Good afternoon. At this time you I would like to welcome every to the first quarter 2009 Earnings Call. (Operator Instructions) Now I would like to introduce David Welch, President and CEO of Stone Energy. Mr. Welsh, you may begin.

Thank you, Mindy and welcome, everyone to today's call to discuss the first quarter results and the outlook for Stone Energy. Our Senior VP and Chief Financial Officer, Ken Beer is joining us this afternoon and will provide you with a summary of the financial results of the first quarter. He'll then turn it back over to me for a few comments and a discussion of our future plans. This will be followed by a question-and-answer session. Ken?

Let me start with the forward-looking statement. In this conference call, we may make forward-looking statements within the meaning of Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements are subject to all the risks and uncertainties normally incident to the exploration for, and the development, production and sale of oil and natural gas. We urge you to read our 2008 Annual Report on Form 10-K for a discussion of the risks that could cause our actual results to differ materially from those in any forward-looking statements we may make today. In addition, in this call we may refer to financial measures that may be deemed to be non-GAAP financial measures as defined by the Exchange Act. Please refer to the press release we issued yesterday, which is posted on our website, for a reconciliation of the differences between these financial measures and the most directly comparable GAAP financial measures. Now rather than go through the financials in great detail we will assume that everyone has seen the press release and the attached financials. This quarter did have a few unusual items, which we will review directly. The biggest impact on earnings was that $340 million pretax non-cash ceiling test write-down using quarter and NYMEX pricing of $49 per barrel and $3.60 per MMBtu. The after tax impact on earnings in equity was about $221 million. Additionally, we have $5.9 million inventory impairment charge, which impacted after-tax earnings by just under $4 million, leaving a total adjusted net loss of about $7.7 million or $0.20 per share. The other unusual item, which occurred last quarter, was the unwinding of several hedges which provided cash proceeds of $113 million. Although this cash was received in the quarter, there was no impact to the first quarter income…

Okay. Thank you very much, Ken. As you've just heard, the first quarter had a lot of moving parts. The external situation continued to deteriorate as natural gas prices continued to weaken. This along with the hurricane-related production curtailment and recovery costs resulted in the ceiling test write-down and the net loss for the quarter. These are reflective of the times. We are continuing to get fundamentally stronger along a number of dimensions however. We are reducing debt, controlling costs and increasing production. Our organic prospect inventory is real and our people are actively engaged and determined to create success. We began the year with a clear and essential focus on maintaining financial flexibility during an already difficult external market. We are focused on addressing the principal issues impacting our business, responding to the curtailment and production and added expenses due to hurricanes, the collapse in oil and natural gas prices and the financial system crisis. All three of these issues arose shortly after we completed the merger with Bois d'Arc Energy for which we incurred additional debt. We are dealing with this situation cautiously, seeking to spend within our cash flow, optimizing our production and watching our expenses while maintaining optionality for the future. Originally we had planned a capital budget in the range of $700 million for 2009, but have since reduced that to under $300 million to live within cash flow and to reduce the debt incurred with the Bois d'Arc transaction, which was completed last August. Since the closing of that merger, we've paid down about $70 million of debt, even though our production has been curtailed due to hurricane damage to third party pipeline infrastructure and with low commodity prices. As of today, we are producing about 230 million cubic feet equivalents of natural gas.…

(Operator instructions). Your first question comes from Dave Kistler from Simmons. Dave Kistler - Simmons & Company: Quick question for you, under the new capital spending program of $250 million, which looks like a lot of its going to workovers and what not. Can you talk a little bit about thoughts on what that might do to reserves, reserve potential and then I guess under the new reserve rules you'll be working with an average price, which may be above where current prices are. But any kind of discussions and color you can give us on how that looks under the current spending program would be great?

Well, let me just comment on the production side of it. We think that we will be able to continue growing production throughout this year, even given that curtailed 250 target. Truthfully, we haven't made the final decision yet on whether we are going to spend only 250 to 300. So as the year evolves, we'd just maintain the flexibility to only spend the 250. On the reserve side, you know that's something that we really just go through once a year and I'd be allowed to predict, where we are going to end up this year. Ken, anything you want to add on that?

Yes, again, Dave, as you're aware, also within that capital budget we do have dollars being spent in what we call risk mitigation, dollars to be spent on kind of proactively doing plug and abandonment work. Obviously, that's not going to add reserves. You know the delta between 250 and 300 to a certain extent between even the 200 and 250, that's where you'd find at least a good portion of the exploration side of our capital budget you've mentioned earlier. We really are focused more on the production side, which would be more exploitation drilling, which took place more in the first quarter and then re-completions and workovers during the course of the year to keep production relatively flat. Dave Kistler - Simmons & Company: One more question on reserves and I realize way too early to be asking these things, but this is actually backward looking. With the 40 to 50 million a day that are awaiting potential production in terms of an inventory that's out there being connected either through pipe or what not. With those offline as you were doing your reserves last year, was that accounted for in one way or another in that reserve calculation and is that something that we could look at as an immediate up tick?

