Moody's cuts Stone Energy

Moody's Investors Service said it lowered the corporate family rating for Stone Energy Corp. to B1 from Ba3 and the ratings on the senior subordinated notes to B3 from B2 following the company's announcement that it is taking a significant reserve write-down and that the majority of its production remains shut-in from the hurricanes.

However, Moody's said it is still evaluating the company's speculative grade liquidity rating of SGL-2 in order to assess the amount and length of the cash flow impact of the shut-in production and what the impact of the reserve revision will have on Stone's borrowing base driven revolving credit facility.

The ratings downgrade reflects the write-down of about 171 Bcfe (28.5 mmboe) of proved reserves following a review of the company's reserves by a new third party engineering firm, Moody's said.

The negative outlook reflects the uncertainty of shut-in production, Moody's said.

But, Moody's said the ratings gain support from still strong commodity prices, a degree of production diversification and sound liquidity despite the impact of the hurricane.

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