- Production volumes set record and grow 82% over 2005 HOUSTON,
March 13 /PRNewswire-FirstCall/ -- Goodrich Petroleum Corporation
today announced financial and operating results for the year and
fourth quarter ended December 31, 2006. YEAR END RESERVES Year end
proved reserves reached a record 206 Bcfe using the SEC-mandated
unescalated pricing on December 31, 2006 of approximately
$5.64/Mcfe of natural gas and $57.75/barrel of crude oil, subject
to further reductions for quality and basis differentials. At year
end 2006, the Company's reserve life, or R/P ratio, was
approximately 13 years. Proved reserves were approximately 90%
natural gas, 43% developed and approximately 84% were related to
the Company's acreage in the Cotton Valley trend. All of the
Company's proved reserve estimates were prepared by the independent
reserve engineering firm Netherland, Sewell & Associates.
Reported year end reserves included revisions due to the relatively
low natural gas prices on December 31, 2006 of 45.6 Bcfe. Including
reserves that were excluded due to price revisions, proved reserves
were approximately 252 Bcfe. Under SEC pricing, proved reserves
grew by approximately 19% versus the year end 2005 proved reserves
of 173 Bcfe. Excluding the impact of price related revisions,
proved reserves grew by approximately 46% versus proved reserves at
year end 2005. Reserve growth was achieved predominantly through
organic growth with the drill bit in the Cotton Valley trend.
Organic drill bit reserve growth accounted for approximately 90% of
reserve additions and the remainder was associated with the
acquisition of working interests within the Company's Beckville
field of the Cotton Valley trend. When including all revisions in
the calculation, the Company replaced approximately 210% of its
2006 net production volumes of approximately 15.8 Bcfe. Excluding
the impact of revisions due to price, the Company replaced
approximately 400% of its 2006 net production volumes. Year end
2006 all-in finding and development costs ("F&D"), being
defined as 2006 drilling, completion and acquisition capital
expenditures of $252 million, which excludes capital costs
associated with undeveloped leasehold acquisition and facility
costs of approximately $17 million, divided by proved reserve
additions, of 94.6 Bcfe, which includes reserve revisions based on
performance but excludes reserve revisions due to end of the year
pricing, were $2.66 per Mcfe. Regarding the Company's Cotton Valley
drilling activity, approximately $217 million was expended during
the year on drilling, completion, and reserve acquisitions in the
trend. Excluding reserve revisions due to price related solely to
the Cotton Valley properties, reserve additions in this trend
totaled 99.0 bcfe, resulting in an all-in finding cost of $2.19
with respect to the trend. NET INCOME Net income applicable to
common stock for the fourth quarter of 2006 was a loss of $23.9
million ($0.96 per share) which compares to a fourth quarter 2005
amount of $8.4 million ($0.34 per share). Results for the fourth
quarter of 2006 included a charge to exploration expense of $7.9
million reflecting the impact of dry hole costs in the Bayou
Bouillon field of South Louisiana, as well as $24.8 million of
non-cash impairment charges to oil and gas properties at year end
2006. Approximately two-thirds of the impairment expense, or $16.4
million, was related to oil and gas properties located in South
Louisiana. The remaining impairment expense was associated with two
non- core properties, the Gilmer and Blocker fields, on outlying
areas of our Cotton Valley trend. These two properties comprise
approximately 6,600 net acres, or 6% of the Company's current total
net acres in the Cotton Valley trend, and represent acreage on
which the Company does not currently plan any future development
activities. During the fourth quarter, the Company also recorded a
$3.5 million gain on derivatives not qualifying for hedge
accounting. For the full year 2006, GDP reported a loss applicable
to common of $5.9 million ($0.24 per share) versus a loss of $18.2
million for 2005. CASH FLOW Earnings before interest, taxes,
DD&A, non-cash general and administrative expenses and
exploration ("EBITDAX"), was approximately $18.0 million for the
fourth quarter, compared to $18.8 million in the prior year period.
