uploads///SGY Q Net Debt to Adjusted EBITDA

Why Is Stone Energy’s Debt Level at Such a Critical Point?


Aug. 29 2016, Updated 10:04 a.m. ET

Stone Energy’s debt

As of June 30, 2016, Stone Energy’s (SGY) total debt stood at ~$1.4 billion. With ~$169 million in cash and cash equivalents, SGY’s net debt was ~$1.24 billion at the end of 2Q16.

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Net debt-to-adjusted EBITDA

Net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) is a debt ratio that shows how many years it will take for a company to pay back its debt under its current situation. As of 2Q16, SGY’s net debt-to-adjusted EBITDA is very high at ~8x.

When compared to its own net debt-to-EBITDA historical average of ~2.2x, SGY’s current net debt-to-adjusted EBITDA is much higher. The steep increase in net debt-to-adjusted EBITDA ratio in 2Q16 can be attributed to the steep decrease in adjusted EBITDA.

Net debt-to-adjusted EBITDA trend

Stone Energy’s net debt-to-adjusted EBITDA ratio has been increasing since 2Q14. Stone Energy’s net debt-to-adjusted EBITDA ratio has increased from ~1.3x in 2Q14 to ~8.0x in 2Q16. This increase in net debt-to-EBITDA ratio can be attributed to the increase in its net debt as well as a steep decrease in adjusted EBITDA during the same period.

From 2Q14 to 2Q16, Stone Energy’s net debt increased from ~$700 million to ~$1.2 billion, whereas its trailing-12-month EBITDA has decreased from ~$546 million to ~$155 million during the same period.


As of 2Q16, Stone Energy has a negative stockholder equity of about -$429 million. Due to this, Stone Energy’s leverage in 2Q16 can’t be calculated. Stone Energy had a leverage of ~361% in 3Q15 before its stockholder’s equity turned negative in 4Q15. This level of leverage was on the much higher side when compared with other oil and gas companies.

By comparison, SM Energy (SM), Gulfport Energy (GPOR), and WPX Energy (WPX) have debt-to-equity ratios of ~170%, ~43%, and ~87%, respectively.


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