We are upgrading Stone Energy Corp.'s (SGY) shares to Buy from Hold following the company's better-than-expected second quarter 2008 results. The stock's recent pullback (down more than 20% in the last month alone), primarily due to commodity-price weakness, has made its valuation very attractive. We like the acquisition of Bois d'Arc Energy (BDE). The strategic rationale of the transaction is compelling, given the complementary asset bases, strategies, and skill sets of the two companies. The new Stone Energy will be more diversified with a significant Gulf of Mexico exploration exposure. Our price objective remains unchanged, though we have raised our estimates. In the quarter, Stone Energy reported recurring earnings of $2.91 per diluted share, compared to $1.29 per diluted share in the year-earlier quarter. The year-over-year gain was driven
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