At press time, Stone Energy Corp., Lafayette, La., (NYSE: SGY) was waiting to hear from Plains Exploration & Production Co., Houston, (NYSE: PXP) on whether it would improve its offer for Stone in light of a better bid from Energy Partners Ltd., New Orleans (NYSE: EPL). EPL's offer is valued at approximately $2.2 billion, consisting of $1.4 billion for Stone stock and assumption of approximately $800 million of Stone debt. The cash-and-stock offer was worth $49.10 per Stone share, compared with the Plains' bid of $34.74 each. Morgan Stanley E&P analyst Lloyd Byrne says Stone, which has suffered in earnings during the past few quarters, wouldn't be much of an asset to Plains if it has to beef up its offer to seal the deal. "Plains will either up its offer or walk away. The latter would be better for (Plains') stock near-term, in our view," he says. "If Plains walks away, it avoids a competitive bidding situation, which is positive, but is this sufficient to drive sustained outperformance in the stock? The issue: Plains' proposed acquisition of Stone represented a significant shift in operational strategy which, in our view, caught many investors by surprise. Walking away from the deal does not nullify this shift...." Stone's assets are primarily in the Gulf of Mexico and on the Gulf Coast. Additional assets are in the Rockies and offshore China. The company's production during the first quarter was 1 million bbl. of oil and 11.3 billion cu. ft. of gas for a total of 17.5 billion cu. ft. of gas equivalent, averaging 194 million cu. ft. of gas equivalent per day. Proved reserves at year-end 2005 were 41.5 million bbl. of oil and 344 billion cubic of gas for a total of 593.1 billion cu. ft. of gas equivalent. Gulf of Mexico-focused EPL chairman and chief executive Richard A. Bachmann says, "The financial benefits of this offer are extremely compelling for Stone shareholders...The combination of Stone and EPL will create a premier offshore E&P company capable of generating considerable upside value for shareholders of both companies."

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