Goodrich Petroleum Second Quarter 2021 Results

Goodrich Petroleum Corp. announced financial results for the second quarter ended June 30, 2021.

Highlights:

• Net loss was $11.6 million in the quarter, or ($0.86) per basic and fully diluted share. The Company incurred a non-cash mark-to-market loss of $21.2 million in the quarter due to the change in fair value of unsettled derivatives not designated as hedges.

• Adjusted net income (net income prior to change in fair value of unsettled derivatives not designated as hedges) was $9.6 million, or $0.72 per basic share and $0.64 per fully diluted share for the quarter.

• Operating Income was $13.0 million in the quarter. Net cash provided by operating activities was $15.5 million in the quarter, which was negatively impacted by a change in working capital of $8.1 million.

• Adjusted EBITDA was $24.4 million in the quarter.

• Discretionary Cash Flow was $23.6 million and Capital Expenditures totaled $19.7 million in the quarter.

• Production averaged 155,400 Mcfe per day for the quarter, which grew by 24% sequentially over the first quarter.

• Average realized price per unit was $2.69 per Mcfe, or $2.60 per Mcfe including settled hedges, and per unit expense was $1.77 per Mcfe for the quarter, which included non-cash expense of $0.88 per Mcfe.

Financial Highlights:

• Lease operating expense ("LOE") was flat sequentially at $0.28 per Mcfe, which included $0.08 per Mcfe of workover expense
• Production and other taxes were flat sequentially at $0.06 per Mcfe
• Transportation and processing expense decreased by 8% sequentially to $0.33 per Mcfe
• General and Administrative ("G&A") expense payable in cash decreased by 24% sequentially to $0.22 per Mcfe. G&A including stock based compensation decreased by 25% sequentially to $0.24 per Mcfe; and
• Cash interest expense decreased sequentially by 25% to $0.06 per Mcfe

Cash Margin was $1.65 per Mcfe (63%), comprised of a net realized price including hedges of $2.60 per Mcfe less per unit cash expenses (including interest) detailed above of $0.95 per Mcfe. The Company expects continued margin expansion for the rest of this year with lower per unit cash costs and higher realized prices than the second quarter.

Return on Invested Capital ("ROIC"), defined as trailing twelve month Adjusted EBITDA divided by total assets less current liabilities, increased by 18% to 45% at quarter-end. The Company expects ROIC to increase through the end of the year with higher volumes, higher realized prices and lower per unit costs.

2H21 Guidance Update

Second Half of 2021 Guidance has been updated with production expected to average 165,000 - 175,000 Mcfe/day in 3Q21 and 187,500 - 197,500 Mcfe/day in 4Q21, with a mid-point for full year 2021 guidance of 162,000 Mcfe/day. Second half of 2021 cash operating expenses are expected to range between approximately $0.70 - $0.80 per Mcfe and cash interest expense is expected to range between $0.06 - $0.07 per Mcfe for total cash expenses of approximately $0.76 - $0.87 per Mcfe. Capital expenditures are expected to range between $38.0 - $42.0 million in the second half of the year.

Please see the disclosures and tables at the end of this press release for discussion of the non-US GAAP measures presented above and in the discussion below and a reconciliation of such measures to the most directly comparable US GAAP financial measure.

Acreage Acquisition

During the quarter, the Company added another 1,500 net acres through drill-to-earn transactions in the core of the North Louisiana Haynesville Shale play, bringing total core Haynesville acreage to 27,500 net acres. The Company continues to review additional opportunities to expand its footprint in the play.

Well Result

The Company's Lattin 3&34 No. 1, which was previously reported with a 24-hour initial production rate of 35,000 Mcfe per day from a completed interval of 9,900 feet, has averaged approximately 32,000 Mcfe per day over the first 90 days of production. The well is currently producing in excess of 30,000 Mcfe per day, with results to date significantly above the Company's type curve.

Financial Results

Net loss was $11.6 million in the quarter, or ($0.86) per basic and fully diluted share versus net loss of $22.9 million, or ($1.83) per basic and fully diluted share in the prior year period. Adjusted net income was $9.6 million, or $0.76 per basic share and $0.64 per fully diluted share in the quarter.

Net cash provided by operating activities was $15.5 million in the quarter, which was negatively impacted by a change in working capital of $8.1 million, versus $16.2 million in the prior year period. Adjusted EBITDA was $24.4 million in the quarter and discretionary cash flow ("DCF"), defined as net cash provided by operating activities before changes in working capital, was $23.6 million in the quarter, versus Adjusted EBITDA of $15.4 million and DCF of $14.5 million in the prior year period.

