Watch List: GDP

[dan_s]

Keep an eye on Goodrich Petroleum (GDP). Howard Weil recently upgraded the stock to "Market Outperform" with a price target of $24/share.

GDP closed Friday, June 25 at $13.53.

GDP made it on to my Watch List because I'm focused on finding small-caps with nice blocks of Eagle Ford Shale acreage.

HW sites:
> The announcement by EnCana (ECA) of a 32 MMcfed wll in the Shelby Trough area of the Haynesville Shale where GDP holds 26,000 net acres
> XCO recently closed on block of Haynesville acreage from SWN for $13,000/acre (adding value to GDP's acreage block)
> GDP holds 35,000 net acres in the Eagle Ford Shale. Most of it is in the "oily northern part".
> GDP is currently drilling their first Eagle Ford well with results expected in late August or early September.

My take is that GDP will be reporting quarterly losses until the 2nd half of 2011, however their cash flow per share is solid (per HW: $2.39 in 2010 and $3.87 in 2011). The Company has the financial flexibility to continue drilling and de-risking their acreage. Based on recent transactions in the Eagle Ford and Haynesville Shales, the Company's undeveloped acreage could be worth over $400 Million. I am very bullish on the Eagle Ford Shale. Forty rigs are working it now and with EOG aggressively drilling their acreage we could be hearing a lot more news coming out of the area.

Dan