By OGJ editors
HOUSTON, Dec. 6 -- Stone Energy Corp. said an independent review found that the company lacked adequate internal guidance or training on regulatory standards for estimating proved reserves.
The Lafayette, La., independent announced a downward revision of 171 bcf of gas equivalent in its reverses on Oct. 6. The following month, it was notified that the US Securities and Exchange Commission was conducting an informal inquiry into its changes (OGJ Online, Nov. 23, 2005).
"There is evidence that some former members of Stone management failed to fully grasp the conservatism of the SEC's 'reasonable certainty' standard of booking reserves," Stone said in a news release. The law firm Davis Polk & Wardwell issued the independent review to Stone's audit committee and board.
A full reserves report by an engineering firm is expected by yearend. On Dec. 5, Stone announced that D. Peter Canty resigned as a director. In addition, the board has directed management to request the resignations of an officer and a senior manager associated with reserves estimation.
Based on Stone's internal review, a restatement of financial results will be required for 2001-04 and for the first half of 2005. Stone also said class-action lawsuits have been and are being filed concerning the reserves revisions.
In addition, Stone received an inquiry from the Philadelphia Stock Exchange related to matters including trading activity before the revision.