EBITDAX for the year was $71.3 million, compared to $47.1 million
in the prior year period (see accompanying table for a
reconciliation of EBITDAX, a non-GAAP measure, to net cash provided
by operating activities). Discretionary cash flow, defined as net
cash provided by operating activities before changes in working
capital, increased to $14.2 million in the quarter, compared to
$8.4 million in the prior year period. Discretionary cash flow
increased to $60.2 million for the year, compared to $32.4 million
in the prior year period. Net cash provided by operating activities
was $65.1 million for the year, compared to $45.6 million for the
prior year period (see accompanying table for a reconciliation of
discretionary cash flow, a non-GAAP measure, to net cash provided
by operating activities). REVENUES Total revenues for the year
increased by 67% to $116.2 million versus $69.4 million for the
prior year period. Average net oil and gas prices received for the
year were $6.66 per Mcf of gas and $57.12 per barrel of oil, versus
$8.62 per Mcf of gas and $29.91 per barrel of oil from the previous
period, including the effects of hedging for the derivatives which
qualified for hedge accounting. Total revenues for the quarter
increased by 21% to $30.8 million, versus $25.5 million for the
prior year period. Revenues for the quarter increased by 5%
sequentially over the third quarter of 2006. Average net oil and
gas prices received in the quarter were $6.54 per Mcf of gas and
$57.42 per barrel of oil. The average prices received in the fourth
quarter do not include the realized losses on its oil or gas
derivatives, all of which were ineffective during the quarter.
OPERATING INCOME Operating income, defined as revenues minus
operating expenses totaled a loss of $27.1 million for the year
versus operating income of $13.2 million for the prior year,
primarily due to the previously mentioned expensing of a dry hole
and impairment of other properties during the fourth quarter of
2006. Operating income for the quarter was a loss of $34.2 million
versus operating income of $9.3 million in the prior year period.
After adjusting for the previously mentioned items, adjusted
operating income for the fourth quarter would have been $0.5
million, and the full year 2006 adjusted operating income would
have been $11.6 million (see accompanying table for a
reconciliation of Adjusted Operating Income, a non-GAAP measure, to
Operating Income). OPERATING EXPENSES Total Operating expenses were
$65.1 million during the quarter, including the previously
mentioned dry hole and impairment charges. Lease operating expenses
(LOE) totaled $7.6 million in the quarter, versus $3.0 million
during the fourth quarter of 2005. The increase in LOE was
primarily related to higher production levels, increased workover
costs, and the impact of higher salt water disposal and compression
charges in the Company's Cotton Valley Trend properties. For the
year, LOE totaled $21.9 million in 2006, versus $9.9 million in
2005, with the increase due primarily to the same reasons as those
impacting the fourth quarter differences. General and
Administrative expenses (G&A) were $5.0 million during the
quarter, versus $2.7 million during the similar quarter in 2005,
due primarily to higher stock related compensation expense
resulting from the requirements of FAS 123R, which the company
adopted at the beginning of 2006. For the year, G&A expenses
totaled $17.2 million, versus $8.6 million for the full year 2005,
with the increase in the year over year period due primarily to the
higher stock related compensation expenses. For the quarter, the
Company recorded non-cash general and administrative expenses
related to stock based compensation for its officers, employees and
directors of $2.1 million, including a one-time expense in the
quarter of approximately $1.0 million. For the full year, the
Company recorded non-cash G&A expense related to stock based
compensation of approximately $6.0 million, or approximately 35% of
total G&A for the year, including the one-time expense recorded
in the fourth quarter. CAPITAL EXPENDITURES The Company drilled 105
gross (79 net) wells in 2006 with a 98% success rate. The Company
had in excess of a 99% success rate on its Cotton Valley trend
wells, with one well outside of its core acreage unsuccessful.
Capital expenditures for the quarter and year totaled $70.7 million
and $269.5 million respectively, compared to $58.1 million and
$164.6 million in the prior year's quarter and year respectively.
Approximately 85%, or $60.0 million of the capital expenditures in
the quarter and approximately 90%, or $244 million of the capital
expenditures for the year were associated with drilling and
completion costs. Of the drilling and completion capital
expenditures, approximately $48.0 million for the quarter, and $211
million for the year, were associated with wells drilled and
completed in the Cotton Valley Trend. For the year 2007, the
Company has preliminarily budgeted total capital expenditures of
approximately $275.0 million, of which approximately 89%, or $245.0
million, is expected to be focused on the drilling program in the
Cotton Valley trend of East Texas and North Louisiana, where the
Company plans to average nine rigs working throughout 2007. The
remainder of the $30.0 million budgeted amount is earmarked for
lease acquisitions, gathering and facility, and other capital
expenditures. The Company expects to finance its 2007 capital
expenditures through a combination of cash flow from operations,
borrowings under its existing bank credit facility and the proceeds
from the pending sale of its South Louisiana properties. OPERATIONS
PRODUCTION Net production volumes for the year increased by
approximately 82% to 13.0 Bcfe of gas and 474,000 barrels of oil,
or 15.8 Bcfe, versus 6.2 Bcf of gas and 408,000 barrels of oil, or
8.7 Bcfe, in 2005. Net production volumes in the quarter increased
by approximately 61% to 4.3 billion cubic feet equivalent ("Bcfe"),
or approximately 46,600 Mcfe per day, versus 2.64 Bcfe, or
approximately 29,000 Mcfe per day, in the prior year period.
