Company Update (NYSE:GDP): Goodrich Petroleum Corporation Announces Third Quarter 2015 Financial Results And Operational Update


Goodrich Petroleum Corporation (NYSE:GDP) announced financial results for the quarter ended September 30, 2015 and a financial update.

FINANCIAL UPDATE:

  • To date, the Company has reduced total debt by approximately $198 million (31%) and annual interest expense by approximately $9.5 million(debt exchanges and conversions only) since the end of the second quarter through the following transactions:
    • In September the Company exchanged $55 million of (old) 2032 convertible notes into $27.5 million of (new) 2032 convertible notes resulting in $27.5 million of net debt reduction;
    • In September the Company closed on the sale of its Eagle Ford Shale production, proved reserves and associated acreage which allowed for a reduction in net debt through the third quarter of approximately $72.5 million. Approximately $14 million of sales proceeds is still held in escrow pending a post-closing settlement;
    • In October the Company exchanged $158.2 million of 2019 senior notes into $75 million of second lien notes resulting in $83.2 millionof net debt reduction. The Company expects to book an estimated gain of $62.6 million in the fourth quarter for the debt exchange;
    • In October the Company exchanged $17.1 million of (old) 2032 convertible notes into $8.5 million of (new) 2032 convertible notes resulting in $8.6 million of net debt reduction;
    • In September and October the Company reduced total debt by an additional $6.2 million through conversion of (new) 2032 convertible notes into common stock.

The Company remains focused on transactions that will reduce debt and interest expense.

  • The borrowing base under the Company’s senior credit facility was reaffirmed at $75 million and covenants amended to provide for flexibility through February 2017.

THIRD QUARTER HIGHLIGHTS:

  • Capital expenditures for the quarter totaled $16.4 million. Full year capital expenditures expected to be lower by 10-15% versus previous guidance;
  • Production for the quarter totaled 645,000 barrels of oil equivalent (“Boe”) (50% oil), which was affected by deferred completions and the sale of the Company’s Eagle Ford production, proved reserves and associated acreage;
  • Adjusted Revenues, which includes the benefit of realized gains on the Company’s oil hedges, were $31.5 million for the quarter versus $55.1 million in the prior year period;
  • Operating Expenses were lower by $114.5 million in the quarter versus the prior year period primarily due to a decrease in the amount of impairment expense recognized of $52.9 million and a $42.8 million gain recognized on the sale of the Company’s producing interest and associated acreage in the Eagle Ford Shale.  Sequentially Operating Expenses were lower by $9.2 million;
  • (“Adjusted EBITDAX”) defined as earnings before interest, taxes, non-cash general & administrative (“G&A”) expenses and exploration was$20.3 million in the quarter, compared to $37.1 million in the prior year period.

 

FINANCIAL RESULTS

LIQUIDITY

The Company exited the quarter with credit facility borrowings, net of cash on hand, of $13.5 million with a borrowing base of $105 million. The Company’s borrowing base was reduced to $75 million on October 1, 2015 in conjunction with the exchange of $158.2 million of our 2019 Notes for the issuance of $75.0 million of 8.875% Second Lien Notes due 2018.  The borrowing base was re-affirmed on November 3, 2015 at $75 million. In addition, the covenants in the credit facility were amended to 1.25 to 1 First Lien Debt to EBITDAX and 1.25 to 1 EBITDAX to Cash Interest expense. The Current Ratio as defined in the credit agreement remains the same. The Company expects to finance the remainder of its 2015 capital expenditures budget from cash flow from operations.

CASH FLOW

Adjusted EBITDAX was $20.3 million in the quarter, compared to $37.1 million in the prior year period.

Discretionary cash flow (“DCF”), defined as net cash provided by operating activities before changes in working capital, was $8.8 million in the quarter, compared to $26.8 million in the prior year period.  Net cash used in operating activities was $6.3 million in the quarter, compared to net cash provided by operating activities of $25.3 million in the prior year period. The Company estimates the vast majority of its negative change in working capital occurred in the first three quarters of the year.

DCF and Adjusted EBITDAX for the quarter were negatively impacted by the sale of the Company’s producing Eagle Ford Shale properties and the sale in December 2014 of its non-core, Beckville/Minden field in East Texas when compared to the previous year period.

(See accompanying tables at the end of this press release that reconcile Adjusted EBITDAX and DCF, each of which are non-US GAAP financial measures, to their most directly comparable US GAAP financial measure.)

