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Goodrich 'Better Positioned' to Weather Low Prices, CEO Says

Goodrich Petroleum Corp. is issuing notes and shares to bolster its balance sheet as it continues to make progress in the Tuscaloosa Marine Shale (TMS). The potential sale of the company's Eagle Ford Shale assets can wait until prices improve, executives said Friday.

"...[W]e are now far better positioned to not only weather the current downturn [in oil prices] but also be extremely well positioned to benefit as the oil market recovers in the coming quarters and years," CEO Gil Goodrich told analysts last week after the company announced the notes offering and earnings. "And there are some silver linings in the current market, which include the real cost improvement...which we are seeing not only across the industry but in particular with our experience in the TMS..."

During the fourth quarter Goodrich had three rigs running in the TMS and reached total depth on three wells, its two-well CMR/Foster Creek 8H-1 (78.8% working interest) and 8H-2 (81.8% WI) pad in Wilkinson County, MS, and its T. Lewis 7-38H-1 (90.5% WI) well in Amite County, MS. During the quarter, it continued drilling operations on its two-well B-Nez 43H-1 (69.5% WI) and 43H-2 (70% WI) pad, its Kinchen 58H-1 (78.3% WI) well, all in Tangipahoa Parish, LA, and its Painter 5H-1 (73% WI) well in Washington Parish, LA.

Goodrich completed its Kent 41H-1 (99.8% WI) well in Tangipahoa Parish but has yet to drill out the frack plugs, which is currently planned for early March. In addition, Goodrich has seven TMS wells drilled and waiting on completion, with plans to begin completion operations on these beginning late in the first quarter 2015 through early 2016, "pending better market conditions." Since the end of the fourth quarter, Goodrich has released two rigs, with one active in the TMS. The company has more than 300,000 net TMS acres.

"...[W]e are seeing tremendous progress in the TMS since our last call," said COO Rob Turnham, adding that costs have been trending down in the play. Additionally, drill times are improving with better optimized completion techniques.

"The well costs are down significantly such that we will be generating very attractive and competitive rates of return when oil prices return to a more normal range, which we expect in the back half of the year."

Last December the company said it was exploring the sale of its Eagle Ford assets to focus on the TMS (see Daily GPIDec. 11, 2014).

Goodrich is still working on finding a joint venture partner for the TMS, but low oil prices aren't helping. "...[S]o we just are taking a bit of pause here, but the process will go on, and as we see oil market start to heal, which we hope will happen in second half of this year, we will continue to uptick that back up and in time look for partners that might be interested in joining us in this play," CEO Goodrich said.

Last week Goodrich announced the issuance and sale of $100 million of 8% senior secured notes due 2018 together with warrants to purchase up to 4.88 million shares of common stock at an exercise price of $4.66/share. Goodrich has increased its liquidity and may issue an additional $75 million of the notes in the future. On Monday it said it had commenced an offering of 12 million shares of common stock, with proceeds to be used to repay debt and for general purposes.

"...[O]ne of the reasons we decided to go ahead and term up some debt is to bridge until we see better oil prices so that we can either sell the Eagle Ford or do a TMS JV, but we didn't want to do it until oil prices recovered somewhat," Turnham said in response to an analyst's question.

Goodrich reported a net loss of $233.3 million (minus $5.23/share) for the fourth quarter versus a net loss of $30.9 (73 cents/share) in the prior year period. Fourth quarter results included a $246.6 million noncash impairment charge. Adjusted net loss was $21.1 million for the quarter (minus 47 cents/share), which excludes the impact of gains on derivatives not designated as hedges of $47.4 million, net cash received for settlement of derivatives instruments of $9 million, loss on the sale of assets of $3.5 million, noncash impairment of assets of $246.6 million and other expenses totaling $500,000.

For the year the company reported a net loss of $382.9 million (minus $8.62/share) versus a net loss of $113.8 million (minus $2.99/share) in the prior-year period. Adjusted net loss was $87.8 million for the year, or (minus $1.98/share) versus a net loss of $105.6 million (minus $2.77/share) in the prior-year period.

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