It really shouldn't have much impact on approved reserves. In a couple of cases it might have moved things from proved producing to proved not producing for a short period of time and then as they come back online, go back into the proved producing.

There was probably some history that particularly on some of the Bois d'Arc wells that also may have stepped back and wanted to see some additional history, which might be reflected more in the year end 2009 numbers. But as Dave mentioned, a lot of the shut-ins just fell under a category of PDNP or even we had a special category of shut-ins. But for the most part, most of those reserves were indeed in the year end reserve report. Dave Kistler - Simmons & Company: Then on the last thing from the S-3 filing, thinking about where the stock is right now, just kind of curious on your thoughts just had the re-determination. Looks like capital is in a pretty good shape right now, cash flow definitely ticking up in the second half of the year, current stock price where it is. Should we be looking at this as something that will be used to enhance liquidity, not necessarily on the debt side?

Yes. Here the observation is Stone has actually historically had a shelf. We ended up, because of some issues in '05 and '06. We were really in the penalty box and were unable to have a shelf up until this year. So, really just returning to putting in place the shelf that historically Stone has had and I would actually argue most companies do have a shelf just because as we mentioned the idea of having ultimate flexibility in this kind of market makes sense. It's probably somewhat imprudent for us not to have a shelf up and running, especially in this environment. As you saw with the filing, it's universal, it has all sorts of instruments in there and at least for us, we just want to make sure we cover the waterfront in case there was, a need or an opportunity, really just to provide us with ultimate flexibility, as we had three or four years ago.

Your next question comes from Richard Tullis from Capital One South. Your line is open.

Just a couple of questions for you. You may have already touched on this a bit, but how do you envision, the quarterly production coming in for the rest of this year, give or take?

Again, you can look at the annual production guidance, and almost go backward Richard where, as Dave mentioned, we are around this 220, 230 right now. If you kind of do the math and have to bring in $194 million, as one of your four quarters, that's kind of will put you in that 205 to 225. Because we'll get volumes back in the second quarter from barging at Amberjack and then we will get volumes, hopefully a little bit of volumes from the Tennessee line coming back on in the second quarter, that should help. Now the second quarter, and then the third quarter, we should have Tennessee back on kind of for the whole quarter. So that should kind of help it, and then fourth quarter maybe we get a little boost from Amberjack coming on fully into the pipeline. Again, a lot of this is just offsetting natural declines, so we should be, hopefully relatively stable in that range.

We've also had a very active workover program and maybe that's what's allowed us to get very close to the bottom of our guidance even with the slippage in the pipeline repairs.

Right, because it took away about $25 million to $30 million a day.

With the $250 million CapEx for this year, what do you think your 2010 production can look like, just kind of flattish?

Well, again probably a little premature to go down that road. A lot of it really then depends with the activity level that we have towards the very end of this year and importantly what the activity level might be in the first quarter of '10, but probably not appropriate right now to start looking at 2010 guidance.

What significant expiration projects do you have kind of on a backburner ready to go once the situation is right?

Well, we have a number of deepwater prospects that we're keen to get drilled and that's why I mentioned these joint ventures that we are engaged in trying to bring some external capital and these projects are such quality that other people are willing to invest in them. So, the deepwater is an important piece and then we are going to be drilling a few more Marcellus wells trying to define our acreage and, hopefully we will begin some horizontal drilling early next year.

As far as the deepwater projects go, what's going to be the right situation? I mean, you're totally dependent on partners coming in or will a certain commodity price get you to doing most of it yourself?

Well, there are a lot of moving parts right now. In a lot of the deepwater prospects, we already have really good operating partners and so the timing on those will be working with our partners to determine. I would say that there are as many as a dozen deepwater wells over the next four years or so that would have a possibility of being drilled. Of course, we have sculpted our working interest to be more or less affordable to Stone. If we can get these joint ventures, that just enhances the economic return to it. You may recall as we have spoken strategically, if we make a discovery in deepwater, part of our strategy is to try to monetize a portion of that almost immediately and so that will help generate a little fuel for some of these others down the road.

Did you receive an insurance payment in the first quarter? I think maybe around $31 million or so was expected?

No. You might be referring to there was a tax refund.

Tax refund.

Of around $25, $ 30 million, about $30 million.

Did that come in?

Yes, it did.

(Operator Instructions). Your next question comes from [Jon Romel from Romel Asset Management].