CAPITAL EXPENDITURES

Capital expenditures totaled $16.4 million in the quarter, of which $12.7 million was spent on completion costs, $0.7 million on leasehold acquisition and $3.0 million on facilities, capital workovers and other expenditures.  While the Company booked capital expenditures of $16.4 million in the quarter, the Company paid out cash amounts totaling $22.6 million.  Approximately 96% of the quarter’s total capital expenditures were spent drilling and completing wells and extending leases for future drilling operations in the TMS.  The Company currently has no rigs running in any of its areas and has two TMS wells waiting on completion.  The Company will establish its preliminary capital expenditure budget for 2016 in December, which will be dependent on commodity prices as to whether it allocates capital to the TMS and Haynesville Shale areas. The Company anticipates minimum capital expenditures in the fourth quarter and expects to be 10-15% below its full year preliminary capital expenditure budget of $90$110 million.

PRODUCTION

Production totaled approximately 645,000 Boe in the quarter, or an average of 7,008 Boe per day, versus 1,021,000 Boe, or an average of 11,096 Boe per day, in the prior year period.  Oil production totaled 320,000 barrels of oil in the quarter (50% of total production), or an average of approximately 3,477 Bbls per day. Oil production for the quarter was negatively impacted by the sale of the Eagle Ford Shale producing properties in September 2015.  Natural gas production totaled 2.0 Bcf in the quarter, or an average of approximately 21,184 Mcf per day, versus 3.5 Bcf, or an average of 37,957 Mcf per day, in the prior year period.  Natural gas production for the quarter was negatively impacted by the Company’s sale of its Eagle Ford Shale producing properties in September 2015 as well as the sale in December 2014 of its non-core, Beckville/Minden field in East Texas when compared to the previous year period.

REVENUES

Revenues prior to realized gain on derivatives totaled $17.7 million in the quarter versus $54.9 million in the prior year period.  Average realized price per unit was $28.10 per Boe in the quarter versus $53.76 per Boe in the prior year period.  When factoring in the net cash received in settlement of derivative instruments, Adjusted Revenues totaled $31.5 million in the quarter versus $55.1 million in the prior year period, and average realized price per unit was $49.39 per Boe ($88.83 per Bbl and $1.76 per Mcf) versus $53.98 per Boe ($92.34 per Bbl and $3.63 per Mcf) in the prior year period. Revenues for the quarter were negatively impacted by the Company’s sale of its producing Eagle Ford Shale properties inSeptember 2015.

(See accompanying tables at the end of this press release that reconcile Adjusted Revenues, a non-US GAAP measure, to its most directly comparable US GAAP financial measure.)  

CRUDE OIL AND NATURAL GAS DERIVATIVES

The Company had a gain of $7.9 million on its derivatives not designated as hedges in the quarter, versus a gain of $20.3 million during the prior year period.  The Company received net cash proceeds and realized a gain of $13.7 million this quarter for the settlement of its oil derivatives, and incurred an unrealized loss of $5.8 million for the change of the fair value of its oil and natural gas contracts.  For 2015, the Company has a total of 3,500 Bbls/day swapped at an average price of $96.11 per Bbl.

OPERATING EXPENSES

Operating expenses for the quarter were lower by $114.5 million, or 80%, in the quarter versus the prior year period primarily due to a decrease in the amount of impairment expense recognized of $52.9 million and a $42.8 million gain recognized on the sale of the Company’s producing interest and associated acreage in the Eagle Ford Shale. Operating expenses for the quarter decreased by $9.2 million sequentially. Operating expenses for the quarter are broken out as follows:

Lease operating expense (“LOE”) was lower by $2.8 million to $3.9 million in the quarter, versus $6.7 million in the prior year period.  LOE for the quarter included $0.5 million for workovers, versus $0.6 million in the prior year period.  The decrease in LOE was primarily due to (i) field level cost cutting results; (ii) the divestment of our East Texas assets during the fourth quarter of 2014; and (iii) the divestment of our producing Eagle Ford Shale properties in September 2015.

Production and other taxes were lower by $1.6 million to $1.3 million in the quarter versus $2.9 million in the prior year period.  The decrease in production and other taxes was primarily due to significantly lower crude oil prices during the quarter, lower oil production from our Eagle Ford Shale and more oil production from the TMS, which has severance tax abatement for a minimum of twenty-four months after initial production.

