Guarantor Financial Statements

9 Months Ended

Sep. 30, 2013

Text Block [Abstract]

Guarantor Financial Statements

Note 12 – Guarantor Financial Statements

Stone Offshore is an unconditional guarantor (the “Guarantor Subsidiary”) of the 2017 Convertible Notes, the 2017 Notes and the 2022 Notes. Our other subsidiaries (the “Non-Guarantor Subsidiaries”) have not provided guarantees. The following presents unaudited condensed consolidating financial information as of September 30, 2013 and December 31, 2012 and for the three and nine month periods ended September 30, 2013 and 2012 on an issuer (parent company), Guarantor Subsidiary, Non-Guarantor Subsidiaries and consolidated basis. Elimination entries presented are necessary to combine the entities.

CONDENSED CONSOLIDATING BALANCE SHEET

SEPTEMBER 30, 2013

(In thousands)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	191,193		$	51,242		$	640		$	—		$	243,075
Accounts receivable		83,310			313,610			—			(207,355	)		189,565
Fair value of hedging contracts		—			14,423			—			—			14,423
Current income tax receivable		10,893			—			—			—			10,893
Deferred taxes *		6,631			19,719			—			—			26,350
Inventory		3,560			283			—			—			3,843
Other current assets		1,439			—			—			—			1,439
Total current assets		297,026			399,277			640			(207,355	)		489,588
Oil and gas properties, full cost method: Proved		1,211,964			6,377,189			—			—			7,589,153
Less: accumulated DD&A		(429,380	)		(5,333,557	)		—			—			(5,762,937	)
Net proved oil and gas properties		782,584			1,043,632			—			—			1,826,216
Unevaluated		274,986			291,750			9,659			—			576,395
Other property and equipment, net		23,965			—			—			—			23,965
Fair value of hedging contracts		—			5,114			—			—			5,114
Other assets, net		44,324			1,349			3,475			—			49,148
Investment in subsidiary		896,798			—			13,116			(909,914	)		—
Total assets	$	2,319,683		$	1,741,122		$	26,890		($	1,117,269	)	$	2,970,426
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	289,204		$	22,576		$	61		($	207,355	)	$	104,486
Undistributed oil and gas proceeds		39,141			3,772			—			—			42,913
Accrued interest		14,272			—			—			—			14,272
Fair value of hedging contracts		—			8,261			—			—			8,261
Asset retirement obligations		—			60,938			—			—			60,938
Other current liabilities		17,242			4,438			—			—			21,680
Total current liabilities		359,859			99,985			61			(207,355	)		252,550
Long-term debt		923,745			—			—			—			923,745
Deferred taxes *		31,295			355,738			—			—			387,033
Asset retirement obligations		5,758			401,954			—			—			407,712
Fair value of hedging contracts		—			360			—			—			360
Other long-term liabilities		26,463			—			—			—			26,463
Total liabilities		1,347,120			858,037			61			(207,355	)		1,997,863
Commitments and contingencies
Stockholders’ equity:
Common stock		488			—			—			—			488
Treasury stock		(860	)		—			—			—			(860	)
Additional paid-in capital		1,393,439			1,496,509			27,404			(1,523,913	)		1,393,439
Accumulated deficit		(426,917	)		(620,093	)		(64	)		620,157			(426,917	)
Accumulated other comprehensive income (loss)		6,413			6,669			(511	)		(6,158	)		6,413
Total stockholders’ equity		972,563			883,085			26,829			(909,914	)		972,563
Total liabilities and stockholders’ equity	$	2,319,683		$	1,741,122		$	26,890		($	1,117,269	)	$	2,970,426

* Deferred income taxes have been allocated to the Guarantor Subsidiary where related oil and gas properties reside.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2012

