Goodrich Petroleum Details Q2 Results

Goodrich Petroleum Corp. detailed its Q2 2019 results.

Highlights:

• Adjusted EBITDA increased by 142% over the prior year period and 42% sequentially to $21.5 million despite lower natural gas prices versus the prior year and first quarter of 2019.
• Net income was $11.8 million in the quarter ($0.96 per basic and $0.82 per diluted share). Net income was positively impacted by a gain of $10.7 million, representing the change of fair value of the Company's derivative contracts, and negatively impacted by a loss of $1.8 million on early extinguishment of debt.
• Production increased by 128% over the prior year period and 35% sequentially to average 138,200 Mcfe per day for the quarter.
• Per unit cash operating expenses decreased by 35% versus the prior year period and 23% sequentially to $1.02 per Mcfe for the quarter, as follows.
• Lease operating expense ("LOE") decreased by 33% sequentially to $0.24 per Mcfe
• Production and other taxes expense decreased by 29% sequentially to $0.05 per Mcfe
• Transportation and processing expense decreased by 8% sequentially to $0.46 per Mcfe
• General and Administrative ("G&A") expense (payable in cash) decreased by 33% to $0.27 per Mcfe
• Return on Capital Employed ("ROCE"), defined as annualized second quarter earnings before interest and taxes ("EBIT") divided by total assets less current liabilities, was 18% for the quarter.

Ops Update

The Company has recently completed its Melody Jones et al 20H No. 1 (89% WI) well in the Bethany-Longstreet field of DeSoto Parish, Louisiana. The well, which has a lateral length of approximately 4,600 feet, had an average 24-hour initial production rate of approximately 22,000 Mcfe per day. The Company is running one rig with current plans to complete its next well late in the third quarter.

Production

Production totaled 12.6 Bcfe in the quarter, or an average of approximately 138,200 Mcfe per day, versus 5.5 Bcfe, or an average of approximately 60,600 Mcfe per day, in the prior year period. Natural gas production totaled 12.3 Bcf in the quarter (98% of total production), versus 5.2 Bcf (94% of total production) during the prior year period.

2Q19 Financials

Revenues

Revenues totaled $31.9 million in the quarter, versus $17.8 million in the prior year period. Average realized price per unit was $2.54per Mcfe ($2.35 per Mcf of gas and $65.00 per barrel of oil) in the quarter, versus $3.23 per Mcfe in the prior year period ($2.67 per Mcf of gas and $69.39 per barrel of oil). Revenues in the quarter, when adjusted for settled oil and natural gas derivatives, totaled $33.9 million.

Cash Flow

Adjusted EBITDA was $21.5 million in the quarter and discretionary cash flow ("DCF"), defined as net cash provided by operating activities before changes in working capital, was $20.6 million in the quarter versus Adjusted EBITDA of $8.9 million and DCF of $9.2 million in the prior year period.

Net Income

The Company announced net income of $11.8 million in the quarter ($0.96 per basic and $0.82 per diluted share), versus a net loss of $2.7 million ($0.23 per basic and diluted share) in the prior year period. Net income for the quarter was positively impacted by a gain of $10.7 million, representing the change of fair value of our open natural gas and oil derivative contracts, and negatively impacted by a loss of $1.8 million on early extinguishment of debt.

Operating Expenses

Lease operating expense ("LOE") was $3.0 million ($0.24/Mcfe) in the quarter, versus $2.5 million ($0.45/Mcfe) in the prior year period. LOE for the quarter included $0.2 million ($0.02/Mcfe) for workovers, versus $0.3 million ($0.05/Mcfe) in the prior year period. Lease operating expense for the quarter excluding workovers was $2.8 million ($0.22/Mcfe) versus $2.2 million ($0.40/Mcfe) in the prior year period.

Production and other taxes were $0.6 million in the quarter ($0.05/Mcfe), versus $0.7 million ($0.12/Mcfe) in the prior year period.

Transportation and processing expense was $5.8 million ($0.46/Mcfe) in the quarter, versus $2.1 million ($0.38/Mcfe) in the prior year period.

Depreciation, depletion and amortization ("DD&A") expense was $13.3 million ($1.06/Mcfe) in the quarter, versus $5.6 million($1.01/Mcfe) in the prior year period.

General and administrative expense was $4.9 million ($0.39/Mcfe) in the quarter, which includes non-cash expense of $1.6 million($0.12/Mcfe) for stock based compensation versus $4.8 million ($0.87/Mcfe) in the prior year period, which included $1.4 million for stock based compensation. G&A payable in cash was $3.4 million ($0.27/Mcfe) in the quarter.

Operating Income

Operating income, defined as revenues minus operating expenses, totaled $4.4 million in the quarter, versus $2.1 million in the prior year period.

Capital Expenditures

Capital expenditures totaled $25.0 million in the quarter, of which $24.5 million was spent on drilling and completion costs and $0.5 million on other expenditures, versus $31.0 million in the prior year period of which $29.3 million was spent on drilling and completion costs and $1.7 million on other expenditures. All of the quarter's drilling and completion capital expenditures were spent in the Haynesville Shale Trend.

Interest

Interest expense totaled $3.4 million in the quarter, which included cash interest of $1.0 million incurred on the Company's senior credit facilities and non-cash interest of $2.4 million incurred primarily on the Company's second lien notes, which included $1.4 million paid in-kind interest and $1.0 million of debt discount and debt issuance cost amortization. Interest expense for the prior year period totaled $2.7 million in the quarter, which included cash interest of $0.1 million incurred on the Company's senior credit facility and non-cash interest of $2.6 million incurred primarily on the Company's second lien notes, which included $1.6 million paid in-kind interest and $1.0 million of debt discount and debt issuance cost amortization.

Crude & Natural Gas Derivatives

The Company had a gain of $12.7 million on its derivatives not designated as hedges in the quarter, which was comprised of a gain of $10.7 million representing the change of the fair value of our open natural gas and oil derivative contracts as well as a $2.0 million gain on cash settlement, versus a loss of $2.2 million on its derivatives not designated as hedges in the prior year quarter, which was comprised of a loss of $2.0 million representing the change of the fair value of our open natural gas and oil derivative contracts as well as a $0.2 million loss on cash settlement.

Balance Sheet

The Company exited the quarter with $1.7 million of cash, $84.4 million outstanding under the Company's senior credit facility, which had a borrowing base of $115 million, and $12.1 million outstanding under the Company's second lien notes.

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