Energy Prospectus

Is the Goodrich's plan to rehedge higher when they have the first opportunity until the debt is retired at year-end 2022?

When will they have the first opportunity to hedge for the first quarter, 2022? If they have done so already, what price have they locked in on how much production?

Is your $3.25 average price assumption for 2022 conjecture now or based on some hedges already acquired.

The only problem I see down the line for Goodrich is highly profitable companies with no debt and lots of room to grow production at low cost become takeover targets. This is exactly why beloved AG Edwards is gone. They had no
debt, cash rich, and appetizing retail market share.

Chesapeake came out of chapter 11 and ran after Vine Energy to buy 85% of it. And Vine is about $1.3 billion market cap while GDP is about $250 million, a small bite and short chew for someone.

So far Goodrich just has just hedged about 40% of 2022 production at ~$3.25.

I was taking a deep dive into gdp last night. If I were them , I’d sell some shares here at 20 and pay off the 2nd lien debt, which depending how you look at it is costing them 13.5 percent per year, actually 20 per cent if you strip out the equity component of the convertibility factor.

They have a negative working capital of 50 m, due primarily to crap hedges and can’t borrow any more from 1 st lien debt.
They issued a press release a few weeks ago and some warrants are now exercisable at 15 ish which will help if the holders exercise at 15 but they will sell to capture the 5 dollar spread. So the good news , perhaps a 15 m infusion offset with a one million share overhang

Another thing, is it takes them 45 days to collect on their sales but the hedges are settled in real time causing a 45 day cash gap

They should do something to reset or redo hedges and definitely enter collars and capture more upside

They definitely need a good cfo which is lacking. They frittered away millions with crap hedges

Ng is 4.65 and pushing 5 bucks. It’s a darn shame many locked in at 2.50 and lower

I want upside and that’s why I favor CLR (unhedged) as they are getting every penny of this upsurge

Just remember that getting rid of "crap hedges" costs current dollars. Hedging programs always look bad when commodity prices are spiking and they always look great when commodity prices are falling. Goodrich will be free cash flow positive in 2H 2021 and in great shape in 1H 2022. Based on the mid-point of their fresh guidance, their production will be up 40% year-over-year and all of that increased production is unhedged.

Download my forecast/valuation model to Excel and go to the column for 2022. At the bottom put in $4.00 for the realized gas price for 2022 to how much upside their is for this small company.

Also note that after Q1 2022 they only have 30,000 Mcf per day (less than 15% of production) hedged with Swaps for Q2 and Q3.

GDP announced the warrants can be exercised.
Also with the recent strength in the equity price , the 2nd lien debt is getting close to the convertible conversion price
The good news is the debt may be converted to equity. The bad news more shares outstanding

This from the recent 10-k

“
As of March 9, 2021, we have outstanding (i) 910,790 warrants exercisable into approximately 1.3 million shares of the Company's common stock at an exercise price of $15.52 per share, (ii) 2023 Second Lien Notes convertible into approximately 1.4 million shares of the Company's common stock at an exercise price of $21.33, and (iii) approximately 305,442 restricted stock awards at target, collectively representing in total approximately 19% of our shares on a fully diluted basis. The exercise of equity awards, including any stock options that we may grant in the future, and warrants and the sale of shares of our common stock underlying any such options or the warrants, could have an adverse effect on the market for our common stock, including the price that an investor could obtain for their shares. Investors may experience dilution in the net tangible book value of their investment upon the exercise of the warrants and any stock options that may be granted or issued pursuant to the warrants in the future.”