(In thousands)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	228,398		$	51,128		$	—	$	—		$	279,526
Accounts receivable		59,213			108,075			—		—			167,288
Fair value of hedging contracts		—			39,655			—		—			39,655
Current income tax receivable		10,027			—			—		—			10,027
Deferred taxes *		5,947			9,567			—		—			15,514
Inventory		3,924			283			—		—			4,207
Other current assets		3,626			—			—		—			3,626
Total current assets		311,135			208,708			—		—			519,843
Oil and gas properties, full cost method: Proved		1,004,808			6,239,658			—		—			7,244,466
Less: accumulated DD&A		(370,111	)		(5,140,055	)		—		—			(5,510,166	)
Net proved oil and gas properties		634,697			1,099,603			—		—			1,734,300
Unevaluated		254,757			193,038			—		—			447,795
Other property and equipment, net		22,115			—			—		—			22,115
Fair value of hedging contracts		—			9,199			—		—			9,199
Other assets, net		41,679			1,500			—		—			43,179
Investment in subsidiary		736,331			—			—		(736,331	)		—
Total assets	$	2,000,714		$	1,512,048		$	—	($	736,331	)	$	2,776,431
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	74,503		$	19,858		$	—	$	—		$	94,361
Undistributed oil and gas proceeds		21,841			1,573			—		—			23,414
Accrued interest		18,546			—			—		—			18,546
Fair value of hedging contracts		—			149			—		—			149
Asset retirement obligations		—			66,260			—		—			66,260
Other current liabilities		16,765			—			—		—			16,765
Total current liabilities		131,655			87,840			—		—			219,495
Long-term debt		914,126			—			—		—			914,126
Deferred taxes *		47,758			263,072			—		—			310,830
Asset retirement obligations		5,479			416,563			—		—			422,042
Fair value of hedging contracts		—			1,530			—		—			1,530
Other long-term liabilities		29,563			6,712			—		—			36,275
Total liabilities		1,128,581			775,717			—		—			1,904,298
Commitments and contingencies
Stockholders’ equity:
Common stock		484			—			—		—			484
Treasury stock		(860	)		—			—		—			(860	)
Additional paid-in capital		1,386,475			1,496,510			—		(1,496,510	)		1,386,475
Accumulated deficit		(542,799	)		(789,012	)		—		789,012			(542,799	)
Accumulated other comprehensive income		28,833			28,833			—		(28,833	)		28,833
Total stockholders’ equity		872,133			736,331			—		(736,331	)		872,133
Total liabilities and stockholders’ equity	$	2,000,714		$	1,512,048		$	—	($	736,331	)	$	2,776,431

* Deferred income taxes have been allocated to the Guarantor Subsidiary where related oil and gas properties reside.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2013

(In thousands)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	6,904		$	179,704		$	—		$	—		$	186,608
Gas production		19,971			32,757			—			—			52,728
Natural gas liquids production		9,224			7,252			—			—			16,476
Other operational income		711			162			—			—			873
Total operating revenue		36,810			219,875			—			—			256,685
Operating expenses:
Lease operating expenses		3,895			50,091			—			—			53,986
Transportation, processing and gathering expenses		10,072			3,009			—			—			13,081
Production taxes		1,773			3,451			—			—			5,224
Depreciation, depletion, amortization		26,728			66,125			—			—			92,853
Accretion expense		93			8,338			—			—			8,431
Salaries, general and administrative		14,202			—			(1	)		—			14,201
Incentive compensation expense		4,566			—			—			—			4,566
Other operational expenses		194			43			—			—			237
Derivative expense, net		—			1,684			—			—			1,684
Total operating expenses		61,523			132,741			(1	)		—			194,263
Income (loss) from operations		(24,713	)		87,134			1			—			62,422
Other (income) expenses:
Interest expense		7,922			—			—			—			7,922
Interest income		(1,234	)		(69	)		(8	)		—			(1,311	)
Other income		(230	)		(552	)		—			—			(782	)
Income from investment in subsidiaries		(56,166	)		—			(7	)		56,173			—
Total other (income) expenses		(49,708	)		(621	)		(15	)		56,173			5,829
Income before taxes		24,995			87,755			16			(56,173	)		56,593
Provision (benefit) for income taxes:
Current		(88	)		—			—			—			(88	)
Deferred		(11,019	)		31,598			—			—			20,579
Total income taxes		(11,107	)		31,598			—			—			20,491
Net income	$	36,102		$	56,157		$	16		($	56,173	)	$	36,102
Comprehensive income	$	17,985		$	56,157		$	16		($	56,173	)	$	17,985

