Lafayette, Louisiana-based Stone Energy Corporation (SGY) is an independent oil and gas exploration and production company focused on the U.S. Gulf Coast, where the bulk of its assets are concentrated offshore in the Gulf of Mexico (GoM). The company also has properties in the Rocky Mountain and Williston basins. Stone is also engaged in an exploratory joint venture in Bohai Bay, China. As of year-end 2006, the company had estimated proved reserves of approximately 591 billion cubic feet equivalent (Bcfe), of which 71% were proved developed and 58% were natural gas. During 2006, 85% of the company's production and 69% of proved reserves came from its GoM properties, while the remaining was from the Rocky Mountain region. However, the company recently completed the previously announced sale of substantially all of its Rocky Mountain properties to Newfield Exploration Company for $578 million.

Following a major reservoir-level review of proved reserve base, Stone Energy announced a major reserve revision late 2005, which shaved off roughly one-fifth of its previously reported year-end 2004 proved reserves tally. As a result of the reserve revisions, the company delayed the release of its third-quarter 2005 results and associated SEC filing (the third-quarter 2005 10Q was finally released on March 13, 2006), and restated its financial results since 2001. The filing delay triggered compliance issues with some of its debt covenants, from which it had to obtain a waiver. The SEC initiated an informal investigation, which was subsequently upgraded to the level of a formal investigation. In addition, the company is faced with several class action lawsuits on behalf of investors.

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