  •  amend its certificate of incorporation or bylaws in a manner that adversely affects the terms of the Stone common stock;
 
  •  acquire ownership or become a “beneficial owner” for the purposes of Section 78.414 of the Nevada Revised Statutes of any shares of any voting securities of Bois d’Arc, other than shares so owned as of


74


Table of Contents

  the date of the merger agreement or any shares beneficially owned as a result of Stone and Merger Sub entering into the stockholder agreements or acquired pursuant to the merger agreement;
 
  •  take any action that would reasonably be expected to (1) result in any of the conditions to the merger not being satisfied, (2) result in a material adverse effect on Stone or (3) materially impair or delay consummation of the merger or the other transactions contemplated by the merger agreement;
 
  •  adopt or enter into or permit any of its subsidiaries to adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Stone or any of its subsidiaries (other than the merger) or any agreement relating to an acquisition proposal (except certain confidentiality agreements);
 
  •  change any material tax method of accounting, make or change any material tax election, authorize or undertake any indemnities for taxes, extend any period for assessment of any tax, file any request for ruling or determination, amend any material return, or settle or compromise any material tax liability, except where such action would not have a material effect on the tax position of Stone and its subsidiaries taken as a whole; and
 
  •  enter into an agreement, contract, commitment or arrangement to take any of the prohibited actions described above.
 
Covenants
 
Access to Information and Properties
 
During the period prior to the effective time of the merger, upon reasonable notice and subject to applicable laws relating to the exchange of information, Stone and Bois d’Arc and their respective subsidiaries will afford to the authorized representatives of the other party reasonable access, during normal business hours, to all of their properties, offices, contracts, books, commitments, records, data and personnel. During this period, each party will make available to the other parties all information concerning its business, properties and personnel as the other parties may reasonably request. No party or any of its subsidiaries will be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of its customers, jeopardize any attorney-client privilege or contravene any law or binding agreement entered into prior to the date of the merger agreement. Stone and Bois d’Arc will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. Stone and Bois d’Arc will hold any information obtained under this provision confidential.
 
Further Action; Commercially Reasonable Efforts
 
Each of the parties to the merger agreement will use its commercially reasonable efforts to take all actions necessary, proper or advisable to consummate the transactions contemplated by the merger agreement, including using commercially reasonable efforts to satisfy the conditions precedent to the obligations of any of the parties, to obtain all necessary authorizations, consents and approvals, and to effect all necessary registrations and filings.
 
Each of the parties to the merger agreement will furnish to the other parties such necessary information and reasonable assistance as such other parties may reasonably request in connection with the foregoing and, subject to applicable laws and any applicable privilege relating to the exchange of information, provide the other parties with copies of all filings made by such party with any governmental entity (except for filings available publicly on the SEC’s EDGAR system) or any other information supplied by such party to a governmental entity in connection with the merger agreement and the transactions contemplated thereby; provided, that neither party is obligated to share any document submitted to a governmental entity that reflects the negotiations between the parties or the valuation of some or all of any party’s business.
 
Each of Stone, Merger Sub and Bois d’Arc will use its respective commercially reasonable efforts and will cooperate with the other parties to resolve any objections that may be asserted with respect to the transactions contemplated by the merger agreement under the laws, rules, guidelines or regulations of any


75


Table of Contents

governmental entity. Bois d’Arc and Stone will, as soon as practicable, file notification and report forms under the HSR Act with the FTC and the Antitrust Division, and will use commercially reasonable efforts to respond as promptly as practicable to all inquiries received from the FTC or the Antitrust Division for additional information or documentation.
 
If at any time after the effective time of the merger, any further action is necessary or desirable to carry out the purposes of the merger agreement, the proper officers and/or directors of Stone will take all such necessary action.
 
All of the parties to the merger agreement will use commercially reasonable efforts to prevent the entry of, and to cause to be discharged or vacated, any order or injunction of a governmental entity precluding, restraining, enjoining or prohibiting consummation of the merger.
 
