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Goodrich Petroleum First Quarter 2020 Results

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   |    Thursday,May 07,2020

Goodrich Petroleum Corp. reported its Q1 2020 results.

Highlights:

- Net Income: Net income was $3.0 million in the quarter ($0.24 per basic, $0.22 per diluted share).

- Adjusted EBITDA: Adjusted EBITDA was $16.6 million in the quarter.

- Production: Production averaged approximately 137,000 Mcfe per day for the quarter. The Company completed 5.0 gross (1.8 net) wells in the quarter, with 1.0 gross (1.0 net) operated well added in January and 4 gross (0.8 net) non-operated wells added at the end of March.

- Cash Operating Expenses: Per unit cash operating expense was $1.03 per Mcfe for the quarter, broken out as follows:

• Lease operating expense ("LOE") was $0.27 per Mcfe, which included workover expense of $0.04 per Mcfe
• Production and other taxes were $0.07 per Mcfe, which included $0.04 per Mcfe for production taxes and $0.03 per Mcfe for ad valorem taxes
• Transportation and processing expense was $0.39 per Mcfe
• General and Administrative ("G&A") expense payable in cash was $0.30 per Mcfe

Return on Capital Employed ("ROCE"), defined as trailing twelve months earnings before interest and taxes ("EBIT") divided by total assets less current liabilities, was 12.5% at quarter-end.

Credit Facility Cut by $5MM

In conjunction with its spring redetermination under its reserve based lending facility, the Company and the participating banks have executed an amendment to the credit facility establishing a new borrowing base of $120 million, down from $125 million, with no material changes to terms and conditions.

Notes

The Company has entered into an amendment to its second lien note indenture extending the maturity date to May 31, 2022, with no additional changes to terms and conditions.

Service Cost Deflation

The Company is currently seeing a 15-20% reduction in service company bids for its next set of wells, which have increased its field level returns as shown in its earnings call presentation.

Cash Flow

Adjusted EBITDA was $16.6 million in the quarter and discretionary cash flow ("DCF"), defined as net cash provided by operating activities before changes in working capital, was $15.4 million in the quarter versus Adjusted EBITDA of $15.2 million and DCF of $14.8 million in the prior year period.

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

Net Income

Net income was $3.0 million in the quarter, or $0.24 per basic and $0.22 per fully diluted share, versus net income of $0.4 million, or $0.04 per basic and $0.03 per fully diluted share, in the prior year period.

Production

Production totaled approximately 12.5 Bcfe in the quarter, or an average of approximately 137,000 Mcfe (98% natural gas) per day, versus 9.3 Bcfe, or an average daily production of approximately 104,000 Mcfe (97% natural gas) per day, in the prior year period.

Revenues

Oil and natural gas revenues adjusted for cash settled derivatives of $6.0 million was $29.0 million. Oil and natural gas revenues prior to cash settled derivatives was $23.0 million. Oil and gas revenues including cash settled derivatives was $27.4 million in the prior year period. Average realized price per unit was $1.84 per Mcfe ($1.73 per Mcf of gas and $47.64 per barrel of oil) in the quarter, versus $3.12 per Mcfe in the prior year period ($2.91 per Mcf of gas and $59.45 per barrel of oil). Average realized price per unit when incorporating the Company's settled derivatives for the quarter was $2.32 per Mcfe.

Operating Expenses

Lease operating expense ("LOE") was $3.3 million in the quarter, or $0.27 per Mcfe, which included $0.5 million, or $0.04 per Mcfe, for workovers. LOE was $3.3 million, or $0.36 per Mcfe, in the prior year period, which included $0.6 million, or $0.07 per Mcfe, for workovers.

Production and other taxes were $0.9 million in the quarter, or $0.07 per Mcfe, versus $0.6 million, or $0.07 per Mcfe, in the prior year period.

Transportation and processing expense was $4.9 million in the quarter, or $0.39 per Mcfe, versus $4.7 million, or $0.50 per Mcfe, in the prior year period.

Depreciation, depletion and amortization ("DD&A") expense was $13.3 million in the quarter, or $1.06 per Mcfe, versus $10.0 million, or $1.08 per Mcfe, in the prior year period.

General and administrative expense ("G&A") was $4.9 million in the quarter, or $0.39 per Mcfe, versus $5.3 million, or $0.57 per Mcfe, in the prior year period. G&A expense payable in cash was $3.8 million, or $0.30 per Mcfe, versus $3.8 million, or $0.40 per Mcfe, in the prior year period.

(See accompanying table at the end of this press release that reconciles G&A expense payable in cash, which is a non-US GAAP financial measure, to its most directly comparable US GAAP financial measure.)

Operating Income/Loss

Operating income adjusted for cash settled derivatives was $1.7 million for the quarter, which included $6.0 million received for cash settled derivatives. Operating loss, defined as revenues minus operating expenses, totaled $4.3 million in the quarter prior to cash settled derivatives. Operating income adjusted for cash settled derivatives was $3.3 million in the prior year period, which included $1.8 million paid for cash settled derivatives. Operating income totaled $5.1 million in the prior year period prior to cash settled derivatives.

(See accompanying table at the end of this press release that reconciles operating income adjusted for cash settled derivatives, which is a non-US GAAP financial measure, to its most directly comparable US GAAP financial measure.)

Interest Expense

Interest expense totaled $2.0 million in the quarter, which included interest payable in cash of $1.2 million incurred on the credit facility and non-cash interest of $0.8 million incurred primarily on the Company's second lien notes, which included $0.4 million paid in-kind interest and $0.4 million amortization of debt discount and issuance costs. Interest expense for the prior year period was $3.7 million, which included interest payable in cash of $0.5 million incurred on the credit facility and non-cash interest of $3.2 million incurred on the Company's second lien notes, which included $1.8 million paid in-kind interest and $1.4 million amortization of debt discount and issuance costs.

Capital Expenditures

Capital expenditures totaled $18.4 million in the quarter, of which a majority was spent on drilling and completion costs, versus $29.5 million in the prior year period, of which $28.5 million was spent on drilling and completion costs and $1.0 million on other expenditures. The Company conducted drilling operations on 12.0 gross (4.0 net) wells in the quarter and added 5 gross (1.8 net) wells to production, with 4 gross (0.8 net) wells added at the end of March. The Company had 10.0 gross (4.6 net) drilled but uncompleted ("DUC") wells at the end of the quarter, which the Company plans to complete in the future in a better price environment. The Company reaffirms its full year preliminary budget of $40 - $50 million and the Board of Directors will review the 2020 capital expenditure budget quarterly and adjust, if necessary, based on commodity prices and the goal of free cash flow generation from moderate growth in volumes and a further reduction in per unit costs.

Balance Sheet

The Company exited the quarter with $1.3 million of cash, $92.9 million outstanding under the Company's credit facility, and total principal debt outstanding, including the credit facility and second lien notes, of $106.3 million.