Goodrich Petroleum (GDP) Q2 Results - Aug 9

[dan_s]

I plan to get all of the forecasts/valuations for our Small-Cap Growth Portfolio companies updated this week.
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Goodrich Petroleum Corporation (NYSE American: GDP) announced financial results for the second quarter ended June 30, 2021.

QUARTER HIGHLIGHTS

Goodrich reported a net loss of $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. < Adjusted Net Income compares to my forecast of $8.8 million.

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 operating cash flow of $23.6 million (before changes in working capital) compares to my forecast of $26.0 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. < Compares to my Q2 production forecast of 157,100 Mcfepd.

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. < Realized price compares to my forecast of $2.85/mcfe.

Per unit cash operating expense was $0.89 per Mcfe, a 10% sequential decrease from the first quarter, and total per unit cash expense including cash interest was $0.95 per Mcfe for the quarter, broken out as follows:

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.

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. < 2H 2021 operating cash flow should be in the $65 to $75 million range with over $25 million of FCF from operations.


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 < this is one heck of a well!

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.

[Fraser921]

Not to nitpick:

Goodrich definition

>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.

>>This was caculated on "book equity" not EV. Book equity went down to hedge loss which helps the roic calculation based on book

My definition (use ev not book)

gdp market cap at 15.15 equity= 216
debt = 121

ev 337

ebitda doesnt have hedges settlements as reported 24.4 less hedge "cash" settlements of 1.3 =23.1 * 4 = 92.4

92.4/337 = 27.5% not too shabby but lower than the reported 45%

[dan_s]

I have updated my GDP forecast for Q2 actual results and their updated guidance for 2H 2021.
> Goodrich is on pace to generate $105 to $115 million of operating cash flow this year, which compares to their capex guidance of $80 to $90 million.
> I would love to see them add two more high rate horizontal Haynesville wells to the Q4 drilling program to take advantage of high gas prices.
> At the time of this post, GDP is trading for $15.70. < Just 2X 2021 operating cash flow per share.
> My valuation based on an average HH gas price of $3.25/MMBtu in 2022 is $35.00/share.

My estimate of Goodrich's net asset value of just their P1 reserves - debt at 12-31-2021 based on $3.25/mcf gas price discounted at 10% will be over $35/share.

Take 15 minutes to go thru their new slide presentation to see the upside of this small-cap gasser at $4/mcf gas. It could go to $50/share if we have the "Mother of all Bidding Wars" for gas supply this winter.