Imagine that you’re an early mover in a great new play, and you accelerate into cash-burn mode to prove it up.

But just as you’re about to ink a deal with a joint venture partner to wipe out the debt and bank the drill carry, the bottom falls out of oil, and you’re left holding the bill with a light wallet, half of your Ebitda evaporated.

That might be your story and a few dozen others’ too, and it’s certainly the testimony of Goodrich Petroleum, with 327,000 net acres of primo Tuscaloosa Marine Shale in Mississippi and Louisiana, ripe for development. Suddenly, the torque on the balance sheet becomes the overriding priority, taking precedence over geologic code breaking and strategic dealmaking.

With a $44 million market cap and close to $600 million in debt heading into summer—and no more JV partners waiting in the wings—Goodrich began taking measures to shore up its financial situation in light of “lower for longer” prognostications regarding the price of oil.

“We don’t have an asset problem; we have a debt problem,” Goodrich president and COO Rob Turnham told Investor in mid September. “We’re going to focus on reducing our overall debt without layering on additional equity or additional debt from another source.”

The sale of producing Eagle Ford assets in July wiped out some $86 million in borrowing base debt, leaving the company with $105 million of undrawn capacity, and another $20 million in cash. Goodrich also suspended its distributions in August, saving some $30 million over the course of the next year, or $7.4 million per quarter.

With its commercial bank debt settled, in September, the Houston-based producer went to work restructuring its privately held debt. It announced a deal in which it would retire $55 million of convertible notes in exchange for $27.5 million of convertible notes, most terms essentially the same. The kicker: the $34.66 per share conversion price in the old notes was swapped into a conversion of $2 per share for the new, an incentive worth a 50% near-term haircut to the issuers.

“By virtue of them writing off $27.5 million of the bond up front, they got the lower conversion price of $2 per share, and a much better shot of being in the money by converting that into equity much sooner,” Turnham said.

Goodrich’s stock at press time was trading near 75 cents, off its peak of $29 before oil turned last summer.

Its bonds were selling at some 30 cents to par prior to the deal.

“Once we get through this downturn, the likelihood of our stock blowing through $2 should happen quickly. Not only will the new bond trade at a better price to par, the $34.66 conversion price of the original note was not likely to be seen anytime soon.”

In total, the $27.5 million trim represents about 4% of Goodrich’s total debt, and approximately $1.4 million in annual interest savings, leaving debt-to-Ebitda at a high 5.5x for 2015, and 16.3x in 2016, per Global Hunter Securities analysts.

Those numbers matter little to the company’s financial security, Turnham suggested, as banks would rather companies in such situations stay conservative with capex and not drill uneconomic wells simply to juice the Ebitda ratio, and they are willing to be flexible on covenants in return for common sense.

“We have plenty of runway as we sit here now,” he assured, with financial capacity to manage well into 2017 absent any new financial engineering, “but improving the debt metrics and further lengthening the runway makes sense if we can pull it off. Whatever you can do to improve the balance sheet is critical to ensuring you get to the other side of this downturn.”

The mission now is to focus on the entirety of its debt portfolio. “We’ll target as big a discount as we can get.”

Currently, all Goodrich rigs are idle, but that could change come early 2016, and neither the TMS nor remaining undeveloped Eagle Ford assets are the target. Instead, “we’re excited about the evolution in the Haynesville Shale,” he said.

There, where Goodrich holds 37,000 acres, longer laterals and enhanced fracks by others have resulted in 50% to 100% better wells.

“Under a scenario with $3 gas, we can make 25% to 40% rates of return, better than the Eagle Ford or TMS at $50 oil. We may get more active there in 2016.”

At some point, this downturn will pass, he said, “and we’ll have less debt outstanding and our metrics will look better. We’ll be positioned to accelerate at the appropriate time.”

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