Approximately 76%, or 3.3 Bcfe of net production volumes for the
quarter came from Cotton Valley Trend wells in East Texas and North
Louisiana, a 128% increase over the 1.45 Bcfe of net Cotton Valley
Trend volumes for the prior year period. Cotton Valley Trend gross
production volumes averaged approximately 54,500 Mcfe per day from
an average of 133 gross wells producing for the quarter, or
approximately 410 Mcfe per day, per well. The Company's net Cotton
Valley Trend production volumes averaged approximately 33,100 Mcfe
per day from an average of 103 net wells producing for the quarter,
or approximately 322 Mcfe per day, per well. Due to the rotation
out of three of the Company's older drilling rigs which began in
the third quarter and continued in the fourth quarter, the Company
had an average 6.4 rigs running in the Cotton Valley Trend for the
entire quarter (4.0 net rigs when applying the Company's working
interest), which increased gross Cotton Valley Trend production
volumes by 5% sequentially. Net Cotton Valley Trend volumes for the
fourth quarter increased by 2.5% sequentially over the third
quarter. By early February, the Company had begun utilizing three
newly built drilling rigs for which it had previously contracted,
and it currently has nine rigs running in the Trend. Since year end
2006, daily net production volumes have increased over the fourth
quarter of 2006 by approximately 10% and the Company currently
expects net daily production volumes will average between 49,000
and 52,000 Mcfe per day for the first quarter of 2007, including
production from the properties to be sold in South Louisiana. In
the Cotton Valley trend, gross production volumes have increased
over the fourth quarter of 2006 by approximately 12.5% to an
average in the first quarter through March 7, 2006 of approximately
61,500 Mcfe per day and net Cotton Valley trend volumes have
increased approximately 15% over the fourth quarter of 2006 to
approximately 38,000 Mcfe per day through March 7, 2006.
OPERATIONAL UPDATE Cotton Valley Trend Drilling. The Company
completed and added to production 19 Cotton Valley trend wells
during the quarter, eight of which produced for the entire quarter.
Through year end the Company had drilled and logged a total of 156
wells, with a success rate in excess of 99%. The one unsuccessful
well drilled was on acreage the Company owns in Harrison County,
which resulted from a completion failure. As previously stated, the
Company has had 9 drilling rigs under contract since early
February. In October 2006, the Company initiated a plan to drill
several horizontal wells in the Cotton Valley sand section on its
acreage to test the viability and economics of horizontal versus
vertical drilling in the Cotton Valley trend. The Company's initial
well, the J.K. Williams No.1-H in the North Minden field, spud in
October 2006 and successfully fracture stimulated four of six
planned frac stages, or approximately 1,800 feet of the 2,600 feet
of lateral drilled, using the Packers Plus open hole design in
December 2006. After flow back of the frac fluids in early January
2007, the well produced at an initial rate of 3,300 Mcfe per day.
Subsequent to the initial production, the well's performance
declined to a rate of approximately 1,000 Mcfe per day for the
first thirty days of production, and is currently producing at that
rate. The Company's second horizontal well, the A. Jones No.1-H
well also in the North Minden field, has been drilled to total
depth with an effective horizontal lateral of approximately 2,650
feet. A multi-stage frac stimulation is planned for the week of
March 12, 2007. A third horizontal well in the Cotton Valley sand
section, the C. Graham No.3-H in the Bethany-Longstreet field, is
currently drilling and is expected to reach total depth in the
horizontal lateral prior to the end of March, 2007. Acreage. The
Company currently has 180,000 gross acres, 110,000 net acres in the
Cotton Valley trend in eight counties in Texas and three parishes
in Louisiana, which yields over 1,900 possible drilling locations
predominantly on 40 acre spacing. The Company intends to test 20
acre spacing on a portion of its acreage to determine if there is
potential application to its acreage. The Company continues to seek
additional opportunities to expand its inventory in resource plays
similar to the Cotton Valley trend. South Louisiana The Company has
previously announced that it has entered into an agreement with a
private company to sell substantially all of its assets in South
Louisiana for $100 million, with an effective date of July 1, 2006.