Neither Stone nor Merger Sub will be required to accept, as a condition to obtaining any required approval or resolving any objection of any governmental entity, any requirement to divest or hold separate or in trust (or the imposition of any other condition or restriction with respect to) any assets or operations of Stone or Merger Sub or any of their respective affiliates or any of the respective businesses of Bois d’Arc or any of its subsidiaries, including the assets of Bois d’Arc.
 
In addition, Bois d’Arc will provide to Stone as soon as available but in any event on or before September 30, 2008 an interim reserve report prepared by Bois d’Arc containing estimates of the oil and gas reserves of Bois d’Arc and its subsidiaries as of June 30, 2008.
 
Proxy Statement/Prospectus; Registration Statement
 
Bois d’Arc and Stone will cooperate in preparing and each will cause to be filed with the SEC, in connection with the merger, this joint proxy statement/prospectus in preliminary form, and Stone will promptly prepare and file with the SEC the related registration statement, in which the proxy statement will be included as a prospectus, and the parties will file, if necessary, any other statement or schedule relating to the merger agreement and the transactions contemplated thereby. Each of Bois d’Arc, Stone and Merger Sub will use its reasonable best efforts to furnish the information required to be included by the SEC in the joint proxy statement/prospectus, the related registration statement and any such statement or schedule. Stone will use its reasonable best efforts to have the registration statement declared effective under the Securities Act as promptly as practicable after such filing. Each of Bois d’Arc and Stone will, as promptly as practicable thereafter, mail the joint proxy statement/prospectus to its stockholders.
 
If, at any time prior to the effective time of the merger, any event or circumstance relating to Bois d’Arc, Stone, Merger Sub or any of their respective affiliates, or its or their respective officers or directors, should be discovered by Bois d’Arc, Stone or Merger Sub that should be set forth in an amendment to the registration statement or a supplement to the joint proxy statement/prospectus, Bois d’Arc, Stone or Merger Sub will promptly inform the other parties hereto thereof in writing. All documents that Bois d’Arc or Stone is responsible for filing with the SEC in connection with the transactions contemplated in the merger agreement will comply as to form in all material respects with applicable requirements of the Securities Act and the Exchange Act. Stone will notify Bois d’Arc promptly of the time when the registration statement has become effective, of the issuance of any stop order or suspension of the qualification of the Stone common stock to be issued in connection with the merger for offering or sale in any jurisdiction, and the parties will notify each other promptly of the receipt of any comments from the SEC or the staff of the SEC and of any request by the SEC or the staff of the SEC for amendments or supplements to the joint proxy statement/prospectus or the related registration statement or for additional information and will supply each other with copies of (1) all correspondence between it or any of its representatives, on the one hand, and the SEC or the staff of the SEC, on the other hand, with respect to the joint proxy statement/prospectus, the related registration statement or the merger and (2) all orders of the SEC relating to the related registration statement.


76


Table of Contents

Special Meetings
 
Bois d’Arc, acting through the Bois d’Arc board of directors, will, in accordance with its articles of incorporation and bylaws and with applicable law, promptly and duly call, give notice of, convene and hold, as soon as reasonably practicable following the date upon which the registration statement becomes effective for the purposes of voting upon the approval of the merger agreement and the approval of the consummation of the transactions contemplated by the merger agreement, including the merger, a special meeting of its stockholders for the sole purpose of considering and taking action upon the merger agreement, and will use its reasonable best efforts to hold such meeting no later than 45 days after such date. Subject to certain exceptions, Bois d’Arc, acting through the Bois d’Arc board of directors, will (1) recommend approval of the merger agreement and include in the joint proxy statement/prospectus such recommendation and (2) use its reasonable best efforts to solicit and obtain such approval. Notwithstanding any withdrawal, amendment or modification of its recommendation or the commencement, public proposal, public disclosure or communication to Bois d’Arc of any acquisition proposal with respect to Bois d’Arc or any of its subsidiaries, or any other fact or circumstance (except for the occurrence of an adverse recommendation change by the Bois d’Arc board of directors prior to obtaining the required Bois d’Arc stockholder vote or termination of the merger agreement), the merger agreement will be submitted to the stockholders of Bois d’Arc at the special meeting for the purpose of approving the merger agreement, with such disclosures as are required by applicable law.
 