Transportation and processing expense was lower by $0.7 million to $1.4 million in the quarter versus $2.1 million in the prior year period.  The decrease in transportation and processing expense pertains to lower operated natural gas production due to the divestment of our East Texasassets during the fourth quarter of 2014.

Depreciation, depletion and amortization (“DD&A”) expense was lower by $14.2 million to $21.8 million in the quarter versus $36.0 million in the prior year period.  The decrease in DD&A expense was primarily due to the divestment of our East Texas assets during the fourth quarter of 2014 and lower Eagle Ford Shale Trend DD&A.

Impairment expense was $32.5 million for the quarter versus $85.3 million in the prior year period. Approximately 83% of the impairment for the quarter was from the Company’s Angelina River Trend acreage.

Exploration expense was higher by $3.4 million to $4.3 million in the quarter versus $0.9 million in the prior year period.  Non-cash lease expiration expense, which represents 95% of total exploration expense in the quarter, was mostly for non-core acreage in the Eagle Ford and Tuscaloosa Marine Shale.

General and Administrative expense was lower by $2.9 million to $5.4 million in the quarter versus $8.3 million in the prior year period.  G&A expense related to non-cash, stock based compensation totaled $0.9 million in the quarter versus $2.0 million in the prior year period.  G&A was lower versus the prior year period primarily due to the Company’s cost cutting efforts and staff reductions. The Company expects year over year cash G&A for 2015 to be down 20 – 25% versus the prior year period.

Gain on Sale of assets was $42.8 million for the quarter due to the sale of the Company’s producing Eagle Ford Shale properties in September 2015. The Company did not have a gain on sale of assets in the prior year period.

OPERATING INCOME

Operating income, defined as revenues minus operating expenses, totaled a loss of $10.1 million in the quarter, versus an operating loss of $87.4 million in the prior year period.  Adjusted operating income, when adjusted for cash received in settlement of derivative instruments of $13.7 million, impairment expense of $32.5 million and gain on sale of assets of $42.8 million was a $6.6 million loss for the quarter.  Operating income for the quarter was negatively impacted by completion deferrals, the sale of its producing Eagle Ford Shale properties in September 2015 and the Company’s sale in December 2014 of its non-core, Beckville/Minden field in East Texas when compared to the previous year period.

(See accompanying tables at the end of this press release that reconcile adjusted operating loss, a non-US GAAP financial measure to its most directly comparable US GAAP financial measure.) 

INTEREST EXPENSE

Interest expense totaled $15.6 million in the quarter versus $12.6 million in the prior year period.  Non-cash interest expense associated with the Company’s debt totaled $4.7 million (representing 30% of total interest expense) in the quarter versus $2.7 million in the prior year period. As referenced above, annual interest expense will be reduced going forward by approximately $9.5 million annually through the recent debt exchanges and conversions.

NET INCOME

The Company announced a net loss applicable to common stock of $25.2 million in the quarter, or ($0.44) per basic share, versus a net loss applicable to common stock of $87.1 million, or ($1.96) per basic share in the prior year period.  Adjusted net loss applicable to common stock was$25.6 million for the quarter, or ($0.44) per basic share, versus an adjusted net loss applicable to common stock of $21.8 million, or ($0.49) per basic share in the prior year period. Net income for the quarter was negatively impacted by the sale of its producing Eagle Ford Shale properties and the sale in December 2014 of its non-core, Beckville/Minden field in East Texas when compared to the previous year period. (Original Source)

Shares of Goodrich Petroleum closed yesterday at $0.642. GDP has a 1-year high of $11.48 and a 1-year low of $0.54. The stock’s 50-day moving average is $0.69 and its 200-day moving average is $1.62.

On the ratings front, Goodrich Petroleum has been the subject of a number of recent research reports. In a report issued on November 2, FBR analyst Chad Mabry downgraded GDP to Hold, with a price target of $0.75, which represents a potential upside of 16.8% from where the stock is currently trading. Separately, on October 5, Imperial’s Kim Pacanovsky maintained a Hold rating on the stock and has a price target of $0.60.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Chad Mabry and Kim Pacanovsky have a total average return of -35.8% and -37.0% respectively. Mabry has a success rate of 23.2% and is ranked #3821 out of 3824 analysts, while Pacanovsky has a success rate of 19.4% and is ranked #3820.

Goodrich Petroleum Corp is an independent oil & natural gas company engaged in the exploration, development & production of oil & natural gas on properties in South Texas, Northwest Louisiana & East Texas & Southwest Mississippi & Southeast Louisiana.