The Company is estimating approximately $80 million of net
proceeds, after adjustments to closing date, which primarily relate
to the net revenues from South Louisiana production after July 1,
2006. The Company has granted the purchaser an extension of the due
diligence period and the transaction is now estimated to close
before the end of March. The closing date was previously estimated
to be February 28, 2007. Walter G. "Gil" Goodrich, Vice Chairman
and CEO, commented on the results as follows, "The year 2006 was a
watershed year for Goodrich Petroleum. We drilled and completed a
record 105 wells during the year, primarily in the Cotton Valley
trend. The aggressive drilling program in the Cotton Valley trend
allowed us to grow production volumes by 82% compared to 2005. In
addition, we negotiated the sale of substantially all of our
interests in South Louisiana, which will allow us to focus entirely
on the Cotton Valley trend and will provide meaningful incremental
capital to help fund our 2007 capital budget. While year end
SEC-mandated prices limited the amount of growth in proved
reserves, utilizing the current twelve month average strip price
for natural gas of $7.98 and year end oil price of $57.75, our year
end proved reserves would have been approximately 262 Bcfe, which
is within the range of proved reserves we anticipated at year end.
In 2007, we will continue with the aggressive development of our
core Cotton Valley acreage, test newly acquired acreage, further
test the viability of horizontal drilling and drill several 20-acre
spaced vertical wells. We are committed to our strategy of
expanding our position and developing our significant asset base in
the Trend, as evidenced by both our $275 million budget for 2007
and the sale of our South Louisiana properties." OTHER INFORMATION
In this press release, the Company refers to three non-GAAP
financial measures, EBITDAX, discretionary cash flow, and adjusted
operating earnings. Management believes that each of these measures
is a good financial indicator of the Company's ability to
internally generate operating funds. Management also believes that
these non-GAAP financial measures of cash flow and operating
earnings provide useful information to investors because they are
widely used by professional research analysts in the valuation and
investment recommendations of companies within the oil and gas
exploration and production industry. Neither discretionary cash
flow nor EBITDAX should be considered an alternative to net cash
provided by operating activities, as defined by GAAP, nor should
Adjusted operating income be considered an alternative to operating
income, as defined by GAAP. Certain statements in this news release
regarding future expectations and plans for future activities may
be regarded as "forward looking statements" within the meaning of
the Securities Litigation Reform Act. They are subject to various
risks, such as financial market conditions, operating hazards,
drilling risks, and the inherent uncertainties in interpreting
engineering data relating to underground accumulations of oil and
gas, as well as other risks discussed in detail in the Company's
Annual Report on Form 10-K and other filings with the Securities
and Exchange Commission. Although the Company believes that the
expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will
prove to be correct. The Company has provided the alternative
proved reserve estimates in this release assuming natural gas
prices other than those in effect on December 31, 2006 solely for
illustrative purposes to demonstrate hypothetically the effect that
year end economic conditions have on the Company's proved reserve
estimates. The natural gas price used in one of these alternative
presentations was selected by management based upon a review of the
twelve month average forward trading prices on the NYMEX. The
United States Securities and Exchange Commission (SEC) has
generally permitted oil and gas companies, in their filings with
the SEC, to disclose only proved reserves that a company has
demonstrated by actual production or conclusive formation tests to
be economically and legally producible under economic and operating
conditions existing at the date of the report. Accordingly, the SEC
guidelines may prohibit us from including these alternatively
priced proved reserve estimates in filings with the SEC. Goodrich