Thank you. Just a quick question, in talking to some of your peers, particularly ones whose balance sheets are in better shape, they seem to be kind of lining up to possibly make acquisitions and I'm wondering, if you have been approached by anyone in terms of an interest in selling any of your properties, either developed or not and/or whether there are any discussions in terms of getting through this kind of current crunch through selling some assets…

John, thank you for that question. We have been very actively engaged in looking at our portfolio as we continually do. It was always our intention at the time of the Bois d'Arc acquisition to sell-off a few of the properties that are not as material to the combined enterprises as they were to either Stone or Bois d'Arc. So, yes, that is one of the things that we are looking at. Another thing is the joint venture idea that I mentioned earlier. We still have I think about 70,000 net acres in the Rockies exploratory acreage and that's another place where we do a joint venture and potentially get some cash coming in without having any reserves or production impact to us right now. So we are actively engaged in looking at that and there is a lot of interest in the industry, people that are anxious to find properties.

Your next question comes from [Andrew McCrease from Centuries Select Invest].

I was wondering if you could please tell me with respect to your capital spending, could you provide a little guidance, breaking it down between the Marcellus, the deepwater and workovers?

Well, I believe Ken mentioned that about 40% of our capital spent in the first quarter, most of that was spent on Gulf of Mexico exploitation or development drilling.

What about remaining 150 or so?

That's going to be split, a small amount of that, under 10 million will be deepwater. 10 to 15 in Appalachia and the remainder will be spent on hurricane risk mitigation to [obligate] future risks in the platforms and then maintenance P&A. Ken, anything else?

Some additional workover and re-completions, throughout the balance of the year.

Could you please tell me, what is the historical recycle ratio up in the Marcellus for the Bois d'Arc properties?

Recycle? Give me a little color on that.

Just with respect to BOEs found relative to money spend.

Well, actually Bois d'Arc was strictly in the Gulf. We started moving into the Marcellus back in 2005 and put our acreage position together, it's about 30,000 net acres. There are two types of wells, that are being drilled up there and a typical vertical well, may yield about one Bcf of natural gas, give or take half, depending upon if it's in a lesser productive area, maybe only half a Bcf, it's in a better area. So that's the range that you're seeking.

At a cost of what, Ken?

It varies. You know, around a $1 million or so is a pretty good rule of thumb.

With respect to the renegotiated credit facility, could you enlighten us on the financial covenants involved?

Yes. Those did not change. We have got really two financial covenants, debt to EBITDA, which is a ratio of 3.2.

I'm sorry. The debt to EBITDA what? Sorry.

3.25. Then a interest expense coverage versus EBITDA of 3x.

Right. And are there any adjustments to the EBITDA calculation?

Adjustments?

Well, some companies have adjustments to the actual calculation of the EBITDA?

Yes, there are some adjustments that just by definition EBITDA, is not a GAAP number, so there are some adjustments within the definition of EBITDA.

Could you give me a range for what those adjustments typically.

Yes. For instance, all the non-cash, ceiling test write, write-offs does not impact that at all.

I can understand that, I meant more from a point of view of less obvious ones. Do the less obvious ones total 10 million, 15 million, 20 million a quarter typically or …

No. Again, there is no substantial adjustments, it's just more trying to time non-cash adjustments versus from a GAAP standpoint. The GAAP versus EBITDA delta where there is a non-cash impact are the adjustments that we tend to.

One last one if I may, and that is with respect to the Mississippi Canyon 109, what are you assuming production wise during the last three quarters of the year relative to Q1?

Well, in Q1, we really didn't produce anything at Mississippi Canyon and so we are barging now, I would say that's probably in the 1,500, 2,000 barrels a day range and it will remain that way unless we add another barge, which would increase it a little bit. That's something that we are always looking at. We haven't made any decision to do that yet. The second big change would be when the pipeline gets built and we just [jack] up the full production, which could get us back to 4,000, 5,000 barrels a day or higher.

I know you said earlier on when you expected that could be. I apologize.

September.

September. Okay.

Your next question comes from [Kelly Cringer from Banc of America].

Just wanted to follow-up with you guys on, I think you had noted that one of your primary goals for the year was just maintaining financial flexibility, the borrowing base re-determination is behind you guys now. But what kind of metrics or targets do you guys kind of look at in terms of where you won't to have the balance sheet ultimately or by the end of the year?

We are obviously in a mode where we are trying to continue to reduce our debt load that clearly is pretty high importance. Having said that, we are also, husbanding and valuing our cash. A lot of it, Kelly, depends upon commodity prices and what sort of cash build we might see in the backend of the year. We also have a positive tension and that we have some pretty impressive projects that we would like to put money back into, that you might not get an immediate cash return on. I mean, the payback period might be pretty attractive, but obviously every time you're spending money, you're reducing your liquidity. So, we certainly would like to continue to chip away. The debt load, as Dave mentioned earlier, we have paid down about $70 million during the first four months and we would like to continue to chip away at that, but just pretty cautious on making sure that we have cash and flexibility as we go through the back half of the year.