Stone, acting through the Stone board of directors, will, in accordance with its certificate of incorporation and bylaws and with applicable law, promptly and duly call, give notice of, convene and hold, as soon as reasonably practicable following the date upon which the registration statement becomes effective for the purpose of voting upon the Stone proposal, a special meeting of its stockholders, and will use its reasonable best efforts to hold the special meeting no later than 45 days after such date. Subject to certain exceptions, Stone, acting through the Stone board of directors, will (1) recommend approval of the Stone proposal and include in the joint proxy statement/prospectus such recommendation and (2) use its reasonable best efforts to solicit and obtain such approval. Notwithstanding any commencement, public proposal, public disclosure or communication to Stone of any acquisition proposal with respect to Stone or any of its subsidiaries, or any other fact or circumstance (except for the occurrence of an adverse recommendation change by the Stone board of directors prior to obtaining the required Stone stockholder vote or for termination of the merger agreement), the Stone proposal and, if applicable, plan amendment will be submitted to the stockholders of Stone at the special meeting for the purpose of approval of the Stone proposal and, if applicable, plan amendment, with such disclosures as are required by applicable law.
 
Notification of Certain Matters
 
Each of Bois d’Arc, on the one hand, and Stone and Merger Sub, on the other hand, will give prompt notice to the other of any fact, event or circumstance known to such party that would be reasonably likely to result in a failure of a condition to the merger agreement.
 
Directors’ and Officers’ Insurance and Indemnification
 
Stone agrees that all rights to exculpation, advancement of expenses and indemnification for acts or omissions occurring prior to the effective time of the merger in favor of the current and former officers and directors of Bois d’Arc as provided in the articles of incorporation or bylaws of Bois d’Arc or in the employment agreements with certain of Bois d’Arc’s officers, in each case in effect as of the date of the merger, will survive the merger continue in full force and effect in accordance with their terms and without amendment thereof.
 
Stone also agrees to maintain the directors’ and officers’ (D&O) insurance that serves to reimburse persons currently covered by Bois d’Arc’s D&O insurance in full force and effect for the continued benefit of such persons for a continuous period of not less than three years from the effective time of the merger on terms that are not materially different from Bois d’Arc’s D&O insurance in effect as of the date of the merger agreement (provided that Stone may substitute therefor policies of at least the same coverage containing terms and conditions that are not less favorable) with respect to matters occurring prior to the effective time of the


77


Table of Contents

merger. However, Stone will not be obligated to make annual premium payments for this insurance to the extent the premiums exceed 150% of the annual premium paid by Bois d’Arc for such insurance on the date of the merger agreement. In the event that the annual premium for such insurance exceeds such maximum amount, Stone will purchase as much coverage per policy year as reasonably obtainable for such maximum amount.
 
Publicity
 
None of Bois d’Arc, Stone or Merger Sub, nor any of their respective affiliates, will issue or cause the publication of any press release or other announcement with respect to the merger, the merger agreement or the other transactions contemplated by the merger agreement without the prior consultation of the other party, except as may be required by law or by any listing agreement with, or regulation of, any securities exchange or regulatory authority if all reasonable best efforts have been made to consult with the other party. In addition, Bois d’Arc will, to the extent reasonably practicable, consult with Stone regarding the form and content of any public disclosure of any material developments or matters involving Bois d’Arc, including earnings releases, reasonably in advance of such publication or release.
 
Stock Exchange Listing
 
Stone has agreed to use its reasonable best efforts to cause the shares of Stone common stock to be issued in connection with the merger to be listed on the NYSE, subject to official notice of issuance as of the effective time of the merger.
 