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2012

(In thousands)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	7,682		$	173,124		$	—		$	—		$	180,806
Gas production		9,197			24,806			—			—			34,003
Natural gas liquids production		5,436			6,474			—			—			11,910
Other operational income		568			(1	)		111			—			678
Total operating revenue		22,883			204,403			111			—			227,397
Operating expenses:
Lease operating expenses		5,886			55,107			2			—			60,995
Transportation, processing and gathering expenses		4,163			2,599			—			—			6,762
Production taxes		684			1,158			—			—			1,842
Depreciation, depletion, amortization		19,336			69,939			(1	)		—			89,274
Accretion expense		138			8,181			86			—			8,405
Salaries, general and administrative		13,672			1			—			—			13,673
Incentive compensation expense		67			—			—			—			67
Other operational expenses		61			21			—						82
Derivative expense, net		—			1,812			—			—			1,812
Total operating expenses		44,007			138,818			87			—			182,912
Income (loss) from operations		(21,124	)		65,585			24			—			44,485
Other (income) expenses:
Interest expense		7,671			21			—			—			7,692
Interest income		(112	)		(5	)		—			—			(117	)
Other income		(98	)		(345	)		—			—			(443	)
Income from investment in subsidiaries		(42,200	)		(24	)		—			42,224			—
Total other (income) expenses		(34,739	)		(353	)		—			42,224			7,132
Income before taxes		13,615			65,938			24			(42,224	)		37,353
Provision (benefit) for income taxes:
Current		595			—			—			—			595
Deferred		(10,639	)		23,738			—			—			13,099
Total income taxes		(10,044	)		23,738			—			—			13,694
Net income	$	23,659		$	42,200		$	24		($	42,224	)	$	23,659
Comprehensive income (loss)	($	9,507	)	$	42,200		$	24		($	42,224	)	($	9,507	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(In thousands)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	20,625		$	537,406		$	—		$	—		$	558,031
Gas production		47,240			90,142			—			—			137,382
Natural gas liquids production		17,901			18,953			—			—			36,854
Other operational income		2,150			509			—			—			2,659
Total operating revenue		87,916			647,010			—			—			734,926
Operating expenses:
Lease operating expenses		9,611			147,936			—			—			157,547
Transportation, processing and gathering expenses		17,853			9,521			—			—			27,374
Production taxes		3,960			7,444			—			—			11,404
Depreciation, depletion, amortization		62,007			193,490			—			—			255,497
Accretion expense		279			24,733			—			—			25,012
Salaries, general and administrative		43,300			4			47			—			43,351
Incentive compensation expense		8,047			—			—			—			8,047
Other operational expenses		295			87			—			—			382
Derivative expense, net		—			1,537			—			—			1,537
Total operating expenses		145,352			384,752			47			—			530,151
Income (loss) from operations		(57,436	)		262,258			(47	)		—			204,775
Other (income) expenses:
Interest expense		26,431			21			—			—			26,452
Interest income		(1,384	)		(144	)		(15	)		—			(1,543	)
Other income		(671	)		(1,519	)		—			—			(2,190	)
(Income) loss from investment in subsidiaries		(168,887	)		—			32			168,855			—
Total other (income) expenses		(144,511	)		(1,642	)		17			168,855			22,719
Income (loss) before taxes		87,075			263,900			(64	)		(168,855	)		182,056
Provision (benefit) for income taxes:
Current		(10,827	)		—			—			—			(10,827	)
Deferred		(17,980	)		94,981			—			—			77,001
Total income taxes		(28,807	)		94,981			—			—			66,174
Net income (loss)	$	115,882		$	168,919		($	64	)	($	168,855	)	$	115,882
Comprehensive income (loss)	$	93,462		$	168,919		($	64	)	($	168,855	)	$	93,462

