Offshore oil exploration company Stone Energy Corp. (NYSE: SGY), which filed for bankruptcy during the week of Dec. 12, has agreed to increase the potential recovery for shareholders in its Chapter 11 plan, according to court papers filed on Dec. 21.

On Dec 14, the Lafayette, La.-based company joined a long list of oil producers that have filed for bankruptcy amid a two-year slump in prices. Stone plans to use Chapter 11 to eliminate about $1.2 billion in debt by transferring control to its noteholders.

Stone's two largest shareholders, Thomas Satterfield of Birmingham, Ala., and Raymond Hyer of Tampa, Fla., criticized the company's Chapter 11 plan and requested the formation of an official equity committee.

According to Dec. 21's filing, the pair have dropped that demand and are now backing the plan of reorganization, which Stone revised to increase the post-bankruptcy stake reserved for shareholders to 5% from 4%.

The shareholders will also receive warrants for 15% of the stock in a reorganized Stone, up from 10%, and Stone agreed to pay up to $1 million of professional fees incurred by the shareholders.

Stone's stock plummeted 16% on Dec. 21, surrendering the prior day's sharp gains and then some, closing at $9.33 on the New York Stock Exchange.

The stock had rallied on Dec. 20 after Hyer said in a securities filing that he would not support the restructuring plan.

The shareholder settlement stipulates that no official equity committee will be appointed in the bankruptcy. Official committees can play a major role in negotiating a Chapter 11 plan and receive a budget from the bankrupt company to hire professionals and conduct investigations.