Goodrich Petroleum Corp., Houston, (NYSE: GDP) reported its financial and operating results for the second quarter ended June 30, 2011.
Earnings before interest, taxes, DD&A, non-cash general and administrative expenses and exploration (Adjusted EBITDAX), increased by 63% to $43.7 million for the quarter, compared to $26.9 million in the prior year period. Adjusted EBITDAX increased by 30% sequentially.
Discretionary cash flow (DCF), defined as net cash provided by operating activities before changes in working capital, was $33.3 million for the quarter, compared to $22.0 million in the prior year period. DCF increased by 24% sequentially.
The company announced a net loss applicable to common stock of $1.4 million for the quarter, or ($0.04) per basic share, versus a net loss applicable to common stock of $23.1 million, or ($0.64) per basic share in the prior year period.
Production
Net production volumes in the quarter increased by 23% to 10.3 billion cubic feet equivalent (Bcfe), or an average of 113,300 Mcfe per day, versus 8.4 Bcfe, or an average of 92,000 Mcfe per day in the prior year period. Average net daily production volumes for the quarter were up 12% sequentially from the first quarter of 2011. Oil production averaged approximately 1,500 barrels of oil per day for the quarter.
Production for the third quarter of 2011 is expected to average 115,000 – 118,000 Mcfe per day, with oil production expected to comprise approximately 12 – 15% of total equivalent volumes.
Revenues
Revenues for the quarter were $52.9 million versus $34.2 million in the prior year period. Revenues, including realized gain on derivatives not designated as hedges of $6.0 million for the quarter, would have been $58.9 million. Average realized price per unit for the quarter, prior to factoring in the company's realized derivative gain, was $5.09 per Mcfe, versus $4.07 per Mcfe in the prior year period. When factoring in the company's realized derivative gain, the average realized price per unit was $5.67 per Mcfe, versus $4.98 in the prior year period.
Liquidity
The company ended the quarter with approximately $31.3 million in cash and cash equivalents and restricted cash, with $22.5 million drawn on its senior credit facility, under which the company currently has a borrowing base of $225 million. The company expects that the borrowing base will be increased when redetermined by the lenders under the senior credit facility in September of this year.
To further enhance the company's liquidity, the Board has authorized management to evaluate and pursue several property monetization options, such as non-core asset sales and potential partnerships and joint ventures.
Capital Expenditures
Capital expenditures for the quarter were $110.3 million, of which $89.2 million was spent on drilling and completion costs, $15.6 million on acreage acquisitions, $4.2 million on facility costs and $1.3 million on other expenditures. For the quarter, the company conducted drilling operations on 18 gross (10 net) wells, added 15 gross (7 net) wells to production and had 10 gross (5 net) wells waiting on completion at the end of the quarter. The company added 4 gross (2.7 net) wells from the Eagle Ford Shale, with 5 gross (3.3 net) wells waiting on completion. The company is increasing its 2011 capital expenditure budget to $315 million from $235 million, and now expects to drill 53 gross (35 net) wells for the year, up from 34 gross (26 net) wells previously budgeted. The company has increased its production guidance for the year, and now expects to grow production by 15 – 25% year-over-year, up from 10 – 20% growth as previously announced.
Operational Update
Eagle Ford Shale, LaSalle and Frio Counties, Texas
The company has completed its Burns Ranch 15H (67% WI) well, a 9,200 foot lateral with 32 frac stages, at a 24-hour initial production rate of 1,250 barrels oil equivalent (BOE) per day, comprised of 1,155 barrels of oil and 570 Mcf per day. The Burns Ranch 15H, which is the longest Eagle Ford Shale well drilled by the company to date, has been online approximately 50 days and has averaged approximately 850 BOE (87% oil) per day.
The company has completed its Burns Ranch 17H (67% WI) well, a 4,700 foot lateral with 19 frac stages, at a 24-hour initial production rate of 1,155 BOE per day, comprised of 1,108 barrels of oil and 280 Mcf per day.
The company has completed its Burns Ranch 18H (67% WI) well, a 5,000 foot lateral with 19 frac stages, at a 24-hour initial production rate of 1,030 BOE per day, comprised of 955 barrels of oil and 450 Mcf per day.
The company has completed its third Buda Lime well, the Carnes 6H (67% WI) well, an unstimulated 3,100 foot lateral, at a 24-hour initial production rate of 1,635 BOE per day, comprised of 1,380 barrels of oil and 1,535 Mcf per day. The well averaged 1,000 BOE per day over the first thirty days, and had an estimated completed well cost of less than $3.0 million.
The company is currently flowing back its Burns Ranch 19H (67% WI) well, a 6,000 foot lateral, Burns Ranch 3H (67% WI), a 5,300 foot lateral, and Burns Ranch 20H (67% WI), a 5,900 foot lateral. The company has drilled and is waiting on completion on its Burns Ranch 2H (67% WI), which has an 8,200 foot lateral, Burns Ranch 30H (67% WI), which has a 5,100 foot lateral and Burns Ranch 35H (67% WI), with a 9,400 foot lateral.
The company has two rigs running full time drilling Eagle Ford Shale and Buda Lime wells. For the remainder of 2011, the company currently anticipates drilling 5 gross (3.5 net) Eagle Ford Shale wells on the southern half and 8 gross (5.5 net) Buda Lime wells on the northern half of the company's approximate 40,000 net acre block.
Angelina River Trend, Nacogdoches and Angelina Counties, Texas
The Nelson 1H (100% WI) well, which was previously released with an initial production rate of 12,400 Mcfe per day on a restricted choke, has averaged 9,800 Mcfe per day over 145 days and is currently producing at a rate of approximately 9,200 Mcfe per day, which significantly exceeds the company's expected restricted choke type curve.
Cotton Valley Taylor Sand, South Henderson Field, Rusk County, Texas
The company has completed its third Cotton Valley Taylor sand horizontal well in the field, the Craig 4H (100% WI), at an initial 24-hour production rate of 9,360 Mcfe per day, comprised of 8,400 Mcf per day and 160 barrels of oil per day. The company is currently in completion phase on its Travis Crow – Holland 1H (100% WI) and Rayford – Siler 1H (100% WI) wells.
Tuscaloosa Marine Shale, Louisiana and Mississippi
The company has increased its investment in the Tuscaloosa Marine Shale trend, and now owns approximately 79,000 net acres in the play at an average purchase price of $175 per acre. The company anticipates commencement of exploration and development operations on the acreage in 2012.
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