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2012

(In thousands)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	20,729		$	544,016		$	—		$	—		$	564,745
Gas production		20,693			70,313			—			—			91,006
Natural gas liquids production		11,010			24,218			—			—			35,228
Other operational income		2,024			139			357			—			2,520
Derivative income, net		—			3,119			—			—			3,119
Total operating revenue		54,456			641,805			357			—			696,618
Operating expenses:
Lease operating expenses		17,108			139,937			(15	)		—			157,030
Transportation, processing and gathering expenses		8,361			7,550			—			—			15,911
Production taxes		2,354			5,224			—			—			7,578
Depreciation, depletion, amortization		45,884			214,908			190			—			260,982
Accretion expense		423			24,246			257			—			24,926
Salaries, general and administrative		40,516			5			—			—			40,521
Incentive compensation expense		3,907			—			—			—			3,907
Other operational expenses		150			45			—			—			195
Total operating expenses		118,703			391,915			432			—			511,050
Income (loss) from operations		(64,247	)		249,890			(75	)		—			185,568
Other (income) expenses:
Interest expense		21,189			(82	)		—			—			21,107
Interest income		(216	)		(11	)		—			—			(227	)
Other income		(121	)		(1,108	)		—			—			(1,229	)
(Income) loss from investment in subsidiaries		(160,650	)		75			—			160,575			—
Total other (income) expenses		(139,798	)		(1,126	)		—			160,575			19,651
Income (loss) before taxes		75,551			251,016			(75	)		(160,575	)		165,917
Provision (benefit) for income taxes:
Current		1,164			—			—			—			1,164
Deferred		(30,793	)		90,366			—			—			59,573
Total income taxes		(29,629	)		90,366			—			—			60,737
Net income (loss)	$	105,180		$	160,650		($	75	)	($	160,575	)	$	105,180
Comprehensive income (loss)	$	113,151		$	160,650		($	75	)	($	160,575	)	$	113,151

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(In thousands)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	115,882		$	168,919			($64)			($168,855)		$	115,882
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		62,007			193,490			—			—			255,497
Accretion expense		279			24,733			—			—			25,012
Deferred income tax provision (benefit)		(17,980	)		94,981			—			—			77,001
Settlement of asset retirement obligations		—			(61,178	)		—			—			(61,178	)
Non-cash stock compensation expense		7,583			—			—			—			7,583
Excess tax benefits		(156	)		—			—			—			(156	)
Non-cash derivative expense		—			1,626			—			—			1,626
Non-cash interest expense		12,384			—			—			—			12,384
Non-cash (income) loss from investment in subsidiaries		(168,887	)		—			32			168,855			—
Change in current income taxes		(704	)		—			—			—			(704	)
Change in intercompany receivables/payables		207,267			(207,311	)		44			—			—
(Increase) decrease in accounts receivable		(24,053	)		1,776			—			—			(22,277	)
Decrease in other current assets		2,187			—			—			—			2,187
Decrease in inventory		158			—			—			—			158
Increase in accounts payable		2,610			5,425			—			—			8,035
Increase in other current liabilities		13,613			6,638			—			—			20,251
Other		499			(2,290	)		—			—			(1,791	)
Net cash provided by operating activities		212,689			226,809			12			—			439,510
Cash flows from investing activities:
Investment in oil and gas properties		(234,776	)		(226,695	)		(10,833	)		—			(472,304	)
Proceeds from sale of oil and gas properties, net of expenses		6,300			—			—			—			6,300
Investment in fixed and other assets		(3,830	)		—			—			—			(3,830	)
Change in restricted funds		—			—			(2,394	)		—			(2,394	)
Investment in subsidiaries		(14,000	)		—			(13,404	)		27,404			—
Net cash used in investing activities		(246,306	)		(226,695	)		(26,631	)		27,404			(472,228	)
Cash flows from financing activities:
Deferred financing costs		(11	)		—			—			—			(11	)
Excess tax benefits		156			—			—			—			156
Equity proceeds from parent		—			—			27,404			(27,404	)		—
Net payments for share-based compensation		(3,733	)		—			—			—			(3,733	)
Net cash (used in) provided by financing activities		(3,588	)		—			27,404			(27,404	)		(3,588	)
Effect of exchange rate changes on cash		—			—			(145	)		—			(145	)
Net change in cash and cash equivalents		(37,205	)		114			640			—			(36,451	)
Cash and cash equivalents, beginning of period		228,398			51,128			—			—			279,526
Cash and cash equivalents, end of period	$	191,193		$	51,242		$	640		$	—		$	243,075

