Stone Energy in Talks to Sell Appalachian Assets to Reduce Debt

(Bloomberg) -- Stone Energy Corp., an oil and natural gas producer that’s been in debt restructuring talks with note holders, said it’s negotiating to sell its Appalachian assets in a deal that could fetch $350 million.

The potential buyer isn’t related to the group of note holders, to which it has offered $150 million of sale proceeds, the Lafayette, Louisiana-based company said Tuesday in a filing. Other proceeds would pay down bank debt and provide working capital, according to the filing. Expressions of interest in the assets earlier this year ranged from $250 million to $400 million.

Stone has said it’s analyzing various strategic alternatives to reduce debt, including a prepackaged bankruptcy, amid a plunge in oil and gas prices that’s led to eight straight quarterly losses for the company. As of Aug. 1, the energy rout had forced 90 oil and gas producers into bankruptcy since the beginning of 2015, according to law firm Haynes and Boone LLP.

“Stone’s balance sheet remains in a precarious situation and a restructuring is probable,” John Gerdes, head of research at KLR Group LLC, said in a note to clients Tuesday. “We would not advise ‘fresh’ money to invest” in the company.

The announcement was made before regular trading began in U.S. markets. Stone fell 16 percent Monday to $11.76. The shares have tumbled 73 percent this year.

Stone’s assets in West Virginia and Pennsylvania as of January 2014 included leasehold rights in the Marcellus shale basin, America’s biggest gas play by volume.