Employee Benefits
 
Bois d’Arc employees will be credited for their service with Bois d’Arc at the effective time of the merger for purposes of eligibility, participation and vesting (but not the accrual of benefits under any defined benefit pension plan) under any employee benefit plan, program or arrangement established or maintained by Stone in which they may participate.
 
To the extent Bois d’Arc employees and their dependents enroll in any health plan sponsored by Stone, Stone will waive any preexisting condition limitation otherwise applicable to them. In addition, Stone will cause such health plans to (1) waive all waiting periods otherwise applicable to Bois d’Arc employees and their dependents, other than waiting periods that are in effect with respect to such individuals as of the effective time of the merger under Bois d’Arc’s benefit plans, and (2) provide each Bois d’Arc employee and his or her dependents with credit for any co-payments and deductibles paid by them under the corresponding benefit plans of Bois d’Arc prior to the effective time of the merger.
 
Stone will permit Bois d’Arc employees who continue to be employed by Stone or a subsidiary of Stone after the effective time of the merger to schedule and take vacation days that have accrued prior to the effective time of the merger through December 31, 2008, and Stone will give service credit for purposes of determining vacation, sick leave and any other paid time off entitlements after the effective time of the merger.
 
2008 Retention Bonus Plan.  Pursuant to the Bois d’Arc 2008 Retention Bonus Plan, employees of Bois d’Arc (other than employees with employment or change in control agreements) whose employment is terminated by Stone other than for cause within the 90-day period following the merger, or who do not receive an offer of comparable employment from Stone and terminate their employment at the end of such 90-day period, will receive a severance payment equal to 100% of the employee’s annual base salary as in effect on May 1, 2008. Payment is conditioned upon the employee’s execution of a release and waiver of all employment-related claims. An offer of comparable employment means an offer of employment in Houston from Stone or a subsidiary of Stone with no reduction in base salary or bonus opportunity, and with employee benefits that are provided to Stone’s similarly situated employees.
 
Overriding Royalty Interest Incentive Plan.  Bois d’Arc maintains an Overriding Royalty Interest Incentive Plan (the “ORRI Plan”), which provides for annual bonuses to certain employees other than senior


78


Table of Contents

executives. The ORRI Plan provides for an annual bonus pool, which is credited, in general, with an ORRI in each well at the time drilling begins equal to approximately 0.9% of Bois d’Arc’s net working interest in the well. At year-end, the amount credited to the bonus pool is paid to the eligible employees in cash. The ORRI Plan has been amended in connection with the merger to provide that the amount of the bonus pool for 2008 will be determined as of the merger date and for a participant to receive a bonus under the ORRI Plan, the participant must remain employed through the 90-day period following the merger or be involuntarily terminated by Stone other than for cause during that 90-day period. The bonus pool will be paid on the date that is 90 days following the effective time of the merger.
 
If requested by Stone, Bois d’Arc shall terminate, immediately prior to the effective time, such Bois d’Arc benefit plan(s) that are identified by Stone, other than the Retention Bonus Plan and the ORRI Plan.
 
Bois d’Arc and Stone will cooperate with each other in all reasonable respects relating to any actions described above.
 
Nothing in the merger agreement will constitute an amendment to, or be construed as amending, any benefit plan, program or agreement sponsored, maintained or contributed to by Stone or any subsidiary of Stone. No Bois d’Arc employee nor any other person (other than the parties to the merger agreement) is intended to be a beneficiary of the provisions described above. Nothing in the merger agreement will require or be construed or interpreted as requiring Stone or any of its subsidiaries to continue the employment of any Bois d’Arc employee after the effective time of the merger.
 
Certain Tax Matters
 
The merger agreement is intended to constitute a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g). Each of Bois d’Arc and Stone have agreed that they will use their reasonable best efforts to cause the merger to qualify as a reorganization within the meaning of section 368(a) of the Internal Revenue Code.
 
