Moody's confirms Stone Energy liquidity rating

Moody's confirmed the SGL-2 rating for Stone Energy Corp.

Moody's said the rating reflects the company's still significant availability under its committed bank facility despite borrowings used to fund the majority of a senior subordinated note redemption; ample room under the maintenance covenants of the bank credit agreement, ensuring accessibility of the bank line over the next 12 months; and operating cash flow that should cover working capital, normal capital spending and projected interest expense in 2004 under the current commodity price and production outlooks.

The SGL-2 rating would be pressured by weaker commodity prices that would require a greater proportion of cash flow for reserve replacement costs and would result in a borrowing base re-determination, thus reducing borrowing capacity under the revolver; if production falls below current levels resulting in materially weaker cash flow; or if Stone elects to spend beyond cash flow and fund it with bank borrowings, the agency said.

Stone has no debt maturities other than "immaterial" capital lease obligations coming due over the next six quarters, Moody's said. The first maturity is the bank facility, which was extended to June 2005, this past October.

The SGL rating assumes no acquisitions or capital markets activities that the company may be contemplating.

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