Why Stone Energy’s Stock Price Rose on Its Bankruptcy News



Stone Energy files for bankruptcy

On December 14, 2016, Stone Energy (SGY) announced that it had filed for voluntary relief under Chapter 11 of the United States Bankruptcy Code in a US bankruptcy court for the Southern District of Texas.

Stone Energy will be focusing its efforts on restructuring its balance sheet. In this series, we’ll look at the details of Stone Energy’s debt restructuring support agreement. We’ll look at what lies ahead for current debt holders and common stockholders and what benefits Stone Energy will receive by way of its debt restructuring.

Stone Energy intends to carry on with normal operations during restructuring, so we’ll also look at the company’s cash flow situation and capital expenditure plans.

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SGY’s stock price rose despite bankruptcy news

In reaction to the news of Stone Energy’s filing for a pre-packaged bankruptcy plan, the company’s stock price fell ~27% on opening on December 15, 2016, but it managed to reverse its losses and close the day with a rise of ~2%.

On December 16, 2016, SGY continued its momentum and rose a whopping ~24% to close at $7.75, a rise of almost 26% since it filed for bankruptcy. During these two days, crude oil (USO) rose ~2%.

Year-to-date performance

Stone Energy is turning out to be one of the worst-performing stocks in the energy sector in 2016. SGY has fallen ~82% year-to-date (or YTD), whereas other oil and gas producers such as Energen (EGN), Denbury Resources (DNR), and SM Energy Company (SM) have risen ~43%, ~91%, and ~81%, respectively, YTD. The SPDR S&P Oil and Gas Exploration & Production ETF (XOP) has risen ~40% YTD.

Having looked at SGY’s stock price performance, let’s try to answer why SGY’s stock rose on its bankruptcy news by studying the details of its restructuring plan and financials.

We’ll start with details on Stone Energy’s pre-packaged plan of reorganization.


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