In connection with the merger, Stone will file all required information with its tax returns and maintain all records required for tax purposes. Stone and Bois d’Arc will cooperate in the preparation, execution and filing of all tax returns and related documents.
 
Section 16 Matters
 
Prior to the closing date of the merger, Stone and Bois d’Arc, and their respective boards of directors, will use their reasonable best efforts to take all actions to cause any dispositions of shares of Bois d’Arc common stock (including derivative securities with respect to shares of Bois d’Arc common stock) or acquisitions of Stone common stock (including derivative securities with respect to Stone common stock) resulting from the transactions contemplated by the merger agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act to be exempt from Section 16(b) of the Exchange Act under Rule 16b-3 promulgated under the Exchange Act in accordance with the terms and conditions set forth in that certain No-Action Letter, dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
 
No Solicitation of Alternative Transactions
 
The merger agreement provides, subject to limited exceptions described below, that each of Bois d’Arc and Stone will not, and will cause its subsidiaries and representatives not to:
 
  •  directly or indirectly initiate, solicit or knowingly encourage or facilitate (including by way of furnishing non-public information) any inquiries regarding or the making or submission of any proposal that constitutes, or may reasonably be expected to lead to, any acquisition proposal (as defined below);
 
  •  participate or engage in any discussions or negotiations with, or disclose any non-public information relating to itself or any of its subsidiaries, or afford access to its or its subsidiaries’ properties, books or


79


Table of Contents

  records to any person that has made or that it knows or has reason to believe is contemplating making an acquisition proposal; or
 
  •  accept an acquisition proposal or enter into any agreement, including any letter of intent (other than a confidentiality agreement in certain circumstances that contains specified terms), that (1) provides for, constitutes or relates to any acquisition proposal or (2) requires or causes either Bois d’Arc or Stone to respectively abandon, terminate or fail to consummate the merger or the other transactions contemplated by the merger agreement.
 
The merger agreement permits Bois d’Arc and Stone to take and disclose to their respective stockholders a position with respect to an acquisition proposal from a person to the extent required under applicable federal securities laws or other applicable law. If either Bois d’Arc or Stone receives a written acquisition proposal at any time prior to obtaining, in the case of Bois d’Arc, the required Bois d’Arc stockholder vote approving the merger agreement, or in the case of Stone, the Stone stockholder vote approving the issuance of Stone common stock pursuant to the merger, then that party and its respective board of directors may participate or engage in discussions or negotiations with, furnish non-public information to, and afford access to its properties, books or records to, the person making the acquisition proposal if:
 
  •  the acquisition proposal was not initiated, solicited, knowingly encouraged or facilitated by that party, its subsidiaries, or any of its officers or directors, investment bankers, attorneys, accountants, financial advisors, agents or other representatives after the date of the merger agreement;
 
  •  the board of directors of the party that received the acquisition proposal determines in good faith, after consultation with its financial advisors and outside legal counsel, that such acquisition proposal constitutes or is reasonably likely to lead to a superior proposal (as defined below);
 
  •  the board of directors of the party that received the acquisition proposal determines in good faith (after consultation with its outside legal counsel) that failure to take such action would be inconsistent with its fiduciary duties to the applicable company and its stockholders under applicable law;
 
  •  the board of directors of the party that received the acquisition proposal determines in good faith, after consultation with its financial advisors and outside legal counsel, that the person making such acquisition proposal is reasonably expected to have the ability to consummate such acquisition proposal; and
 
  •  before the party receiving the acquisition proposal provides any information to the person making the acquisition proposal, such person enters into a confidentiality agreement on specified terms with the party that received the acquisition proposal.
 
