Stone Energy Corporation (NYSE: SGY) announced entry into a comprehensive restructuring support agreement and a purchase and sale agreement for its properties in the Appalachia basin.

Restructuring Support Agreement

As previously disclosed, Stone Energy Corporation has been involved in discussions with certain of its stakeholders in respect of a possible restructuring of the indebtedness and capitalization of Stone and certain of its subsidiaries. On October 20, 2016, the Company entered into a restructuring support agreement with certain (i) holders of the Company's 1¾% Senior Convertible Notes due 2017 and (ii) holders of the Company's 7½% Senior Notes due 2022, to support a restructuring on the terms of a pre-packaged plan of reorganization as described therein. The RSA contemplates that the Company will file for voluntary relief under chapter 11 of the United States Bankruptcy Code in a United States Bankruptcy Court  on or before December 9, 2016 to implement the Plan in accordance with the term sheet annexed to the RSA. The following description of the RSA and annexed Term Sheet is qualified by reference to the full text of such agreement, a copy of which is included as Exhibit 10.1 to the Current Report on Form 8-K filed today.

"The execution of the RSA is the culmination of months of hard work to right-size our balance sheet in response to a sustained period of low oil and natural gas commodity prices," said David Welch, Chairman, President and Chief Executive Officer. "The agreement with our Noteholders will provide value to all of our stakeholders, improves our liquidity and better positions us to be profitable during a historically difficult time in our industry. Importantly, this agreement will allow all stakeholders to share in potential valuation growth if commodity prices improve."

The RSA will become effective upon (i) execution by the Company and Noteholders holding, in the aggregate, at least 66-2/3% of the outstanding aggregate principal amount of the Notes, and (ii) Stone having entered into a PSA for the sale of Properties, defined below, for a cash purchase price of at least $350 million. Both conditions have been satisfied, with Noteholders holding approximately 85.4% of the aggregate principal amount of the Notes executing the RSA and Stone signing the PSA, as indicated below. Pursuant to the terms of the RSA and the Term Sheet, Noteholders and other interest holders will receive treatment under the Plan summarized as follows:

Purchase and Sale Agreement

On October 20, 2016, Stone entered into a purchase and sale agreement with TH Exploration III, LLC, an affiliate of Tug Hill, Inc.. Pursuant to the terms of the PSA, Stone agreed to sell the Properties to Tug Hill for $360 million in cash, subject to customary purchase price adjustments. The following description of the PSA is qualified by reference to the text of such agreement, a copy of which is included as Exhibit 10.2 to the Current Report on Form 8-K filed today.

"The sale of the Appalachia properties, an important component of the restructuring support agreement, will further streamline our operations and allow us to advance our efforts to grow value in the Gulf of Mexico, which is central to our long-term business plan," said David Welch.

The Disposition has an effective date of June 1, 2016. In connection with the execution of the PSA, Tug Hill deposited $5.0 million in escrow, which amount may be supplemented by an additional $31 million at a later date on certain conditions being met. Upon a closing, the deposit will be credited against the Purchase Price. From the Execution Date through December 19, 2016, Tug Hill intends to conduct customary due diligence to assess the aggregate dollar value of any title and environmental defects associated with the Properties. The parties expect to close the Disposition by February 27, 2017, subject to customary closing conditions and approval by the Bankruptcy Court.

The PSA contains customary representations, warranties and covenants. From and after the closing of the Disposition, Stone and Tug Hill, respectively, have agreed to indemnify each other and their respective affiliates against certain losses resulting from any breach of their representations, warranties or covenants contained in the PSA, subject to certain customary limitations and survival periods. Additionally, from and after closing of the Disposition, Stone has agreed to indemnify Tug Hill for certain identified retained liabilities related to the Properties, subject to certain survival periods, and Tug Hill has agreed to indemnify Stone for certain assumed obligations related to the Properties.

The PSA may be terminated, subject to certain exceptions, (i) upon mutual written consent, (ii) if the closing has not occurred by March 1, 2017, (iii) for certain material breaches of representations and warranties or covenants that remain uncured, (iv) if, on or prior to the end of the Diligence Period, title and environmental defect amounts (after application of customary thresholds and deductibles), casualty losses and the value of any assets excluded from the Properties due to the exercise of preferential purchase rights or consents equal or exceed $10 million in the aggregate, (v) if Stone fails to file for bankruptcy on or before December 9, 2016, (vi) if the Bankruptcy Court does not enter an order approving Stone's assumption of the PSA and certain other matters within 30 days of Stone filing for bankruptcy, (vii) if the Bankruptcy Court does not enter a sale order for the Disposition by February 10, 2017, and (viii) upon the occurrence of certain other events specified in the PSA.

Additional Information

Additional details of the restructuring and the asset sale can be found in the RSA and PSA, respectively, as filed with the Securities Exchange Commission on a Current Report on Form 8-K today.

Stone is an independent oil and natural gas exploration and production company headquartered in Lafayette, Louisiana with additional offices in New Orleans, Houston and Morgantown, West Virginia. Stone is engaged in the acquisition, exploration, development and production of properties in the Gulf of Mexico and Appalachian basins.