When I wrote aboutStone Energy (NYSE:SGY) in March 2004, I labeled the stock "cheap" at $47.65 because it was a strong natural gas producer and was selling for 10 times earnings. Since then, the stock soared to $62.50 on Sept. 29, only to settle back in mid-afternoon trading today at $47.98 a share.

What happened, and is this stock still a bargain?

Stone escaped the destruction wrought by Hurricane Katrina but reported yesterday that it had lost three platforms and five lesser structures (caissons) to Hurricane Rita. The lost production amounts to 34 million cubic feet equivalent (MMcfe) a day -- about 13% of daily production expected for the last half of the year. While this loss will hurt current earnings, 25-30 MMcfe of that lost production is expected to be brought back into production.

Lost and shut-in production has the company producing at 95 MMcfe a day now -- down from an expected 260-280 MMcfe. That's really going to hurt near-term earnings, although production is expected to rise to 250 MMcfe by year's end.

Also hurting the stock was an 18.8% downward revision of the company's estimated proven reserves. Since going public in 1993, the company had grown reported proven reserves by a compounded annual rate of 24%. The company didn't give details about the revisions other than to mention the two principle fields being downgraded. The company's board has hired an outside consultant to review all reserve numbers by the end of the year.

Adding to the company's woes yesterday were a brokerage downgrade and a credit downgrade. Moody's found the combination of a reserve revision and production curtailment merited a credit downgrade and a negative outlook for the company's credit.

I mentioned in 2004 that the company's debt, then at $370, was a risk. Since then, rapidly expanding natural gas prices have ostensibly encouraged the company to add debt, which now stands at $558 million. Although interest payments are not burdensome today, a sharp drop in natural gas prices would change that.

At this juncture, it's safe to say that Stone Energy is not cheap. While the company wants investors to look at its ability to scale production back up, confidence has been shaken by the reserve reduction. It will pay for investors to step aside and let this turmoil (hurricanes, downgrades, and all) play itself out.

Until then, investors looking for a natural gas play might be better served to consider a major like BP (NYSE:BP) or perhaps mid-tier companies like Apache (NYSE:APA) and Anadarko (NYSE:APC).

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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see The Motley Fool's disclosure policy.