Each of Bois d’Arc and Stone has also agreed:
 
  •  to promptly advise the other party in writing of the receipt of any acquisition proposal or any request for information received from any person that has made or that it reasonably believes may be contemplating an acquisition proposal, or any inquiry, discussions or negotiations with respect to any acquisition proposal, the material terms and conditions of any request, acquisition proposal, inquiry, discussions or negotiations, and the identity of the person or group making any request or acquisition proposal or with whom any discussions or negotiations are taking place;
 
  •  to provide the other party any non-public information concerning it provided to any other person or group in connection with any acquisition proposal that was not previously provided to the other party and copies of any written materials received from that person or group;
 
  •  to keep the other party fully and promptly informed of the status of any acquisition proposals (including the identity of the parties involved and price and any material changes to any terms and conditions); and
 
  •  not to release any third party from or waive any provisions of any confidentiality agreement related to any potential acquisition proposal or any standstill agreement.


80


Table of Contents

 
Bois d’Arc’s Ability to Make an Adverse Recommendation Change
 
At any time prior to obtaining the required Bois d’Arc stockholder vote approving the merger agreement, and subject to Bois d’Arc’s compliance at all times with the no-solicitation provisions described above, the board of directors of Bois d’Arc may make an adverse recommendation change (defined below) and (as a result of such adverse recommendation change) cancel the Bois d’Arc Stockholder Special Meeting if: (1) not in connection with an acquisition proposal with respect to Bois d’Arc, the Bois d’Arc board of directors determines in good faith, after consultation with its financial advisors and outside legal counsel, that the failure to make an adverse recommendation change would be inconsistent with its fiduciary duties to Bois d’Arc and its stockholders under applicable law, or (2) in connection with an acquisition proposal with respect to Bois d’Arc, the Bois d’Arc board determines in good faith, after consultation with its financial advisors and outside legal counsel, that such acquisition proposal constitutes a superior proposal and that the failure to make an adverse recommendation change would be inconsistent with its fiduciary duties to Bois d’Arc and its stockholders under applicable law; provided, that the Bois d’Arc board of directors may not make any adverse recommendation change until the fifth business day the after receipt by Stone of written notice (a “notice of change”) from Bois d’Arc advising Stone that the Bois d’Arc board of directors has determined:
 
  •  in the case of clause (1) above, that the Bois d’Arc board of directors intends to make such adverse recommendation change and containing the material facts and information constituting the basis for such determination by the Bois d’Arc board of directors that the failure to make an adverse recommendation change would be inconsistent with its fiduciary duties to Bois d’Arc and its stockholders. During such five business day period, Bois d’Arc agrees, at the request of Stone, to negotiate in good faith with Stone with respect to any changes or modifications to the merger agreement that would allow the Bois d’Arc board of directors not to make such adverse recommendation change consistent with its fiduciary duties; provided that a determination by the Bois d’Arc board of directors in good faith, after consultation with its outside legal counsel and financial advisors, that, after taking into account any such changes or modifications, the failure to make a company adverse recommendation change would be inconsistent with its fiduciary duties to Bois d’Arc and its stockholders will not require a new notice of change or a new five business day notice period, and
 
  •  in the case of clause (2) above, that such acquisition proposal with respect to Bois d’Arc constitutes a superior proposal, that the Bois d’Arc board of directors intends to make such company adverse recommendation change and containing all required information, together with copies of any written offer or proposal in respect of such superior proposal unless previously provided and a summary of the terms and conditions of such proposal. During such five business day period, Bois d’Arc agrees, at the request of Stone, to negotiate in good faith with Stone with respect to any revised offer from Stone in respect of the terms of the transactions contemplated by this agreement. In making a determination that such acquisition proposal with respect to Bois d’Arc constitutes a superior proposal and that the failure to make an adverse recommendation change would be inconsistent with its fiduciary duties to Bois d’Arc and its stockholders, the Bois d’Arc board of directors shall take into account any changes or modifications to the terms of the merger agreement proposed by Stone; provided that a determination by the Bois d’Arc board of directors in good faith, after consultation with its outside legal counsel and financial advisors, that, after taking into account any such changes or modifications, such acquisition proposal with respect to Bois d’Arc continues to constitute a superior proposal and the failure to make a company adverse recommendation change would be inconsistent with its fiduciary duties to Bois d’Arc and its stockholders will not require a new notice of change or a new five business day notice period.
 
