March 20 - Standard & Poor's Ratings Services today said it revised its recovery rating on Lafayette, La.-based Stone Energy Corp.'s senior unsecured notes to '3' from '4', indicating our expectation of meaningful (50% to 70%) recovery in the event of a payment default. The 'B' issue rating on the senior unsecured notes remains unchanged. Our recovery and issue-level ratings on Stone's subordinated notes remain unchanged. The improved recovery expectation reflects an updated higher valuation of Stone's year-end 2011 reserves and the recently issued $300 million convertible debt. Our reserve valuation for Stone is based on a company provided PV10 report using stress-level price assumptions of $45 per barrel of West Texas Intermediate crude oil and $4.00 per million BTU of Henry Hub natural gas. We expect the newly issued convertible notes to be pari passu with Stone's existing senior unsecured notes and senior to Stone's existing subordinated notes in a default scenario. A higher PV10 valuation for Stone more than offsets the adverse recovery impact of additional pari passu senior unsecured debt and results in a revision of our recovery rating to '3'. The corporate credit rating and stable outlook on Stone Energy Corp. reflect the company's limited scale, geographic concentration in the mature U.S. Gulf of Mexico shelf region, weak internal reserve replacement, and relatively high finding and development (F&D) costs. Our rating on Stone also reflects the favorable outlook for crude oil prices, the company's adequate liquidity position, and its healthy credit metrics. RELATED RESEARCH AND CRITERIA -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011 -- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009. -- Corporate Ratings Criteria 2008, published April 15, 2008. -- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, May 27, 2009 RATINGS LIST Stone Energy Corp. Corporate credit rating B/Stable/-- To From Revised Recovery Rating Senior unsecured notes B B Recovery rating 3 4 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.