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Goodrich Petroleum Corp.’s (NYSE: GDP) path into the Tuscaloosa Marine Shale (TMS) always seemed to be on a one-way street as the company plowed into the play.
Of the company’s 274 billion cubic feet equivalent of proved reserves, 42% lies in the TMS. The company has committed virtually all of its 2015 capex to the play.
And in March, the company issued $100 million in warrants with a share price of $4.66 to buy time for an Eagle Ford Shale divestiture.
Pearce Hammond, co-head of E&P research, Simmons & Co. International, said Goodrich is still facing outspend and will need a catalysts: an Eagle Ford sale or a TMS joint venture (JV).
Goodrich was an early entrant into the Eagle Ford, paying about $1,650 per acre. The company has 45 net wells on 30,000 net acres and an estimated 226 net, un-risked probably locations remaining, assuming 6,000 foot laterals at 100-acre spacing.
In December, Goodrich’s board authorized management to explore strategic alternatives for all or a portion of its Eagle Ford asset in the first half of 2015, with the goal of significantly enhancing the “company's flexibility to further expand its development activities under better market conditions.”
“GDP has talked about the possibility of a JV or divestiture in the Eagle Ford extensively in the past,” Hammond said. “The company has held off due to oil price, but assuming some improvement in price, this could come back on the table.”
The company’s Eagle Ford position is located in Frio and LaSalle counties, Texas, near producers such as Chesapeake Energy Corp. (NYSE: CHK), Cabot Oil & Gas Corp. (NYSE: COG), Carrizo Oil & Gas Inc. (NASDAQ: CRZO) and EOG Resources Inc. (NYSE: EOG).
John Freeman, managing director, Raymond James, said management is keeping its Eagle Ford sales option open, “while trying to hold out for as long as possible, hoping for prices to go up.”
“On the Haynesville side, management suggested that if other operators show good results, Goodrich may consider shifting some investment there,” Freeman said.
For now, the company has solid liquidity. In March, Goodrich closed its $100 million offering of senior notes with an aggregate principal amount of 8% senior secured notes issued at par due 2018. Net proceeds were about $98 million. The company intends to use the net proceeds from the offering to repay borrowings under its credit facility and for general corporate purposes.
Pro-forma for the March equity offering, Goodrich had $174.5 million in total liquidity at year-end 2014 inclusive of their undrawn $150 million borrowing base.
In 2015, Hammond said the company is estimated to outspend cash flow by $30 million based on a price deck of $52.34 WTI and $2.81 gas. In 2016, outspend increased to $80 million at a price deck of $58.13 oil and $3.10 gas.
Contact the author, Darren Barbee, at dbarbee@hartenergy.com.
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