Stone’s Ability to Make an Adverse Recommendation Change
 
At any time prior to obtaining the required Stone stockholder vote approving the issuance of Stone ordinary shares pursuant to the merger, and subject to Stone’s compliance at all times with the no-solicitation provisions described above and (as a result of such adverse recommendation change) cancel the Stone Stockholder Special Meeting if: (1) not in connection with an acquisition proposal with respect to Stone, the Stone board of directors determines in good faith, after consultation with its financial advisors and outside legal counsel, that the failure to make an adverse recommendation change would be inconsistent with its


81


Table of Contents

fiduciary duties to Stone and its stockholders under applicable law, or (2) in connection with an acquisition proposal with respect to Stone, the Stone board determines in good faith, after consultation with its financial advisors and outside legal counsel, that such acquisition proposal constitutes a superior proposal and that the failure to make an adverse recommendation change would be inconsistent with its fiduciary duties to Stone and its stockholders under applicable law; provided, that the Stone board of directors may not make any adverse recommendation change until the fifth business day the after receipt by Bois d’Arc of written notice (a “notice of change”) from Stone advising Bois d’Arc that the Stone board of directors has determined:
 
  •  in the case of clause (1) above, that the Stone board of directors intends to make such adverse recommendation change and containing the material facts and information constituting the basis for such determination by the Stone board of directors that the failure to make an adverse recommendation change would be inconsistent with its fiduciary duties to Stone and its stockholders. During such five business day period, Stone agrees, at the request of Bois d’Arc, to negotiate in good faith with Bois d’Arc with respect to any changes or modifications to the merger agreement that would allow the Stone board of directors not to make such adverse recommendation change consistent with its fiduciary duties; provided that a determination by the Stone board of directors in good faith, after consultation with its outside legal counsel and financial advisors, that, after taking into account any such changes or modifications, the failure to make a company adverse recommendation change would be inconsistent with its fiduciary duties to Stone and its stockholders will not require a new notice of change or a new five business day notice period, and
 
  •  in the case of clause (2) above, that such acquisition proposal with respect to Stone constitutes a superior proposal, that the Stone board of directors intends to make such company adverse recommendation change and containing all required information, together with copies of any written offer or proposal in respect of such superior proposal unless previously provided and a summary of the terms and conditions of such proposal. During such five business day period, Stone agrees, at the request of Bois d’Arc, to negotiate in good faith with Bois d’Arc with respect to any revised offer from Stone in respect of the terms of the transactions contemplated by this agreement. In making a determination that such acquisition proposal with respect to Stone constitutes a superior proposal and that the failure to make an adverse recommendation change would be inconsistent with its fiduciary duties to Stone and its stockholders, the Stone board of directors shall take into account any changes or modifications to the terms of the merger agreement proposed by Bois d’Arc; provided that a determination by the Stone board of directors in good faith, after consultation with its outside legal counsel and financial advisors, that, after taking into account any such changes or modifications, such acquisition proposal with respect to Stone continues to constitute a superior proposal and the failure to make a company adverse recommendation change would be inconsistent with its fiduciary duties to Stone and its stockholders will not require a new notice of change or a new five business day notice period.
 
Acquisition Proposal.  For purposes of this joint proxy statement/prospectus, the term “acquisition proposal” means, with respect to Bois d’Arc or Stone, any proposal, other than the transactions contemplated by the merger agreement; whether or not in writing, for the:
 
  •  direct or indirect acquisition or purchase of a business or assets that generates or constitutes 25% or more of the net revenues, net income or the assets (based on book value or fair market value thereof) of such party and its subsidiaries, taken as a whole;
 
  •  direct or indirect acquisition or purchase of 25% or more of any class of equity securities or capital stock of such party or any of its subsidiaries whose business generates or constitutes 25% or more of the net revenues, net income or assets of such party and its subsidiaries, taken as a whole; or
 
  •  merger, consolidation, restructuring, transfer of assets or other business combination, sale of shares of capital stock, tender offer, exchange offer, recapitalization, stock repurchase program or other similar transaction that, if consummated, would result in any person beneficially owning 25% or more of any class of equity securities of such party or any of its subsidiaries whose business generates or constitutes 25% or more of the net revenues, net income or assets (based on book value or fair market value thereof) of such party and its subsidiaries, taken as a whole.