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2012

(In thousands)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows from operating activities:
Net income (loss)	$	105,180		$	160,650			($75)			($160,575)	$	105,180
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		45,884			214,908			190			—		260,982
Accretion expense		423			24,246			257			—		24,926
Deferred income tax provision (benefit)		(30,793	)		90,366			—			—		59,573
Settlement of asset retirement obligations		—			(47,211	)		—			—		(47,211	)
Non-cash stock compensation expense		6,800			—			—			—		6,800
Excess tax benefits		(882	)		—			—			—		(882	)
Non-cash derivative income		—			(584	)		—			—		(584	)
Non-cash interest expense		9,068			—			—			—		9,068
Other non-cash expense		16			—								16
Change in current income taxes		(3,240	)		—			—			—		(3,240	)
Change in intercompany receivables/payables		207,166			(206,669	)		(497	)		—		—
(Increase) decrease in accounts receivable		(9,229	)		(6,631	)		28			—		(15,832	)
Increase in other current assets		(2,456	)		—			—			—		(2,456	)
Decrease in inventory		136			—			—			—		136
Increase (decrease) in accounts payable		5,733			422			(39	)		—		6,116
Decrease in other current liabilities		(20,441	)		(3,860	)		—			—		(24,301	)
Other		(163,921	)		(1,032	)		—			160,575		(4,378	)
Net cash provided by (used in) operating activities		149,444			224,605			(136	)		—		373,913
Cash flows from investing activities:
Investment in oil and gas properties		(240,877	)		(204,434	)		—			—		(445,311	)
Proceeds from sale of oil and gas properties, net of expenses		403			—			—			—		403
Sale of fixed assets		134			—			—			—		134
Investment in fixed and other assets		(3,998	)		—			—			—		(3,998	)
Net cash used in investing activities		(244,338	)		(204,434	)		—			—		(448,772	)
Cash flows from financing activities:
Proceeds from bank borrowings		25,000			—			—			—		25,000
Repayments of bank borrowings		(70,000	)		—			—			—		(70,000	)
Proceeds from issuance of senior convertible notes		300,000			—			—			—		300,000
Deferred financing costs of senior convertible notes		(8,855	)		—			—			—		(8,855	)
Proceeds from sold warrants		40,170			—			—			—		40,170
Payments for purchased call options		(70,830	)		—			—			—		(70,830	)
Excess tax benefits		882			—			—			—		882
Net payments for share-based compensation		(3,773	)		—			—			—		(3,773	)
Net cash provided by financing activities		212,594			—			—			—		212,594
Net change in cash and cash equivalents		117,700			20,171			(136	)		—		137,735
Cash and cash equivalents, beginning of period		37,389			926			136			—		38,451
Cash and cash equivalents, end of period	$	155,089		$	21,097		$	—		$	—	$	176,186