Sure. I guess, my question is a little more with regard to maybe not liquidity, but from a balance sheet standpoint.

I can tell you long term we'd like get it back down to around 35% debt ratio.

35% debt to cap?

Debt plus equity, yes.

(Operator instructions). Your next question comes from [Wei Romualdo from Stone Harbor]. Your line is open.

Yes. Pardon me if you went through this already. I got dropped off for a moment there. You mentioned in the second quarter you expect cash to be down, but CapEx to be minimum in the second half of the year. Could you just elaborate a little more on that when you say minimum second half. Are you talking about spending closer to 150 million in second quarter or more like a 100 million in the second quarter?

Let me give you a little operational background and then Ken can give you some numbers. But we began the year under about four rigs running in the Gulf of Mexico shale. And as of April we've brought that down to zero. So most of our spending on drilling in the Gulf was front-end loaded and the way that's played out is a lot of the invoices came in the first quarter but a few continue to trickle in the second quarter.

Yes, that really addresses the cash outflow from our capital expenditure program is clearly front-end loaded as I think we highlighted. In the first quarter we spent about 40% of our capital program, invoices are coming in more into the second quarter as well. But as you get into the third quarter, since we have reduced our rig activity level in the Gulf to zero, obviously there won't be any invoices coming through into the third quarter for activity that just didn't happen in the second quarter. So that's why we are highlighting. We are pulling back and would expect some cash build assuming, gas and oil prices, essentially assuming the strip is a pretty good number. Looking at the production levels that we have provided from a guidance standpoint, then that's where we are coming up with the expected build.

In regards with the shelf filing and your comment on increasing or keeping the financial flexibility. In terms of timing, do you have intention to do something, to act upon the shelf before the hurricane season starts or are you talking about more longer-term?

No. This is really a shelf that we were looking to put in place and, again something that came up at the Board level earlier, and it just so happened to actually come out and actually be filed yesterday. It was more coincidence than anything else, but really the thought here is, just like most of our peers, virtually all of our peers, have the shelf out there, it certainly makes sense particularly in this environment. So, we don't have anything that has been initiated at this moment, but certainly to have the shelf out there, certainly made some sense and that was the impetus behind it.

Your next question comes from [Jim Civagne] from Deutsche Asset Management. Your line is open.

Is it reasonable assumption to make that, the reduction in the CapEx budget to 250 is kind of being sized to expected operating cash from operations such that, cash given what we know today, cash on hand, is kind of exiting the year, may look like $70 million to $90 million, somewhere in that range, somewhere between where it ended last year and what you have now?

The better answer is that as we guide further into the year, particularly as Jim you're aware, you had gas prices come down, oil prices come down, I think what management did was take a step of kind of resizing our capital expenditure program to just, be more protective of our cash and cash flow. As Dave mentioned earlier, as we go through the second, third quarter, there may be some opportunities to move up from that 250 just depending upon the environment, et cetera. But we just thought it was a prudent step to take to pull back the reins a little bit given especially the commodity and price environment and as you are well aware, kind of the capital markets are just somewhat non-existent. So our thought was that has been cash and cash flow as much as we can and maybe put on the accelerator later on in the year or early 2010.

I guess just as a follow-up to that point. Ken, I mean, do you guys think it's really wise to be front loading this budget via the first and second quarter given that the cash is your primary source of liquidity faced another borrowing based re-determination November 1?

That front end loading was a residual from the higher oil price environment where we had contracts et cetera. So it just took us a little time to work through those contracts. That's all that was.

As Dave mentioned, I mean if you roll back the clock when you had $100 plus oil, that's when you're putting in place a lot of these rig contracts and a lot of the dollars that were, put in place for the first quarter, was really put in place six months before. As Dave mentioned, I mean, we were approaching 2009 with a view towards a $700 million plus capital budget that quickly as the end of '08 approached quickly got shrunk down. So it was not by design that we are trying to front end load the CapEx budget. It was an evolving budget.

So then I guess how much, if any of the spend in the second quarter is discretionary or is it all basically spoken for vis-à-vis commitments made last year?

Very minimal now would be spent tied to commitments, made late '08.

Yes. We've pretty much finished all of the commitments that we have, so pretty much anything we would do going forward would be discretionary.

At this time there are no more questions in the queue.

Well thank you, Mindy and thank you everyone for joining us on the call and we look forward to talking to you again, so long.

Thank you. This concludes today's first quarter 2009 earnings conference call. You may now disconnect your lines.