82


Table of Contents

 
Superior Proposal.  For purposes of this joint proxy statement/prospectus, the term “superior proposal,” with respect to Bois d’Arc or Stone, means:
 
  •  any bona fide written acquisition proposal that was not initiated, solicited, knowingly facilitated or encouraged by such party or any of its subsidiaries or any of their respective representatives in violation of the merger agreement, made by a third party to acquire, directly or indirectly, 50% or more of the equity securities of such party or 50% or more of the assets of such party and its subsidiaries, taken as a whole, pursuant to a tender offer, exchange offer, merger, share exchange, asset purchase or other business combination; and
 
  •  the terms of such proposal, as determined by the majority of the board of directors of such party (after consultation with its financial advisors and outside legal counsel) in good faith, (1) would result in a transaction that, if consummated, is more favorable to the stockholders of such party (in their capacity as stockholders), than the merger, taking into account all the terms and conditions of such proposal and the merger agreement (including any changes to the terms of the merger agreement offered by the other party in response to such proposal or otherwise), and (2) is reasonably capable of being completed on the terms proposed, taking into account all financial, regulatory, legal and other aspects of such proposal.
 
Adverse Recommendation Change.  For purposes of this joint proxy statement/prospectus, the term “adverse recommendation change” means, with respect to Bois d’Arc or Stone, a direct or indirect action or public proposal made by its board of directors or a committee of its board of directors to:
 
  •  withdraw or publicly propose to withdraw (or amend or modify in a manner adverse to the other party) its approval, recommendation or declaration of advisability of the merger agreement, the merger or the other transactions contemplated by the merger agreement; or
 
  •  recommend, adopt or approve or propose publicly to recommend, adopt or approve any acquisition proposal.
 
Termination of the Merger Agreement
 
General
 
The merger agreement may be terminated by written notice at any time prior to the effective time of the merger in any of the following ways:
 
  •  by mutual written consent of Stone and Bois d’Arc;
 
  •  by either Stone or Bois d’Arc if:
 
  •  the merger is not completed on or before December 31, 2008, unless the failure of the party seeking to terminate the merger agreement to fulfill any material obligation under the merger agreement has been the cause of, or resulted in the failure of the merger to have been completed on or before this date;
 
  •  any court or other governmental entity having jurisdiction over any party to the merger agreement has issued a statute, rule, order, decree or regulation or taken any other action, in each case permanently restraining, enjoining or otherwise prohibiting the consummation of the merger or making the merger illegal and such statute, rule, order, decree, regulation or other action has become final and nonappealable, provided that the right to terminate the merger agreement pursuant to this provision may not be exercised by a party whose failure to fulfill any material obligations under the merger agreement has been the cause of or resulted in such action or who is then in material breach of its obligations described above under “— Covenants — Further Action; Commercially Reasonable Efforts;”
 
  •  prior to obtaining the required vote of the Bois d’Arc stockholders, the Bois d’Arc board of directors makes an adverse recommendation change;


83


Table of Contents

 
  •  prior to obtaining the required vote of the Stone stockholders, the Stone board of directors makes an adverse recommendation change;
 
  •  the Bois d’Arc stockholders fail to approve the merger agreement by the requisite vote;
 
  •  the Stone stockholders fail to approve the issuance of additional shares of Stone common stock pursuant to the merger;
 
  •  there has been a breach of or failure to perform in any material respect any of