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Goodrich Swaps Haynesville Acreage, Cuts NatGas Gathering Fees

Goodrich Petroleum Corp. said it has entered into separate agreements to sell a portion of its assets in the Tuscaloosa Marine Shale (TMS) in Louisiana for $3.3 million, as well as to swap acreage and reduce gathering fees in the core of the Haynesville Shale.

Meanwhile, the Houston-based independent reported a net loss for the first quarter and lowered its full-year production guidance, despite a more than 60% surge in natural gas production.

On Wednesday, Goodrich said it would sell some of its interest in the western area of its position in the TMS. Specifically, the company is looking to monetize wells and acreage in Louisiana's East and West Feliciana parishes. The transaction is expected to close by mid-June.

A second agreement, covering an acreage swap on part of Goodrich's leasehold in the Bethany-Longstreet Field in Caddo Parish, LA, would add 10 laterals measuring 10,000 feet each to the operated inventory.

Under a third agreement, Goodrich is amending a natural gas gathering agreement with an undisclosed midstream provider that would lower its gathering fees from 53-75 cents/Mcf to 26-60 cents/Mcf. Gathering fees within the rest of its core Haynesville acreage would remain priced at 22-37 cents/Mcf.

"Really, the driver was activity," COO Rob Turnham said of the revised agreement during an earnings call Wednesday to discuss 1Q2018. "The midstream provider was noticing all of our operated activity adjacent to them.

"They want to see activity on them and needed to get more competitive with what we have on our other operated acreage. We're willing to reduce these fees as long as we see an activity level pick up on that block."

Besides the TMS sale, CEO Gil Goodrich said the company considers its 32,500 gross (14,000 net) acres in the Eagle Ford Shale as a "legacy...tier two position,” and it also would be open to offers.

"...We would be receptive to proposals to take us out of that," Goodrich said. "We've had some conversations along those lines.” Although there’s no definitive agreements in hand, “I think that's something that's pretty high on the noncore divestiture list for the company."

Outside the Eagle Ford, Goodrich holds 38,500 gross (18,500 net) acres in the core of the Haynesville in North Louisiana, plus an additional 8,500 gross (3,500 net) acres in the Angelina River Trend region, which is prospective to the Haynesville and the Bossier Shale, in East Texas. It also holds 88,000 gross (65,000 net) acres in the TMS.

Production totaled 3.32 Bcfe (36.8 MMcfe/d) in 1Q2018, a 42.7% increase from the 2.32 Bcfe (25.8 MMcfe/d) in the year-ago quarter. Natural gas production totaled 2.95 Bcf, up 61% from 1.83 Bcf produced in 1Q2017. Goodrich attributed the increase in gas production to the completion of three operated wells targeting the Haynesville in the first quarter.

However, shut-ins from offset fractures of 4.3 MMcfe/d, coupled with delays in performing hydraulic fracturing at two of its three completed wells because of a downhole equipment malfunction, impacted first quarter production. That, in turn, prompted the company to lower its full-year production guidance to 65-75 MMcfe/d. However, Goodrich maintained its full-year exit guidance of 100 MMcfe/d.

The CEO said the downhole malfunction "obstructed a portion of the lateral, and resulted in a reduced lateral completion. We've adjusted all future well plans to eliminate this particular malfunction from occurring."

Goodrich is currently running one rig, but it plans to add a second rig in late June. It plans to drill 17 gross (eight net) wells during 2018.

The company spent $21 million on capital expenditures (capex) in 1Q2018, most of which ($20.6 million) was devoted to drilling and completion costs and all of it was spent in the Haynesville. Goodrich said it plans to spend $30 million on capex in 2Q2018 and reaffirmed its full-year capex budget of $85-95 million. It also reaffirmed a preliminary capex budget of $125-150 million for 2019.

Goodrich reported a net loss of $5.3 million (minus 47 cents/share) in 1Q2018, compared with a net loss of $5.7 million (minus 63 cents) in the year-ago quarter. Revenues totaled $11.8 million in 1Q2018, compared with $9.4 million in 1Q2017.

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