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Is Stone Energy’s Free Cash Flow Trending in the Right Direction?

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Stone Energy’s revenue and operating cash flow

In 1Q17, Stone Energy’s (SGY) total operating revenue was ~$95 million, ~17% higher than it was in 1Q16. The company’s higher operating revenue in 1Q17 was the direct result of higher realized prices for crude oil (SCO) and natural gas (UNG).

In 1Q17, SGY reported an OCF (operating cash flow) of ~$5 million, ~$24 million lower than its OCF of ~$29 million in 1Q16. The fall in its 1Q17 OCF was primarily due to its higher asset retirement obligations.

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Stone Energy’s free cash flow trend

As we can see in the chart above, Stone Energy has reported negative FCF (free cash flow) since 1Q16. In 2Q16, Stone Energy reported its lowest FCF of ~-$182 million. In 1Q17, SGY reported a free cash flow of ~-$10 million. SGY’s peers Murphy Oil (MUR) and W&T Offshore (WTI) reported free cash flows of ~$94 million and ~$53 million, respectively, in 1Q17.

FCF helps companies to enhance their shareholder value. It can be used to pay dividends, buy back stock, or repay debt. FCF is calculated by subtracting capital expenditure (or capex) from OCF.

Stone Energy’s capex guidance

In 1Q17, SGY spent ~$14 million in capex, ~89% less than it spent in 1Q16. For 2017, Stone Energy expects capex of ~$181 million, 12% higher compared to its 2016 capex. Stone Energy’s capex guidance includes ~$27 million worth of exploration activities.

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