Production totaled approximately 14.1 Bcfe in the quarter, or an average of approximately 155,400 Mcfe (99% natural gas) per day, versus 12.6 Bcfe, or an average of approximately 138,000 Mcfe (98% natural gas) per day, in the prior year period.

Oil and natural gas revenues were $38.1 million and oil and natural gas revenues adjusted for cash settled derivatives of ($1.3) million was $36.8 million. In the prior year period, oil and natural gas revenues were $20.5 million and oil and natural gas revenues adjusted for cash settled derivatives of $7.3 million was $27.8 million. Average realized price per unit was $2.69 per Mcfe ($2.58 per Mcf of natural gas and $66.36 per barrel of oil) in the quarter, versus $1.63 per Mcfe in the prior year period ($1.54 per Mcf of natural gas and $40.41 per barrel of oil).

Lease operating expense ("LOE") was $4.0 million, or $0.28 per Mcfe, in the quarter, versus $3.2 million, or $0.26 per Mcfe, in the prior year period. LOE for the quarter included $1.1 million, or $0.08 per Mcfe, for workovers, versus $0.5 million, or $0.04 per Mcfe, in the prior year period. Lease operating expense for the quarter excluding workovers was $2.9 million, or $0.20 per Mcfe, versus $2.7 million, or $0.22 per Mcfe in the prior year period.

Production and other taxes were $0.8 million in the quarter, or $0.06 per Mcfe, versus $0.9 million, or $0.07 per Mcfe, in the prior year period.

Transportation and processing expense was $4.6 million, or $0.33 per Mcfe, in the quarter, versus $5.4 million, or $0.43 per Mcfe, in the prior year period.

Depreciation, depletion and amortization ("DD&A") expense was $12.2 million, or $0.86 per Mcfe, in the quarter, versus $11.9 million, or $0.95 per Mcfe, in the prior year period.

General and administrative expense was $3.4 million, or $0.24 per Mcfe, in the quarter, versus $4.5 million, or $0.36 per Mcfe, in the prior year period. G&A expense payable in cash was $3.1 million, or $0.22 per Mcfe, versus $3.2 million or $0.25 per Mcfe, in the prior year period.

Operating income, defined as revenues minus operating expenses, totaled $13.0 million in the quarter. Adjusted operating income adjusted for cash settled derivatives was $11.7 million for the quarter, which included $1.3 million paid for cash settled derivatives. Operating loss totaled $19.6 million and adjusted operating loss adjusted for cash settled derivatives was $12.3 million, which included $7.3 million received for cash settled derivatives, in the prior year period.

Interest expense totaled $2.1 million in the quarter, which included interest payable in cash of $0.9 million incurred on the credit facility and non-cash interest of $1.2 million incurred primarily on the Company's second lien notes, which included $1.0 million paid in-kind interest and $0.2 million amortization of debt discount and issuance costs. Interest expense totaled $1.7 million in the prior year period, which included interest payable in cash of $1.0 million incurred on the credit facility and non-cash interest of $0.7 million incurred primarily on the Company's second lien notes, which included $0.5 million paid in-kind interest and $0.2 million amortization of debt discount and issuance costs.

Capital Expenditures

Capital expenditures totaled $19.7 million in the quarter, of which a majority was spent on drilling and completion costs, versus $10.2 million in the prior year period, of which a majority was also spent on drilling and completion costs. The Company conducted drilling and completion operations on 9 gross (4.2 net) wells in the quarter and added 3 gross (2.8 net) wells to production. The Company had 6 gross (1.4 net) wells in the drilling or completion process at the end of the quarter, which the Company plans to complete in the fourth quarter.

Balance Sheet

The Company exited the quarter with $0.8 million of cash, $90.4 million outstanding under the Company's credit facility, and total principal debt outstanding, including the credit facility and second lien notes, of $120.6 million.

Derivatives

The Company had a loss of $22.5 million on its derivatives not designated as hedges in the quarter, which was comprised of a loss of $1.3 million on cash settlements and a $21.2 million loss representing the change of the fair value of our open natural gas and oil derivative contracts. The Company had a loss of $1.7 million on its derivatives not designated as hedges in the prior year period, which was comprised of a gain of $7.3 million on cash settlements and a $9.0 million loss representing the change of the fair value of our open natural gas and oil derivative contracts.