Thursday, January 8, 2015

Goodrich Petroleum: Top Stock To Not Buy In 2015

This article was first published by Seeking Alpha on December 16, 2014. 

By Sarfaraz A. Khan

On Friday, oil prices tumbled to under $60 a barrel, their lowest levels in more than five years as International Energy Agency gave a grim forecast of further downward pressure on prices. That is bad news for most of the exploration and production companies, but even worse for Goodrich Petroleum (NYSE:GDP).

The Houston, Texas based Goodrich Petroleum is a small oil and gas producer, valued at nearly $175 million, which operates primarily in the Tuscaloosa Marine Shale (TMS), Eagle Ford Shale and the Haynesville Shale formations in Louisiana, Mississippi and Texas. The company owns more than 300,000 net acres at TMS, around 76,000 net acres at Haynesville and 30,000 net acres at Eagle Ford.
In an environment of depressed natural gas prices over the last couple of years, Goodrich has been focusing on developing its oil rich properties. Last year, the company spent 43% of its capital expenditure on Eagle Ford, 42% on TMS, and 15% on Haynesville Shale. The TMS and Eagle Ford are liquid rich properties, with former holding up to 4 million barrels of oil equivalents of proven reserves while the latter has 12 million barrels of oil equivalents.
Consequently, the company was able to more than double its liquids production between 2011 and 2013. This year, Goodrich has focused on developing TMS, which will drive its liquids production growth. For 2014, Goodrich has allocated between 70% and 80% of its capital expenditure for TMS.
Further, as compared to last year, the company has almost doubled the size …. Read full article at Seeking Alpha