Goodrich Petroleum (GDP) Update - Dec 4

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dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Goodrich Petroleum (GDP) Update - Dec 4

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New report on Goodrich from John White at Roth Capital. GDP is one of three very profitable "gassers" in our Small-Cap Growth Portfolio.

"Our valuation is based on a net asset value (NAV) analysis which produced $18.04 per share which we rounded lower to our $18.00 per share price target."

GDP: Updating Estimates: Free Cash Flow in 4Q 2019

GDP previously announced 4Q 2019 capital expenditure guidance of $10 million to $15 million and our operating cash flow estimate is $18.1 million. Production for 4Q 2019 is expected to be 140,000 to 145,000 Mcfe per day, which is in line with our previous estimate of 143,696 Mcfe per day. After additional review we have adjusted our 4Q 2019 production estimate slightly lower to 141,160 Mcfe per day. < This compares to my Q4 production estimate of 141,900 Mcfe per day (~98% natural gas).

The expected 4Q completion schedule is currently 2.0 gross (1.7 net) wells compared to the prior guidance of 5.0 gross (2.7 net) wells. The reduced activity was deemed appropriate by GDP and in agreement with the operator of certain non-operated wells. As such, our previous 4Q 2019 estimates for CFPS/EBITDA of $1.38/$20.9 million move slightly lower to $1.29/$19.6 million primarily due to the reduced 4Q 2019 activity.

Looking to 2020, on the earnings conference call GDP talked in general about its optionality regarding 2020 capital expenditures and the possibility of the 2020 capex being somewhat lower than the planned $90 to $95 million for 2019. This would bode well for free cash flow in 2020. Using a production estimate of 154,992 Mcfe per day and a Henry Hub natural gas price of $2.51/MMBtu results in cash flow from operations of $70.7 million. Our production estimate may prove conservative as we note the consensus 2020 production estimate is 166,680 Mcfe per day. We expect a 2020 capital expenditure announcement in December. < My take on Goodrich's CC is that they will complete several high rate wells in Q1 that will get 2020 off to a very good start.
Dan Steffens
Energy Prospectus Group
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