Petroleum is an independent oil and gas exploration and production
company listed on the New York Stock Exchange. The majority of its
properties are in Louisiana and Texas. GOODRICH PETROLEUM
CORPORATION SELECTED INCOME DATA (In Thousands, Except Per Share
Amounts) Three Months Ended Year Ended December 31, December 31,
2006 2005 2006 2005 Total Revenues $30,842 $25,202 $116,154 $69,403
Operating Expenses Lease operating expense 7,550 2,995 21,877 9,931
Production taxes 946 1,119 5,993 4,053 Transportation 1,092 - 4,013
558 Depreciation, depletion and amortization 15,522 7,276 52,642
25,563 Exploration 9,880 1,528 15,058 6,867 Impairment of oil and
gas properties 24,790 340 24,790 340 General and administrative
4,975 2,668 17,223 8,622 (Gain) loss on sale of assets (23) (66)
(23) (235) Other 365 - 1,709 512 Operating Income (loss) (34,255)
9,342 (27,128) 13,192 Other income (expense) Interest expense
(3,139) (1,140) (7,845) (2,359) Gain (loss) on derivatives not
qualifying for hedge accounting 3,517 5,056 38,128 (37,680) Loss on
early extinguishment of debt (612) - (612) - Gain on litigation
judgment - - - - (234) 3,916 29,671 (40,039) Income (loss) from
continuing operations before income taxes (34,489) 13,258 2,543
(26,847) Income tax (expense) benefit 12,057 (4,638) (904) 9,397
Income (loss) from continuing operations (22,432) 8,620 1,639
(17,450) Discontinued operations including gain on sale of assets,
net of tax - - - - Net income (loss) (22,432) 8,620 1,639 (17,450)
Preferred stock dividends 1,512 281 6,016 755 Preferred stock
redemption premium - - 1,545 - Net income (loss) applicable to
common stock $(23,944) $8,339 $(5,922) $(18,205) Net income (loss)
per common share Basic $(0.96) $0.34 $(0.24) $(0.78) Diluted
$(0.96) $0.33 $(0.24) $(0.78) Weighted average shares basic 25,016
24,793 24,948 23,333 Weighted average shares diluted 25,406 25,537
25,412 23,333 GOODRICH PETROLEUM CORPORATION (In Thousands, Except
Per Share Amounts) Selected Cash Flow Data (In Thousands) Three
Months Ended Year Ended December 31, December 31, 2006 2005 2006
2005 Calculation of EBITDAX Revenue 30,842 25,502 116,154 69,403
Lease operating expense (7,550) (2,995) (21,877) (9,931) Production
taxes (946) (1,119) (5,993) (4,053) Transportation (1,092) (300)
(4,013) (558) G&A - cash portion only (2,897) (2,333) (11,261)
(7,238) Other operating expenses (365) - (1,709) (512) EBITDAX
17,992 18,755 71,301 47,111 Reconciliation of EBITDAX to Net Cash
Provided by Operating Activities: EBITDAX 17,992 18,755 71,301
47,111 Exploration (9,880) (1,528) (15,058) (6,867) Prospect
amortization 1,579 1,143 5,488 3,344 Dry hole costs 7,906 2 7,926
2,014 Interest expense (3,139) (1,155) (7,845) (2,359) Realized
gain (loss) on derivatives not qualifying for hedge accounting
(298) (8,596) (2,057) (10,720) Other non-cash items 20 (202) 476
(156) Net changes in working capital 1,310 (6,106) 4,902 13,195 Net
cash provided by operating activities (GAAP) 15,490 2,313 65,133
45,562 Reconciliation of Discretionary Cash Flow to Net Cash
Provided by Operating Activities: Discretionary cash flow 14,180
8,419 60,231 32,367 Net changes in working capital 1,310 (6,106)
4,902 13,195 Net cash provided by operating activities (GAAP)
15,490 2,313 65,133 45,562 Reconciliation of Adjusted Operating
Income to Operating Income Adjusted Operating Income 519 10,018
11,550 16,929 Non Cash Charges: Dry Hole Costs 7,906 2 7,926 2,014
Impairment of Oil and Gas Properties 24,790 340 24,790 340 Non cash
G&A expense 2,078 319 5,962 1,383 Operating Income (GAAP)
(34,255) 9,357 (27,128) 13,192 GOODRICH PETROLEUM CORPORATION Three
Months Ended Year Ended December 31, December 31, 2006 2005 2006
2005 Selected Operating Data Production Natural gas (MMcf) 3,578
2,143 13,001 6,237 Oil and condensate (MBbls) 118 83 474 408 Total
(Mmcfe) 4,285 2,646 15,843 8,686 Average sales price per unit:
Natural gas (per Mcf) $6.54 $10.57 $6.66 $8.62 Oil (per Bbl) 57.42
29.91 57.12 29.91 Natural gas and oil (Mcfe) 7.04 9.50 7.18 7.88
Expenses per Mcfe Lease operating expense $1.76 $1.13 $1.38 $1.14
DD&A 3.62 2.75 3.32 2.94 Exploration 2.31 0.58 0.95 0.79
DATASOURCE: Goodrich Petroleum Corporation CONTACT: Robert C.
Turnham, Jr., President, or David R. Looney, Chief Financial
Officer, both of Goodrich Petroleum Corporation, +1-713-780-9494,
Fax, +1-713-780-9254 Web site: http://www.goodrichpetroleum.com/
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